Financial Management and Insurance Study Guide for the Medical Assistant test

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General Information

A medical assistant test will likely contain questions about the procedures for dealing with financial and insurance matters within a medical office. These questions can test your knowledge of related terms as well as your understanding of procedures in specific cases. Be sure to look for more information in books and online if there are any areas with which you do not feel comfortable or desire more practice.

Patient Payment

Securing payment for services is an important job in a medical office. Every office has its own unique procedures, but here are some of the basics you’ll need to know.

Procedures with Patients

When communicating with patients, you must be well-versed in all office policies, particularly those related to patient payment. Most offices ask for payment at the time of service and post a sign notifying patients of the policy. Many patients have health insurance that pays at least part of the charges. Patients may ask what copayments or deductibles they are responsible for when they come to an office visit.

When talking with new patients scheduling an appointment, most offices will have you ask the patients what insurance provider they have and then give them the amount they will be responsible for paying when they come to the appointment. If that information is not immediately available, you should collect it from the insurance provider before the patient comes to the first appointment.

When a patient checks in, you should ask for the copayments or deductibles required by the patient’s insurance provider. If the patient does not have insurance, you may have to ask for the whole payment or a portion of charges incurred at that visit, depending on office policy.

Individual statements must be up-to-date and accurately show payments made, whether from the patient or a third-party provider. Depending on the parties involved, exact payment amounts can be difficult to figure. Payments from insurers that appear to be inaccurate, and are not clarified by the Explanation of Benefits (EOB), must be investigated by contacting insurers. Office policy should determine whether the office staff or the patient takes the lead in contacting the insurer to get clarification.


Billing practices are critical to maintaining adequate cash flow for a medical office. Patient payments should be collected promptly; the longer the time period between the payment and the date of service, the more difficult it is to collect patient payments. A key part of billing procedures is a patient statement that includes the date of service, services provided, the amount paid by the patient, the amount paid by the insurance carrier, and any remaining balance owed.

Billing statements should be provided to patients at regular intervals, giving them the opportunity to check payments and budget for any outstanding balance. Many offices provide statements on a monthly basis, sending them out the same day each month. Large practices sometimes opt for cycle billing, which allows the practice to divide accounts into groups and send statements to different groups at different times during the month. Patients still get billed monthly, but payments get spread out more evenly over the course of the month, providing a more balanced income and spreading out the workload for office staff.

Collection Procedures

Some medical care or procedures may be expensive, even when part of the cost is paid by insurance. In some cases, the office may choose to offer the patient preplanned payment options. An example is prenatal care. Most offices accept payment by credit card, and a patient may request to have a credit card on file to be used for copayments and other charges. Electronic payments are convenient, but patients may still choose to pay by paper check or cash.

Aging of accounts indicates the length of time an account is overdue. Accounts age according to the time elapsed between the date the first statement is sent and the date payment is received by the office. Accounts are normally considered overdue when 30 days have passed without payment. Offices determine how to handle aging accounts—usually by continuing to bill the patient every 30 days and adding an overdue notice to the bill. Some offices also contact patients by phone to remind them of an overdue payment.

When an account is several months (90+ days) overdue, the office may turn it over to a collection agency. Before doing so, the office must notify the patient of its intent to turn over the account, if it is not paid in a specific period of time. It is to the benefit of the medical practice to collect the debt on its own, as collection agencies typically keep 40% to 50% of the amount collected.

Collection agencies can be worth their fees under certain circumstances, especially when the debtor’s contact information is no longer valid. Collection agencies are equipped to do skip tracing to find “lost” debtors; methods vary, but medical offices seldom have the time or resources to trace down delinquent account holders.

Other Topics

The Truth in Lending Act of 1968 is a U.S. law that concerns consumer credit and requires certain disclosures when extending credit to an individual. If a medical practice enters into an agreement with a consumer to pay for care with preplanned payments, information about interest charges must be provided to the patient. If the preplanned payments number more than four, information about interest charges must be provided to the patient in writing.

A medical practice may have trouble collecting on overdue accounts for many reasons. The Fair Debt Collection Practices Act of 1977 places certain restrictions on how debt collection is carried out. Office staff must be aware of these restrictions when contacting patients with overdue accounts.

A practice always has the option of taking a person with an overdue balance to small claims court. In such cases, a judge may rule in favor of the practice, but the court will offer no help in collecting the debt. In the case of bankruptcy, medical debts are usually not considered a priority, making it unlikely that any payment will be received.

Financial Records

Financial records are a critical part of a medical practice. The records must be accurate and complete, including payments made by the patient and insurer, services rendered, and balance due.

Financial Terminology

Be sure you understand the meaning and role of all of these in office financial records:

Accounts receivable: money owed to a medical practice for services that have been rendered and billed

Accounts payable: payments for supplies, equipment and any practice-related products and services

Assets: tangible assets include medical equipment, real estate or leasehold improvement, inventory and personal property

Liabilities: any outstanding money owed by a practice to suppliers

Debits: an amount incurred when something is purchased for use by the practice; also called a charge

Credits: payments received by a practice, typically from patients or insurance companies

Diagnosis Related Groups (DRGs): medical conditions grouped together for coding purposes

Relative Value Units (RVUs): a key part of how Medicare determines the reimbursement rate for all the physician services and procedures listed in the CPT codes

Account Management

You will be responsible for accepting payment by check or cash from clients and for depositing all payments in an office bank account. You will also disburse funds, usually by check, to cover all accounts receivable for the practice. You must reconcile all funds received and funds disbursed, maintaining an accurate record of funds available. Small expenses such as food and gifts are typically paid out of petty cash and should be included in your balance sheet.

Check Processing

Examine all checks accepted from clients to be sure the check includes the correct date, correct amount, and a signature. Do not accept a check marked “payment in full” unless it is for the total amount owed. Checks must be endorsed correctly before depositing. If a check is returned from the bank for NSF (non-sufficient funds), note the deduction in the balance sheet and apply any charges, per office policy.

Data Management

Accurate data entry is essential. The pegboard/double entry system allows for handwritten records, with three copies and a running total of charges and credits. It allows for checking the balance of assets versus liabilities daily. Computerized financial systems may be customized to meet the needs of a medical office and rely on data being entered into the system. Either system will enable you to determine a monthly trial balance, then check for errors if the balance is off.

Once a client’s account is created, you can record any changes in contact information, plus services provided, charges, and payments. Charges may be adjusted when third-party payments are based on predetermined reimbursement amounts for various procedures.

Employee Payroll

Compiling detailed payroll information for all employees is crucial in maintaining successful operations. Among the information included are the employee earnings, either the hourly rate or a fixed salary, and any indirect forms of payment. The amount of deductions must also be calculated. This will be unique to each employee and is largely dependent upon their individual withholdings, including the number of dependents that are claimed on their W-4.

An employee financial listing is the document that would contain information for each employee and his or her deductions, including any taxes owed. All amounts to be credited would be processed by accounts payable.

There are also additional documents that must be provided to employees, including a W-2 Wage and Tax Statement for the year, Form 941, which is the Employer’s Quarterly Federal Tax return, and the Form 940, which is the Employer’s Quarterly Federal Unemployment Tax return.


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