Taxes, Collections, and Writeoffs

AngelTrack tracks each individual dispatch until it is fully paid, no matter how long that takes. This tracking can be switched off when receivable balances are sold to a collections agency, or written off on your taxes.


How the Balance Due is Calculated

How the "Balance due" is calculated depends on whether or not the call was covered by insurance.

When an insurance carrier has not adjudicated a price, then the balance due is a straightforward calculation:

$ 1500.00 Price quote
plus $ 20.00 Service charges
minus $ 5.00 Discounts applied
plus $ 7.00 Finance charges
minus $ 1425.00 Payments received
equals $ 97.00 Balance due

Service charges and discounts are voided by a "Price allowed"

When insurance is claimed, the insurer has the authority to set the final price for the service, overriding any other agreement or contract in play. This is true the moment the insurer acknowledges coverage, even if the insurer does not then pay any benefits (owing to a deductible).

It also binds any collections agency that you sell the receivable to.

AngelTrack knows this, and so the "Price Allowed" field will -- if set -- always override the "Price Quote" field:

$ 1500.00 Price quote
plus $ 20.00 Service charges
minus $ 5.00 Discounts applied
$ 360.00 Price allowed
plus $ 7.00 Finance charges
minus $ 310.00 Payments received
minus $ 5.00 Payments sequestered  What's this?
equals $ 52.00 Balance due

When the insurer returns an EOB that acknowledges coverage, the EOB will include the adjudicated price. This is true for paper EOBs as well as EDIs. AngelTrack stores that adjudicated price in the "Price allowed" field. At that moment, all service charges and discounts become void, in keeping with insurance contract requirements. In other words, once the insurance company determines an allowed price, that is the price AngelTrack uses.

If necessary you can clear the "Price allowed" field, and revert to regular pricing. Discounts and service changes will then apply again.

Patient responsibility [PR] adjudications

Insurance carriers adjudicate the amount which the patient is obliged to pay. This amount is abbreviated as the "PR". It is a complicated topic, and is discussed at length in the Patient Responsibility guide.

When a PR has been determined, and when the patient is the obligated party (i.e. when Payor is set to "Patient"), then the PR determines the balance due. Normally, the PR asks the patient to pay exactly the balance remaining after adjudication:

$ 1500.00 Price quote
plus $ 20.00 Service charges
minus $ 5.00 Discounts applied
$ 360.00 Price allowed
minus $ 310.00 Payments received from insurance
minus $ 5.00 Payments sequestered
equals $ 45.00 Non-patient balance due
$ 45.00 Patient responsibility [PR]
equals $ 45.00 Patient balance due

Not allowed amount [NAA] / Copay forbidden

When a PR asks the patient to pay less than the balance due after adjudication, or entirely forbids the collection of the copay (as Medicaid often does), it is called a "not allowed amount" [NAA]:

$ 1500.00 Price quote
plus $ 20.00 Service charges
minus $ 5.00 Discounts applied
$ 360.00 Price allowed
minus $ 310.00 Payments received from insurance
minus $ 5.00 Payments sequestered
equals $ 45.00 Non-patient balance due
$ 35.00 Patient responsibility [PR]
$ 10.00 Implied "not allowed amount" [NAA]
equals $ 35.00 Patient balance due

Finance charges add to the PR

Finance charges can require the patient to pay more than the Patient Responsibility [PR] amount adjudicated by the carrier:

$ 1500.00 Price quote
plus $ 20.00 Service charges
minus $ 5.00 Discounts applied
$ 360.00 Price allowed
plus $ 7.00 Finance charges
minus $ 310.00 Payments received from insurance
minus $ 5.00 Payments sequestered
equals $ 52.00 Non-patient balance due
$ 45.00 Patient responsibility [PR]
equals $ 52.00 Patient balance due (PR + finance charges)

Patients can never be required to pay more than the PR plus any finance charges

The patient can never be required to pay more than the PR amount (if set), other than finance charges (e.g. late charges), so this can provoke a patient refund even if a non-patient balance remains:

$ 1500.00 Price quote
$ + 20.00 Service charges
$ 5.00 Discounts applied
$ 360.00 Price allowed
plus $ 7.00 Finance charges
minus $ 310.00 Payments received from insurance
minus $ 5.00 Payments sequestered
equals $ 52.00 Non-patient balance due
$ 20.00 Patient responsibility
$ 30.00 Implied "not allowed amount" [NAA]
equals $ 27.00 Total patient obligation (PR + finance charges)
minus $ 32.00 Payments received from patient
equals $ − 5.00 Patient balance due (patient owed a refund)

Bulk clearing the "Price allowed" during facility/affiliate invoicing

Your facility and affiliate contracts will usually stipulate a fixed price schema that overrides any adjudications from insurance carriers, because it will apply only to denials and rejections*. The Invoice Generators have a ☑ Clear any insurer adjudicated prices checkbox to automatically clear all such adjudications during invoice commit, so that the facility's or affiliate's price schema will prevail.

*Anything approved by insurance must instead go onto a patient invoice, regardless of whether the insurance carrier actually paid anything. AngelTrack's automatic workflow will do this for you.


Invoices are Used to Sell Receivables to Collections

AngelTrack provides invoices as a way to quickly record the event of selling a batch of receivable dispatches to a collections agency.

To do so, create an invoice in the usual way, taking care to include only those dispatches that are to be sold. Remember you can add and remove individual dispatches from an invoice, one at a time, once the invoice is created.

Commit the invoice once you're happy with it, so as to pull all of its dispatches out of the  Billing office , and set their price quotes as necessary.

Next, use the invoice's Close link as if paying it normally. On the subsequent Close Invoice page, select the "Sold to Collections" radiobutton at the bottom-left. Then click the "Save" button and you're done.

All items in the invoice will be moved to  Finished , causing them to exit any billing queues they may be waiting in. Any nonzero balances will thereafter appear as writeoffs in AngelTrack's tax and revenue reports.

Transferring data to the collections agency

The collections agency will ask for a spreadsheet of the receivables to be collected. AngelTrack already knows how to provide all the information they will need.

The Invoices List will prepare the data export for you. Simply tick the checkbox next to each sold invoice, then click the "Export data for collections" item in the "Bulk Operations" box.

AngelTrack will download a .CSV document to you containing all the necessary information. The document opens in Microsoft Excel™ or in Google Sheets™. From there you can make any necessary edits, and then send it onward.

If your collections agency requests additional data -- something not already included in the .CSV -- then you can add it yourself... or, contact AngelTrack Support. Additional data columns can be easily added to the export as necessary.

Selling many invoices at once

If you need to sell many invoices to collections at once, then use the "Bulk Operations" toolbox on the Invoices List page. After selecting multiple invoices from the list, you can mark all of them as "Sold" with the click of a button, then one more click to export all of their collections data.

AngelTrack will create a consolidated .CSV spreadsheet containing all dispatches in all selected invoices, with duplicates automatically removed; your web browser should automatically download the file. The spreadsheet contains all the information needed by the collections agency.

Implementing a reinvoicing and collections workflow

AngelTrack's design includes a workflow for invoicing your counterparties a certain number of times, then giving up and selling the receivables to collections.

To learn how to implement it, read the Weekly/Monthly Reinvoicing Guide.


Tax Calculations

AngelTrack's Revenue Accrual Report can quickly provide you with highly pertinent data needed to close out your books and file your taxes. It produces four important subtotals for you:

Depending on how much Medicare/Medicaid work you do, your contractual adjustment can be enormous.

Your accountant will decide whether or not the contractual adjustment has useful tax implications. If your accountant is not aware of the potential benefits of the contractual adjustment, then we recommend consulting an accountant who specializes in healthcare accounting.

A simple example

Suppose you run exactly one stretcher call with a 10 mile transport. At your retail price of $1500 + $5 per mile, the charged amount will be $1550.

Medicare covers the call, but only pays $250 + $5 per mile, for a total benefit of $300. The contractual adjustment is therefore $1550 - $300 = $1250.

Medicare cuts a check for $260, leaving a $40 copay for the patient. Suppose the patient only pays $10 and then stops responding. That means your payments received is $260 + $10 = $270. Your cash writeoff is therefore $300 - $270 = $30.

Finally, suppose you sell the $30 balance to collections and receive $5 for it. AngelTrack doesn't know you received $5 for it, so it will still report a total cash writeoff of $30. It's likely that your accountant must subtract the $5 received from collections before calculating your final taxes, which should therefore be:

$ 1550 Charged amount
minus $ 1250 Contractual adjustment
minus $ 270 Payments received: as reported by AngelTrack
minus $ 5 Payments received: sale to collections, booked separately
equals $ 25 Cash writeoff

Accounting for the proceeds of a sale to collections

When a receivable is sold to collections, AngelTrack's records will still show a balance owing, calculated according to the rules given above. That balance -- the debt purchased by the collections agency -- is what shows up in the "Total cash writeoff" field of the Taxes and Commissions report.

As noted above in "A simple example", AngelTrack does not know how much you received from the collections agency. Those amounts must be entered into your books separately.


Writeoffs

AngelTrack views a writeoff as whenever you advance a dispatch to  Finished  while it still has a balance due. This is not a "writeoff" in the tax sense; it is only for AngelTrack's own internal recordkeeping.

Simplest view of the workflow

That's it. You need not take any other action to write off a balance due. And you can undo your decision at any time in the future, by pushing the dispatch back into the postprocess workflow.

Because the dispatch is marked  Finished  while not fully paid, the balance will thereafter appear in AngelTrack's tax and revenue reports as a writeoff. Remember that your agency's financial records should eventually reflect (as cash received) the proceeds of the sale to collections -- a monetary amount not recorded by AngelTrack.

Writeoffs must have a price quote or a price allowed

Because writeoffs have important tax benefits, and AngelTrack's reports are sometimes used to calculate these tax benefits, the system requires them to have a price quote... or failing that, a price allowed. This permits the tax and revenue reports to calculate the amount that was written off.

In deference to this requirement, when billable dispatch is  Awaiting payment  yet has neither a price quote nor a price allowed, the postprocess advance button  →  changes to   ?  . Clicking it will prompt for confirmation that the trip is to be automatically quoted at retail as it is advanced to  Finished , for the benefit of any tax or revenue reports.

Bulk writeoffs using an invoice

AngelTrack's invoicing system makes it easy to write off multiple receivables at once.

To write off all dispatches in an invoice, mark the invoice "Paid" and specify zero dollars as the amount paid, like this:

Write off an open invoice

AngelTrack will automatically move the underlying dispatches to  Finished , leaving notes in their journals to that effect.

Facility writeoffs versus the Anti-Kickback Statute

If writing off some or all of a facility invoice, you may be subject to the Anti-Kickback Statute.

If AngelTrack sees that the facility in question has sent you any Medicare or Medicaid business in the past year, then the AKS warning icon will appear if you tick the ☑ Write off unpaid items as a courtesy discount checkbox.

If a contracted facility asks for a writeoff of some of their invoices, or asks you to place patient copays onto the facility's invoice, this may expose your agency to AKS prosectuion.

Patient writeoffs versus the Anti-Kickback Statute

If writing off patient copays that remain after Medicare or Medicaid benefits are paid, writing off these copays, may expose your agency to the Anti-Kickback Statute, because those writeoffs may be seen as a cash benefit paid to obtain future government-subsidized stretcher business. Your legal counsel may suggest a hardship policy.

Reviewing writeoffs

The Revenue Accrual Report has a divedown report called the Revenue Accrual Detail Report, which shows all financial activity for any selected month. This latter report includes writeoffs, and can be filtered to show only writeoffs. It is therefore an easy place to review all writeoffs that occurred during any month.

If you find a writeoff that was made in error, then simply open the associated dispatch record, use the "Billing" tab to push it back into the postprocess workflow.


Clear it With Your Legal Team First

The foregoing is not legal advice.

Before using any data from AngelTrack concerning revenue, collections, or writeoffs, you should consult your legal team and your accountant. Taxes and deductions in the healthcare industry are complex, especially when Medicare/Medicaid writedowns are in play.



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