Finding 386812 (2023-001)

Finding 2023-001 – Patient Services Receivable Allowances Criteria: Management is responsible to ensure that medical records are completed and to make reasonable estimates and assumptions on the allowance for contractual adjustments and doubtful accounts. Condition: Based on audit procedures performed, an adjustment of $878,000 was made to record an additional allowance related to patient services receivable for the year ended June 30, 2023. Rural Health Corporation of Northeastern Pennsylvania did not record an appropriate allowance at the end of the current year. Further, revenue and receivables testing during the audit indicated that several medical records were missing at least one supporting document, including consent to treat forms or incomplete patient records. Cause: Based on audit procedures performed, management has incomplete medical records and did not record an adequate allowance for contractual adjustments and doubtful accounts due to the implementation of a new billing system and turnover of their medical billing team. Effect: The lack of supporting documentation and accurate estimates on the allowance for contractual adjustments and doubtful accounts presents the potential for incorrect reporting of significant financial statement balances Recommendations: Management should ensure complete medical records containing all supporting documents. Additionally, management should review their allowance for contractual adjustments and doubtful accounts on a monthly basis to ensure the accuracy of the account balances. Views of responsible officials and corrective action plan: In June of 2022, Rural Health Corporation of Northeastern Pennsylvania implemented a new Electronic Medical Records System. This implementation, combined with turnover in the billing department, and the hiring of an outsourced claims processor, led to billing delays and various other challenges related to accounts receivable. An internal biller was hired, and processes are in place to monitor and reconcile accounts receivable on at least a monthly basis. The CFO acknowledges and is responsible for this corrective action plan.