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    Which of these four options would you recommend for a hospital? Why?

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    Healthcare financial managers have searched for ways to collect receivables faster since credit transactions began. Some of the techniques briefly described in McLean for speeding the conversion of patient accounts into cash are the lock box system, selling patient accounts to 3rd parties, hiring collection agencies, and securitizing receivables.

    In your response please reference the attached chapter from McLean, Robert A. (2003). Financial Management in Health Care Organizations (2nd ed.). Albany, NY: Delmar Publishers.

    Which of these four options would you recommend for a hospital? Why?

    Are other options available to HCOs to accomplish this conversion? Evaluate these other techniques.

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    Solution Preview

    Which of these four options would you recommend for a hospital? Why?

    Four Options for debt collection for HCOs:

    First is selling patient accounts to 3rd parties. In simple terms this means that the documents related to the insurance payments receivable after 90 days are handed over to a financier, who is called 'third party'. The financier pays the hospital immediately but charges a rate of interest for the transaction. Since there is an element of uncertainty involved in this the rate of interest is higher than the normal bank rate.

    The second option is a collection agency. A collection agency is an organization that obtains or arranges for payment of money owed to a third party; this could be a person or a company.
    Why do businesses use collection agencies?
    Collection agencies provide a service to businesses ...

    Solution Summary

    Clear concise practical thoughts on this situation.