As part of Medical Billing & Collection’s celebration of three decades in the sector, Simon Brignall continues with a highlight of 30 key areas for practices to overcome their medical billing and collection challenges. Here are the all-important final ten…
Invoicing – the who, the how and the why
21Private medical insurance companies
We covered in last month’s issue the coding complexity around insurance billing, so now it’s time to discuss the revenue cycle in relation to private medical insurance (PMI) billing.
Once an invoice has been correctly formulated and delivered to the insurance company following its agreed payment pathway, it then enters the PMI’s processing.
Upon approval, a payment will be made to the practice under the terms of the policy and in line with the consultant’s terms with that insurer.
This could result in the invoice being paid in full, a partial payment or, in some rare circumstances, no payment at all.
These payments are mostly made to the practice via a BACS payment directly into the practice’s bank account or a cheque is sent. The insurance company will also send a remittance advice to notify the practice about the payment and this can include an explanation when the total value of the invoice is not settled in full.
An invoice may not be settled in full for many reasons, but all of these require the practice to have adequate procedures to invoice and chase the patient for the balance. Failure to do so will mean that the practice will lose out on income or its cash flow will suffer.
Shortfalls are where the amount reimbursed under the policy does not cover the consultant’s fees in full;
An excess or co-payment means that the policy requires the patient to contribute towards the cost of treatment;
Some treatments are not covered under the terms of the policy;
Or the benefit may be exhausted.
This is why patients need to be made aware they are liable for any amount that is not reimbursed by their insurance provider.
The management of these outstanding balances in relation to insurance billing is an area most practices struggle with and is often the main reason consultants choose to engage our services.
As Independent Practitioner Today has reported, the self-pay area has grown considerably over the past ten years and is now either the largest or second largest area of revenue for many practices. The impact of the pandemic on NHS waiting lists has simply increased this trend.
The raising of self-pay invoices to patients should always be a priority, as these patients have the greatest risk of bad debts.
I also include in this category self-pay invoices raised for outstanding balances left over from the insurance billing we just discussed.
There are occasions when a practice should also consider requesting payment in advance, particularly when treating patients who do not reside in the UK, the invoice amount is considerable or where the practice undertakes a very large element of self-pay.
It is important that a practice has the full range of invoicing and payment options required to best service these patients. At Medical Billing & Collection (MBC) we offer our clients a range of payment pathways and functionality including the ability to:
Invoice their patients electronically;
Collect payments on a 24/7 basis via our payment portal;
Settle all outstanding invoices at the same time;
Add a pay invoice button to their website;
Raise invoices and collect monies in advance, on the day and post treatment, depending on their specific needs.
In our experience, many consultants begin medico-legal work without ensuring they have adequate terms and conditions in place.
The longer revenue cycle for this work often means these practices carry higher aged debt.
This is important to realise because, when an invoice is raised, a tax liability is created which is why a robust chase process is vital to ensure cash flow is optimised.
Larger medico-legal practices are required to charge VAT and so the situation is more challenging, as they have had to pay the tax to HMRC every quarter.
Your terms and conditions should cover all your fees in relation to this activity and all other associated costs for additional work, court time, travel costs and payment terms.
Your DNA (Did Not Attend) rules should be clear alongside your payment terms and any penalty clauses that may arise for late payment.
The most important step is to always make sure your fees and terms and conditions are accepted up front before taking on any case.
It is important to understand that embassy patients will often have complex conditions, and this is one of the main reasons why they travel to this country.
When you see the patients for their initial consultation, they may be accompanied by an interpreter, which means the consultation is likely to take longer than normal. So make sure you allow enough time in your schedule.
It is vital that you obtain a letter of guarantee (LOG) before you see a patient, because this will authorise treatment for the patient. Note that it must be in your name.
Without this key document, embassies will not process your invoice. Some embassies also require a copy of the medical report and all relevant documentation needs to be presented alongside your invoice.
Similarly, the medico-legal activity payments times in relation to this invoicing are longer, so it is important to ensure that the impact on a practice’s cash flow is taken into account.
Many consultants take on activity that requires the invoicing of companies under standard 30-day terms. Often this may necessitate all activity for the month to be invoiced to the organisation on one invoice.
Examples of this would be:
C-level executives whose benefits packages include the provision of private GP cover or occupational health that is covered directly by the company;
Consultants who undertake seminars and paid speaking events.
All of this activity needs to be invoiced in line with the pre-agreed contractual terms and chased accordingly.
It’s time to get paid
This is an area which we continually see causes problems within a practice.
Often the practice is way behind with the reconciliation process or the remittances are not reconciled correctly against the invoices raised.
A regular complaint from consultants can be that they are unsure what the true picture of their outstanding debt is or whether an invoice has been paid or not.
Lack of access to accurate data at this key stage means it is impossible to have an effective chase process.
Each insurer should send a remittance to the practice when it makes payment. Payment is typically made electronically direct to the practice bank account.
The problem is that it is common for a practice to not receive a remittance or it can get mislaid and so unless the practice is chasing the insurer or reconciling the bank account on a regular basis, these invoices remain outstanding.
Reconciliation issues can cause further problems as any remittance which has been missed and hence not reconciled may result in a shortfall not being identified which, in turn, should have been invoiced to the patient. As a result, the practice cash flow suffers, leading to an increase in bad debts.
Even when the issue is finally discovered, invoicing patients months after the event is never a good thing, as it can lead to complaints from unhappy patients and often means that they are more reluctant to pay.
Often we face these issues when we chase the backlog of outstanding invoices for a practice. We reconcile all remittances the day they are received and any that are outstanding are chased regularly with the insurance companies.
This ensures we remain on top of outstanding payments and that invoices in relation to shortfalls are raised to the patient in a timely fashion.
The art of the chase
28Chasing aged debt
Without exception, we find this area gives most practices the biggest operational headache and is a task that is often deferred for a range of reasons.
Many practices find conversations that mix medicine and money challenging and often detract from the patient’s experience of their care.
In our experience, all invoices need to be routinely chased, including invoices sent to insurance companies. Reasons for a delay in the processing of invoices can be:
Non-receipt of the invoice due to electronic data interchange (EDI) issues or postal problems;
Treatment that was not pre-authorised;
Incorrect membership numbers or lapsed policy details provided by the patient.
For a robust chase process to be effective, it must be clearly defined and routinely applied. There needs to be clear understanding of who is responsible for this role so that there can be direct accountability for this is activity.
Once the chasing process has begun, it needs to be followed up on, otherwise the patient will think that you are not being serious. This will reflect on the professionalism of the practice and will give the patient permission to withhold or defer payment.
The process should allow for a mixture of communication methods used to contact the patient as well as the sending of formal letters. All this needs to be recorded on a complete log of any action taken.
Once all the avenues in the chasing process have been exhausted, the practice then needs to decide whether to send the patient to debt collection.
What you do will typically depend upon the patient, the circumstances involved in the treatment and the associated costs.
If you decide not to send the patient to the debt collectors, then the practice should consider writing the amount off as bad debt, as it is unlikely that the patient will choose to pay the outstanding amount in the future.
You may choose to consult your accountant, as they would know the individual circumstance of the practice and will be in the best position to offer the correct advice.
Time to pay the taxman
30HM Revenue and Customs
Finally, the practice needs to be able to raise financial reports from both a business and tax perspective.
Her Majesty’s Revenue and Customs (HMRC) takes the view that you are responsible for your own tax affairs and it does not consider ignorance or negligence a reasonable defence.
You should be able to run reports which show the number of invoices raised, payments received and outstanding invoices to ensure that all financial aspects of your practice are in order.
Historically, HMRC has looked upon the private medical sector as being a prime area where the financial procedures are not as robust as they should be. This has resulted in a higher percentage of investigations compared to other business sectors.
Our clients get 24/7 access to their data via our reporting dashboard. It has an array of reports to analyse the practice and our account managers are happy to field any request for tax information from their practice’s accountant.
Simon Brignall (right) is director of business development at Medical Billing & Collection, which is celebrating 30 years of partnering with consultants in private practice