Why a bank lockbox is the best way for a medical practice to handle payments and correspondence.

If you want to maintain a consistant office address for all insurance companies and patients to send payments and correspondence  with the least “hassle”, consider the benefits of using a bank lock-box operations.

What it is a Lock-Box?

The lock-box is a physical Post Office address, maintained usually by a bank, which has an associated depository checking account tied to it.

What is it for?

The receipt of payments in the form of paper checks and correspondence, including insurance company “Explanation of Benefits” (EOB’s).

Why would you use it?

a)      Protects you from fraud and embezzlement by office or third-party billing staff.    The bank has a fiduciary relationship and must be insured for this purpose.    You will be more protected from mishandling of funds, if those funds are handled by an independent fiduciary.

b)      the bank performs all “clerical” tasks such as opening the mail, removal of staples and clips, scanning of contents of the lock-box, making the bank deposits on a daily basis.

c)      the bank deposits the payments every day into your designated depository account, providing you with access to either the original bank deposit slips and checks, or with web-based access to the scanned images of these documents over the bank’s lockbox management system.

d)      Deposits are made much sooner than would be the case if payments were made directly to the practice’s office address.

e)      the bank’s staff can be relied upon to do the required work EVERY DAY, without concern for your own employees missing work or not being able to take off to go to the bank to make the deposit.

f)        your office staff does not have to tak the time to open the mail, copy the checks, make out the deposit slips, and transmit or deliver the contents to the bank to deposit or to the billing service to bill.

g)      the lock-box address can remain as the remittance address with all insurance companies in spite of changes of physical address by the medical practice.    This assures no interruption of cash flow or delay in receiving important notices from insurance companies, should the practice relocate or open additional offices.   Since the lock-box address doesn’t change, you would not have to submit “change of address” applications to every payor.

h)      The final and perhaps most important consideration of using a lock-box is …

to ensure a smooth transition, should you change from one billing service to another, or from a billing service to in-house, where you must ensure as of a specific date that all of the contents of the lock-box stop being delivered or transmitted to one party and begin being delivered or transmitted to a new party.   All you have to do is send a letter to the lock-box administrator, with your instructions.

How much does it cost?

The cost varies from bank to bank.   However, they usually charge a base rate, plus $.xx per check deposited.    You will need to provide enough details to your bank to get their best rates, which usually get lower with higher volume.   Check with several banks before making your choice.   The better lock-box operations offer web-portal access to both the scanned images of all lock-box contents to a third-party billing service or office.    They also offer on-line banking access to the depository account to confirm deposits.

When you enter into a billing service agreement with a third-party medical billing or practice management services organization, optimism and euphoria of having finally found the solution to your billing and office management problems may overshadow an often overlooked question:  “What happens IF…

• I want to terminate my contract early?
• The vendor goes out of business?
• If I want to change vendors at the end of the contract term?
• If I want to bring billing back in-house at the end of the contract term?

While there is no one single answer, you should ask and have answers to several questions and position yourself the best way you possibly can to protect yourself.   Here are the top five things you can do to protect yourself:

1) Make sure you will be able to access the software and your patient accounts receivable database directly. If the vendor owns the license and provides you with access to the software as part of its billing service, make sure you have you own user ID and password to be able to view key management reports and perform analysis to independently evaluate their performance and verify financial reports they provide during the contract period.   In other words, it’s good to trust them, but better to “trust and confirm”.

2) Know what steps you would have to take to gain independent ownership and control of the software and your patient data, should the vendor terminate their service or you terminate the vendor. If you own the license and control access as a key administrator, it may be very simple to terminate the user ID’s assigned to the billing service.    If you want to allow a prior vendor access to records to collect the old accounts, but you want to start billing new services on a different system,  you may allow them to work out the old accounts for 90-120 or longer, accessing the old A/R system as necessary.   You should have a “post-termination” clause in every contract defining the responsibilities of both parties during this “wind-down period”.  If you do not own the license to the software the vendor has been using, make sure you can I contract directly with the software vendor to use the same system and access your own database.   It may be possible, but may require “permission” from the current vendor to transfer the database to you.  The database may be delivered in a format you can’t use.   If the vendor uses a web-based or ASP-hosted system it may be possible to sign a direct license agreement with the vendor, have the service company agree in writing to transfer the database to your new license without requiring an actual physical transfer of data or conversion.   For example, AdvancedMD is a web-based practice management system offered through eHealthTech’s billing service agreement.   eHealthTech purchases the license for its clients and accesses their database, which is hosted by AdvancedMD at its secure data center near Salt Lake City, UT.   eHealthTech provides its clients access to their databases during the contract period.   At the end of the service contract period, a client may request that eHealthTech authorize the transfer of their database “Office Key”, containing only their patient demographic and financial data, from which time the client would assume full responsibility for all fees related to the licensing, services, and support provided by AdvancedMD.

If your billing service is using a system that you do NOT own the license to AND you do NOT wish to assume responsibility for billing using that system, make sure you can trust the terminated company to continue to collect the remaining A/R for some period of time under a “wind down period” so you can move forward with new billing using either a new billing service or in-house, using a different practice management system.   This will have its challenges, as explained further.

3) Be aware that you may only have one remittance address at a time for your practice. If you change billing services companies or bring billing in-house, you must understand that the address to which insurance companies send payments and correspondence WILL NOT AUTOMATICALLY CHANGE.   If your payments and correspondence have been going to a bank lock-box owned by your practice, it is very simple to nofify the bank of the change in billing service and give them a new address to which to send the contents of the lock-box and to terminate the former billing service’s on-line access to the lock-box on-line or web-based portal used to view the contents of the scanned files and to view the bank account itself.   NEVER contract with a third-party billing service who requires your payments and correspondence to go directly to their address or to a P.O. Box or Lock-Box owned by them!  If you want to close the existing lock-box or P.O. Box or otherwise change the remittance address, you must notify all insurance companies of the change of address, using the various forms or on-line portals as required by each company.    Know that these changes WILL NOT BE MADE INSTANTLY.    You will continue to have mail sent to the “old” address for some period of time after you notify the payors of the new address.    You may have to track down payments made to you that you never received due to the change of address.

4) You may only have one entity at a time be the recipient of Electronic Data Interchange (EDI) data from most payors. If you change billing services or bring billing in-house from a billing service, you will need to send new Electronic Data Interchange forms to the various insurance companies like Medicare, Medicaid, Blue Cross Blue Shield, etc. notifying them of the change.    When these companies process these new applications, be aware that this will re-direct all electronic remittance files, all claim edit reports, etc. that are processed by your clearinghouse or directly by that payor to the NEW entity.    This means the former billing services WILL NO LONGER RECEIVE ELECTRONIC REMITTANCE FILES OR CLAIM EDIT REPORTS.    If you had intended for the previous service to continue collecting the outstanding A/R during the “wind down period”, this will make is more difficult for them to perform their contractual obligations as effectively.   To overcome this, you must ensure that you or your new service FORWARD TO THE FORMER BILLING SERVICE all remittances and correspondence that is related to services billed by them under their contract.   This will create additional work for your staff, but is necessary and must be done expeditiously!

If all payments and correspondence has been coming to your practice’ physical address or your own P.O. Box, no change of address need be filed with the insurance companies or patients.

5) It will be VIRTUALLY IMPOSSIBLE FOR BOTH THE OLD BILLING SERVICE AND A NEW BILLING SERVICE TO WORK ON THE SAME SYSTEM AT THE SAME TIME! Please understand that your decision to change to a new billing service should be made with a full understanding of the impact the change will have on both the new and former billing service to perform their contractual obligations under their respective agreements!

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