When a patient walks into a hospital for treatment, a series of events begins—not just clinically, but financially as well. From the moment of admission to the time of discharge, numerous accounting entries, processes, and reconciliations take place behind the scenes.
In this blog post, we break down the patient journey from an accounting perspective, shedding light on how hospitals track, report, and manage healthcare-related finances.
1. Advance Collection at Admission
Hospitals often collect an advance deposit before beginning inpatient treatment. This is especially common for:
- Self-paying patients
- Patients pending insurance approvals
2. Final Billing at Discharge
Once treatment is completed, the hospital issues a final bill. This bill summarizes:
- All medical services
- Stay charges
- Diagnostics
- Pharmacy
- Applicable taxes
Key Actions:
- Generate a final invoice from the hospital billing system
- Include all charges incurred from admission to discharge
- Identify payment coverage, including:
- Advance already paid
- Third-Party Administrator (TPA) coverage
- Patient’s remaining payable amount
Note: The final amount may be equal to, greater than, or less than the advance collected.
3. Advance Settlement
Once the final bill is generated, the system (either automatically or manually) adjusts the advance collected.
Scenarios:
Final Bill = Advance Amount
- The advance is completely utilized.
Final Bill > Advance
- Additional amount is collected from the patient to cover the shortfall.
Final Bill < Advance
- Excess advance is refunded to the patient.
Journal Entry for Advance Adjustment:
4. Advance Refund
When the final bill is less than the advance, the balance amount is refunded to the patient.
Journal Entry Example:
5. TPA (Third-Party Administrator) Settlement
TPA Billing Process:
- Pre-authorization approval must be received before or during hospitalization
- Final bill is prepared in the TPA-specified format
- Bill is submitted to the TPA for final approval
TPA Issues:
- Final Approval
- Shortfall Note (if any deductions are made)
Post-Approval Action:
- Once the amount is received in the bank, the user manually records the entry in the bank book
- TPA payment details are received later, it settles the TPA control account.
- TPA Account Settlement
Internal Control Points:
- Maintain a TPA Outstanding Register (TPA Name, Patient, Bill No., Amount, Status).
- Monthly follow-up with TPA for pending payments.
- Reconcile TPA ledger accounts monthly
Frequently Asked Questions (FAQs)
1. What is the first financial step during patient admission?
→ Advance payment is collected and posted in the accounting system.
2. What systems handle patient finance?
- HIS (Hospital Information System)
- Middleware (integrates HIS with D365)
- D365 (accounting system)
3. How is the advance recorded?
→ Journal entries include patient details, G/L accounts, and document numbers.
4. What happens at discharge?
→ A final bill is generated and posted in D365 for settlement.
5. How is the advance adjusted?
→ It’s either utilized, topped up, or refunded.
6. How is the refund processed?
→ Refunded via NEFT/RTGS, and journal entries are posted in D365.
7. What is TPA’s role?
→ Acts as an insurance intermediary:
8. How is TPA payment tracked?
→ Through manual entries in the bank book and D365 postings
9. How are TPA deductions handled?
→ Deductions and TDS are posted as write-offs in Sundry Debtors – TPA
10. What internal controls help manage TPA?
- Outstanding Register
- Monthly TPA follow-ups
- Ledger reconciliations
Need Help?
Have questions or need support with your hospital’s admission-to-discharge accounting process in D365 Business Central? We’re here to help!
