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Charity, bad debt play role in revenue-cycle management

Patient Financial Services Weekly Advisor, April 16, 2004

Charity, a patient's inability to pay, and bad debt, a patient's unwillingness to pay, plays a role in effective revenue-cycle practices, says Sandra J. Wolfskill, FHFMA, president of Wolfskill & Associates, Inc.

Charity represents consumption of resources that must be managed. It's an important indicator of an organization's fulfillment of charitable purposes. It also may generate financial assistance for the provider.

Bad debt, in turn, represents the effectiveness of a provider's collection processes.

Wolfskill says it's crucial to look at your processes to understand how charity and bad debt can impact the revenue cycle. She suggests analyzing five areas:

1. Inpatient/outpatient v. scheduled/unscheduled patient flows

• preservice processing-includes all scheduled patient types and allows provider to determine in advance whether charity may be applicable to the visit 
• time-of-service processing-a comprehensive opportunity for provider to screen uninsured and underinsured patients for Medicaid eligibility and charity qualification
• postservice processing-the final opportunity to review all self-pay accounts for ability to pay
  

2. Roles of access-management staff v. patient-accounts staff

• patient education
• patient financial counseling
• determination of ability to pay

3. Involvement of Medicaid eligibility services in charity processing

4. Role of payment plans

• changing circumstances-charity eligibility must be geared toward circumstances at time of service
• once the determination is made to classify service as charity or bad debt, it should not be changed
  

5. Role of collection agencies and their staff

• charity determinations previously processed and denied
• new request from patient for charity determination

Next week: Wolfskill offers tips on what to include in your charity policy.

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