Chapter 46: Managing Practice Finances

Differentiate between a cashier's check and a certified check. Which is used more often?

A cashier's check is drawn on the bank itself, whereas a certified check is that of an individual or business that the bank guarantees (by withdrawing the amount from the account when the check is certified). Banks prefer to have clients purchase a cashier's check.

What is necessary before a check can be cashed or deposited? How is this handled in a medical office?

A check must be endorsed (signed on the back) before it can be cashed or deposited. A stamped endorsement is allowed for deposits. In the medical practice, checks are endorsed (usually with a stamp) and the amount added to a deposit slip before being deposited.

Describe the services and function of a checking account.

A checking account is a bank account that allows withdrawals by checks that are written to creditors. It is used to pay bills and often as a repository for money earned to avoid the use of cash.

What is the advantage of maintaining a savings account or money market account compared with a checking account?

A savings account pays more interest than a checking account, but checks cannot be written on an ordinary savings account, and the number and amount of checks that can be written on a money market account are limited.

What does it mean to "close the day," and why is this important for accurate financial record-keeping?

After all figures for a day have been entered and accepted and a manual day sheet has been balanced, the day is "closed" so that no changes can be made to the entries for that day. This prevents any tampering with financial records at a later date. It is possible to make an adjustment later, but it will be dated on the day it was made, not on the date to which it refers.

How does the medical assistant (MA) know what to charge a patient for a specific procedure?

Charges are calculated based on a fee schedule, or list of the amounts charged by the office for a specific procedure. This may be a printed list or calculated by the computer.

When an insurance company pays an amount that is lower than the usual charge, how is the patient's balance due returned to zero?

If the office has agreed to accept the insurance payment as payment in full, an adjustment (amount to be subtracted from the account) is posted to the patient's account to return the balance to zero.

What is the difference between the cash basis and the accrual basis of accounting?

In the cash basis of accounting, income is recorded when it is received. In the accrual basis of accounting, income is recorded when goods are shipped (or services provided).

How is information arranged in the patient account ledger?

Information about services provided to an individual patient and payments received for that patient show up in chronological order on the patient ledger.

How is a petty cash fund (account) managed?

Money is added to the account by cashing a check for a small amount. The money is kept in a box or drawer to pay for small, miscellaneous items. A record should be kept of all payments and a receipt filled out so that the account can be balanced.

Identify five reasons why the monthly bank statement may not agree with the medical office's calculation of the bank balance in a checking account.

More checks may have been written after the final balance of the statement. Checks written around the time of the statement will not have cleared the bank. Some recipients of checks will not have deposited or cashed checks. Bank charges may have been added to the account. Interest may have been added to the account.

What generates income in the medical office?

The bulk of the income of a medical practice comes from payments made for services to the patients of the practice by patients and insurance companies. A practice may obtain a small amount of income from rental of office space and/or perhaps from some invention or publication produced by a member of the practice.

Why does a charge slip (superbill) usually contain diagnosis and procedure codes?

The charge slip contains the diagnosis codes and procedure codes most commonly used in the office so that the physician can identify codes at the time of the patient visit. These codes will be necessary to complete the insurance form.

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 charges are entered for the individual patient account. Because a code is usually entered for the physician who saw the patient, the computer can automatically post the information to other accounts, including daily financial activity for the practice and for each individual physician.

What are three types of financial records used in a bookkeeping system?

The daily journal or day sheet keeps a chronological record of financial activity for each day; accounts receivable ledgers keep records by patient; monthly cumulative records of financial activity track monthly income and charges.

What are four ways that payments are made to a patient account?

The patient pays at the time of service, in full or in part (such as a copayment for an HMO). The office will accept cash and checks, and many offices also accept credit and debit cards. The patient may make a payment through the mail in response to a bill. The patient may make an online payment using a credit or debit card through the medical practice website. An insurance company may make a payment—either by mail or, increasingly, by electronic transfer.

What should the MA do if he or she writes a check incorrectly?

Write "void" on the check but do not destroy it. File it with cancelled checks (so that it is known what happened to it).

What information is recorded on a day sheet?

A day sheet is a record of charges, payments, previous balance, adjustments, and new balance for each patient seen on a particular day; in addition, charges generated by a specific doctor can usually be recorded, and manual day sheets usually contain a bank deposit slip.

What is the difference between a special endorsement and a restricted endorsement?

A special endorsement identifies the party to whom the check should be paid, usually with the words "Pay to the order of." A restrictive endorsement gives directions for how the check can be paid out; for example, "For deposit only."

What are common precautions for accepting checks in the medical office?

Checks should be accepted only for the outstanding amount. Checks should be scrutinized to be sure they are genuine. Third party checks should never be accepted. Checks with the notation "payment in full" should only be accepted if the medical assistant is sure that the check covers the entire outstanding balance.

What is the difference between a credit adjustment and a debit adjustment? Give one example of each.

Credit adjustments are subtracted from the patient balance and debit adjustments are added to the patient balance. An example of a credit adjustment is a professional discount or cash discount. An example of a debit adjustment is a fee added for a returned check.

If a medical office accepts credit or debit cards, what policies should be in place?

Credit or debit cards should only be accepted if the actual card is presented by the individual named on the card. Identification can be required if the individual is not personally known to the office. The processor of credit and debit transactions should be reliable and provide insurance against the loss of customer data.

What financial accounts does a medical office usually have, and what do those accounts include?

Medical offices usually have accounts receivable, accounts payable, and a petty cash account. The accounts receivable includes patient accounts, accounts payable include suppliers and other businesses that provide services to the medical office, and the petty cash account includes a small amount of cash kept in the office to pay for incidentals.

What steps must be taken to reconcile a bank account?

Reconciling a bank account is useful to double-check that the financial records of the owner of the account agree with the bank records. To reconcile an account, take the end balance provided by the bank, subtract the total of checks that have been written since the end of the period, add the amount of any checks that have not cleared the bank, subtract any bank fees, and add interest earned; then compare with the balance in the account's checkbook or ledger. Any discrepancy must be identified and clarified.

Identify three ways that checks can be generated, or bills can be paid, and describe how information is recorded.

By hand using a checkbook with information recorded on a check stub or check register. By computer with the check generated and information recorded by a software program. Using an online system, usually with a bank, in which either checks are produced, or money is simply transferred. Records are usually kept both by the bank and by the person or company performing the transaction.

What is the MICR (magnetic ink character recognition) line on a check, and what information does it contain?

The MICR line is a set of numbers across the bottom of a check containing the American Bankers Association (ABA) bank routing number and the individual account number and check number. These numbers are used to process the check and transfer funds from one bank to another.

How is the cash drawer balanced at the end of the day?

The individual responsible for the cash drawer counts the money and returns the usual amount of cash on hand to the drawer. The rest of the money is checked against the receipts issued to patients and added to the daily bank deposit. The drawer is either locked or moved to a safe for the night.

Describe three types of bank accounts.

The most common types of bank accounts are checking accounts, savings accounts, and money market accounts. Checking accounts are used primarily to make payments, using checks. Savings accounts are used to store money and usually pay a higher rate of interest than that for checking accounts. Money market accounts usually require a higher minimum balance, but in addition to a higher interest rate (like a savings account), they also allow the owner to write a certain number of checks during a given time period. They are useful for making large monthly payments.

If the office typically charges $65.00 to perform an electrocardiogram, is this the amount paid by all patients? Why or why not?

The office may have contracts with health maintenance organization (HMO)-type insurance companies providing for reduced payments for most procedures and tests. In addition, Medicare and Medicaid have maximum payments for all procedures. The office must agree to accept these payments as payments in full to participate in these insurance plans. Therefore, the typical charge may not be the amount that is actually accepted for payment.