Chapter 46 Managing Practice Finances
What generates income in the medical office?
Patient accounts make up the bulk of the medical practices income (specimen collections).
What financial accounts does a medical office usually have and what do those accounts include?
Petty cash which is the small amount of cash for incidental things.
What is the advantage of maintaining a savings account or money market account compared with a checking account?
Savings accounts keep cash; you earn interest at a slightly higher rate than a checking account.
If the office typically charges $65.00 to perform an ECG, is this the amount paid by all patients?
Some patients may be given discounts if they don't have insurance, if they pay with cash or if they demonstrate a medical need.
What is the difference between a special endorsement and a restricted endorsement?
Special: the statement whom the check should be paid to. Restricted: the endorsement is how the check is paid.
What are common precautions for accepting checks in the medical office?
Look at the check carefully to avoid accepting a phony check. Make sure date and amount are correct.
What should the MA do if a mistake is made on a check?
MA should write "void" on the check and check stub. It should be filed with bank statements (not destroyed).
How is a petty cash fund (account) managed?
Money is added to the amount from a bank account incase of an emergency.
Describe the services and function of a checking account.
Money is held and can be withdrawn by writing a check against the funds available.
What document must be provided to Medicare patients when Medicare is unlikely to cover a service?
Must be given a copy of the Medicare Advance Beneficiary Notice (ABN).
How is info arranged in the patient account ledger?
Transaction recorded in chronological order on patient ledger screen.
Identify 3 ways that checks can be generated or bills can be paid; and describe how info is recorded.
1) Business checkbook with stubs; for each check -keeps a running balance. 2) Computer generated checks; create and print checks- prints MICR number on it. 3) Online payment; paid through internet as monthly/ 1st time payments
What are four ways that payments are made to a patient account?
1) Pay at time of service 2) through mail 3) online payment through website 4) insurance and company may make payment through mail/ electronic transfer.
Identify 5 reasons why the monthly bank statement may not agree with the medical office's calculation of the bank balance in a checking account.
1) Takes a week to receive statement 2) the check will not have cleared the account 3) some vendors don't cash checks 4) interest may occur during the month 5) bank charges are added to the statement
What are three types of financial records used in a traditional manual bookkeeping system?
A daily journal (day sheet), accounts receivable ledger, and a cumulative record of financial activity.
What is the MICR (magnetic ink character recognition) line on a check, and what info does it contain?
A set of numbers ; ABA routing number which is the unique number of the bank account number and check number.
What does it mean to "close the day" and why is this important for accurate financial record-keeping.
Additional entries cannot be entered using the date and prevents entries to be made for that day.
If a medical office accepts credit or debit cards, what policies should be in place?
Cards and transactions should only be allowed if card is present; name and signature should be verified when card is accepted.
What is the difference between the cash basis and the accrual basis of accounting?
Cash basis enters income when payment is received; accrual income is entered at the time of sale
Differentiate between a cashier's check and a certified check. Which is used more often?
Cashier's check is drawn on bank rather than individual account. Certified check: withdrawing funds from checking account at time the check is issued.
Why are charges linked in a computer system to diagnosis and procedure codes?
Charges are linked for insurance purposes (billing); so that the physician can select the correct diagnosis code for each procedure.
Describe 3 types of bank accounts.
Checking account: money held can be withdrawn by writing checks. Savings: keeps cash if not necessary to pay expenses. Money market account: offers savings and checking (requires a minimum balance).
What is necessary before a check can be cashed or deposited? How is this handled in a medical office?
Checks must be endorsed on the back of the check.
What is the difference between a credit and debit adjustment?
Credit (negative): adjustments are subtracted from balance (discounts). Debit (positive): adjustments are added to the balance (returned check).
What steps must be taken to reconcile a bank account?
Enter/ subtract bank fees & add interest, the amount of checks should be added/ subtracted from the "new balance" and the amount of any deposits should be added.
When is a patient usually required to pay in advance for a procedure?
If the insurance doesn't cover a procedure; such as a cosmetic surgery.
How is the cash drawer balanced at the end of the day?
Take the amount that you started with in your drawer and everything else should be taken out.
If patient charges are recorded using a computer billing program, where must the data about the charge be entered? Why is it sufficient to enter the data once?
The data should be entered in the EHR; the physician specifies services provided and links each service to a diagnosis at the time of the visit.
When an insurance company pays an amount that is lower than the usual charge, how is the patient's balance due returned to zero?
The insurance will not cover service, patient is usually expected to pay upfront.
Ledger
a book, card, or computer account used to record financial transactions
Petty cash
a cash account kept in a business office to pay for incidentals
Adjustment
a change to a patient account that is neither a charge nor a payment
Cashier's check
a check drawn on a bank instead of an individual account
Certified check
a check on an individual account for which a bank assumes responsibility
MICR line
a line of numbers across the bottom of a check that are read by a magnetic character reader
ABA routing number
a nine digit number that identifies an individual bank
Debit
a posting that is added to an account balance
Credit
a posting that is subtracted from an account balance
Cash basis of accounting
account method where income is entered when payment is received
Accural basis of accounting
accounting method where income is entered at the time of sale
assets
in accounting, a combination of property owned and money owed to a business
Liabilities
in accounting, the amount owed by a business to creditors
Invoice
itemized bill for goods and services
Fee Schedule
list of charges for specific procedures that may be performed in a medical office
Reconciling
making sure that two financial records agree
Disbursements
money paid out
Accounting
systematic recording and reporting of financial transactions
Day Sheet
the chronological record of daily transactions
Accounts payable
the outstanding bills of a business, such as a medical office
Payee
the person to whom a check is made out
Bookkeeping
the process of posting charges and payments and balancing financial records
Accounts receivable
total amount owed to a business for goods and services