Medical Office Management Accounting Terms

The Fundamental Accounting Equation
Assets = Liabilities + Owner’s Equity
Assets
Cash in the bank, property owned, all possessions, Accounts Receivable
Accounts Receivable
Money owed TO the practice
Liabilities
Money you owe to other entities
Owner’s Equity
The amount of money a person has invested
Fixed Expenses
Expenses that are the same every month: rent or house payment, equipment maintenance, etc.
Variable Expenses
Expenses that change with usage
Revenue
The amount of income of a person or practice
Expenses
Costs that relate to the cost of doing business
Accounts Payable
Unwritten promise to pay a supplier or merchandise purchased on credit or for service rendered–amount owed by the practice
Revenue Cycle
activities that begin with the patient making the appoint, seeing the doctor through getting reimbursed for the service
Medical Necessity
Proof that a patient needed the service because of signs, symptoms, and assessment–justification for the service
Third-party payers
Any entity besides the patient that pays for the patient medical care
RA
Remittance advice–an electronic document that shows what the insurance paid, on which patient, for which services OR why a claim was denied
EOB
Explanation of Benefits–a document that shows what the insurance paid, on which patient, for which services OR why a claim was denied–usually comes attached to a check
Timely filing
health plan’s rules specifying the number of days after the date of service that the practice has to file the claim.
Adjustment
The amount that has to be “written off” when the charge was more than the allowed amount by the insurer
Accounts Aging Report
A report usually done at the end of the month that shows how much money is owed and by whom and for how long
Fraud
1. Billing for services not performed
2. Altering diagnosis codes to justify payment
3. Falsifying medical records
4. Using incorrect procedure codes to increase fees
Auditing patient services
Comparing the appointment sheet, the sign-in sheet, and the day sheet for discrepancies
Patient responsibility
the amount the patient may owe after insurance has paid
Unbundling
Using several CPT codes for a service that has one code that covers all the services–Fraud
Day Sheet
A report at the end of the day that totals all charges and payments and shows the change in accounts receivable
Accounting
System of monitoring the financial status of a facility and financial results of its activities, providing information for decision making.
Cost Analysis
A procedure that determines the cost of each service.
Income Statement
The financial statement showing net profit or loss