Working with Medical Insurance

The trillion-dollar health care industry—including pharmaceutical companies, hospitals, doctors, medical equipment makers, nursing homes, assisted-living centers, and insurance companies—is a fast-growing and dynamic sector of the American economy.

Spending on health care in the United States continues to rise. Advances in medical technology improve health care delivery but are expensive. Health care reform legislation requires insurance coverage for a growing number of people. Perhaps most importantly, the aging American population requires more health care services. Average life expectancy is increasing and a larger percentage of the population is over age 65. Older people need more health care services than do younger people. Two-thirds of Americans over 65 and three-quarters of those over 80 have multiple chronic diseases, such as diabetes, hypertension, osteoporosis, and arthritis. 

Since medical costs are rising faster than the overall economy is growing, more of everyone’s dollars are spent on health care. Federal and state government budgets increase to pay for medical services, employers pay more each year for medical services for their employees, and patients also pay higher costs. These rising costs increase the financial pressure on physicians’ practices. To remain profitable, physicians must carefully manage the business side of their practices. Knowledgeable administrative medical office employees are in demand to help. 

Medical administration tasks in medical offices may be handled by employees who have various educational backgrounds and work experience, such as administrative medical assistants, medical assistants, medical billers, patient services specialists, and receptionists. (In this text, for simplicity, the term medical assistant includes all of these administrative medical employees.) Their effective and efficient work is critical for the satisfaction of the patients—the physician’s customers—and for the financial success of the practice. 

To maintain a regular cash flow—the movement of monies into or out of a business—specific tasks must be completed on a regular schedule before, during, and after a patient visit. Managing cash flow means making sure that sufficient monies flow into the practice from patients and insurance companies paying for medical services, referred to as accounts receivable (AR), to pay the practice’s operating expenses, such as for overhead, salaries, supplies, and insurance—called accounts payable (AP) . Tracking AR and AP is an accounting job. Accounting, often referred to as “the language of business,” is a financial information system that records, classifies, reports on, and interprets financial data. Its purpose is to analyze the financial condition of a business following generally accepted accounting principles. The practice accountant sets up accounts such as AR, AP, and Patient Accounts for all aspects of running the practice and then prepares financial statements that show whether the cash flow is adequate. These statements are monitored regularly to see if revenues are sufficient or need improving.

 For this reason, revenue cycle management (RCM)—acting to ensure that the practice receives all appropriate payments from both insurance companies and patients, and gets them on time—is critical to practice success. Medical assistants have an important role in revenue cycle management. They help to ensure financial success by (1) carefully following procedures, (2) communicating effectively, and (3) using health information technology—medical billing software, electronic health records, Microsoft Office, and the Internet—to improve efficiency and contribute to better health outcomes.