CLRT » Topics » Allowance for Doubtful Accounts and Bad Debt Expense

These excerpts taken from the CLRT 10-Q filed May 11, 2009.

(b)          Allowance for Doubtful Accounts and Bad Debt Expense

An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from various payor groups.  The process for estimating the allowance for doubtful accounts involves significant assumptions and judgments. Specifically, the allowance for doubtful accounts is adjusted periodically, and is principally based upon an evaluation of historical collection experience.  The payment realization cycle for certain governmental and managed care payors can be lengthy, involving denial, appeal and adjudication processes, and is subject to periodic adjustments that may be significant. After appropriate collection efforts, accounts receivable are written off and deducted from the allowance for doubtful accounts.  Additions to the allowance for doubtful accounts are charged to bad debt expense in the Condensed Consolidated Statements of Operations.

Allowance for doubtful accounts and bad debt expense

An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from various payor groups.  The process for estimating the allowance for doubtful accounts involves significant assumptions and judgments. Specifically, the allowance for doubtful accounts is adjusted periodically, and is principally based upon an evaluation of historical collection experience.  The payment realization cycle for certain governmental and managed care payors can be lengthy, involving denial, appeal and adjudication processes, and is subject to periodic adjustments that may be significant. After appropriate collection efforts, accounts receivable are written off and deducted from the allowance for doubtful accounts.  Additions to the allowance for doubtful accounts are charged to bad debt expense in the Condensed Consolidated Statements of Operations.

The Company’s gross accounts receivable by payor class as a percentage of total gross accounts receivable at March 31, 2009 and December 31, 2008 is as follows:

March 31, 2009

December 31, 2008

Governmental

27

%

27

%

Private health insurers

46

%

40

%

Clients (pathologist, hospitals, clinics)

15

%

17

%

Patients

12

%

16

%

Collection of governmental, private health insurer, and client receivables are generally a function of providing complete and correct billing information to the insurers and clients within the various filing deadlines.  Collection of receivables due from patients and clients is generally subject to increased credit risk due to credit worthiness or inability to pay.

These excerpts taken from the CLRT 10-K filed Mar 19, 2009.

Allowance for Doubtful Accounts and Bad Debt Expense

An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from various payor groups such as Medicare and private health insurance companies. The process for estimating the allowance for doubtful accounts associated with our diagnostic services involves significant assumptions and judgments. Specifically, the allowance for doubtful accounts is adjusted periodically, and is principally based upon an evaluation of historical collection experience. We also review the age of receivables by payor class to assess our allowance at each period end. The payment realization cycle for certain governmental and managed care payors can be lengthy, involving denial, appeal and adjudication processes, and is subject to periodic adjustments that may be significant. Accounts receivable are periodically written off when identified as uncollectible and deducted from the allowance for doubtful accounts after appropriate collection efforts have been exhausted. Additions to the allowance for doubtful accounts are charged to bad debt expense in the Consolidated Statements of Operations.

The Company's gross accounts receivable by payor class as a percentage of total gross accounts receivable at December 31, 2008 and 2007 is as follows:


2008 2007

Governmental

27 % 19 %

Private health insurers

40 % 40 %

Clients (pathologists, hospitals, clinics)

17 % 16 %

Patients

16 % 25 %

Collection of governmental, private health insurer, and client receivables are generally a function of providing complete and correct billing information to the insurers and clients within the various filing deadlines. Collection of receivables due from patients and clients is generally subject to increased credit risk due to credit worthiness or inability to pay.

Allowance for Doubtful Accounts and Bad Debt Expense





An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from various payor groups such as Medicare and
private health insurance companies. The process for estimating the allowance for doubtful accounts associated with our diagnostic services involves significant assumptions and judgments. Specifically,
the allowance for doubtful accounts is adjusted periodically, and is principally based upon an evaluation of historical collection experience. We also review the age of receivables by payor class to
assess our allowance at each period end. The payment realization cycle for certain governmental and managed care payors can be lengthy, involving denial, appeal and adjudication processes, and is
subject to periodic adjustments that may be significant. Accounts receivable are periodically written off when identified as uncollectible and deducted from the allowance for doubtful accounts after
appropriate collection efforts have been exhausted. Additions to the allowance for doubtful accounts are charged to bad debt expense in the Consolidated Statements of Operations.



The
Company's gross accounts receivable by payor class as a percentage of total gross accounts receivable at December 31, 2008 and 2007 is as follows:

































































2008 2007

Governmental

27% 19%

Private health insurers

40% 40%

Clients (pathologists, hospitals, clinics)

17% 16%

Patients

16% 25%




Collection
of governmental, private health insurer, and client receivables are generally a function of providing complete and correct billing information to the insurers and clients
within the various filing deadlines. Collection of receivables due from patients and clients is generally subject to increased credit risk due to credit worthiness or inability to pay.





(d) Allowance for Doubtful Accounts and Bad Debt Expense

An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from the aforementioned payors. The process for estimating the allowance for doubtful accounts associated with the Company's diagnostic services involves significant assumptions and judgments. The allowance for doubtful accounts is adjusted periodically, based upon an evaluation of historical collection experience and other relevant factors. The payment realization cycle for certain governmental and managed care payors can be lengthy, involving denial, appeal, and adjudication processes. The Company's receivables are subject to periodic adjustments that may be significant. Increases to the allowance for doubtful accounts are charged to bad debt expense. Accounts receivable are written off when identified as uncollectible and deducted from the allowance after appropriate collection efforts have been exhausted.

The following is the 2007 and 2008 summary of activity for the allowance for doubtful accounts (in thousands):

Ending balance, December 31, 2006

$ 1,040

Bad debt expense

3,558

Write-offs

(1,228 )

Ending balance, December 31, 2007

3,370

Bad debt expense

12,199

Write-offs

(7,524 )

Ending balance, December 31, 2008

$ 8,045

(d) Allowance for Doubtful Accounts and Bad Debt Expense



An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from the aforementioned payors. The process for
estimating the allowance for doubtful accounts associated with the Company's diagnostic services involves significant assumptions and judgments. The allowance for doubtful accounts is adjusted
periodically, based upon an evaluation of historical collection experience and other relevant factors. The payment realization cycle for certain governmental and managed care payors can be lengthy,
involving denial, appeal, and adjudication processes. The Company's receivables are subject to periodic adjustments that may be significant.
Increases to the allowance for doubtful accounts are charged to bad debt expense. Accounts receivable are written off when identified as uncollectible and deducted from the allowance after appropriate
collection efforts have been exhausted.



The
following is the 2007 and 2008 summary of activity for the allowance for doubtful accounts (in thousands):





















































































Ending balance, December 31, 2006

$1,040

Bad debt expense

3,558

Write-offs

(1,228)

Ending balance, December 31, 2007

3,370

Bad debt expense

12,199

Write-offs

(7,524)

Ending balance, December 31, 2008

$8,045