Recently, a group of executives from one national health care company was pursued successfully by the SECURITIES AND EXCHANGE COMMISSION because, said the SEC, the reserve for bad debts was understated. It need not have happened. It was a judgment call, and the people with the information, attorneys in the field, were not called in.

The manner of dealing with reimbursement can determine the success or failure of a company, or difficulty in dealing with the regulatory authorities.

How should reimbursement be handled? First we must look at how the reimbursement is being handled. Should outside help be used, or should it be dealt with in-house?

There are 3 stages of reimbursement. The billing, the dunning, and special treatment. Billing is usually handled in house. However, for those companies that are not fully automated there are many billing companies, nationwide, that do competent work, and relieve the company of boring, repetitive jobs. For this the billing agency gets between 3% and 6% of the amounts collected.

When the initial invoice is not paid, there are collection agencies who are only too willing to relieve the company of another boring, repetitive job. Here, however, there are certain risks. To begin with, the collection agency gets 10% from hospitals, and between 20% and 40% from nursing agencies. However, they are only geared to collect the easy cases, where payment has been simply delayed. If the collection agency is not aggressive, they are no better than your own personnel. If they are aggressive, they antagonize the patient, and frequently the doctor who recommended the patient. Also, there are Federal Rules of fair collection practices. This can be a minefield.

But most important, the use of a collection agency can cause the company to neglect the insurance and Medicare cases. If the collection agency, (or the company) pursues a patient who has an insurance policy, or Medicare, this engenders real hostility from the patient, and it also gets back to the referring doctor. If the collection agency gets a rejection from the insurance company or from Medicare, they are not equipped to deal with it. The nursing agency or hospital, or nursing facility, has no experience with insurance or Medicare denials, so the case is written off, and the collection agency continues to pursue the patient. If the patient does not have money it is a total write off. But, of course, the collection agency pursues the patient, he has no money, but he had insurance, so he gets angry, and complains to the referring doctor. If the treating agency decides to have the collection agency undertake to pursue the insurer, the collection agency will exact a 50% fee from the hospital or nursing agency, if he collects anything. And then, all they will do is write more letters, until the time to sue runs out. For instance, suppose the insurer refuses to pay for nursing a paraplegic, saying it will not pay for "custodial care" Do we really expect a collection agency to deal with that problem? Yet in at least one case on Long Island the claim was paid in full, after trial. Such accounts can be collected, if pursued in the proper manner. They need to be addressed, quickly.

In several articles we have written, we have pointed out that Medicare cases are reversed 50% of the time, after the initial denial. In fact, in TPN or enteral therapy, we have had 3 reversals on appeal in the last 4 cases. These cases were initially denied payment because Medicare does not cover for drugs, or biologicals. Yet there are numerous TPN and enteral cases which should be paid. We have also shown, in a prior article, that insurance companies make mistakes. If they are not challenged, those mistakes become write offs. Thus, although Medicare does not pay for drugs, we have a hemophilia case where payment was denied on that basis. But the regulations state that a hemophiliac can be paid for his blood clotting drugs.

But it does not require a mistake by an insurance company to reverse their decision. When an insurer makes a very small payment because of "usual and customary", we have found that few insurers can back up their decision with appropriate statistics.

In that case involving "custodial care" the insurer which had refused to pay for 24 hour a day treatment was found to have ignored 56 incidents of choking and suctioning, any one of which might have been life-threatening had a nurse not been present. There are many similar cases where the insurer refused to pay, but was compelled to pay after they were challenged in court. Each of these cases would have been write-offs. Each of the patients and their doctors would have been antagonized. And the company would have sustained a substantial loss, needlessly. Thus, if there are any insurance cases among those sent to the billing company, or the collection agency, they must be tracked. All these cases must go back to the company for special handling. (by a law firm that specializes in the field, the cases can turn into profit.)

Do not let the cases linger in the outside agency. They must be pursued immediately, It is not fair to have a patient dunned when the Insurance money is out there. The patient may not have any recourse, but his doctor, who may have been paid by the insurer, will think twice about recommending your nursing agency or nursing home again. If you are a hospital, the patient will be antagonized, and the doctor will have less faith in the hospital. If it simply happens to one patient it may not be significant for a hospital. But this situation occurs numerous times. The reputation of the hospital is diminished when the insurance is not pursued. And, if the write-offs are too great, the price of treatment must be raised.