Medical Practice Management
Aug 09

Bad-debt Control Checklist to Improve Practice Cash Flow

With what seems like a continuous decline in physician reimbursement, it is imperative that all practices collect every dollar they are entitled to.  However we all know this is not always the case. As such, mechanisms and systems need to be in place to avoid bad debt situations as much as possible. The following is a bad debt control checklist you can use to assess whether or not a medical practice is prepared to minimize its bad debts. Any “no” answers should be investigated immediately, with recommended solutions following soon thereafter. I have provided commentary to aid you in this analysis.


Do written guidelines exist on the collection of self-pay accounts?     ___ yes    ___ no


Every practice should have written guidelines to guide its employees on how to collection self-pay and patient-pay accounts. These are accounts where the patient might not have insurance at all or accounts where the amount shown is the amount the patient personally owes after his or her insurance has paid.


Are collection guidelines reviewed and revised periodically?     ___ yes       ___ no


Medical practice in today’s environment does not remain constant and so neither should the internal policies of a practice. This is especially true of collection policies and one main reason why these policies should be reviewed and revised at selected points in time. For example, many practices used to refuse to press patients for payment of their overdue accounts for a variety of reasons; but with insurance reimbursement declining, this type of policy may have to be reconsidered.


Are collection guidelines clear, concise and sufficiently detailed to serve as a working reference to personnel?     ___ yes       ___ no


You want a document you can give to an employee and after reading it, they can  understand what their job duties are. This not only minimizes training time but it provides the employee a guide he or she can refer to on an ongoing basis.


Do business office personnel receive formal training on collection guidelines before beginning work?

    ___ yes       ___ no


Up front training can prevent and sometimes even eliminate many of the day-to-day problems that occur within the practice. Just don’t throw an employee into the water and assume they can swim. The good practices take the time to train their employees as soon as they start work and then on an ongoing basis thereafter.


Do employees receive formal training on collection guidelines after any revision, or otherwise at least annually?     ___ yes       ___ no


Here is the main point about a “guideline”: Do the employees follow it? Employees are almost always going to tell you that they are but what are the results? Are the guidelines really working? There must be a continuous assessment to ensure they are working and effective.


Does management solicit employee suggestions for changes in policies and procedures?

    ___ yes       ___ no


The good practices constantly solicit employee feedback. Listen to them – they often have good ideas on how to improve various aspects of how the practice operates.


Do exceptions to approved guidelines require the approval of management on a case-by-case basis?

    ___ yes       ___ no


If a guideline is implemented, it should be followed “to the letter.” However, there may be situations where the policy cannot or should not be followed. However, this is not a decision of the employee to make. Exceptions should be reviewed and approved by management before such action is undertaken. Make sure the exception is properly documented.


Do self-pay guidelines allow monthly payments on certain accounts?___ yes     ___ no


 A sound bad debt policy will allow a patient to make installment payments on their account. Just make sure there is a review mechanism in place to make sure the patients that are allowed to make payments are actually making them each and every month.


Do self-pay guidelines specify the maximum number of payments that will be accepted?

    ___ yes       ___ no

If so, how many? _______________________


The installment policy should be fair to both the patient and the practice. It is crazy to allow a patient to pay $5 a month for ever until their balance is paid off. This really creates collection hassles for the practice. Set a reasonable length of time for time for the patient to pay off their account.


Do self-pay guidelines specify the minimum monthly payment amount that will be accepted?

    ___ yes       ___ no

If so, how much? ________________________ 


This ties in with the commentary above. The minimum amount to pay should tie in with the maximum allowed length of time a patient is allowed to pay off their account. Of the two, the maximum number of payments allowed is the most important. Fit and set the payment amount within this guideline.


Do collection guidelines specify what action should be taken if a patient misses a payment?

    ___ yes       ___ no

If so, describe the policy.


The point to be made here is to set a policy and stick to it. If the policy is to turn the patient over to collection if two consecutive payments are missed, then make sure this policy is adhered to and if exceptions are made, they are made with management’s approval.


Does management support the collection guidelines, even when a patient complains?

    ___ yes       ___ no


It is useless to implement a policy and then have the doctors not follow it. There must be a “buy in” to the guidelines by every doctor within the practice. In other words, they must support them. If not, policies and guidelines never get abided by and end up becoming a “joke.” Employees also get very confused on how to implement policies and guidelines when the doctors tell them different things and so does administration.

About Reed Tinsley, CPA

As a top advisor to physicians, I help increase practice profits by delivering hands-on, expert medical accounting/tax support, practice counsel, and revenue-building strategies. Read more →