What are accounts receivable (A/R)? An extremely important part of any business, A/R represents the money owed to a company by those for who have purchased its goods or services and not paid for them. A/R is one of a series of accounting transactions dealing with the billing of a customer (CMS) for goods and services received by the customers (patients/clients). In most business entities, this involves generating an invoice (RAP/EOE) and electronically delivering it to the customer (CMS), who in turn, must pay the invoice within an established timeframe (RAPs 7 days, EOEs 14 days) on agreed payment terms (HHRG).

Let us review the accounting equation:
     A/R beginning balance
     Plus charges
     Less payments
     Plus/Less Adjustments
     Equals A/R ending balance

A/R beginning balance

• If this is a new company, you will not have a beginning balance; therefore, your balance will be zero.
• If this is an established company, your beginning balance will be the closing balance from the previous month.

Plus charges

• Charges include the Request for Anticipated Payments (RAPs) and End of Episode Claims (EOEs) transmitted within the month for which you are reconciling.

Less Payments

• Payments equal the amount of cash that actually hit your bank account; the amount shown on your remittance advice that you posted in the month for which you are reconciling.

Plus/Less Adjustments

• Adjustments include LUPAs, PEPs, and Final Claim adjustments in the month for which you are reconciling.

Equals A/R ending balance

• This balance should equal the balance you have in Pending Claims at the end of the month for which you are reconciling.

A/R is a monthly reconciliation. You can stay on top of your accounts receivables by:

• Submitting RAPs and EOEs daily (Charges)
• Posting payments daily (Payments)
• Monitoring the End of Episodes and transmitting the EOE before the RAP auto cancels (Auto Cancel)

My next blog post will cover "Home Health Accounting 102: Reconciling Medicare Accounts Receivable in Kinnser." This will include a systematic process that is fool proof! I do it every month, and it mirrors my monthly goals and projections. Stay tuned!

Pamela Pruitt has over 20 years experience as an accountant, with a majority in public accounting specializing in health care industry such as physicians, anesthesiologists, dentists, hospitals/clinics, etc. Ms. Pruitt is the Chief Accountant at All Nursing Home Health Services, Inc. in Houston, TX, as well as a Certified QuickBooks Pro Advisor, Certified Public Bookkeeper and Certified Bookkeeper. After hours, she blogs on Jobing.com and runs a business providing services to small businesses such as bookkeeping, accounting, and software setup, among other services. To reach Ms. Pruitt, call (281)617-1180 or visit www.ppruitt.com