chapter 63 financial management in the dental office

Collections

It is essential for the business assistant to have the skills to manage the money owed to the practice and to collect it in a timely and organized manner. Accounts Receivable Report The accounts receivable report is a valuable management report that shows the total balance due on each patient account plus an analysis of the "age of the account." This shows how much of the balance is current (recent charges not yet billed), 30 days old, 31 to 60 days old, 61 to 90 days old, and older. This information is helpful in tracking and acting on overdue accounts. A computer can generate this report automatically with a breakdown of account age. Although creation of the report is not automatic with a pegboard system, it is possible to generate one manually. Management of Collection Efforts All collection efforts must be handled tactfully and in keeping with the dentist's needs and policies, because the dentist is ultimately responsible for the actions of his or her employees. The dentist does not want to lose a patient's goodwill because of poor collection tactics. Under the federal Fair Debt Collection Practice Act, it is illegal for anyone to carry out the following: • Telephone the debtor at inconvenient hours (before 8:00 PM is considered an acceptable time). • Threaten violence or use obscene language. • Use false pretenses to get information. • Contact the debtor's employer, except to verify employment or residence. Collection Telephone Calls Telephone calls can be more effective than letters when collecting money because they provide direct contact with the debtor and therefore are not as easily ignored. When placing a collection call, be certain to speak only to the person responsible for the account. Never leave a message that could be misunderstood, could reveal confidential information, or could be considered damaging. Before you pick up the phone, it is critical that you have all the specifics of the debt you are calling about. Having the facts in front of you keeps you in control. You do not want the conversation to get disrupted by a question you cannot answer. Many debtors know how to use this to their advantage. Suddenly they cannot discuss payment on their account without details you do not have and they do not "have in front of them" either. So, the call is over. If you hear yourself saying, "I'll have to get back to you on that," you have just given the debtor an extension without a commitment to pay—and you will have to start from the beginning with that person when you call back. At minimum, be sure to have the following information in front of you before you make the call: • Exact amount owed • Payment due date • Notes from previous conversations Once the appropriate person has been reached, the business assistant should identify himself or herself and wait. The person who is being called knows what is wanted, and it is best to let that person make the first statement. The debtor may react with anger or hostility. It is important to remember that this is part of a defense mechanism and not a personal attack. Regardless of what the debtor says or does, do not become argumentative or defensive. Try to be understanding but firm and never permit yourself to be insulting, no matter what the provocation. Note any agreement made over the telephone on the patient's account ledger. Promises should be followed up carefully, and, if they are not kept, the account should be taken to the next step in the collection process (Box 63.1). Box 63.1 Specific Responses to Say When Calling to Collect Money Patient: The check is in the mail. Collector: Great! May I have the check number, amount, and date it was mailed so I can ensure it is posted correctly? Patient: I have a cash flow problem right now. Collector: I understand that times are difficult. Can I set you up on a payment plan, or can you make at least a partial payment today? Patient: I don't have a copy of the invoice. Collector: I'll fax/mail the invoice right now. Will you be mailing the check today? Collection Letters All collection letters should be phrased in a firm, positive, business-like manner that makes every effort to persuade the patient to pay the debt and allows the patient to avoid embarrassment (Fig. 63.7 and Box 63.2). FIG. 63.7 Two examples of collection letters showing the intensity of the wording. (From Finkbeiner BL, Finkbeiner CA: Practice management for the dental team, ed 8, St Louis, 2016, Mosby.) Box 63.2 Suggestions for Composing Collection Letters • Your account has always been paid promptly in the past, so this must be an oversight. Please accept this note as a friendly reminder of your account due in the amount of $______. • Since your care in this office in March, we have had no word from you in regard to how you are feeling or your account payment. If it is impossible for you to pay the full amount of $______ at this time, please call this office before June 15 so that satisfactory arrangements can be worked out. • Medical bills are payable at the time of service unless special credit arrangements are made. Please send your check in full or call this office before June 30, 20__. • If you have some question about your statement, we will be happy to discuss it with you. If not, may we have a payment before the end of this month? • Unless some definite arrangement is made to reduce your balance of $_____, we can no longer carry your account on our books. Delinquent accounts are turned over to our collection agency on the 25th of the month. • When a payment plan has been established, it can be reinforced by recognizing the first remittance with a letter of acknowledgment: Thank you for the recent payment of $_____ on your account. We are glad to cooperate with you in this arrangement for clearing your account. We will look for your next check at about the same time next month, and your final payment the following month. • When a payment schedule has been arranged by a telephone call, it can be confirmed by letter: As agreed upon in our telephone conversation today, we will expect you to mail a payment of $50 on February 10; $50 on March 10; and the balance on April 10. If some emergency should prevent your making one of these payments on time, please notify us immediately by telephone. Do's and Don'ts Do • Individualize letters to suit the situation. • Design your early letters as mere reminders of debt. • Always imply that the patient has good intentions to pay, until lack of response over a period of time proves otherwise. • Send letters with a firmer tone only after you have sent one or two friendly reminders. Don't • Use the same collection letter for a patient with good paying habits as for one who is known to neglect financial obligations. • Place an overdue notice of any kind on a postcard or on the outside of an envelope. This is an invasion of privacy. From Adams AP, Proctor DB: Kinn's the medical assistant: an applied learning approach, ed 11, St Louis, 2011, Saunders. Final Collection Options The final decision regarding turning accounts over for collection must be made by the dentist, and an account is never turned over without the dentist's specific approval. Collection Agency A collection agency makes additional efforts to collect the balance on an overdue account. The agency's charge is a percentage of the amount collected, and this is deducted before the balance is remitted to the dental office. Some attorneys also attempt to collect overdue accounts in exchange for a percentage of the amount collected. Small Claims Court Another option is to take the debtor to small claims court. Sometimes, arrangements are made so that the business assistant, not the dentist, appears for the hearing. One drawback to the option of seeking a small claims court judgment is that even if the court rules that the debtor must pay, it is still up to the practice to collect the amount of the judgment. Collection Follow-Through A sample collection follow-through timetable to be used to collect money is as follows: • 30 days: The regular statement, which is sent at the end of the month, within 30 days, or on completion of treatment with financial arrangements printed on the statement. • 60 days: A second statement, with a kindly printed collection message or a telephone call. • 75 days: Another telephone call and an amiable collection letter mailed. • 90 days: A third statement with a stronger note or a collection letter; often, this letter states that unless payment is made within 10 days, the account will be turned over to a collection agency for action. • 105 days: Another telephone call; in this call, the message should be, "Unless the account is paid by the specified date, it will be necessary to turn the account over to a collection agency for action." • 120 days: If no payment has been made and promises have not been kept, the account is turned over to a collection agency for action. Recall 9. What is the time frame for an office to begin collection efforts? 10. Give four ways that a business can follow through on the collection of fees. Accounts Payable Management Accounts payable systems manage all the money that is owed by the practice. Expenses and disbursements determine the cost of doing business in the dental practice. Expenses are called overhead, which is the actual cost of doing business. As these expenses are incurred, they become accounts payable. Disbursements are the payments made for these accounts payable. It is the responsibility of the office manager or the business assistant to ensure accuracy in all accounts payable transactions within the practice and in the management of day-to-day expenses and disbursements. Dental Office Overhead Dental office overhead consists of all expenses incurred in running a dental practice; these expenses are categorized as fixed overhead and variable overhead. Fee schedules must reflect both overhead factors, plus a fair return to the dentist. Fixed Overhead Fixed overhead includes business expenses that always continue; these are costs (such as the rent or mortgage, utilities, insurance, and salaries) that are incurred regardless of whether the dentist is in the office or whether professional services are actually being provided. Note that not all salaries are part of fixed overhead. Salaries that are considered "not fixed" are those of professionals who work as independent contractors, on a commission basis, or as part-time workers, who are employed on an hourly rate "as needed." Variable Overhead Variable overhead expenses are those that change according to the types of services procured or obtained, for example, dental and stationery supplies, independent contractor fees, dental laboratory fees, and equipment repair fees. Gross Versus Net Income The money the dentist receives for professional services is calculated as gross income (the total of all professional income received). Gross income minus the payment of all practice-related expenses yields the dentist's net income from the practice. Unless the dentist earns an adequate net income, he or she will not be able to afford to maintain a practice. Disbursements Effective management of a dental practice requires organized handling and prompt payment of all bills for practice-related expenses. Payment of major expenses should be made by check, with records always kept up to date and balanced. Minor expenses are handled using petty cash. All expenses should be documented as completely as possible with bills and receipts or canceled checks. A certified public accountant (CPA) is often employed on a retainer basis. It will be the CPA's responsibility to handle the major financial records, such as annual profit and loss statements, tax returns, and other government reports. These reports are based on financial information supplied by the dental practice. This information must be accurate, up to date, complete, and presented in a usable format. The business assistant can help the accountant by having the required information and records in good order and ready on time. Packing Slips, Invoices, and Statements A packing slip is a form used in a warehouse operation that lists the items to be shipped and the recipient of the shipment. The packing slip may also include the amount due for a credit order and any shipping and handling charges, as well as a shipment control number. The packing slip travels with the shipment and, at the destination, is used to confirm that the shipment is complete. It is matched with the invoice before payment is made. When materials are received, they should be carefully checked against the packing slip to ensure that everything has been received as ordered and that everything is in good condition. Discrepancies or damage should be reported immediately to the supplier. An invoice may be included with the shipment, or it may be emailed separately, but it is a detailed list of goods shipped or services rendered, with an account of all costs on an itemized bill. Once an invoice has been verified, it should be paid promptly unless other arrangements have been made (Fig. 63.8). FIG. 63.8 Example of an invoice statement. (Courtesy of Patterson Office Supplies, Inc.) A statement is a summary of all invoices (charges), payments, credits, and debits for the month (Fig. 63.9). FIG. 63.9 Example of a statement from a dental supply company. (Courtesy of Patterson Office Supplies, Inc.) Organizing Expenditure Records Statements and invoices that have not yet been paid are placed in the accounts payable folder. As part of the organization of expenditure records, expenses are classified into categories; these usually include groups such as professional supplies, laboratory fees, salaries, rent and maintenance, utilities, and business office supplies. Category headings, which are determined by the dentist, are placed on file folders to store expense records in an organized manner. At the end of the year, this expense documentation is removed and filed, in the same categories, with other business records for that year. The same categories are used to organize disbursements in the check register and for budget purposes. If the practice has a computer system that handles disbursements, this information is entered by category and is used when disbursements are made and records for financial management of the practice are maintained. Payment of Accounts In the dental office, the accounts payable is routinely paid monthly. Before writing checks to pay these accounts, the business assistant removes all invoices and statements from the accounts payable folder. These statements and invoices are verified by checking the numbers and amounts of the invoices received from each supplier during that period against the monthly statement. It also is necessary to verify that all payments, credits, and returns have been properly entered. To facilitate the handling and storage of records, the invoices are stapled to the statement that covers them. The dentist should review and approve all bills before payment is made. Once these accounts have been approved for payment, the business assistant writes the necessary checks. As each statement is paid, the number of the check and the date the payment was made are noted on the statement. Customarily, the business assistant writes the checks but does not sign them; the prepared checks are given to the dentist for his or her signature. The office manager who has been given limited power of attorney by the dentist and has proper authorization on file with the bank may sign checks. Cash on Delivery Sometimes goods are shipped cash on delivery (COD), also referred to as "collect on delivery," which is the sale of goods by mail order with payment made on delivery rather than in advance. Some delivery services that handle COD merchandise will accept a check or credit card for the exact amount. The check should be made out to the supplier and not to the delivery service. The business assistant should never accept a COD package unless it is something that has been ordered and is expected. When paying for a COD, the business assistant should receive a signed receipt of payment. Petty Cash As stated earlier in the chapter, petty cash is a limited supply of cash that is kept on hand to reimburse patients with change. It is also available to meet frequent small expenses for which immediate cash is needed (e.g., postage stamps). The amount in the fund should be large enough to last weekly but not large enough to invite theft. In most offices, this amount is no more than $50. If more than this is needed within 1 week, it is likely that the concept of petty cash is misunderstood or that the cash is being misused. A petty cash voucher must be submitted for all payments made from the fund. Each voucher must include the date, the amount spent, to whom it was paid, what it was spent on, and who spent it. A receipt should be attached to each voucher (Fig. 63.10). FIG. 63.10 Petty cash voucher. Replenishing Petty Cash Funds Petty cash should be balanced and replenished on a regular basis. Because a voucher is completed for each petty cash payment, the sum of all the vouchers plus the cash on hand should always equal the total amount of the petty cash fund. When these have been balanced, a check is written to refill the fund. If the fund is balanced, the check (which will return the fund to its original amount) should be written for a sum equal to that of the vouchers for that month. The vouchers and attached receipts are stapled together, and the date and total are noted. These are filed under the "Business Office" expense category.

Payroll

Payroll is the sum of all financial records of salaries, wages, bonuses, and deductions. From the accounting perspective, payroll refers to the amount paid to employees for services provided during a specified period. From an accounting point of view, payroll is crucial because payroll and payroll taxes considerably affect the net income of a dental practice, plus they are subject to laws and regulations. Federal regulations require that an employer must make certain deductions from an employee's pay and that the employer also must pay certain payroll taxes. These federal requirements are explained in the Circular E booklet issued by the Internal Revenue Service (IRS). Most states publish similar booklets that explain the requirements for state income tax. The business assistant who is responsible for handling payroll should study these booklets carefully and ask questions about any point that is not clear. It is better to ask questions first than to make an expensive mistake that can be corrected only with great difficulty later. The government requires that each employer keep records of the hours worked, the amounts paid, and the amounts deducted for tax purposes. Complete and accurate employee records must always be kept, and back records should be stored with other important financial papers. A separate payroll sheet is maintained for each employee (Fig. 63.12). The headings on this form show the employee's full name (spelled correctly), Social Security number, address, and number of exemptions claimed. FIG. 63.12 Sample payroll report. The gross (total pretax) pay for each pay period is entered on this form, as are each of the deductions and the net (gross pay minus all deductions) pay. Net pay plus deductions must equal the earned gross pay. A withholding statement must be included with each payroll check. This provides the employee with information regarding the gross pay and the amount and reason for each deduction. Payroll Deductions Income Tax Withholding All employees must file a federal income tax return before April 15 of each year. A portion of the estimated tax is withheld directly from each paycheck during the year. By the end of the year, the amount withheld should approximate the annual tax that the employee will owe. Amounts withheld are determined from a schedule in Circular E. These amounts are based on earnings and the number of exemptions claimed. It is the responsibility of the employer to withhold this tax and to remit it to an authorized bank or directly to the IRS. Each employee must complete an employee's withholding exemption certificate (W-4 form) at the following times: (1) at the beginning of employment, (2) within 10 days of any change of status (such as marriage), and (3) before December 1 of the following year. This form authorizes the employer to deduct the tax and indicates the number of exemptions that the employee is claiming. These completed forms must be kept with other payroll records. Federal Insurance Contributions Act Under the Federal Insurance Contributions Act (FICA), commonly known as Social Security, the employer is required to deduct a certain percentage of the employee's gross pay. This is a fixed amount regardless of the number of exemptions. The employer also is required to match the contribution. Thus, for each FICA dollar withheld from the employee's wages, the employer also contributes a dollar. Both contributions are forwarded quarterly to the federal government to be credited to the employee's account. For FICA earnings to be properly credited, it is important to keep the Social Security Administration informed of any change of name. The employee will receive a Statement of Earnings from the Social Security Administration annually. This is a written record of the amount "credited" to the employee's account. Should an error be found here, it must be reported and corrected through the Social Security Administration. Other Deductions Additional federal, state, and local taxes may be withheld from the employee's pay. The person in charge of payroll computations is responsible for having current information about the regulations that govern these deductions. Personal deductions, such as the employee's contribution to health or life insurance coverage, an automatic personal savings plan, or pretax retirement contributions, may be taken directly from the employee's earnings. The employer must pay additional payroll taxes such as workers' compensation, federal unemployment taxes (FUTA), and state unemployment insurance (SUI). These amounts are not deducted from the employee's earnings, except in states in which a portion of the SUI tax is paid by the employee. Government Remittance All government reports must be completed accurately and neatly (preferably typewritten or computer generated) and filed on time. Stiff penalties are issued for late reports. All employers are required to file an "Employer's Quarterly Federal Tax Return." This is a report of all taxable wages paid during the quarter. Withheld taxes and FICA contributions must be deposited regularly; the frequency of these deposits depends on the total amount owed. Within 30 days of the end of the calendar year or on termination of employment, the employee must be furnished with a statement of total earnings and taxes withheld for that year (W-2 form). Many computer systems have the capabilities to process payroll and taxes, creating computer-generated reports and business summaries that fit the individual practice.

Writing Checks

Some practices have computerized check-writing capabilities. Advantages of computerized check writing include savings in time, reduced possibility of error, and ease of storage and retrieval of specific information. Other practices use a manual pegboard check-writing system or a business checkbook. Check Terminology A check is a draft, or an order, drawn on a specific bank account for payment of a specified sum of money to the payee or to the bearer. Payment is made on demand, meaning that when the check is presented to the bank, that amount of money must be paid, provided the account includes sufficient funds to cover the amount of the check. The payee is the person named on the check as the intended recipient of the amount shown. The payee's name is written after the words "Pay to the order of." The name of the payee should be written out in full; however, titles such as Mr., Mrs., and Ms. are best omitted. It is preferable to make a check out to "Mary Jones" rather than to "Mrs. John Jones." The maker of the check is the one from whose account the amount of the check will be withdrawn. The maker of the check, or his or her authorized agent, must sign the check on the signature line. The check register is a record of all checks issued and deposits made to the account. The check register entry should be made before the check is written. It should include the following: • Date (a check should be dated for the day it is written and should never be predated or postdated) • Number of the check • Name of the payee • Amount and purpose of the check Whether a manual or computerized system is used to process check writing, the utmost care should be taken in stating the amount of the check in both figures and words and in making certain that the amount stated agrees in the following three places (Fig. 63.11): FIG. 63.11 Correct ways to write a check. • On the check register • In numbers on the right side of the check next to the dollar sign • Written out in words on the line before the word "dollars" Note that the number of cents is usually written as a fraction to avoid a mistaken placement of the decimal point. Check Endorsement Before the payee can receive cash for the check, he or she must endorse (sign) it. Endorsement is made on the back-left side of the check and must match the name shown on the face of the check. A check signed in this manner has a blanket endorsement, and anyone holding that check may cash it (including someone who may have stolen it). With a restrictive endorsement, which may read "For deposit only to the account of [the name of the payee]," the check can be deposited only to the account of the named individual. This type of endorsement makes the check nonnegotiable, that is, it can be deposited only to that account, and if it is stolen, it cannot be cashed. A rubber stamp with the appropriate restrictive phrase and the payee's name may be used in place of the payee's signature. As a safeguard, such a restrictive endorsement should be placed on all checks as soon as they are received. Stop Payment Order If the maker of a check, for various reasons, does not want the bank to pay a check he or she has written, the maker may request that the bank issue a stop payment order for that check. The stop payment order must give all necessary information, such as number of the check, date issued, name of the payee, amount of the check, and reason for stopping payment. The written stop payment order must reach the bank bookkeeper before the check is presented for payment. These orders are usually in force for 90 days, and the bank charges for this service. Nonsufficient Funds A check written for more than what is in a person's account will be returned. The check will be returned to the payee marked nonsufficient funds (NSF). This means that not enough money is in the account to cover the check, and the payee cannot collect any of the amount due. A check that has been returned for this reason is known as a returned item; however, it is commonly referred to as having "bounced" (come back). The bank will add a charge against the account of the person (or company) who wrote the NSF check; however, no charge is usually applied to the person who received the check. For accounting purposes, when a check from a patient is returned, the amount of that check must be "charged back" against the patient's account. Do this by making an entry in the ledger, noting the date on which the check was returned. Then make an adjustment, which acts as a charge and increases the account balance by the amount of the returned check. It also is necessary to make a check register entry; here, the amount of the returned check is subtracted from the checking account balance. Often a telephone call to the maker will resolve the problem, and the check may be redeposited. A check that is to be redeposited should be listed on a separate deposit slip and clearly marked so that it is not credited twice to income. When the check is redeposited, this should be noted on the account history, and the amount of the check again should be subtracted from the balance. If a returned check cannot be redeposited, the outstanding balance on that account requires immediate attention. Business Summaries All checks must be accounted for in a specific expense category. With a computerized system, posting to the appropriate category is part of the check-writing process. With the pegboard system, check-writing expenses are posted into categories at the time the check is written. Totals from monthly summaries are carried forward to an annual summary. By keeping these records, the dentist and the accountant at any time can quickly tell what the practice expenses have been to date. This is important information for management, budgeting, and tax purposes.

Accounts Receivable

The accounts receivable system manages all money owed to the practice. Accounts receivable management, which is commonly referred to as bookkeeping, involves the daily maintenance of financial records from all transactions related to the collection of fees for professional services provided to a patient. This information is arranged systematically so it is always accurate and provides the data needed for effective management of these financial matters. The business assistant assumes the responsibility of handling another person's money. In this way, he or she is responsible for making every effort to keep this money safe, to record it accurately, and to respect the confidence in which all this information must be held. The dentist may choose to obtain fidelity bonding insurance on staff members who handle practice funds by receiving and banking patient payments or writing checks. This insurance will cover a loss, and the employee can be prosecuted under the law for any such theft. Types of Accounts Receivable Systems The most frequently used type of accounts receivable bookkeeping system in a dental practice is the computerized system or a manual pegboard system. It is estimated that 75% of dental offices are using an electronic practice management system because of the capability of integrating technology with their accounting system. Computerized Accounts Receivable Management With a computerized accounts receivable system, data entered into the system is used to maintain account histories and practice records (Fig. 63.1). It is essential that the information be entered into the system accurately because it is used to generate account totals and daily and monthly summaries. These and other management reports are automatically calculated and produced by the system. It is also important that the data collected is secured and protected by being backed up (copied for safekeeping) daily. An additional set of backup files should be stored in a safe place. These backup records are vital in the event of theft, fire, or other disaster that makes it necessary to reconstruct information that may have been lost from the system. FIG. 63.1 Computerized accounts receivable management system. (Courtesy Patterson Dental, St Paul, MN.) Pegboard Accounts Receivable Management Pegboard accounting, also known as a one-write system, is a manual bookkeeping system in which all records are completed with a single entry. Through positioning of the daily journal page, ledger card, and a carbonized receipt, all financial records for each patient visit are completed by documenting the information (Fig. 63.2). Entries for additional records, such as daily totals and monthly summaries, are also completed manually. The totals then must be calculated and verified for accuracy. FIG. 63.2 Anatomy of pegboard accounts receivable system. (Modified from Gaylor LJ: The administrative dental assistant, ed 4, St Louis, 2016, Elsevier.) Accounts Receivable Management Basics Whether you are using a computerized system or manual system, the same information requirements and organizational format are necessary. Learning to use either system begins with an understanding of the basics of accounts receivable bookkeeping. The accounting process begins when the patient leaves the treatment area. Charge Slips A charge slip, also referred to as a routing slip or superbill, is used to transmit financial information from the treatment area to the business office. The form contains information about the patient, such as name, account number and previous balance, current charges, and payment. The form can be designed to include all the procedures completed in the office along with the insurance Current Dental Terminology (CDT) code. The form provides space for the dentist or assistant to note the treatment provided at the visit. The form consists of three color-coded pages (white for the patient's permanent record, yellow for the office or patient to submit to the insurance company, and pink for the patient's copy) (Fig. 63.3). FIG. 63.3 A sample superbill form is used to transmit financial information from the treatment area to the business office. (Courtesy Patterson Dental, St Paul, MN.) The completed charge slip is returned to the business office, and the information is posted to the accounts receivable system. Charge slips are a part of the audit trail. A charge slip is generated for each patient. At the end of the day, a specific number must account for each charge slip. This provides the business assistant with verification that all patient visits have been entered into the system. Walkout Statements A walkout statement is like a receipt, except that it shows the current account balance. It is provided to patients who do not provide payment in full (Fig. 63.4). A walkout statement should be provided with a postage-paid reply envelope, allowing the patient to mail the outstanding payment within a specified time period. The use of walkout statements improves cash flow because it speeds payments. It also reduces the number of statements that must be prepared and mailed at the end of the month. FIG. 63.4 A walkout statement is presented to the patient for his or her records. (Courtesy of Patterson Office Supplies, Inc.) Daily Journal of Business Transactions A journal is a detailed account that records all the financial transactions of the day. The entry into the journal can be either a computerized or manual step in the account cycle. All transactions recorded show the account name and amount received. This information is this transferred to the ledger Recording Payments All payments are entered into the bookkeeping system, which includes the account history and the daily journal page. Payments received by mail are entered in the same manner as those made in person. As a safeguard, checks should be stamped immediately with a restrictive endorsement, which prevents anyone from cashing a check if stolen. Patient Account Records Patient account records are organized based on information regarding the responsible party. The responsible party, also known as the guarantor, is the person who has agreed to be responsible for payment of the account. This is not always the patient. The patient account record is used to track all account transactions. A current account balance is always maintained, and this information is used to generate statements, insurance claims, and other collection efforts. In a manual system, patient account records are maintained on account ledger cards. In a computerized system, these are organized as account histories or ledgers. Payment Patients' accounts can be handled in several ways, such as payment at the time of treatment, payment by monthly statement, and payment plan. Dental insurance can be considered as another method of payment, although it must be emphasized that the patient is responsible for the balance not covered by the insurer. To help alleviate concern for the patient, a pretreatment estimate form can be submitted to the insurance carrier. This would provide information on what the insurance company covers and any additional patient payment or copayments that will be required. Payment at the Time of Treatment Under this payment policy, patients are asked to make payment in full for treatment provided at each visit. This system helps control practice costs by improving cash flow and reducing the cost of sending statements or using other collection methods. Patients must be notified of this type of payment plan before the first visit. In many practices, this is completed during the initial telephone conversation. Under this plan, cash, checks, and credit cards are accepted for payment. Cash Although few patients pay for dental treatment in cash, it is necessary to be alert to the needs of cash-paying patients. When you are accepting payment in cash for services, it is essential to ensure that the office has correct change available for the patient. The patient who is paying cash is provided a written (or computer-generated) receipt. A change fund, or petty cash fund, is a fixed amount of cash (usually $50 or less) that is maintained in small bills so that money will be available when a patient pays in cash. Each morning, the change fund is placed in the cash drawer, and it is used as needed during the day. At the end of the day, the change fund is removed and placed in safekeeping. Money from the change fund does not become part of the daily deposit, and the amount in the change fund at the end of the day must be the same as it was at the beginning of the day. Check Patients will pay for dental services with a personal check to the dentist or to the name of the professional practice. In some practices, it is office policy to review the payer's driver's license number and one other form of identification. Patients paying by check will see the receipt for payment in the checking statement provided by their bank. Credit Cards Approximately 75% of consumers prefer to pay with a credit or debit card. Credit card transactions are listed as payments, but the posting code is different from that used for cash or a check. To accept credit cards in a small business, you need to have a merchant account with a participating bank. The bank charges a percentage rate (average 2%) as a service fee for handling these transactions, and a fee per transaction (average 25 cents). This is referred to as discounting because at the end of the month, these charges are deducted, or discounted, from the funds. An adjustment entry is made in the checkbook to accommodate this discount as a practice expense. This difference is not subtracted from the patient's account. You will have a credit/debit card reader. A credit card reader works with your point of sale system to handle the transactions. Once the card is swiped or inserted, the purchase will be approved or denied. The bank will receive their fees and deposit the funds into the practice's account. The credit card charge form is completed, and a copy is handed to the patient. Credit card charges are not part of the regular bank deposit. Instead, they are managed in accordance with the instructions from the institution issuing the credit card. Digital Wallet A new means of payment, referred to as the digital wallet, is taking the place of checks and credit cards. This allows an individual to make a payment using an "app" that is downloaded on his or her smartphone to make an electronic transaction. This new technology can provide security and encryption of personal information, making it a safer means of financial transactions. The individual's bank account is linked to the digital wallet, allowing the money to move directly from one account to another. Professional Courtesy and Discounts Occasionally, the dentist will extend a professional courtesy in the form of a discount to professional colleagues or members of their families. The dentist makes this determination and places a notation on the chart after completing the treatment for the day. For example, if the usual fee for a procedure is $50 and the dentist wishes to give a professional courtesy of $10, the amount owed is $40. A practice may offer a discount if payment is made in full before the beginning of planned treatment. For example, if a patient is having a complete upper and lower denture fabricated at a cost of $1400, the dentist might extend a 5% discount ($70) for payment in full. In this case the patient would pay $1330 in advance, for a savings of 5% off the total charge. To enter this discount into the bookkeeping system, the total fee of $1400 is posted. Then an adjustment representing the discount is entered for $70. This adjustment acts as a credit and leaves an account balance of $1330 to be paid. Daily Proof of Posting At the end of each workday, the entries on the daily journal page are compared with the appointment book to ensure that all patient visits have been entered. Computerized systems total all figures automatically and can print various reports as needed. The total for receipts must match the amount in the cash drawer minus the change fund. If these two numbers do not match, or "balance," it is necessary to go back and find the error. Bank Deposits All receipts should be deposited daily. When the amount of receipts exactly matches the amount of deposits, the account has met the auditor's critical test to verify bookkeeping accuracy. A deposit slip is an itemized memorandum of the currency and checks taken to the bank to be credited to the practice's account (Fig. 63.5). This slip is generated from the computer after all checks have been posted. After the deposit has been made, the date and amount of the deposit should be entered in the practice check register as follows: FIG. 63.5 Deposit slip. • The deposit slip must be imprinted with the practice name, address, and account number. • The information on the deposit slip must be legible. • All cash (bills and coins) is listed together under "Currency." • Checks are listed separately, usually by the last name and first initial of the person writing the check. Computer systems do this automatically when checks are posted. • In many practices, the deposit slip is completed in duplicate so a copy can be retained with the practice records. Monthly Statement The monthly statement represents a request for payment of the balance due on the accounts receivable. Under this plan, the patient is expected to pay the balance in full on receipt of the statement. A computer-generated statement shows these data, plus an age analysis of the account balance. Financial arrangements also can be printed on a computer-generated statement. Some practices add a finance charge (usually 1%) to accounts that are not paid within 30 days of receipt of the first statement. When a charge such as this is incorporated on an account, or when more than four payment installments are set up, the patient will receive a Truth in Lending statement (Fig. 63.6). FIG. 63.6 Example of a truth-in-lending form. (Modified from a form provided courtesy Patterson Dental, St Paul, MN. From Finkbeiner BL, Finkbeiner CA: Practice management for the dental team, ed 8, St Louis, 2016, Mosby.) Divided Payment Plans Divided payment plans are arrangements by which the patient pays a fixed amount on a regular basis. For example, orthodontic treatment is commonly divided into a monthly payment plan. These arrangements are made at the time of the case presentation. After the patient has accepted the proposed treatment plan, the business assistant will work with the patient to develop a divided payment plan. When a divided payment plan is set up, the primary information to be determined includes: • Total fee for services to be rendered • Balance after deduction of the down payment; the resulting amount is to be financed • Annual percentage rate of the finance charge (if there is one) • Number of payments to be made • Amount of each payment • Date on which each payment is due Once this information has been gathered, the payment plan agreement is completed, and both the patient and the dentist must provide a signature to confirm the agreement. A copy is provided to the patient, with the original kept in the patient's record.

transaction

any charge, payment, or adjustment made to a financial account

fixed overhead

business expenses that are ongoing

variable overhead

business expenses that change depending on the types of services needed

coordination of benefits (COB)

coordinating insurance coverage between two insurance carriers

provider

dentist who provides treatment to the patient

accounts payable

expenses and disbursements paid out from a business

customary fee

fee that is within the range of the usual fee charged for the service

ledger

financial statement that maintains all account transactions

change fund

fixed amount of cash

fidelity bonds

form of insurance that protects a business from employee theft

net income

gross income minus expenses

invoice

itemized list of goods that specifies the prices and terms of sale

packing slip

itemized listing of shipped goods

deposit slip

itemized memorandum of funds to be deposited into the bank

petty cash fund

limited amount of cash that is kept on hand for small daily expenses

pegboard system

manual bookkeeping system that keeps the transactions for the day

carrier

name of the insurance company that pays the claims and collects premiums

expenses

overhead costs of a business that must be paid to keep operating

statement

summary of all charges, payments, credits, and debits for the month

accounting

system designed to maintain the financial records of a business

gross income

total of all professional income received

walkout statement

written indication of a balance due on an account, given to a patient at the end of an appointment

Dental Insurance

Dental insurance is an assistance program that supports the patient or family with the cost of dental care. There are different forms of dental insurance policies available for individuals, with each one designed to help offset the costs associated with necessary dental care. They are the traditional dental insurance dental plan, managed care dental insurance plan, and government programs. Traditional Insurance Plan The traditional insurance plan, also referred to as the indemnity plan, provides benefits for dental treatment that the covered individual has received from his or her own dentist. These plans are considered fee-for-service and come with limitations and copayment options. This means that the patient pays a flat fee for the dental visit but has an annual limit on coverage for dental spending, and specific coverage limits that may apply to individual dental procedures. The total dollar amount of coverage one of these policies provides is typically limited by its deductible and maximum benefit. Managed Care Dental Insurance Plan With escalating medical and dental premiums affecting the healthcare system, managed care is a method of providing low- to medium-cost healthcare coverage to everyone. Under these plans, the type, level, and frequency of treatment can be limited and disease prevention is encouraged. The plans also try to control the level of reimbursement for services. Capitation Plans (Dental HMOs) Capitation plans (dental HMOs) involve an arrangement in which a dentist (dental office, several dental offices, a network of dentists) has contracted to provide dental services for the plan's members. The dentist is paid (usually monthly) a fixed amount per dental plan participant who has selected the dentist as his or her treatment provider. In return, it is the dentist's obligation to provide any and all needed dental treatment for these individuals (as specified by the conditions of the plan) during the negotiated time frame. Preferred Provider Organizations (Dental PPOs) Preferred provider organizations (dental PPOs) are technically a "closed panel" type of plan. This is a variation of a fee-for-service practice. A dentist may join a PPO in hopes of attracting new patients or to retain his or her current patients who are covered by the PPO plan. These patients are seen in the dentist's office. The dentist also may continue to see other fee-for-service patients who are not part of the PPO contract. These fee-for-service patients are charged the dentist's usual fees. Exclusive Provider Organizations (EPOs) Exclusive provider organizations (EPOs) are another form of "closed panel" dental insurance. They are similar to dental PPOs, with the exception that the patients are offered no option other than receiving their treatment from a dentist who is a member of the plan's network of providers. Direct Reimbursement Plan A direct reimbursement plan is a self-funded program in which the individual is reimbursed by his or her employer based on a percentage of dollars spent for dental care provided. This type of plan allows beneficiaries to seek treatment from the dentist of their choice. Under a direct reimbursement plan, no insurance carrier is involved. Instead, the employee pays the dentist, and the employer reimburses a portion of this expense. The amount of reimbursement depends on the benefit design established by the employer. Individual Practice Associations An individual practice association (IPA) is an organization that is formed by groups of dentists or, in some cases, dental societies, for the primary purpose of collectively entering into contracts to provide dental services to enrolled populations. Frequently, services are provided on a capitation basis. These dentists may practice in their own offices. In addition to treating patients enrolled in the IPA, they may provide care to patients who are not covered by the contract. Treatment of patients who are not covered is provided on a traditional fee-for-service basis. Patient Protection and Affordable Care Act Millions of individuals lack access to dental care because of lack of health insurance or their income is too low to pay for any type of medical or dental bills. On March 23, 2010, President Barack Obama signed a comprehensive health reform, the Patient Protection and Affordable Care Act (ACA), into law. This law was intended to expand coverage, control healthcare costs, and improve the healthcare delivery system. Dental care for adults is not an essential health benefit under the ACA. Dental care for adults is an optional benefit in Medicaid. However, dental care for children is a mandated benefit in Medicaid and the Children Health Insurance Program (CHIP) to provide medical and dental health to eligible children. Medicare is funded by the federal government, but the terms of the program and what is or is not covered is established by each state government. It is a health insurance program that is available for people who are 65 years and older or for those patients who have specific disabilities or a special need. Medicaid Dental Coverage serves low-income children, pregnant women, the disabled, and the impoverished elderly. Medicaid is a voluntary partnership program between the federal government and individual states. Medicaid covers dental services for all children enrolled as part of a comprehensive set of benefits. Dental services for children must minimally include relief of pain and infections, restoration of teeth, and maintenance of dental health. As of 2018, 38.5% of children ages 2 through 18 have dental benefits through Medicaid or CHIP. Of adults ages 19 through 64, 7.4% have dental benefits through Medicaid. Parties Involved in Dental Insurance A working knowledge of the parties involved in dental insurance is necessary for an understanding of basic insurance concepts. In most instances, the following parties are involved. The person who receives the dental treatment is the subscriber who carries the dental insurance plan or the dependent of the subscriber, such as a spouse or a child. The group is the union or employment organization that has negotiated the dental insurance as part of its benefits package. The carrier is the party (usually an insurance company) who pays the claims and collects the premiums. The provider is the dentist who provides the treatment to the patient. Table 63.1 provides a list of the terms most commonly used for dental insurance. TABLE 63.1 Insurance TermsTermDefinitionAccepted feeThe dollar amount that the contracting dentist has agreed to accept as payment in full from the insurance and the patient. This amount is shown on the notice that accompanies payment of a claim.Annual maximumThe total dollar amount that an insurance plan will pay for dental care incurred by an individual patient or family (under a family plan) in a specified benefit period, typically a calendar year.Balance billingWhen a dentist bills the patient for an amount above fee and the enrollee's coinsurance, the dentist is balance billing and violating his or her contract with the insurance company.Basic services/basic benefitsA category of dental services in an open network dental benefits contract that usually includes restorations (fillings), oral surgery (extractions), endodontics (root canals), periodontal treatment (root planing), and sealants. (This may vary by contract.) Typically, the same coinsurance percentage applies to all services grouped as basic services.BenefitsThe amounts that the insurance pays for dental services covered under a patient's contract.CapitationCompensation paid to general dentists in a closed network dental benefit plan (such as a DHMO) for providing covered services to enrollees assigned to their office.Claim/claim formA standard form that provides an itemized statement submitted by an enrollee or a dentist requesting payment of benefits for dental services provided.Closed network planA type of dental plan in which enrollees must visit a preselected or assigned network dentist to receive benefits.CoinsuranceThe enrollee's share, expressed as a fixed percentage, of the contract allowance. For example, a benefit that is paid at 80% by the plan creates a 20% coinsurance obligation for the enrollee. Coinsurance applies after the enrollee meets a required deductible.Contract benefit levelThe percentage of the maximum contract allowance that the insurance company pays after the deductible has been satisfied.Contracted dentistA dentist who has a contract with the insurance company to participate in a network.Contracted feeThe fee for each single procedure that a contracted dentist has agreed to accept as payment in full for covered services provided to an enrollee.Coordination of benefits (COB)A process that carriers use to determine the order of payment and amount each carrier will pay when a person receives dental services that are covered by more than one benefit plan (dual coverage). COB ensures that no more than 100% of the charges for services are paid when an enrollee has coverage under two or more benefits plans—for example, a child who is covered by both parents' plans.CopaymentA fixed dollar amount that an enrollee under certain dental plans (such as a DHMO-type plan) is required to pay at the time the service is rendered.DeductibleA dollar amount that each enrollee (or, cumulatively, a family for family coverage) must pay for certain covered services before insurance begins paying benefits.Diagnostic and preventive servicesA category of dental services in an open network dental benefits contract that usually includes oral evaluations, routine cleanings, x-rays, and fluoride treatments.Dual choiceA program that allows enrollees to select one of two or more dental plans. (Also, may be referred to as "dual option.")Dual coverageWhen dental treatment for an enrollee is covered by more than one dental benefits plan, such as when dental services are provided to a child who is covered by both parents' benefit plans.Effective dateThe date a dental benefits contract begins; may also be the date that benefits begin for a plan enrollee.EligibilityThe circumstances or conditions that define who and when a person may qualify to enroll in a plan and/or a specific category of covered services. These circumstances or conditions may include length of employment, job status, length of time an enrollee has been covered under the plan, dependency, child and student age limits, etc.Eligible enrolleeAn enrollee who has met the eligibility requirements under the insurance plan.Fee-for-serviceCompensation paid to dentists based on an amount per service. A fee-for-service plan generally permits enrollees to freely select a network or noncontracted dentist to provide the service.Health maintenance organization (HMO)An entity that is authorized to issue a benefit plan in which enrollees receive all or most treatment through a preselected or preassigned dental office. The dentist receives a monthly capitation payment for each patient who selects or is assigned to that office, no matter how many services that patient receives.In-network/out-of-networkServices provided in a plan either by a contracted or noncontracted dentist. In-network dentists have agreed to participate in a plan and to provide treatment according to certain administrative guidelines and to accept their contracted fees as payment in full.Lifetime maximumThe cumulative dollar amount that a plan will pay for dental care incurred by an individual enrollee or family (under a family plan) for the life of the enrollee or the plan. Lifetime maximums usually apply to specific services such as orthodontic treatment.Limitations and exclusionsDental plans typically do not cover every dental procedure. Each plan contains a list of conditions or circumstances that limit or exclude services from coverage. Limitations may be related to time or frequency (the number of procedures permitted during a stated period)—for example, no more than two cleanings in 12 months or one cleaning every 6 months.NetworkA panel of dentists that contractually agree to provide treatment according to administrative guidelines for a certain plan, including limits to the fees they will accept as payment in full.Open accessA plan feature that allows enrollees to visit the dentists of their choice (freedom of choice). Also sometimes used to describe an enrollee's ability to seek treatment from a specialist without first obtaining a referral from his/her primary care dentist.Open enrollmentA period (usually a 2-week or 1-month period during the year) when qualified individuals (eligible employees) can enroll in or change their choice of coverage in group benefits plans.Open network planA type of dental plan in which enrollees can visit any licensed dentist and can change dentists at any time without contacting the benefits carrier.Out-of-pocket costsAny amount the enrollee is responsible for paying, such as coinsurance or copayments, deductibles, and costs above the annual maximum.Patient's shareThe portion of a dentist's fee that an enrollee must pay for covered services, including coinsurance or copayment, any remaining deductible, any amount over plan maximums and/or any services the plan does not cover.PreauthorizationA requirement that recommended treatment must first be approved by the plan before the treatment is rendered in order for the plan to pay benefits for those services.Preferred provider organization (PPO) planA reduced fee-for-service plan that allows enrollees to visit any dentist but encourages them to visit PPO network dentists to minimize out-of-pocket expenses. Enrollees usually pay less when visiting a PPO dentist.Prepaid planA term used to describe a benefits plan in which a carrier prepays network dentists a capitated amount for each patient enrolled in (assigned to) his or her office.Pretreatment estimateThe insurance company's written estimate of benefits available as of a specific date, given to an enrollee or treating dentist in advance of proposed treatment.Primary enrolleeAn individual (commonly, an employee or member of an association) who meets the eligibility requirements for enrollment in a dental plan. Family members of a primary enrollee are called dependents.ProviderAny licensed dentist who performs dental health services for an enrollee. This includes general dentists and dental specialists.Submitted feeThe amount that the dentist bills and is entered on a claim as the charge for a specific procedure.Table programA dental plan in which benefits are based on a specific table or schedule of allowances or fees.Usual feeThe amount commonly charged for a service by a dentist.Waiting periodA stated period that a person must be enrolled in a plan before being eligible for benefits or for a specific category of benefits. How Benefits Are Calculated The three most commonly used methods of calculating fee-for-service benefits are (1) usual, customary, and reasonable (UCR) fees; (2) schedule of benefits; and (3) fixed fee schedules. Usual, Customary, and Reasonable Fees The term usual fee refers to the fee that the dentist charges private patients for a given service. These fees are determined by the individual dentist and are the fees that are routinely charged by the practice. The dentist files a confidential list of these fees with the carrier. The carrier uses this information, called prefiled fees, to determine the customary fee for the area. A customary fee is one that is within the range of the usual fees charged for the same service by dentists with similar training and experience within the same geographic area (such as a city or county). Using information from the prefiled fees, the carrier determines what is customary based on a percentile of the fees charged by dentists within that area. A reasonable fee is one that is considered justified by special circumstances necessitating extensive or complex treatment. These apply to unusual cases for which the dentist would charge more than the usual fee, even to a private patient, because of the extent of treatment involved. For instance, a particularly difficult extraction might justify an unusual fee. In these instances, the dentist can charge whatever is reasonable for the situation; however, the carrier may request written documentation to explain why the unusual fee was necessary. In a UCR system, the payment can still be low, and the patient is responsible for the difference between the insurance payment and the dentist's fee. The limitations of the policy also influence the amount that the dentist receives from the carrier and how much the patient must pay. Schedule of Benefits This also is known as a table of allowances or a schedule of allowances. A schedule of benefits is a list of fixed specified amounts that the carrier will pay toward the cost of covered services. A schedule of benefits is not related in any way to the dentist's actual fee schedule. Under most schedule of benefit plans, the patient is responsible for the difference between what the carrier will pay and what the dentist charges. Fixed Fee Schedule A fixed fee schedule is an established fee for any treatment received by the patient. Under government programs, such as Medicaid, the dentist must accept the amount paid by the carrier as payment in full and may not bill the patient for the difference. Determining Eligibility When a subscriber starts a new job, a 30- to 60-day waiting period is commonly required before coverage becomes effective. If a subscriber changes jobs, is laid off, or retires, his or her coverage is customarily terminated within 30 days of the change. However, the subscriber has the option to continue coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985. This entitles the subscriber to continue the same coverage, but he or she is responsible for paying the premiums. If any question regarding eligibility arises, the carrier should be contacted before routine dental care is started. The rules for eligibility under other government programs, such as Medicaid and the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), vary greatly. Medicare does not include dental coverage. When working with clients enrolled in government programs, you must be familiar with the specific form of identification that should be requested to determine eligibility. This usually is an identification card or a proof-of-eligibility sticker. Because the individual's eligibility may change from month to month, it is essential that this identification be verified at each visit. Determining Benefits The employer who purchases coverage as a benefit for employees negotiates the limitations and benefits of the plan. The carrier is responsible for covering only the level of treatment that is included in that plan. Information that explains the coverage under a specific plan is found in the benefits booklet supplied to the subscriber. The patient is asked to bring this booklet to the first dental visit so that coverage can be reviewed and discussed before the start of treatment. The two major factors that determine how much the carrier will pay and how much the patient must pay are the method of payment and the limitations within the plan. Limitations In addition to different methods of payment, other factors influence the level of benefits that the beneficiary is entitled to receive under the plan, and how much he or she must pay as a share of these costs. Least Expensive Alternative Treatment The least expensive alternative treatment (LEAT), also known as an alternative benefit policy, is a limitation in a dental plan that allows benefits only for the least expensive treatment. For example, a patient needs a replacement for a missing tooth. Treatment alternatives include a fixed bridge costing $3000 or a removable partial for $1200. Under LEAT, the carrier will pay benefits only for the partial denture. The patient may choose to have the bridge, but the carrier will pay only $1200 (as if the patient had a partial denture made), and the patient is responsible for the difference in the fee. Dual Coverage If a patient has dental insurance coverage under more than one plan, this is known as dual coverage. In this case it is necessary to take steps to be certain that the appropriate benefits are paid. Determining Primary and Secondary Carriers. With situations involving dual coverage, it is necessary to determine which carrier is primary (and should pay first) and which carrier is secondary (and should pay at least a portion of the balance). Specific questions on a claim form ask for this information. When the patient is the insured, his or her carrier is always primary, and the spouse's carrier is secondary. When spousal coverage is in place for patients with insurance of their own, their insurance must be billed first. After payment from the primary insurance company is received, a claim is sent to the other insurance company if any balance is still due. Birthday Rule. The birthday rule was established to explain which insurance carrier is the primary carrier when both parents have insurance to cover a child. The rule stipulates that when a child is covered under both parents' plans, the plan of the parent whose birthday (month and day, not year) falls earlier in the calendar year is billed first. This rule applies to parents who are not divorced. Other factors are considered when parents are divorced or separated and when step-parents are involved. It is important to work with parents to determine the appropriate sequencing of insurance form filing by clearly defining office billing policies for the parent accompanying the child. Coordination of Benefits. Under coordination of benefits (COB), the patient will receive payment from both carriers, but the total received may not be more than 100% of the actual dental expenses. For example, the fee is $250. Benefits from the primary carrier are $175 for this service. No matter what benefits the secondary carrier usually pays for this service, under coordination of benefits, the second carrier will pay no more than the difference between the fee and the amount paid by the primary carrier. This comes to $75, after which the patient has been reimbursed for 100% of the fee. Nonduplication of Benefits Under plans that call for nonduplication of benefits, also known as benefit-less benefit, a provision relieves the carrier from responsibility for paying for services that are covered under another program. Under these plans, reimbursement is limited to the higher level allowed by the two plans rather than to a total of 100% of the charges. For example, the fee is $250. The primary carrier allows $175 for this service. The secondary carrier allows $190 for this service. In this situation, the primary carrier pays $175. The secondary carrier pays only $15, which is the total amount of the allowed benefit minus the amount that has already been paid. If the primary carrier allowed the higher of the two benefits, the secondary carrier would not pay anything. The result is that the patient is reimbursed for the higher of the two allowed amounts but not for 100% of the fee. Many patients are not aware of the nonduplication of benefits clause, which can cause confusion regarding their benefits. It is important to explain this clause to patients after their predetermination results are returned. Dental Procedure Codes The Code on Dental Procedures and Nomenclature was developed by the American Dental Association (ADA) to speed and simplify the reporting of dental procedures. These codes are provided in Current Dental Terminology (CDT), which is published and periodically updated by the ADA. These codes are very specific. The CDT should be reviewed carefully before specific dental treatment is coded. Each procedure has a designated code number. The codes are divided into categories of service and are listed in Table 63.2. TABLE 63.2 Dental Procedure CodesCodeProcedure(s) Diagnostic D0100-D0999 • Clinical oral evaluations • Radiographs/diagnostic imaging (including interpretation) • Tests and examinations • Oral pathology laboratory Preventive D1000-D1999 • Dental prophylaxis • Topical fluoride treatment (office procedure) • Other preventive services • Space maintainer Restorative D2000-D2999 • Amalgam restorations (including polishing) • Resin-based composite restorations—direct • Gold foil restorations • Inlay/onlay restorations • Crowns—single restorations only • Other restorative services Endodontics D3000-D3999 • Pulp capping • Pulpotomy • Endodontic therapy on primary teeth • Endodontic therapy (including treatment plan, clinical procedures, and follow-up care) • Endodontic retreatment • Apexification/recalcification procedures • Apicoectomy/periradicular services • Other endodontic procedures Periodontics D4000-D4999 • Surgical services (including usual postoperative care) • Nonsurgical periodontal service • Other periodontal services Removable prosthodontics D5000-D5899 • Complete dentures • Partial dentures (including routine postdelivery care) • Adjustments to dentures • Repairs to complete dentures • Repairs to partial dentures • Denture rebase procedures • Denture reline procedures • Interim prosthesis • Other removable prosthetic services Maxillofacial prosthetics D5900-D5999 • Prosthetic replacements • Radiation • Surgical splinting Implant services D6000-D6199 • Presurgical services • Surgical services • Implant supported prosthetics supporting structures • Implant/abutment supported removable dentures • Implant/abutment supported fixed dentures (hybrid prosthesis) • Single crowns, abutment supported • Single crowns, implant supported • Fixed partial denture, abutment supported • Fixed partial denture, implant supported • Other implant services Fixed prosthodontics D6200-D6999 • Fixed partial denture pontics • Fixed partial denture retainers—inlays/onlays • Fixed partial denture retainers—crowns • Other fixed partial denture services Oral surgery D7000-D7999 • Extractions (includes local anesthesia, suturing, if needed, and routine postoperative care) • Surgical extractions (includes local anesthesia; suturing, if needed; and routine postoperative care) • Other surgical procedures • Alveoloplasty—surgical preparation of ridge for dentures • Vestibuloplasty • Surgical excision of soft tissue lesions • Surgical excision of intraosseous lesions • Excision of bone tissue • Surgical incision • Treatment of fractures—simple • Treatment of fractures—compound • Reduction of dislocation and management of other temporomandibular joint dysfunctions • Repair of traumatic wounds • Complicated suturing (reconstruction requiring delicate handling of tissues and wide undermining for meticulous closure) • Other repair procedures Orthodontics D8000-D8999 • Limited orthodontic treatment • Interceptive orthodontic treatment • Comprehensive orthodontic • Minor treatment to control harmful habits • Other orthodontic services Adjunctive general services D9000-D9999 • Unclassified treatment • Anesthesia • Professional consultation • Professional visits • Drugs • Miscellaneous services (bleaching, desensitizing, occlusal analysis) • Temporomandibular joint (TMJ) problems • Occlusal guard In many practices, encounter forms (also known as charge slips or routing slips) are preprinted with the codes used in the practice. One of these forms is clipped to the outside of the patient's file folder before the dentist sees the patient. After the visit, the dentist simply checks the boxes for services and charges and makes notations. This reduces the possibility that coding errors will be made by the clinical assistant or front office personnel. Claim Forms Claim Form Preparation Claims for dental treatment are filed in one of two ways: by submission on a claim form that is mailed to the carrier (paper claim) or by electronic transmission, in which information is submitted electronically to the carrier (electronic claim). Both types of transmission require the same three primary areas of information: patient and subscriber identification, dentist identification, and details concerning the treatment provided. Paper Claim If completed manually, a dental insurance claim form is used to submit a predetermination of benefits for planned treatment or to request payment of claims for services that have been rendered. The ADA provides a standardized claim form that is accepted by most carriers (Fig. 63.13). FIG. 63.13 American Dental Association (ADA) standard claim form. (Copyright 2019 American Dental Association. All rights reserved. Reprinted with permission.) The completed claim form is generated in duplicate; one copy is submitted to the carrier, and the other copy is retained with the practice records. The claim form includes two boxes for patient signatures. These relate to the release of information and the assignment of benefits. Release of information regarding the patient's treatment is confidential and may be done only with the patient's written consent. The patient's signature in the "release of information" box gives the dentist permission to reveal to the insurance carrier information regarding the patient's dental treatment. Assignment of benefits is a procedure by which the subscriber authorizes the carrier to make payment of allowable benefits directly to the dentist. If no assignment of benefits occurs, the check goes directly to the patient. To assign benefits, the subscriber signs the appropriate box on the insurance claim form. If no assignment of benefits occurs, financial arrangements are made for the total amount of the fee, just as if the patient did not have dental insurance. Signature on File The patient registration form has signature boxes like those on the claim form; specific signature authorization forms also can be used. The patient should sign these when completing the form. These signatures are kept on file, and when the claim form is prepared, "Signature on File" can be used. When claims are submitted electronically, there is no place for a patient signature. The "Signature on File" option covers the need to have the patient's permission for the release of this information. Electronic Claim With electronic claims processing, data stored in the practice's computer are used to generate and submit claims from the practice's computer to the carrier's computer (Fig. 63.14). This provides the advantages of speeding claim submission and payment and reducing paperwork and the possibility of errors. As part of claims preparation on the computer, the system checks each claim for missing information before electronic submission. When claims have been verified as complete, they are transmitted by modem. This transmission may occur directly to the carrier's computer; however, because a practice contracts with many carriers, claims are transmitted through a clearinghouse that is set up through the individual practice software. Your software vendor will assist you with this process. FIG. 63.14 Computerized claim form submitted for payment. (Copyright 2019 American Dental Association. All rights reserved. Reprinted with permission.) Dental practices that see many patients transmit their claims on a daily basis. Dentists who see a small number of patients per day may decide to transmit their claims once a week. Although no paper claim is generated, the practice must have a record of each claim that was submitted. Transmission problems can arise periodically when electronic claims are submitted. Therefore this record is essential in the event that a claim is lost or disputed and must be submitted again. It also is important in tracking claims for payment. A daily or weekly status report of claims is sent electronically from the clearinghouse to be checked against your record. HIPAA and Electronic Transactions Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the U.S. Department of Health and Human Services (DHHS) implemented transaction standards to protect the integrity and promote the standardization of electronic claims submissions. The goal of this program is to allow one standardized format for each specific transaction, along with a standard set of procedure codes. When this is done, electronic data transmissions are more efficient, which results in a cost savings for healthcare providers. For dentistry, the CDT codes are used to simplify transaction processing. Dental offices that are not filing electronically are not affected by this section of the law but must still comply with the privacy rule and with the other aspects of administrative simplification that address security standards. Medicaid accepts only electronic claims, so any office that accepts Medicaid will have to submit all insurance claims electronically. HIPAA Electronic Transfers Under the Health Insurance Portability and Accountability Act (HIPAA), electronic claim submissions must be standardized. For dentistry, Current Dental Terminology (CDT) codes are used to standardize submission processing. Claim Form Processing At the end of the patient's visit, all charges are entered in the patient's account history or ledger (with or without insurance). A claim for payment then is submitted to the insurance company. If this is the patient's first visit, it also may be necessary to file a predetermination for planned additional treatment. If so, the predetermination is submitted on a separate claim. Make definite financial arrangements with the patient for payment of his or her portion of the fee. Tracking Claims in Process Insurance claims are another form of accounts receivable—that is, money that has been earned and must now be collected. It is important that these claims be handled in a business-like manner. Most computerized programs generate the reports needed to track these claims, including the following: • Claims that have been submitted for predetermination but have not yet been returned • Claims that have been submitted for payment but have not yet been paid • Charges for claims that have been generated but have not yet been submitted • Claims that have been returned for any reason and have not yet been resubmitted These reports should be printed and reviewed on a regular basis. It is important that you follow up promptly on any claims process that has not been completed in a reasonable length of time. Payments From Insurance Carriers Checks received from insurance carriers should be accompanied by an explanation of benefits that tells which benefits have been paid and which have been denied. The explanation of benefits breaks down how payment was determined and contains the following information: • Patient's name and policy number • Provider of services • Dates of services • Procedures • Amount billed by the provider • Amount allowed by the insurance carrier • Amount disallowed or not eligible for payment • Deductible amount deducted • Copayment or coinsurance amount due from the patient • Total amount paid by the insurance carrier • Comments explaining why payment was denied, asking for more information, or specifying coordination of benefits This report should be reviewed carefully to determine whether further action is necessary. Each check is entered into the bookkeeping system by patient account with a notation that shows the source of the payment. If, after making this payment, the patient owes a balance, he or she should be notified that the insurance carrier has paid its portion, and that the patient is now responsible for the unpaid balance. Occasionally, it is necessary to make an adjustment in the bookkeeping system to write off (deduct) amounts that cannot be collected. The balance of the patient's account is reduced by the amount of the adjustment. Handling Overpayments If the patient has paid his or her account and a check also arrives from the insurance carrier, this procedure must be followed to handle the resulting overpayment: 1. Credit the check from the carrier to the patient's account, and deposit it as any other payment on account. Crediting the check to the patient's account will create a credit; insurance carriers report to the IRS how much they paid to each dentist, and it is important that the practice records show receipt of these funds. 2. Write a check from the practice to the patient to refund the amount of the overpayment. This check is taken from the accounts payable system and shows up as a practice expense. 3. Make an entry on the account ledger to show that the check was sent. This will eliminate the credit balance on the account. Because the funds received are equal to the amount of the refund check, the total amount of taxable income for the practice is not increased. Insurance Fraud The business assistant is responsible for accurate and honest claims submission. It is important for the assistant to understand the consequences of submitting fraudulent claims even if it is the dentist's idea. An assistant cannot escape liability by pleading ignorance; therefore it is necessary for the assistant to understand what constitutes fraud. To commit fraud is to lie to or deceive someone for unlawful gain. Some examples of dental insurance fraud are as follows: • Billing for services not provided • Changing fees on a claim form to obtain a higher payment • Disregarding a copayment or deductible, accepting only the insurance payment, and writing off the difference

posted

describes the documentation of money transactions within a business

check

draft or order drawn on a bank account for payment of a specified amount of money

check register

draft or order drawn on a bank account for payment of a specified amount of money

reasonable fee

fee that is considered justified for an extensive or complex treatment.

usual fee

fee that the dentist charges for a specific service

audit trail

method of tracking the accuracy and completeness of bookkeeping records

disbursements

payments on any outstanding accounts payable

payee

person (or business) named on the check as the recipient of the amount shown

responsible party

person who has agreed to pay for services or for an account

bookkeeping

process of recording financial transaction accounts of a business

Current Dental Terminology (CDT)

publication that lists the procedure codes assigned to dental services for the processing of dental insurance