Patient Accounts Receivable in a Private Hospital Setting – Hospital Risk Management

Patient Accounts Receivable in a Private Hospital Setting – Hospital Risk Management

Reynaldo O. Joson, MD, MHA, MHPEd, MSc Surg

September 15, 2013

Patient accounts receivable (PAR) refers to the monetary amounts owed to the hospital by a patient or his relatives or a third party payor for services rendered to the patient.

Managing patient accounts receivable should be included in a hospital risk management program.  If uncontrolled, patient accounts receivable can lead to financial instability and eventual non-sustainability of a hospital.  Uncontrolled PAR can occur in two forms, one is non-payment and the other is delayed payment.  These two potential negative consequences of patient accounts receivable should be controlled by the hospital administration.

In a private hospital setting, the patient account settlement (PAS) is usually done through two methods, one is through self-payor and the other is through a third-party payor.  Self-payor means the patient or a kin or guardian is directly responsible for the PAS.  Third-party payor means   either a Health Maintenance Organization (HMO) or a company that has a contract with the hospital is directly responsible for the PAS.

PAR results whenever there is no or incomplete PAS, either by the self-payor or by the third-party payor.  As to the relative frequency of PAR with respect to kind of payor, the general observation in the Philippines is that PAR is more frequently seen in patient accounts to be settled by self-payor.   As to the relative amount of financial losses from PAR inclusive of cost of money, depending on the quality of financial management system of the hospital, it may be higher for patient accounts to be settled by a third-party payor.   Thus, regardless of the kind of payor for the PAS, all private hospitals should be on guard for PAR as a financial risk.

Except in the emergency setting particularly in the ER, all patient accounts, before they are incurred have accompanying contracts specifying who is responsible for the settlement.  The immediate cause of the PAR is usually due to non-fulfilment of the patient account settlement contracts brought about by inadequate finances by either the self-payor or the third-party payor.  An uncommon cause for the non-fulfilment of the contract is the presence of complaint, protest or a legal suit being readied or filed by the self-payor or third-party payor.  The antecedent cause of inadequate finances on the part of the self-payor is usually due to a non-anticipated high emergency room or hospital bill.  For the third-party payor, bankruptcy of the HMO or company is usually the cause of inadequate finances.  The underlying cause for the non-anticipation of high emergency room or hospital bill on the part of the self-payor is usually the absence or inadequacy of information given by the attending physicians.

PAR usually occurs at three points of services (POS).  The first POS is hospital emergency room (ER), emergency medicine department (EMD) or department of emergency / medicine (DE / DEM).  The second POS is the inpatient services (IPS).  The third POS is the outpatient services (OPS).

Among the 3 POS, the outpatient services has the least frequency of PAR as prices of services are usually known to and account settled by the self-payor before and right after the services are rendered.  If there is a PAR, it is usually in the setting of a charged patient account with the third-party payor being unable to settle.

The two more common sources of hospital’s PAR, in cases self-payors are the ones responsible for the PAS, are from the ER and IPS.

In the ER, the contributory factor for a PAR is the presence of statutory requirement for the ER staff to provide emergency treatment without asking for monetary deposits from the patients or their kins.  Other contributory factors are abandoned patients and severity of the emergency conditions that incur a huge amount of ER bill that was not anticipated by the patients or their kin.

In the IPS, there are two antecedent causes to the lack of finances on the part of the self-payors.  One is the non-anticipation of a high hospital bill on the part of the self-payors because of absence or inadequacy of information given by the attending physicians.  Second is the undue or adverse development occurring during the medical management that ends up with a high hospital bill that the self-payors can no longer afford to pay, in other words, way beyond their prepared budget for the hospitalization.

After identifying PAR as a financial risk for hospitals and after analyzing its possible sources and causes in the hospital, the next thing to do is to formulate strategies on how to prevent and mitigate.

To be continued with the following tentative outline:

  • General strategies
  • Specific strategies  – for self-payors / third-party payors; in the OPS, IPS, and ER.
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