Question

Question 1. Read the below scenario regarding a revenue cycle of Kabwe Medical Center, and answer the questions that follow. Kabwe Medical Center Limited is a small health care provider owned by an Insurance Company. It employs five salaried physicians 5(doctors), five nurses, three support staff, and three clerical workers. The clerical workers perform activities such as reception, correspondence, cash receipts, billing, and appointment scheduling. Most patients pay for services rendered by cash or cheque on the day of their visit. Sometimes, however, the physician approves credit and files a memo with one of the clerks to set up the receivable using data the physician generates. The front office clerks receive cash and cheques directly from patients and give each patient a pre- numbered receipt. The clerks take turns opening the mail. All cheques are stamped "for deposit only "by one of the clerks. Each day, just before lunch, one of the clerks prepares a list of all cash and cheques to be deposited in Kabwe Medical Center's bank account. The office is closed from 13:00 until 14:00 hrs for lunch. The office manager takes the daily deposit to the bank during the lunch hours. Updates to patient's accounts are done during the same period. The clerks are responsible for preparing and mailing monthly statements to patients with unpaid balances. Write-offs of uncollectible accounts are done only after the physician who performed the respective services approves it indicate to the office manager verbally. The credit memo is issued to effect the write-off. The manager is responsible for issuance of write-off memos, scheduling of appointments for the doctors, bank deposits, reconciling of bank statements, and general correspondence duties. An externally hired local accountant comes at the end of the month to posts summaries prepared by the clerks to the general ledger, prepares income statements, and files the appropriate payroll forms and tax returns. Required: a. Identify at least three control weaknesses at Kabwe Medical Center. Describe the potential threat and exposure associated with each weakness, and recommend how to best correct them.[ 8 marks] b. Draw a data flow diagram or a work flow chart to depict Kabwe Medical Center's existing revenue cycle. [8 marks) c. Draw a data flow diagram revised to incorporate your solutions to requirement "a" above[ 8 marks]

Answer 1

(a) Control Weakness , Potential Threat , Corrective Measures

(A) Control Weakness

(i) Each day's cash collection is being deposited in the Bank on the next day during office lunch time .

(ii) Every day's cash collection time is not defined

(iii) Same staff is responsible for Billing , Collection & Preparation of receipts

(iv) Exactly no specific demarcation of duties is available netween the clerical workers and the Office Manager

(v) Office Manager is also doing the work of the cklerical staffs

(vi) Same clerk does the job of cash & cheque collection , making receipt , correspondence to the patients for dues

(vii) No checking of the datas generated by the physicians for the receivable write offs

(vii) Only oral communication by the Physician for write offs of the receivable amount

(B) Potential Threat

Funds misuse & Embezzlement , Manipulation of the Patients Accounts

(C) Corrective Measures

(i)There must be a clear cut start time & closing time for each days collection

Accordingly , the collection can be esily identified for the " specific day"

At any cost , at the closing of the every day , a summary of cash collection & cheque collection has to be prepared

Next day , first thing in the morning , the cash & cheque collected in the previous day has to be deposited in the Bank.

(ii)There must be an internal note in writing ( with pre-numbered ) for the write offs to be recommended by the physician

Thereby , easy manipulation of the receivable dues can be avoided\

(iii) There must be crystal clear job allocation for the Clerical Staffs & Office Manager

Thereby ovelapping of the sensitive job areas can be avoided

(b) Existing Revenue Cycle

( i ) Cash & Cheque remitted by the patients & received  by the clerical staff

(ii) Credit amount approved by the Physician

(iii) Write offs approved by the Physician orally

(iv) Deposit of cash & cheque in the Bank Account every day during the Office lunch time

(v) Updation of Patients Accounts daily during Office Lunch Time

( c) Revised data flow diagram for the requirement under " a"

(i) Exhaustive list of Fee structures ( approved in wrting by the respective physicians for each services ) for the services rendered by the Physicians to be issued to the front office staffs

(ii) There must be a clear cut start time & closing time for each days collection ( cash & cheque )

(iii) Datas for the write offs to be checked exhaustively by the Office Manager  

(iv) For receivable write offs , the concerned physician has to prepare a memo in writing with a pre-numbered & pre-printed note

(v) Every day , the previous days collection has to be deposited in to the designated Bank Account

(vi) Crystal clear work & job allocation has to be defined for the Office Manager and the front office staffs