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Patient Accounting Methods

Patient accounting methods within a medical practice may be computerized or manual. Computerized patient accounting is the most commonly used type of system. Three types of manual accounting systems may be used by medical practices that are not computerized: single-entry, double-entry, and pegboard (also known as the write-it-once system). All accounting systems record income, charges (money owed to the practice), disbursements (money paid out by the practice), and other financial information. The choice of system is based on the size and complexity of the practice.

Bookkeeping on the Computer

Physicians or office managers who choose to set up the practice's bookkeeping system on the computer enjoy several important benefits over traditional bookkeeping methods. Computerized bookkeeping saves time; many repetitive tasks are done by the computer. The computer also performs mathematic calculations. Most bookkeeping software programs include built-in tax tables, which can calculate tax liabilities and so on.

As discussed in Chapter 6, many bookkeeping software programs or practice management software programs are available on the market. Any bookkeeping software package performs the same tasks as manual bookkeeping methods, so knowing these tasks is essential to performing computerized bookkeeping. Understanding these tasks is an essential part of managing books on a computer. The practice in which you work may already have a computerized bookkeeping program in place, which you should learn. It is also a good idea to stay current by reading computer software magazines. You may learn about a new software program you might recommend to the physician or office manager, or you may read about a new or more efficient way to use the practice's current software program.

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Single-Entry System

As the name implies, the single-entry system requires only one entry for each transaction. Therefore, it is the easiest system to learn and use. Unlike the double-entry system, however, the single-entry system is not self-balancing. In addition, it does not detect errors as readily and has fewer accuracy checkpoints. This system is also more likely to produce errors because information must be posted (copied) separately to each of the bookkeeping forms.

The single-entry system uses several basic records, as well as auxiliary records:

The double-entry and pegboard systems, discussed later in this chapter, also use these records.

Daily Log.

The daily log is a chronological list of the charges to patients and the payments received from patients each day, as shown in Figure 18-1. In the daily log, you write the name of each patient seen that day. Across from the name, you record the service provided, the fee charged, and the payment received (if any). This process is called journalizing. You then post (copy) the charges and payments from the daily log to patient ledger cards (described in the next section). Using a daily or monthly cash control sheet, you record checks and cash received as well as deposits made each day.

Figure 18-1.
A daily log is used to record charges and payments.

There are still a few physicians in individual practices who keep a daily log at their desks for entering information after they see each patient. In such cases, it may be helpful to write the name of each scheduled patient in the log to provide an appointment list. You may be responsible for this task.

In most offices, the medical assistants maintain the daily log. You can obtain the information for the log from charge slips and from checks received from patients or insurance companies. (Note: A charge slip is the original record of the doctor's services and the charge for those services. Some practices use a combination charge slip/receipt, which automatically creates a receipt to tear off for the patient. Typically, a charge slip/receipt includes a duplicate copy underneath to use for bookkeeping purposes. Remember, you need to track charges and receipts for payment, regardless of whether the practice uses separate charge slips and receipts or a combination.) There may also be records of outside visits, such as to nursing homes or hospital emergency rooms.

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Be sure to record any night calls or other unscheduled visits in the daily log. Simply check with the physician each morning. If the physician has not noted the charge amount on a charge slip/receipt or record of outside visits, remember to apply the correct fee.

Record in the daily log all payments that come in the mail. If a check from an insurance company includes payment for more than one patient (which frequently is the case), post the appropriate amount to each patient ledger card. The information will be found on the EOB (explanation of benefits) attached to the check.

If extra columns are available, you can record additional financial information in the daily log. For example, in addition to showing the total amount charged to the patient, you can show a breakdown of that total into the amounts generated by different physicians in a group practice or by different functions of the office, such as laboratory or x-ray.

At the end of each day, total the charges and receipts in the daily log, and post these totals to the monthly summary of charges and receipts. To double-check your totals, perform the following procedures:

Patient Ledger Cards.

Another bookkeeping task is preparing a patient ledger card for each patient. The patient ledger card includes the patient's name, address, home and work telephone numbers, and the name of the guarantor, who is the person responsible for payment of the charges (if different from the patient). The ledger card also lists the patient's insurance information, Social Security number, employer's name, and any special billing instructions. Figure 18-2 shows an example of a patient ledger card.

Figure 18-2.
Patient ledger cards are used to show how much each patient owes.

You use the patient ledger card to record charges incurred by the patient, payments received, adjustments made, and the resulting balance owed to the doctor. Because these cards document the financial transactions of the patient account, they are sometimes called account cards. In some practices, they are photocopied for use as monthly statements.

The information for the patient ledger cards comes from the daily log or from charge slips. It is best to complete all the cards at the end of the day. If this is not possible, you may complete them as time permits during the day. To prevent double or omitted postings, put a small check mark next to each entry in the daily log after you post it to the proper ledger card.

Take great care when posting, because errors on ledger cards will be reflected on patient billing statements. To ensure accuracy, add up the total charges and receipts from the ledger cards, and make sure the information matches the total charges and receipts in that day's daily log.

Accounts Receivable.

Every day, you must also update the accounts receivable record, which shows the total owed to the practice (the amount able to be received but not yet received). Total up the items on the accounts receivable record, and then total up the outstanding balances on the patient ledger cards. The two numbers should match. If they do not, recheck your work to find the cause of the discrepancy.

Accounts Payable.

Accounts payable are the amounts the practice owes to vendors (the amount able to be paid but not yet paid). If your responsibilities include accounts payable, keep careful records of equipment and supplies ordered, and compare orders received against the invoices. In the checkbook register, keep detailed and accurate records of accounts paid.

Record of Office Disbursements.

The record of office disbursements is a list of the amounts paid for such items as medical supplies, office rent, office utilities, employee wages, postage, and equipment over a certain period of time. It shows the payee (the person who will receive the payment), the date, the check number, the amount paid, and the type of expense. Figure 18-3 is an example of a disbursement record.

Figure 18-3.
A record of office disbursements lists the amounts paid over a certain period of time.

A checkbook register may be used to record office disbursements. As an alternative, a disbursement journal or the bottom section of the daily log may be used to record office disbursements. For income tax purposes, this record should include only office expenses. The doctor's personal expenses should not be listed here.

Summary of Charges, Receipts, and Disbursements.

Charges, receipts, and disbursements are usually summarized at the end of each month, quarter, or year, as shown in Figure 18-4. The summary is used to compare the income and expenses of the current period with the income and expenses from any previous period.

Figure 18-4.
Creating a summary of charges, receipts, and disbursements is a regular bookkeeping task, performed monthly, quarterly, or yearly.

By analyzing summaries, a physician (or practice) can see which functions of the practice are profitable, the total amount charged for services, the payments received for services, the total cost of running the office, and a breakdown of expenses into various categories. Based on this information, the practice can make vital business decisions. For example, after analyzing monthly summaries, it may decide to budget expenses differently, collect payments more promptly, cut unprofitable services, or expand profitable services.

Although an accountant may prepare these reports, an experienced medical assistant can prepare them. If you are asked to prepare them, follow these guidelines.

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18-1 PROCEDURE 18-1
Posting Entries, Adjustments, and Collection Payments

Procedure Goal: To maintain a system that promotes accurate record keeping for the practice

Materials: Daily log sheets, patient ledger cards, and check register, or computerized bookkeeping system; summaries of charges, receipts, and disbursements


  1. Use a new log (day) sheet each day. For each patient seen that day, record the patient name, the relevant charges, and any payments received, calculating any necessary adjustments and new balances. If you're using a computerized system, enter the patient's name or account number, the relevant charges, and any payments received and adjustments made in the appropriate areas. The computer will calculate the new balances.

    • Rationale

    Each day's transactions must be accurately and promptly recorded.

  2. Create a ledger card for each new patient, and maintain a ledger card for all existing patients. The ledger card should include the patient's name, address, home and work telephone numbers, and insurance company. It should also contain the name of the guarantor (if different from the patient). Update the ledger card every time the patient incurs a charge or makes a payment. Be sure to adjust the account balance after every transaction. In a computerized system, a patient record is the same as a ledger card. This record must also be maintained and updated.

    • Rationale

    The information on each patient's ledger card must match that of the daily log.

  3. Record all deposits accurately in the check register. File the deposit receipt—with a detailed listing of checks, cash, and money orders deposited—for later use in reconciling the bank statement. The deposit amount should match the amount of money collected by the practice for that day.

  4. When paying bills for the practice, enter each check in the check register accurately, including the check number, date, payee, and amount before writing the check.

    • Rationale

    Record payments first so the step will not be skipped once the check is written.

  5. Prepare and/or print a summary of charges, receipts, and disbursements every month, quarter, or year, as directed. Be sure to double-check all entries and calculations from the monthly summary before posting them to the quarterly summary. Also, double-check the entries and calculations from the quarterly summary before posting them to the yearly summary.

    • Rationale

    Double-checking all entries ensures mistakes are found and corrected as soon as possible.

Remember that the total charges and total receipts in any summary should be almost the same. They may not be identical because some bills may not have been fully collected. Procedure 18-1 offers a plan for setting up a medical practice accounting system.

Pegboard System

The pegboard system lets you write each transaction once while recording it on four different bookkeeping forms. Because of the convenience of this system it was commonly called the “write-it-once” system and used to be the most widely used bookkeeping system in medical practices. With the advancement of computerized medical billing and records, this system is seldom used in actual practice. However, understanding the principles of this system will be an essential part of your training as a medical assistant and will help you understand the concepts behind the computerized accounting system.

A pegboard system usually includes a lightweight board with pegs on the left or right edges. The pegs match holes that are punched in daily log sheets, patient ledger cards, charge slips/receipts, and deposit slips. The holes allow the forms to be aligned while stacked on top of each other. Information, entered on only one form, is simultaneously transferred to the form(s) below. Generally these forms are printed on NCR (no-carbon-required) paper. If not, you must place carbon paper between the forms.

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Starting the Business Day.

Place a daily log sheet on the pegboard at the beginning of each day. Then, place the stack of charge slips/receipts on the pegs, aligning the top line of the first charge slip/receipt with the daily log top line. Because the charge slips/receipts are shingled, or layered one over the other from top to bottom, alignment of the first aligns all the others. The charge slips/receipts are prenumbered. This numbering promotes good cash control and theoretically prevents embezzlement.

Upon Patient Arrival.

As each patient comes into the office, place the patient's ledger card under the next available charge slip/receipt. Be sure to align the card's first blank line with the carbon strip on the charge slip/receipt. Write the date, the patient's name, and the patient's previous balance on the charge slip section. The information will automatically be recorded in the daily log and on the patient ledger card.

Attaching the Charge Slip/Receipt to the Patient Chart.

Next, remove the charge slip/receipt and attach it to the patient chart so that the doctor will see it. After examining the patient, the doctor fills in the appropriate charges on the charge slip/receipt, indicates when the next appointment is needed, and gives the charge slip/receipt to the patient.

Before the Patient Leaves.

The patient comes to you with the completed charge slip/receipt, and you again place the ledger card between the charge slip/receipt and the daily log. Check to be sure you align it properly. On the charge slip/receipt, write the charge slip/receipt number, date, procedure (or code), charges, payments, new balance, and the date and time of the next appointment (if any). As you write this information, it should be automatically transferred onto the ledger card and daily log. Finally, tear off the receipt, and give it to the patient. You can now return the patient ledger card to the file.

Payments After the Patient Visit.

If you receive payments sometime after the patient visit, either by mail or in person, record them on the patient ledger card and day sheet as you normally would. Record charges for doctor visits to hospitalized patients or other out-of-office visits in the same way. If required, you can use the pegboard system to record bank deposits and petty cash disbursements in the daily log, but you will need the appropriate disbursement journal and overlapping forms.

Returned Checks.

If a patient's check does not clear due to nonsufficient funds (NSF), you must adjust the account accordingly. NSF payments are first deducted from the office checking account. The patient's account is then updated with a negative payment (noted in parentheses in the payment column) for the amount of the check, adding that amount back to the patient balance. An office fee may also be charged for the inconvenience of dealing with the NSF check. In addition if the bank imposes a fee on the office, these bank fees should also be passed to the patient to recoup the loss for the practice, and marked on the patient's ledger. Depending on office policy, the patient may now be seen on a cash only basis by the practice. Procedure 18-2 explains the procedure for posting an NSF payment.

End of the Day.

At the end of each day, total and check the arithmetic (addition and subtraction) in all columns. If you find an error, correct it immediately by drawing a line through it and making a new entry on the next available writing line. Remember to make the correction on the patient ledger card also and to issue a new receipt to the patient. To balance a pegboard system (or even check your math on a patient ledger card), after adding the figures in each column, use the following formula for the column totals: