 | | |  | November 2009 When Good Companies Go Bad.
Dear Reader,
For the past ten years, we have worked a lot of receivables from healthcare companies that have gone bankrupt or simply closed their doors. We used to be surprised by some of the issues we encountered with their A/R. No longer. We have learned that as a healthcare provider comes under financial distress, it puts into motion certain events. One thing leads to another. And before you know it, the receivables are seriously compromised. Vigilance regarding these common problems might just avoid a dire outcome. At the least, the receivables will retain their value at a much higher level. What Can Go Wrong - Closing of a bank account or location: Especially worrisome if the bank is providing Treasury Management Services, e.g. lockbox, but even if the bank is only receiving direct deposit payments EFT or the location is receiving correspondence, the result will be that mail and/or EFTs will be returned to third party payers.
- Returned mail or EFT to payers: Most payers, and especially Medicare, will stop sending checks if they receive any correspondence or EFTs back as undeliverable.
- Access to A/R system is lost: When a healthcare company is in financial distress, it often is late making payments to vendors. Too many missed payments to a vendor supplying the company’s A/R system or a billing service responsible for the company’s collection efforts can result in loss of access to that system, bringing collection efforts to a standstill.
- Payments not posted in the A/R system: Sometimes the healthcare company loses the ability to retrieve electronic remittances. Other times it simply cuts staff and they get behind. Or there might be a reason the company wants its A/R to be over-stated. In any event, it is common for payments to be received but not recorded in the system. Future collection efforts are hampered by an inability to distinguish paid receivables from unpaid ones.
- Reporting to collection agencies ceases: In our experience, when collection agencies don’t get their reports of monies paid direct to their clients, they often stop remitting collections to the client.
- Switching billing systems: See our June 2009 newsletter for the issues created in this area. http://www.arrecovery.com/news_jun2009.aspx
How to Maintain the Value of the Receivables - Promptly complete change of address forms with all government payers. Forms can be accessed online at http://www.cms.hhs.gov/CMSForms/.
- Send commercial payers letters informing them of the new address, and include a current W9.
- Promptly change bank wiring instructions with any payers who send payment via electronic funds transfer when a bank account is closed.
- Do a forwarding order with the post office whenever a location or bank account acting as a lockbox is closed. Forwarding can be done online at www.usps.com. Don’t count on this for Medicare, though, as Medicare prohibits forwarding of its mail. See http://www.cahabagba.com/part_b/enroll_update_your_records/enroll_dnf.htm for more information.
- Be in communication with vendors who are providing critical services and make arrangements that will allow continued use of their services.
- Make sure the data back-up process is working.
- If receiving electronic remittances is no longer possible, contact payers and have them send the remittances on paper.
- Even if payments can’t be posted, organize them carefully so that the data can be updated in the future.
Bottom line: When a healthcare company is struggling financially, it’s important to think through the repercussions of actions taken and to proactively address the impacts of those actions.
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Quite simply, we're experts in healthcare accounts receivables. Because A/R Recovery is focused exclusively on healthcare receivables, asset-based lenders and healthcare companies nationwide trust our valuations and use them to facilitate loans and sales. If you need a partner to help you navigate your situation, please call 1-866-444-2031 Ext. 21 or visit www.arrecovery.com for more information. | |
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