There isn’t a urology practice in the United States that doesn’t have a concern about the accounts receivables (ARs). The financial success of any practice depends on the care and feeding of the ARs. This is not an area of practice management that can be taken lightly or delegated to someone who is not attentive to details and doggedly persistent. In this article we will discuss how to identify problematic ARs and what can be done to bring the ARs under control. We will provide you with a plan of action that can be adopted by any practice regardless of size, number of physicians, or whether the practice uses in house billing or outsources its billing arrangements.
Why track ARs?
ARs usually represent one of the largest assets for physicians. While the average small to medium practice doesn’t necessarily mismanage this aspect of the business of the medical practice, these assets are most likely unmanaged since AR management is the usually the last task which the practice manager\biller can address given their daily responsibilities. A recent study by the U.S. Department of Commerce recently reported that business ARs depreciate 0.5% per day for any outstanding accounts receivables in excess of 90 days! It is not unusual for even a solo practitioner to have ARs over $100,000. If the majority of this is more than 90 days old that translates to a loss of $500\day not exactly chump change! Multiply that $500\day by 8-10 physicians and you can easily see how mismanagement can significantly impact the bottom line of the practice.
What’s an acceptable AR ratio? To gauge the efficiency of your AR system, we suggest that you establish the number of days charges you’ve billed that remain uncollected. To do this, start by calculating your expected net revenue. Determine this figure by subtracting contractual discounts from your gross charges. This number is you’re A\R. Next add the past two months of your billed charges, total charges, and divide by 61 which represent the number of days in the two months. This will yield your average revenue per day. Next divide your AR figure into your average revenue per day to determine the average number of days your charges sit in the AR. Most consultants suggest that you bring this number to less than 45 days.
How do you recognize AR dysfunction? If the practice is collecting less than 95% of the expected net revenue, there is room for improvement. However, if the collections are less than 90% of net revenue, then that is dysfunction and drastic steps need to be taken to improve the situation. I suggest that you look at your systems and processes and see where the problem(s) are occurring. Look at your receptionist or whoever is responsible for obtaining critical insurance and billing information. You can avoid back-end effort and denials by collecting more accurate data up front. The person making the appointment should make every effort to verify insurance information. If your staff misses any of these items prior to service, it will mean more work later when the patient may not be accessible. Look at the number of denials, rejections or dirty claims that occur each week or month as every denied claim ties up your money and impacts your cash flow. Look to be sure that you have a system of or a disciplined approach with respect to insurance company follow-up and patient collection calls and letters. Finally, is the practice making threats with letters and then failing to follow through by promptly turning over bad debts to a collection agency. We suggest that patients be sent three statements requesting payment or contacting the office to make payment plan arrangements. After 90 days or three billing cycles and no reactivity, we suggest that patients with balance accounts be turned over to a collection agency or written off if the balance is deemed uncollectible.
Bringing ARs down to a controllable level
We suggest that you institute a comprehensive and financially focused pre-registration policy for your front end staff. This means collecting accurate data when the patient is in the office and this is usually when the patient is filling out his\her demographic and insurance information. It also means that the staff must verify patient insurance information at the time of service. If a patient is no longer employed, or has changed jobs and has a new insurance provider, then the card you are given by the patient may not be accurate. Getting this information when the patient has left the office can take time and delay your payments by the insurance company thus increasing your ARs.
A positive cash flow can be established by staggering the statements sent out to patient by alphabetical sorting on a weekly basis instead of sending out all patients’ statements on a monthly basis. For example you can mail statements to patients with last names beginning with the letters A-F the first week of the month, and the second week include last names of patients beginning with G-L etc until the end of the month. This method facilitates cash flow and also decreases the tremendous number of phone calls from patients when the statements are sent out on a monthly basis.
When Willie Sutton, the famous bank robber, was asked why he robbed banks, he responded simply “That’s where the money is!” We suggest you take on the Willie Sutton philosophy and that you look at your larger ARs first because that is where the money is. Examine your ARs aged balance report (a report that displays one balance for every account by age). Use this report to determine in which bucket most of your AR sits (e.g. 0-30 days), as well as which insurer owes you the most money. These are the accounts you need to determine if adequate follow up is being done on a timely basis. Each of these accounts should have information about the date and action at the time of the last contact. If the note indicates that the insurer needed more information or that the data submitted was not accurate, then you can see if action is being taken. Then if you have done everything that is requested, you should have the billing clerk contact the insurer. This should be accomplished by a phone call with documentation of the call, the person contacted, and the response from that phone call. Then we suggest that you follow up with a letter or E Mail that summarizes the conversation.
In order to reduce your billing days, motivate each doctor to submit charges for patients as soon as possible after the service is rendered. Ideally, it should be just like an office visit and the charges should be submitted on the day the service is provided. The longer an insurance claim sits on the desk of the billing clerk waiting for coding, patient demographic information or insurance billing information the more your AR days will increase.
We strongly recommend that you make use of electronic claims submission as this promotes efficiency of your billing and reduces your AR days. We also suggest an electronic claims submission provider who allows the practice to review and edit electronic billing errors online thus insuring clean claims. The truth is that mistakes made on paper claims are harder to catch. It’s a fact that if you haven’t received payment within 45 days after submitting a claim, there is probably a problem with the claim and a follow up call or inquiry is in order.
