Debt management in the healthcare practice is the effective control and administration of patient accounts. It is vital for the financial survival of the business to prevent bad debt and promote a healthy cash flow by collecting outstanding accounts from medical aids and private patients. The longer accounts are left outstanding, the less likely it is that outstanding fees and expenses can be collected.

This blog will describe the different phases in debt management that aim to minimise outstanding patient accounts. 

TABLE OF CONTENTS 

DEBT MANAGEMENT PROCESSES

The Debt Management Business Process diagram is divided into 4 phases, and each phase is divided into processes that need to be followed. The diagram illustrates the following phases:

  1. Business Process Design
  2. Process Audit
  3. Account Clean-up
  4. Collection Process
GoodX Software’s Debt Management Business Process diagram

The following headings will provide more detail of each phase.

PHASE 1: BUSINESS PROCESS DESIGN

During the Business Process Design Phase the practice has to decide how the collection process will work. The following has to be taken into account:

  1. Journal design – decide who will have access to create journal entries and which journals are going to be used, for example, writing off small balances or bad debts and giving discounts to pensioners. These journals can be pre-configured to post to their respective ledger accounts in the software to minimise user mistakes.
  2. The collection cycles must be designed so that the necessary actions will be taken at different dates, for example, sending notifications on days 30 and 60.
  3. The configuration of the practice’s management software needs to be planned and configured to guide the collection process.

The next step is to do a process audit. 

PHASE 2: PROCESS AUDIT

Users process transactions during the following critical business processes:

  • Fakturering and Billing Corrections
  • Claim Administration
  • Receipting and Receipt Corrections

The Process Audit Phase is where the credit controller checks that all transactions have been correctly captured in the software during these critical business processes. This step is vital to ensure that no paid accounts are collected in error and no unpaid accounts are missed. If all transactions were correctly captured, the outstanding amounts on the debtor’s account will be correct and can be used to start with the Debt Collecting process.

PHASE 3: ACCOUNT CLEAN-UP

The Account Clean-Up Phase aims to clear all the clutter and ensure that no unnecessary communication is sent to medical debtors. The following processes are used to pave the way for an optimal debt collection process:

  1. Processing Journals – get rid of small amounts or amounts that cannot be collected or are not worth collecting so that there can be a singular focus on collecting those worth the effort.
  2. Archiving settled accounts – archive dormant accounts so that they don’t clutter the collection process.
  3. Hiding zero balances on accounts – when zero accounts are hidden/filtered out the user will only see and focus on outstanding amounts.

PHASE 4: COLLECTION PROCESS

The Collection Process Phase can start as soon as the Process Audit Phase and the Account Clean-Up Phase is completed. Only outstanding debtor accounts are part of the process and the collection cycles will guide the process. The collection process can be done in two ways:

  1. Manually by the credit controller; or
  2. Automatically with an automated process in the software.

Even though the collection process can be automated, it is advisable that users understand how the manual collection process works to know how to configure the software for automated processes.

The manual collection process will be guided by the following processes:

  • Drawing Reports – an age analysis report will guide the credit controller to action only those accounts that are outstanding and, depending on the days outstanding, prescribe the type of action necessary.
  • Sending Communication is the most important part of debt management. Without communication, debt collection cannot be done. Communication consists of sending SMSs, emails or making phone calls. Statements can be added to emails sent to patients.
  • Bad Debt Administration – as soon as it has been decided which accounts are going to be sent for external debt collection, the practice needs to gather the necessary information to be handed over for legal action.

CONCLUSION

Thinking about debt management is never a feel-good experience. However, debt management could be quite a clean process and getting it done properly by competent personnel will take the pain out of this important part of a practice’s business management.

For more information, please click here to read our medical practice management book on our Learning Centre.