The Income Reduction payment type, also called 'Provider Payback' within CareStack, is a crucial feature to accurately manage financial adjustments within your practice. This becomes essential in complex billing scenarios, such as when a procedure needs to be redone after the original claim has been paid by insurance.
Let's walk you through all you need to know about the Income Reduction payment type.
Topics Covered
- Prerequisites to Create an Income Reduction
- Create an Income Reduction Payment
- Run the Income Allocation Report
- Create a New Income Reduction Payment Type
- Results on the Patient's Ledger
To help you get started with implementing income reduction, here's a simple use case that will be referred to throughout this article.
Scenario: A patient had a crown done the previous month by one provider, but now it needs to be redone by another provider. In addition to that, the original crown has already been billed to the insurance.
What's more, the insurance was expected to pay $900, and they paid $900, which was the crown amount in full.
Solution: To efficiently remedy this situation, you need to remove the $900 which the provider previously got credit for on their provider payroll i.e. on the practice's upcoming payroll run.
Prerequisites to Create an Income Reduction
When entering the redo on the patient's Ledger, be sure to complete the crown procedure code again under the new provider. To get started,
- Search for the patient using the Global Search bar.
- Use the Ledger quick link.
Locate and click on the Code linked to the insurance receipt.
- In the CodeStack slide-out that appears, select the Fee Details tab at the top left.
- To complete the code for the redo, mark the Billing Order as N.
- This is done so as not to bill this to insurance.
- You will see a toast notification on the top right stating, 'Billing Order Updated Successfully.'
- The full amount for the crown (which is $900 in this example) will now be listed under Pat. Est. (Patient Estimate).
- Click Save to confirm.
Create an Income Reduction Payment
Next, you need to add a Patient Payment to add and apply a receipt for the same.
From the Patient Overview, hover over Billing > select Payments.
- From the resulting slide-out, select Add New Payment/Adj.
- Enter the same Payment Amount as before, which in the current example is $900.
- For Payment Type, choose 'Income Reduction - Provider Payback'.
- In the Provider field, choose the provider who performed the original crown procedure.
- This is because the payment is being taken from the previous provider.
- Select Add Receipt & Apply at the bottom right.
Run the Income Allocation Report
Once you add the receipt and apply, you will be able to retrieve the provider payback details by utilizing the Income Allocation Report. Here's how to generate it:
- Navigate to your System Menu.
- Select Operational Reports under Insights.
Click the + icon on the left or the Generate Report button for the Income Allocation Report.
- Select Income Allocation as the View in the resulting slide-out.
- Adjust other Filter Criteria as needed.
- Click Generate Report.
Let's dive into the details shown on the Income Allocation Report.
In the GIF below you can see:
- The Net Production number from their current provider payroll period and all the way to the very right hand side.
- Under Income Reduction column, you will see a negative amount of $900 for the previous provider.
- Here, if you pay your provider based off of Net Production, you will take Net Production and minus Income Reduction.
- If you pay based off of Applied Payments or Net Applied Payments, you will take those numbers and minus the Income Reduction number for the provider that did the redo.
- You will see that their Net Production number will reflect the total of $900 from the crown redo and same with their Applied Payments.
| Note: For the provider who did the redo, no amount will show up in in the Income Reduction. This is because nothing was taken away from that provider. As explained earlier, the money was only taken away from the previous provider, who in this example is Ms. Nair i.e. the provider who did the original crown. |
Create a New Income Reduction Payment Type
Here's how to create a new Income Reduction payment type:
Navigate to the System Menu > select Practice Settings > Payments & Billing > General.
- Select the Payment Types tab.
- Click + Add Payment Type.
- In the Add Payment Type section, enter a Payment Type Name.
- Select Income Reduction as the Category.
| Note: By default, the income reduction payment type will be listed in Patient Payments and it cannot be included in patient/insurance refunds or capitation/collection/insurance payments. |
Click Save to save your changes.
When you do another payment for income reduction, you will see the Income Reduction Payment Type that you have just created.
Results on the Patient's Ledger
Upon reviewing the patient's Ledger, you will observe a patient payment recorded as an Income Reduction. This indicates that it is not a real patient payment as illustrated in the current example.
| Note: The following ledger entry effectively settles the remaining balance for the crown, meaning the patient is not liable for any payment for the redo. This also explains why the Income Allocation Report reflected a negative $900, thereby deducting income from the provider who performed the initial crown. |
Practices can utilize this guide to learn how to apply the Income Reduction payment type to handle complex financial adjustments, ensure accurate provider payroll, and maintain financial integrity.