The report is very similar to the collections detailed report. But it has to include a check number or EFT number. Ideally, you would have many different fields included in this: patient name, transaction amount, and other fields. Again, the critical component is the dollar payment, the insurer, and the check number or EFT number.
With this report, you want to roll up all the payments and group them by check or EFT number. Many systems can do this, whether it is a billing system or otherwise. You can group them then: all those individual components, the individual transactions that sum up to that one payment.
It is the how-to-do-it segment
Some of the designs even can include both the check amount and the outstanding transaction amount. So that you can make sure all the individual components add up to that payment batch. That is the first report.
The second report that you are going to use in the reconciliation process is a bank deposit report. It could be in any format, whether it is in Excel coming out of the bank or in a PDF. Ideally, it would be Excel. If it is a PDF, you have to extract that information out of that one way or another.
Those transactions typically include a check number or an EFT number, a dollar amount, and a date. Ideally, you want to have dates in multiple reports here so that you can check. The timing of these things, all of that sort of a higher-level thing that we can get into in another podcast.
How to reconcile in case of a mismatch?
To reconcile, you want to compare and essentially look up each number in the bank reconciliation report. That is, the check number or the EFT number, and find that in the deposits report. I mentioned earlier that coming from the bank, you might have a PDF, or you might have a fax copy coming from a provider. If you are a billing company, you may be manually checking some of these things. Ideally, you could automate some of this if it in an Excel format, CSV, or another electronic format.
In addition to checking to find the check number or the EFT number and to see whether it got deposited. For the dollar amounts to make sure that those dollar amounts are, in fact, the same because they are often not.
Studying collection reports for better comprehension
You also want to go the reverse direction: you want to look at every deposit into the bank account from a payer. In the collections report, you will often find prices in the bank account not located in the collections report. It is not uncommon to get an EFT or some price.
- Maybe a check from an insurance company that does not include enough detail to allocate all that money to the different patients you got. You have money in a bank account and no collections published in the report. You still have those transactions out there in unpaid and unadjudicated bills receivable.
- We suggest doing this for all time, meaning going back to its origin. If possible, if it is only a few years for the provider. Ideally, if that is not possible, go for a more extended period than what you want to reconcile. If you are going to negotiate 2020, go several months back into 2019. Start with that because you will find things move in and out of periods, where something late. One month shows up early in the next month or even a couple of months later. It gets very confusing and very hard to manage if you are trying to start with January. You want to look at January data because you will find things in January from the prior October and vice versa.
- Get the numbers for what is accounted for, meaning what matches in both. There will be a large bucket where to find payments that are both posted and in the bank account and the identical dollar amounts. There will be some other variations of small buckets where you might have incorrect dollar amounts going one way or another.
- You will also have a relatively significant number going in and out of periods, meaning late in one or starting one period and going in another period, or the payment got done in December. Still, it did not get posted until March.
- You need to maintain a running ledger. Effectively with balances of what got posted correctly. And what is running in those particular ledger accounts; call it “posted but not paid” or “paid but not posted” or whatever you want to label them. Effectively, every month you need to run and have credits. And debits to each column for what has now got caught up in that particular period, in that month that was outstanding from a prior month. That, unfortunately, does not end over time. That is simply an ongoing thing that will never get resolved. That you will always maintain those buckets, and you’ll be using that constant.
- The purpose of doing all this is twofold. You want to make sure that tallies in any one of those individual buckets aren’t growing significantly. Of course, if the company is growing, the provider is growing, and they are not growing faster than the volume of charge growth.
The other thing is that the purpose of having these buckets. And doing this reconciliation is to identify either payments or collections. Posted or particular transactions where there is some problem that needs to get resolved. Suppose you have that list to give to billers or a billing department, or a billing company. It is vital to maximizing your reimbursement and revenue. While avoiding accounting problems or even paying taxes on the money you did not receive.