Credit and Collections Flashcards
Define Charity Care
service provided that is never expected to result in cash flow. Charity care results from a provider’s policy to provide healthcare services free of charge or at a reduced cost to individuals who meet certain financial criteria.
Describe a indigent individual
an individual who has no means of paying for medical services or treatments and is not eligible for benefits under Medicaid or any other public assistance program.
Define Bad Debt
an uncollectible account resulting from the extension of credit. Examples of bad debt include patients who default from payment arrangements, skip (defined later in this section), file bankruptcy without assets, or have insolvent estates, and guarantors who refuse to pay.
In terms of credit and collections, define Statute of Limitations
the amount of time in which a claim must be collected before it is deemed paid or satisfied. No legal proceedings can be initiated after the statute of limitations expires.
Describe periods of limitations (under statute of limitations)
Periods of limitation may vary from state to state. The limitation periods are usually:
* Less for open-end accounts or oral agreements
* Greater for notes or written agreements
* Greatest for judgments
A statute of limitations may be extended under the following circumstances:
* Obtaining a written “promise to pay”
* Obtaining a partial payment on the principal account
* Reducing the account to judgment immediately
* Executing a new contract with the guarantor whereby the creditor gives new consideration in exchange for a promise to pay
Effective Collection Policies should include what
A written collection policy should include:
* Admission policy
* Minimum acceptable payments
* Follow-up policy, including the title/role of the person responsible for account follow up
* Public relations policy
* Charity care requirements and protocols
* Discount policy
* Practice of charging interest, if applicable
* Contract amount implications
* Age when an account is considered uncollectible and prepared for a bad-debt write-off
* Determination/verification of responsible party
* Process for handling errors/complaints
What is Chapter 7 bankruptcy
This type applies to individuals and businesses that cannot pay their debts based on their income. Except for exempt property as defined by state laws, the debtor’s assets are auctioned to satisfy creditor claims. About 70% of all bankruptcy claims are filed under this chapter.
What is Chapter 11 bankruptcy
This type is frequently referred to as a “reorganization” bankruptcy. It gives a distressed business a reprieve from creditor claims while it continues to function and works out a repayment plan; a bankruptcy judge oversees all important decisions. The business is granted three months to draft an initial plan; after that, anyone can submit a plan. In some cases, the judge will assign a trustee to oversee the business. Most of these cases end up as Chapter 7 liquidation cases.
What is involuntary bankruptcy
A debtor can be placed in this type bankruptcy under Chapter 7 or 11 if the debtor has 12 or more creditors, three of which have claims in excess of $5,000 each and are willing to force the issue. If there are fewer than 12 creditors, then only one creditor owed at least $10,775 is needed to force an involuntary bankruptcy.
What is Chapter 12 bankruptcy
This type is for farmers and provides that only a family farmer with “regular annual income” may file a petition for relief. The purpose of this requirement is to ensure that the debtor’s annual income is sufficiently stable and regular to permit the debtor to make payments under a plan. Allowance is made under this chapter, however, for situations in which family farmers may have income that is seasonal in nature. Relief under this chapter is voluntary; thus, only the debtor may file a petition under this chapter.
What is Chapter 13 bankruptcy
This type is designed for individuals with regular income who desire to pay their debts, but currently are unable to do so. The purpose of this chapter is to enable financially distressed individual debtors, under court supervision and protection, to propose and carry out a repayment plan under which creditors are paid over an extended period of time. Under this chapter, debtors are permitted to repay creditors, in full or in part, in installments over a three-year period, during which time creditors are prohibited from starting or continuing collection efforts. A plan providing for payments over more than three years must be “for cause” and be approved by the court. In no case may a plan provide for payments over a period longer than five years.
What are the two potential outcomes to a bankruptcy?
- Discharge of Debtor
- Dismissal
Describe Discharge of Debtor with respect to bankruptcy
Releases the guarantor/patient from financial responsibility of any and all account balances listed on the bankruptcy petition. The account balance is to be written off to the appropriate transaction code.
Patient accounts that occur after the petition / were not included in the notification are not subject to discharge.
In the case of a Chapter 7 bankruptcy that is deemed to have no assets, the discharge order is usually entered within six months, unless an objection to discharge is filed.
Describe Dismissal with respect to bankruptcy
Bankruptcy dismissal is a court ruling whereby the bankruptcy is rejected by the court. The most common reason for dismissal is the failure of the debtor to follow through on the filing process and on payment to the attorney, and failure to provide requested documentation. Upon dismissal of a bankruptcy, a creditor can bill the debtor directly, refer the account to a collection agency, or pursue litigation.
What steps must a creditor take upon receiving notification of a Chapter bankruptcy (7)?
- Flag the patient account, including the chapter, the court jurisdiction, the representing legal counsel, and the telephone number.
- Suspend all collection activity pending final disposition and notice from the bankruptcy courts.
- Cease all contact with the patient demanding payment in full.
- Notify any third-party collection agencies handling the patient account of the bankruptcy notice.
- Forward a copy of the bankruptcy notice to any and all third-party collection agents.
- Notify all parties if any payments are received on the account.
What are some basic principles for determining who the responsible party is?
- The responsible party is the adult patient himself or herself, even in the case of injuries caused by the negligence of another party.
- In some states, spouses are responsible for each other’s debts incurred during the marriage, even if the marriage ends or the other spouse dies.
- The responsible parties for a minor patient are both parents, who are jointly and fully responsible and may be pursued jointly or separately. This is true whether the parents are married or not. If divorced, both parents may be pursed jointly or separately regardless of what the divorce decree states.
- Authorization for treatment in life-threatening emergencies is not required prior to treatment. Lack of authorization does not relieve the responsible party of financial obligation for services rendered.
- When an estate is filed for a deceased person, it is responsible for paying all outstanding debts but often does not have enough funds to do so. Children and other relatives are not legally responsible for the debts of a deceased person.
When notice is received that a patient is deceased, what steps should be taken
- Check if a legitimate estate exists and file an appropriate caveat to the estate.
- Check the register of wills for an estate.
- Change the mailing address to “The Estate of _.”
- If there is no estate and no other party assumes financial responsibility, write off any self-pay balance remaining after insurance liability is paid.
Describe courtesy discharge
When a patient’s financial considerations have been met, a courtesy discharge may occur in which the patient is allowed to leave the hospital without going through the usual discharge formalities. The patient is billed at a later date.
Advantages of courtesy discharge include:
* Improves patient-hospital relations
* Improves traffic flow
* Reduces need for additional staff at peak discharge times
* Allows for greater accuracy in billing
What is a key, vital element in the best practices for in-house collection practices?
document, document, and document
The success of an in-house collection call is measured by ___?
the outcome / agreement for payment in full.
What is the “Mini Miranda”
A “mini Miranda” should be provided on the in-house collection call. When debt collectors contact debtors, whether by mail or phone, a statement is provided to the debtor which says something like, “This is an attempt to collect a debt and any information obtained will be used for that purpose.” This comment is called a mini Miranda because it is similar to the Miranda rights statement that law enforcement uses. Debt collectors are only required to give the mini Miranda in their initial communication with the debtor.
If a third-party debt collector does not provide the debtor with the mini Miranda disclosure, it is a violation of the Fair Debt Collection Practices Act.
Describe the use of collection agencies
A patient account can be forwarded to third-party collections any time there is a valid and documented service.
It is not necessary to send a statement notifying the patient/guarantor of the intent to forward the account to a collection agency. However, there may be public relations problems if patients are not sent these types of notices.
Medicare bad debt requirements urge an appropriate sequence of collection attempts before an account is referred to third-party collections.
Define Judgement in the context of Collection Lawsuits
a legally verified claim against a debtor validated by the court; a legal right to collect a debt that can be used to obtain a lien
Define Lien in the context of Collection Lawsuits
a recorded claim against real or personal property, generally arising out of a debt; if the property is sold by the debtor, the creditor (the provider) must be paid out of the proceeds of that sale
Define Tort Liability in the context of Collection Lawsuits
a liability for an injury or wrongdoing by one person to another resulting from a breach of legal duty
Describe Skip Tracing
Keeping in mind that we must always adhere to HIPAA rules and regulations about exposing and divulging patient health information, skip tracing is a fundamental tool in collections. A “skip” is a debtor who cannot be located by a creditor.
What are the 3 types of “skips”
- Intentional
- Unintentional
- False
Describe an intentional skip
This refers to someone who avoids paying bills by changing his or her residency and failing to leave a forwarding address, purposely changing his or her name, or intentionally giving false information
Describe an unintentional skip
This refers to someone who moves or changes residence and fails to notify creditors. However, a forwarding address is normally available.
Describe a false skip
This is generally caused by clerical error at the time of registration. The cause could be transposed numbers in the street address, an incorrect zip code, or incomplete information.
What does the acronym “GAAP” stand for
Generally Accepted Accounting Principles (GAAP)
Describe Average Daily Revenue
This is simply the average amount of revenue or charges generated each day over a specified period of time.
Total Revenue or Charges for the Period / Number of Days =
Average Daily Revenue
