Identify internal controls for cash handling
A. The separation of cash handling procedures whereby the same person who opens and endorses the checks is
... [Show More] not responsible for the deposit
B. The establishment of internal audits by personnel outside the involved department.
C. The routine use of outside auditors to track cash flow
D. The routine reconciliation of daily cash against deposits, postings, and write-offs
E. The use of multiple levels of authorization for refund checks, write-offs, and disbursements
Recognize the general concepts of electronic funds transfer (EFT)
EFT is the electronic transfer of funds from payer to payee through the banking system. It is considered the fastest way to move money because it is possible to transfer funds between banks on the same day.
EFT Balancing & Control - EFT simplifies cash balancing & control requirements since the cash is deposited directly into the healthcare provider's bank account.
1. Bank informs healthcare provider of the amount received and issues a deposit.
2. Healthcare provider balances this deposit to the electronic remittance advice (ERA) received.
Categorize the different levels of automation used in electronic remittance advice posting
Electronic Remittance Advice (ERA) 835 Data Set - A standardized healthcare claim payment remittance advice known as the 835 format is used to electronically send third-party payment details to healthcare providers. There are 4 levels of automation that can be used.
A. Level 1 - electronic receipt of data only.
a. Electronic remittance advice is received
b. The information is printed
c. The printout is then processed the same as a paper remittance advice.
d. Advantages include:
1. Saving mail time for remittance
2. Standardized format for data entry
B. Level 2 - electronic receipt & electronic data entry:
a. With this level, the electronic remittance is received
b. Entered into the computer electronically.
c. Viewed on a terminal
1. Data entry tasks are eliminated through automated entry of the information, but usually there continues to be a manual matching of remittance information to an individual account and reconciliation of charges submitted to the amount paid.
C. Level 3 - electronic receipt, data entry, reconciliation, posting, and closing.
a. Electronic remittance advice is received and entered into a computer electronically.
b. The remittance data is electronically posted by the patient accounting software, simultaneously updating the patient's account.
1. Standard adjustment codes must be established to automate entries for payments, i.e. contractual allowances and other write-offs. Manual intervention is only needed if there is a disagreement or an error.
D. Level 4 - total automation of receipt, data entry, payment posting, and adjustment processing.
a, In addition to everything included at level 3, this level links with banking information to allow reconciliation of payments received electronically through a non-bank network, with funds received electronically.
1. Medicare logs and the secondary billing process are automated using the ERA. An electronic explanation of benefits received from the primary health plan is transmitted electronically with the secondary claims. Manual intervention is only required to handle disagreements.
Fraud
Cash handling opens the potential for fraudulent activities and therefore it is imperative to implement controls against these attempts.
Policies and procedures - Fraud
Policies and procedures should segment responsibilities so that no one individual has the ability to post charges, payments, and write-offs without a balancing control, another activity to document the funds transfer, preferably by a supervisory-level staff member.
Large adjustments, including contractual write-offs, bad debt write-offs, and charge transfers, should require a manager-level authorization. While controls may have the effect of slowing the accounts receivable processing, the lack of control can result in the loss of revenue and cash.
Control points for cash posting should be established in 3 area's
1. Checks received through mail -
A. Opened and immediately endorsed with a manual or computerized slip run. The checks can be deposited & copies used for the actual posting.
B. Ideally, depending on staff availability, a second person should do the payment posting, and the balance of payments posted should be independently verified against the total of checks received.
2. Cash received through mail -
A. Staff who open mail should be instructed to immediately bring any cash received in the mail to a supervisors attention for special handling.
3. Lock box -
A. Many healthcare providers have eliminated mail payment deliver to their patient accounts department through the use of lock boxes.
B. Lock box processing not only improves security but also expedites the deposit of funds into the healthcare providers account. Banks are also capable of providing the deposit details via an ERA (Electronic Remittance Advice) file which can then be posted electronically into the patient accounting system
Daily Reconciliation Process steps
1. Obtain totals of all payments-cash, check, credit card, debit card.
2. Divide remittances into batches & obtain a second total of the electronic remittance advices by payment and contractual allowances.
3. Endorse checks immediately
4. Prepare the bank deposit for all payments
5. Separate cash payments and contractual adjustments into separate batches and use separate payment and adjustment codes.
6. Post unidentified payments to an unidentified cash account (deposit everything, do not hold unidentified payments).
7. Balance and post batches
8. Balance payments to the bank deposit
9. Balance the bank deposit to the general ledger.
Processing General Ledger Cash (payments for miscellaneous purchases)
Requires the same separation of duties when processing patient payments.
A. Each payment should be logged within the department, payments should be secured and receipts should be issued.
B. Receipts should be grouped or batched by payment type and totals and balanced to the receipt log.
C. Payments should be totaled and documented.
D. Payments are delivered to a cashier, who re-totals the payments and validates that the totals agree.
E. The cashier then completes a bank deposit slip. [Show Less]