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Healthcare Accounting: Patient Revenue, Collections budget

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Your hospital has billed charges of $4,000,000 in February. If your collection experience indicates that 20 percent is paid in the month billed, 40 percent in the second month, 20 percent in the third month, and 5 percent in the fourth month, determine the following values:
a.) Net patient revenue for February
b.) Collections of February charges in February
c.) Net accounts receivable at the end of March for February bilings

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Solution Summary

Your instructional notes are on the spreadsheet attached. "Net" revenue is shown as well as a schedule to track collections.

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Collecting Receivables in Healthcare organizations

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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