1. Title: Accounts Receivable Sessions: T-1-1000
Track x – xxx day –
Title: Accounts Receivable Sessions: T T

2. Accounts Receivable – Agenda
Accounts Receivable Policy Background
Current Status for the Service Medical Activity (SMA)
Current Status SMA Components
SMA-Army
SMA-Navy
SMA-Air Force
Goals and Objectives
Accounting
Assertion (Auditability)
Accounts Receivable Management
Accounts Receivable – Going Forward

3. Accounts Receivable Policy/Implementation
Accounts Receivable Policy Memorandum
Policy signed on May 8, 2008
Purpose
Establish policy for the recognition (“as rendered”), classification, recording, aging, collection, disposition and reporting of accounts receivable in order to improve the accuracy of financial statements and prepare the Defense Health Program (DHP)–funded activities for audit readiness
Compliance with Federal Management Regulation and Generally Accepted Accounting Principles

4. Accounts Receivable Policy/Implementation (cont’d)
Implementation and Current Status
1 October 2009 (for Fiscal Year 2010 reporting purposes)
All Service Components are currently reporting Medical AR as of 4th Quarter, FY 2010
Gross Public Accounts Receivable Balance as of 4th Quarter, FY 2010, is nearly $500 Million compared with 4th Quarter, FY 2009, in the amount of $174 Million
Net Public Accounts Receivable (Gross Accounts Receivable less Allowance for Doubtful Accounts) Balance as of 4th Quarter, FY 2010, is $347 Million compared to 4th Quarter, FY 2009, in the amount of $157 Million

5. Accounts Receivable Policy/Implementation (cont’d)
Title 10 United States Code, Chapter 55, Section 1095
This policy does not modify the ability of the Services to use monies collected in the fiscal year collected
10 U.S.C. 1095(g) reads as follows: “Amounts collected under this section from a third-party payer or under any other provision of law from any other payer for health care services provided at or through a facility of the uniformed services shall be credited to the appropriation supporting the maintenance and operation of the facility and shall not be taken into consideration in establishing the operating budget of the facility.”

6. Current Status Accounts Receivable
TMA TPOC A/R Reports
Deployed March 2010
Currently developing the consolidation of TPOC data
DFAS Accounts Receivable Development and Implementation
Workgroup with DFAS–Indianapolis AR Standards and Compliance along with Components (Finance and UBO) to document the AR processes and provide more accurate AR
Discussions with SMA components to address CHCS receivable and write-off issues

7. Current Status SMA-Army
Net Public Accounts Receivable (Gross Accounts Receivable less Allowance for Doubtful Accounts) Balance as of 4th Quarter, FY 2010, is $260 Million compared with 4th Quarter, FY 2009, in the amount of $112 Million
Military Treatment Facilities (MTFs) pull Accounts Receivable data from TPOCS and CHCS. Regional Medical Command consolidates MTFs Accounts Receivable data. MEDCOM Headquarters submits consolidated Accounts Receivable report to DFAS–Indianapolis via the AR Tool
MEDCOM now has visibility of over 520,000 accounts
Bad debt write-off procedures and processes review in FY 2011
Clean-up of old debt to be addressed in FY 2011

8. Current Status SMA-Navy
Net Public Accounts Receivable (Gross Accounts Receivable less Allowance for Doubtful Accounts) Balance as of 4th Quarter, FY 2010, is $17 Million compared with 4th Quarter, FY 2009, in the amount of $9 Million
Implementation of the Medical Accounts Receivable policy was completed in July 2010
MTFs currently recognize receivables and calculate Allowance for Doubtful Accounts. Medical Accounts Receivable is entered into Standard Accounting and Reporting System-Field Level (STARS-FL) monthly
Successful completion of new processes and procedures to record Net Medical Accounts Receivable Gross Accounts Receivable less Allowance for Doubtful Accounts) in STARS-FL

9. Current Status SMA-Air Force
Net Public Accounts Receivable (Gross Accounts Receivable less Allowance for Doubtful Accounts) Balance as of 4th Quarter, FY 2010, is $70 Million compared with 4th Quarter, FY 2009, in the amount of $36 Million
Extensive research was performed on SMA-Air Force aged AR. In FY 2010, worked with DFAS–Columbus to successfully evaluate and develop a more accurate methodology for reporting Allowance for Doubtful Accounts for DCMO debt
Continuing to evaluate DCMO debt and allowance balances
Third Party Collections (TPC) program is currently executed by two distinct contractors that provide quarterly AR reports to Air Force Headquarters
SMA-Air Force continues to evaluate contractor processes for TPC AR reporting
Reporting AR via AR Tool to DFAS–Columbus

10. Goals and Objectives – Accounting
Workgroup with DFAS–Indianapolis AR Standards and Compliance
Recording TPOCS receivables to the core general ledgers at field level (SMA-Navy is currently recording to the general ledger)
Workgroup to develop central server for TPOCS accounts receivable transactions for a consolidated view to provide reconciled subsidiary receivable ledgers
Establish Allowance for Doubtful Accounts methodology for Bad Debt and Contractual Allowances in accordance with GAAP
Analysis of current accounts receivable data for all Components and facilitate “clean up” of existing balances

11. Goals and Objectives – Accounting (cont’d)
Continued work to improve DoD Metric scores
Future initiatives:
Enhance the accounts receivable reporting in CHCS
Recording of interest, penalties, and administrative fees for full compliance with the Financial Management Regulation

12. Goals and Objectives – Assertion
Define accounts receivable population records and related transactions that provide adequate audit trail
Identify all AR feeder files and document audit trail
Reconcile accounts receivable population to general ledger balances
Field Level (MTF)
Consolidated (Rolled up to Component level)
Complete audit trail of medical billing invoices to medical records
Coded medical encounter
Accurate medical fee per encounter
Allowable chargeable encounter/Patient eligibility
Accurate coding of encounters

13. Goals and Objectives – Assertion
Balance Sheet and Statement of Budgetary Resources
SMA – Army
30 Sep 12
SMA – Navy
SMA – Air Force
30 Sep 15

14. Accounts Receivable Management
Revenue Recognition
All Defense Health Program (DHP)–funded activities will recognize and record a receivable when it establishes a claim based on goods or services provided (“as rendered”)
Financial Management Regulation (FMR)
Working with OUSD(C) to revise policy in the FMR to further clarify rules for transferring medical debt to DFAS for collection
Currently submitting revisions to policy in the FMR related to medical receivables
Data Quality
Old A/R – Clean-up and reconciliation of accounts receivable balances
New A/R – Accurate billing and recording of accounts receivable, collections, credits, allowances, adjustments and write-offs

15. Accounts Receivable Management (cont’d)
Standardization of Proprietary vs. Budgetary Entries
Recommended proprietary accounting entries are: (1) Debit USSGL 1310 (Accounts Receivable) and credit USSGL 5200 (Revenue from Services Provided)
(2) Credit USSGL 1319 (Allowance for Doubtful Accounts) and debit USSGL 6730 (Bad Debt Expense)
The standardized entry will provide consistency for all Components without the potential for an appropriation violation and maintain USC 1095 flexibility
The budget authority is only increased when the account receivable is collected
Recognition of revenue and the establishment of an accounts receivable will not affect the budget authority

16. Accounts Receivable – Going Forward
Accuracy in reporting
As of 4th Quarter, FY 2010 Medical Debt is reported for all components
Reports will include aging balances and number of claims
Visibility of all accounts
Leveraging best practices to move toward standardization
Central reporting will improve as future initiatives are addressed:
Provide consolidated and centralized accounts receivable data from TPOCS and CHCS/AHLTA (both MSA and inpatient TPC), and
Calculate interest in both MSA and TPOCS

17. Accounts Receivable – Going Forward (cont’d)
SMA Audit Committee will continue to work with the SMA-Army, SMA-Navy, and SMA-Air Force along with DFAS–Indianapolis to document and improve procedures and accuracy for recording AR

18. Q&A
Track x – xxx day –
Questions?

19. Back-up slides for reference

20. Accounts Receivable – Revenue Recognition
Receivables are recorded from the time the goods or services are rendered
A receivable must be recorded in the accounting records in the period in which claims are established
Allowance for Doubtful Accounts (concepts):
Contractual Allowance (fee schedule)
Uncollectible Allowance (aging history)
Each Service will provide training and guidance in the application of these concepts

21. Establishment of Accounts Receivable
What is the “first day” of an account receivable?
Inpatient: 30 calendar days after the date of discharge
Ambulatory: 15 calendar days after the date of encounter (outpatient, laboratory, pharmacy, radiology)
Why is an accounts receivable established?
Government is owed as soon as service is provided
Some invoices can be immediately generated (family member rate)
Some encounters/services need to be coded prior to generating invoice
Many invoices are not generated in a timely manner (unbilled)
Ensure inclusion of medical accounts receivable on the financials statement

22. Establishment of Accounts Receivable (cont’d)
Calendar versus business days
Decided to use calendar days as it is easier to calculate (no need to track federal holidays or training days)
Financial statements are calendar days not business days
Final Decision – First day of Accounts Receivable
30 calendar days after termination of inpatient service
15 calendar days after termination of outpatient service
(APV’s, prescriptions are filled, laboratory tests are certified)

23. Accounts Receivable – Third Party Collections
Accounts receivable will be recognized and recorded, as follows:
Inpatient Institutional Charges
30 Calendar Days post discharge
Outpatient Services Encounters
15 Calendar Days after termination of encounter
Outpatient Ambulatory Procedures Encounters
Ancillary and Pharmaceuticals
15 Calendar Days after test/study/dispense

24. Accounts Receivable – Medical Services Account
Accounts receivable will be recognized and recorded, as follows:
Intragovernmental
Inpatient Institutional Charges
30 Calendar Days after the second month end after discharge
Outpatient Services Charges
15 Calendar Days after month end

25. Accounts Receivable – Medical Services Account (cont’d)
Accounts receivable will be recognized and recorded, as follows:
Nonfederal
Inpatient Institutional Charges
30 Calendar Days post discharge
Outpatient Services Encounters
15 Calendar Days after termination of encounter
Outpatient Ambulatory Procedure Visits
Ancillary and Pharmaceuticals
15 Calendar Days after test/study/dispense

26. Accounts Receivable – Medical Affirmative Claims
Accounts receivable will be recognized and recorded, as follows:
When the Medical Treatment Facility (MTF) receives the adjudication letter from the Attorney (e.g., legal entity pursuing the claim) with the amount and date such funds can be expected to be available (e.g., realization occurs for the account receivable to be booked).
Example:
Medical bill is sent to the Attorney on 25 November 2009
Attorney pursues the claim
Attorney signs and dates the adjudication letter on 2 April 2010
MTF receives adjudication letter from the Attorney on 4 April 2010
Account receivable is recorded as of “the DATE on the adjudication letter” (2 April 2010)

27. Accounts Receivable – Contingency
Medical Affirmative Claims are considered contingencies and are, therefore, not recorded as accounts receivable until an adjudication letter is signed and dated by the attorney who was pursuing the claim
Contingency
A potential or pending development that may result in a future gain to the company, such as a successful lawsuit against another company. Conservative accounting practice dictates that contingencies should not be booked, as potential gains or losses, although a footnote disclosure of the particulars may be made.

28. Accounts Receivable – Interest Accrual (future)
Accounts not paid within 30 days of the first day of account receivable
Collections received must first be applied to interest then to the principal.
Third Party Outpatient Collection System and Medical Services Account are not currently able to automatically calculate interest based on date of invoice
Additional information can be found at

29. Accounts Receivable – Revenue Recognition
Intragovernmental receivables:
U.S. Coast Guard
U.S. Public Health Service
National Oceanographic and Atmospheric Administration
Department of Veterans Affairs
Other Federal Departments and Agencies

30. Accounts Receivable – Revenue Recognition (cont’d)
Nonfederal receivables:
Department of Defense Civilians Overseas
Other Federal Civilians Overseas
Red Cross Overseas
Civilian Emergencies
State Governments
Foreign Governments
Third Party Collections Program
Cosmetic Surgery Procedures

31. Accounts Receivable – Aging of Receivables (cont’d)
Interest begins to accrue:
Inpatient: 30 calendar days after invoice is tendered (printed/mailed)
Ambulatory: 30 calendar days after invoice is tendered (printed/mailed) [includes outpatient, laboratory, pharmacy, radiology]
“First day” of reporting the account receivable is the date of the invoice