Using A Lockbox Is A GREAT Internal Control

April 2, 2006

An element of every medical practice’s internal control strategy should be the use and implementation of a lockbox. As many know, this is a system whereby reimbursement and patient checks go directly to the practice’s financial institution and not to the office directly. So it’s easy to see why this would be such a great internal control – employees can’t steal money if they don’t touch it. So how do you do it??

If implemented correctly, the control benefits and the lessening of related office administrative burdens far outweighs the inevitable, occasional problems that may arise, such as these common ones:  (1) Money deposited in the account that was not the practice’s; (2) Missing EOBs and other documents; (3) Getting EOBs from other medical practices that are clients of the lockbox company; (4) Delays in getting EOBs; and (5) A patient refund, since the check was deposited before the practice sees it – sometimes the patient pays twice and the practice might not have kept the check had it had physical control over it.

Security, costs, and operational setup are the keys to setting up a lockbox successfully. Here are a few questions you want to ask when considering a lockbox arrangement:

What are the charges involved for lockbox? 

Can you get a credit back for those charges for your daily balance in all your accounts?

How will your EOB’s and check copies be delivered to your office?  Many banks want to scan and e-mail the file.  That is great for storage, as you can save it on your server, but it does not work well when you need to look at the EOB to post it to your system.  You would have to print all e-mail files so you could post them.

How quickly will you receive your EOBs and check copies?  Will they deliver the next morning or at least on the same day?

You can set up a lockbox with a bank that may be willing to offset the costs involved if you keep your balance at a certain level.  Also keep in mind that employee time that was normally spent on banking issues can now be redirected to other office efforts, such as additional assistance with internal billing and collection.

You want to make sure you have an account representative designated to your new lockbox.  Be sure to also ask if the bank plans to outsource this service.  If they do, be sure to check out the company they use; Get references if you can.

Operationally, you can set up a lockbox where the billing manager and/or practice administrator receives an e-mail notification the moment the deposit is made.  The e-mail would simply include a list of the check amounts and the total deposit.  The deposit would then be posted in the practice’s accounting system the day it hits the bank.  The office would then receive from the bank a package of the related EOBs and copies of the checks for posting, generally one or two days after the deposit. This should include some kind of batch total that agrees with the actual deposit to the bank account.  When setting up a lockbox, keep in mind that you will have to process mail payments in addition to the lockbox.

As you can see, lockboxes offer many other advantages besides being the best internal control strategy that can be implemented by a medical practice. While there will always be a discussion about the pros and cons of setting up a lockbox, I believe the internal control issue overrides all of them.

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