Business of Medical Practice

MANAGING ACCOUNTS RECEIVABLES

[Appreciating Asset Protection Strategies] 

By David Edward Marcinko
By Hope Rachel Hetico

The one who adapts his policy to the times prospers, and likewise that the one whose policy clashes with the demands of the times does not – Niccolo Machiavelli 

Introduction

All physicians, clinics and medical practices are aware that accounts receivable (ARs) represent money that is owed to them, usually by a patient, insurance company, health maintenance organization (HMO), Medicare, Medicaid, or other third party payer. In the reimbursement climate that exists today, it is not unusual for ARs to represent 75% of a doctor’s investments in current assets [cash, etc].

ARs are a major source of cash flow, and cash flow is the life-blood of any medical practice. It pays bills, meets office payroll, and satisfies operational obligations.

A feature of ARs in medical practice that differentiates them from ARs in other types of business is that they are often settled for less than the billed amounts.

These allowances include four categories that are used to restate ARs to realizable expected values:

1. professional or courtesy allowances;
2. charity (pro bono care) allowances;
3. doubtful account allowances; and
4. HMO and managed care organization (MCO) contractual and prospective payment allowances.

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Dictionary of Health Economics and Finance: http://www.springerpub.com/prod.aspx?prod_id=02549