If your company is going into bankruptcy, and you have guaranteed any of the loans, it is important, of course, that all the receivables be collected to pay off as much of the loans as possible. Similarly, if your company has made an acquisition, it is important that all the receivables be collected, to minimize the cost of the acquisition. The rules set forth herein apply to both situations. In each case sloppy handling can lead to huge unnecessary losses.

In an acquisition, presumably the acquiring company has the system set up to handle the reimbursement. But the company must be sure to gain control immediately of the receivables, and start the process of reimbursement. In a bankruptcy there is no system in place, no money, no income, and no qualified personnel. The trustee in bankruptcy probably has no experience in the field, and he does not even know where the files are. The lead lender may have collection experience, but not in the health care field. Furthermore, the lenders often write off all or part of each receivable after different periods of time. This will impact adversely on health care receivables.

We were recently retained by a lending institution to which the trustee in bankruptcy had turned over all the accounts receivable, as the lending institution had a security interest in all the receivables. The receivables were turned over to us as having a value of $335,000.00. We sat down with the company's former president who showed us that the value of the receivables was actually in excess of $5,000,000.00. It was in his interest to help us because he had personally guaranteed the loan, and the receivables were collateral for the loan. Had we pursued the receivables at the $335,000.00 value, there would have been staggering losses, and he would have had to make good much of these losses because of his personal guaranty. It seems that the lending institution, following good accounting practice, wrote down the receivables leaving only the amounts they expected to collect, which was the $335,000.00 figure. They were able to locate their earliest printout, which showed that the receivables were worth $5,000,000.00, and that was the figure that we worked with.

We have set forth some rules as a guide for dealing with health care receivables.

   1. Retain as soon as possible an attorney familiar with reimbursement. The bankrupt company's personnel were unable to collect the money. A collection agency is not equipped to collect health care receivables, and in many states may not even recommend an attorney. Consulting companies are better suited to deal with operation problems, and are rarely more able to collect receivable than company personnel.

   2. Collect all the files immediately.

   3. Classify all patient files according to the payor, and also according to MEDICARE and MEDICAID.

   4. Collect records of every payment.

   5. Collect all A/R printouts.

   6. Collect all telephone logs.

   7. Collect all company agreements with payors.

   8. Do not pay any attention to bookkeeping writeoffs, as they are only estimates. The patient files will show the amounts that should be collected.