33. Accounts receivable management. Assume there are two physician groups, Lower

Question

33. Accounts receivable management. Assume there are two physician groups, Lower Merion Physician Group and Penncrest Medical Practice, and both groups have contracts with two major health plans.

a. Use the information that follows to compute Lower Merion’s days in accounts receivable, aging schedule, and accounts receivable as a percentage of net patient revenues for Health Plan A and for Health Plan B for quarter 1, 20X2. Compare the two health plans to determine which plan is a faster payor. (Hint: For simplicity, assume that each month is thirty days. Dollar figures are expressed in thousands.)

Health Plan A, Quarter 1 20X2

Mar

Feb

Jan

Quarter

Days outstanding

1-30

31-60

61-90

1-90

Net accounts receivable

$2,520

$600

$280

$3,400

Net patient revenues

$6,300

$3,000

$700

$10,000

Health Plan B, Quarter 1 20X2

Mar

Feb

Jan

Quarter

Days outstanding

1-30

31-60

61-90

1-90

Net accounts receivable

$1,680

$600

$1,120

$3,400

Net patient revenues

$4,200

$3,000

$2,800

$10,000

b. Use the information below to compute Penncrest’s days in account receivable, aging schedule, and accounts receivable as a percentage of net patient revenues for Health Plan A and for Health Plan B for quarter 1, 20X2. Compare the two health plans to determine which plan is a faster payor. (Hint: For simplicity, assume that each month is thirty days. Dollar figures are expressed in thousands.)

Health Plan A, Quarter 1 20X2

Mar

Feb

Jan

Quarter

Days outstanding

1-30

31-60

61-90

1-90

Net accounts receivable

$2,520

$600

$280

$3,400

Net patient revenues

$6,300

$3,000

$700

$10,000

Health Plan B, Quarter 1 20X2

Mar

Feb

Jan

Quarter

Days outstanding

1-30

31-60

61-90

1-90

Net accounts receivable

$1,680

$600

$1,120

$3,400

Net patient revenues

$4,200

$3,000

$2,800

$10,000

Explanation / Answer

Answer:a

Health plan A is a faster payor.

Health Plan A, Quarter 1 20X2 Mar Feb Jan Quarter Days outstanding 30-Jan 31-60 61-90 Jan-90 Net accounts receivable $2,520 $600 $280 $3,400 Net patient revenues $6,300 $3,000 $700 $10,000 Debtor Turnover ratio 3 5 3 3 Average collection period 10 6 10 10 Health Plan B, Quarter 1 20X2 Mar Feb Jan Quarter Days outstanding 30-Jan 31-60 61-90 Jan-90 Net accounts receivable $1,680 $600 $1,120 $3,400 Net patient revenues $4,200 $3,000 $2,800 $10,000 Debtor Turnover ratio 2.5 5 2.5 2.941176 Average collection period 12 6 12 10.2

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