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Dotting your i’s and crossing your t’s
By Howard Zandman, CPA, CFFA
I was recently retained as an expert in a litigation matter involving a medical group, which operated the emergency facilities of a hospital in Georgia, and the agency hired by the medical group to perform billing and collection services. The agency had previously provided collection services primarily for phone and utility companies and had no prior medical billing services experience. Agreements were signed between the two parties for the provision of billing and collection services (both for current and delinquent items) for a period of one year, but the relationship continued for approximately two years. The agency was to be compensated on a percentage of monthly collections, with a higher rate for collection on delinquent items. The agency purchased relevant and highly regarded software for this purpose and hired several new employees familiar with the software as well as the billing process.
One of the central facets of the case was the gaining of an understanding of the areas of responsibility of each of the parties. The contract terms stated that it was the responsibility of the medical group to provide the necessary patient and cash receipt documents to the agency in a timely manner in order for the agency to properly bill the patients serviced. Also, the agency relied on the medical group to inform it of any changes to the patient’s medical insurance.
As you may have already noted, there was an inherent conflict in the duties of the agency. The terms of the contracts stated that the agency was to be paid a certain percentage for current billings and a greater percentage for delinquent collections. Therefore, one could argue that the agency could have intentionally not performed timely billing in order for accounts to be delinquent, which would allow it to collect a higher fee. However, after analyzing the data, I was able to determine this was not the case. In addition, per the contract, the agency was not authorized on its own to write-off any amounts for transfer to collections. The medical group was responsible for letting the agency know which accounts were to be written-off as delinquent accounts for collections.
About a year and a half after the contracts were signed, disputes began to arise about the responsibility of each of the parties. The medical group sued the collections agency for failure to perform its duties and the agency counter-sued for unpaid fees. The medical group hired an outside consultant to analyze the data contained in the software used for billing. The consultant issued a summary of findings with several different damage categories, which consisted primarily of alleged untimely billing for Medicare, Medicaid, and Commercial insurance. Untimely billing was defined as “nothing” being done to that patient’s account or record for a year or more.
Counsel and I met with the outside consultant and received a copy of the hard data that the consultant had extracted and converted from the agency’s software to his proprietary software. I sought out and hired a consultant familiar with the agency’s software who was able to work within its direct environment. In the end, I compared the medical group’s consultant’s data set to data taken directly off the agency’s system. I found files missing from the consultant’s “converted” files that included all information on sources of payments and interim billings. This meant that the group’s consultant did not have critical information indicating performance of timely billing by the agency.
The following conclusions can be made about this case:
- It is important when beginning an engagement to understand the issues at hand with regard to responsibilities of the parties involved, and
- In order to avoid the loss or corruption of data, it is best to work within the native software being used, when possible. If not possible, attempt to perform a test to prove that all the data was converted properly.
After several months of analyzing data from the database, I submitted a 26-page report with numerous supporting schedules and reports generated from the original database. My report demonstrated that the data offered by the medical group’s consultant from his proprietary software was based on incomplete data files and was therefore erroneous and unreliable. After reviewing my report, the other side dropped the case.
For more information contact:
Howard Zandman, CPA, CFFA
404.814.4915
hzandman@tbcpa.com
Sem Berhane, CPA, CVA
404.814.4922
sberhane@tbcpa.com
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