Health Care Finance

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Discussion Questions

1.) Dr. Powers operates a single-provider family medical practice. One medical assistant handles appointments, basic bookkeeping functions, and assists with medical records. Two additional medical assistants assist in patient care. The physician’s spouse comes into the office on an irregular basis to prepare the bank deposit. The accountant for the practice has been able to convince Dr. Powers to hire a practice manager, rather than another medical assistant, to manage the increasing workload of the practice.

Teresa Ruiz has been hired into the position of practice manager and has arrived for her first day of work. The medical assistant responsible for opening the mail and posting patient payments tells Ms. Ruiz that patient records are up to date on payments received and charges for services, but she has been instructed to only place the cash and checks received into the cash drawer and that Dr. Powers’ spouse would handle the cash from that point. In the cash drawer, Ms. Ruiz finds checks dated over the past 2 weeks, cash far in excess of that needed for daily operations, and dozens of IOUs where Dr. Powers has taken cash from the cash drawer for lunches.

What are the appropriate steps for Ms. Ruiz to take to establish reasonable financial controls over the cash handling process?

 

2.) Mrs. Ivanov comes into the medical facility for a routine office visit. Her copayment is $35, and she hands the cashier a $50 bill. The $50 bill is deposited into, and the $15 change is taken from, which of the following?

A.) Petty cash fund

B.)Cash drawer

C.) Operating checking account

D.) Payroll checking account

 

3.) Johnson’s Carpet Cleaning has completed their monthly cleaning at the medical office and submitted their billing for $200. Payment to Johnson’s is made from the?

A.) Petty cash fund

B.) Cash drawer

C.) Operating checking account

D.) Payroll checking account

 

4.) Drs. Sawyer and Preston operate a medical partnership. An employee has been designated and trained as a cashier, responsible for opening the mail and recording payments received. The cashier also takes payments from patients receiving medical services. The cashier balances the cash drawer, prepares the daily bank deposit, and drops the deposit into the bank’s night deposit at the end of the day. What recommendations would you make to improve internal controls over the cash handling process?

 

5.) Mr. Alvarez has just been named as the practice manager for a three-doctor urology practice. Mr. Alvarez is reviewing the petty cash fund and notices that there are several hundred dollars in cash as well as IOUs from various employees in the fund. Dr. Singh, the senior partner, tells Mr. Alvarez that the practice allows employees to use cash from the petty cash fund to tide them over until payday. What do you think of this policy?

 

6.) The office manager of an outpatient facility is responsible for reimbursing employees of the business for miscellaneous purchases. Which cash management tool is being used?

 

7.) Dr. Bernu wants to save time on accounting needs for the practice. Since this one factor is the largest in the practice, the decision was made to outsource this to a service provider. Which cash management tool is being used?

 

8.) Senior medical assistant Hannah is responsible for making change for all the cash paying patients at Quonto Diagnostic Center. Which cash management tool is being used?

 

9.) All of the following would be included in cash and cash equivalents EXCEPT:

A.) Petty cash fund

B.) Cash drawer

C.) Operating checking account

D.) Bank certificates of deposit that mature in 2 years

 

10.) Working in a single-physician medical office, Aaron Hoffman serves as cashier for the office, makes the daily bank deposit, and is responsible for the monthly bank reconciliation. What recommendations would you make to improve internal control in this area?

Sample Solution

Teresa Ruiz should take the following steps to establish reasonable financial controls over the cash handling process in Dr. Powers’ medical practice:

  1. Implement a separation of duties. The person who opens the mail and posts patient payments should not be the same person who prepares the bank deposit. This will help to prevent fraud and embezzlement.
  2. Establish a daily cash limit for the cash drawer. This limit should be based on the practice’s average daily cash receipts. All cash over the limit should be deposited in the bank at the end of each day.
  3. Require all cash transactions to be documented. This documentation should include the date, amount of the transaction, and the purpose of the transaction.
  4. Reconcile the cash drawer daily. This will help to ensure that all cash receipts have been accounted for.
  5. Require all IOUs to be approved by Dr. Powers and repaid within a reasonable period of time.
  6. Implement regular audits of the practice’s financial records. This will help to identify any irregularities or fraud.

In addition to these steps, Ms. Ruiz should also:

  • Review the practice’s existing financial policies and procedures. If there are any policies or procedures that are not being followed, she should work with Dr. Powers to update them.
  • Train the staff on the new financial procedures. It is important that everyone in the practice understands their roles and responsibilities in handling cash.
  • Monitor the practice’s cash flow regularly. This will help her to identify any unusual patterns or activity.

2.)

The $50 bill that Mrs. Ivanov hands the cashier for her $35 copayment would be deposited into the cash drawer. The petty cash fund is typically used for small, incidental expenses, such as office supplies or postage. The operating checking account is used for larger expenses, such as rent and utilities. The payroll checking account is used to pay employee salaries.

Here is a more detailed explanation of each of the options:

  • Petty cash fund: A petty cash fund is a small amount of cash that is kept on hand to pay for small, incidental expenses. The petty cash fund is typically replenished by writing a check from the operating checking account.
  • Cash drawer: The cash drawer is where the cashier keeps the cash received from patients. At the end of each day, the cashier should count the cash in the drawer and deposit it in the bank.
  • Operating checking account: The operating checking account is used for the day-to-day financial transactions of the practice. This includes expenses such as rent, utilities, and payroll.
  • Payroll checking account: The payroll checking account is used to pay employee salaries. This account is typically separate from the operating checking account to prevent fraud.

In the case of Mrs. Ivanov’s copayment, the cashier would deposit the $50 bill into the cash drawer and give her $15 in change. The cashier would then count the cash in the drawer at the end of the day and deposit it in the bank.

 

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