Fam Pract Manag. 1998 Feb;5(2):8-13.
How can you get paid for more of the work you do? First, of course, you need accurate information about your patients and full documentation of their insurance coverage. You also need accurate and vigorous coding, billing and collection processes to ensure that your claims are submitted and that the insurance plans reimburse you appropriately.
But all this is just the beginning. An important and frequently overlooked part of getting paid for your services is assessing your accounts receivable (A/R) performance and analyzing your reimbursement. Just like coding, billing and collection, assessing your A/R is an ongoing process. In fact, every month you should consider the following six questions. If the answer to any of these questions is “no,” you may need to analyze your A/R further to find the underlying problems.
1. Is your total A/R within normal limits (less than three months' total gross charges)? If not, your collection process may be out of control. Possible causes include inadequate financial policies and collection procedures, inadequate staffing, poor training or a lack of accountability among your collection staff.
Carrying deadwood on your books may also explain an excessive A/R. Generally, these old, uncollectible charges fall into two categories:
Contractual adjustments that haven't been made in a timely manner. These adjustments should be made when the insurance payment is posted unless an appeal or further investigative action is pending.
Bad debt not yet written off. Charges in the “patient responsibility” category are difficult to recover after nine months. If you have charges on the books that you have little chance of recovering internally, don't become tied to them emotionally. Send out final notices, turn the accounts over to a collection agency and write them off your books.
2. Do your payers consistently account for about the same percentage of your aged A/R? You could be heading for problems if the A/R due from Blue Cross, which typically represents 20 percent of your total A/R, suddenly jumps to 35 percent of the total. If your A/R by payer classification changes markedly, this may indicate that an insurer hasn't been receiving your claims or is delaying payment because of internal problems.
3. Is your contractual adjustments ratio stable? For example, if your contracts generally pay 75 percent of your charges, you should expect your contractual adjustments to be about 25 percent each month.
If you find an increase in contractual adjustments, research your third-party payments. Pull your explanations of benefits and compare the payments allowed with the contracted amount for each procedure.
You should also examine the write-offs your staff have made. Staff members sometimes assume that insurance plans always process claims correctly — clearly not a safe assumption. In fact, because of plans' errors, you may be writing off amounts due to you. New staff members need detailed training in contract write-offs to ensure that they double-check the payment allowed on each claim.
A sudden increase in write-offs may also be the result of staff members inappropriately writing off the amounts patients owe. It's vital to monitor the performance of all your staff involved in billing and collections.
4. Is your adjusted collection ratio (which excludes contractual write-offs) at least 90 percent?
5. Is less than 20 percent of your total A/R aged 120 days or more?
If your adjusted collection ratio is less than 90 percent or if your A/R older than 120 days makes up more than 20 percent of your total, the responsibility for delays in claim processing may rest with your office. Because of backlogs, your staff may be submitting claims late, or the claims they submit may not be “clean,” which means payers are returning claims to your office for corrections. On the other hand, your payers may not be handling your claims appropriately. In either case, you need to clear up the matter to improve your cash flow and reduce your risk of nonpayment.
6. Is your aged A/R distributed evenly among the physicians in your group? If one physician has an especially large increase in his or her A/R, you should determine which insurance plans are represented. Perhaps one plan hasn't recognized him or her as a provider in your group, in which case you need to take immediate action to remedy the situation.
When your A/R analysis uncovers problems like these, you and your billing department should set goals for improvement and target dates for achieving them. Keep establishing new goals, always setting your sights a little higher, until your A/R performance is stellar and you can answer “yes” to these six key questions each month. With managed care reducing your reimbursements, the burden is on you to ensure that you get paid what is due you in a timely manner.
Judy Capko is executive vice president of The Sage Group Inc., a national health care consulting firm based in Newbury Park, Calif.
Copyright © 1998 by the American Academy of Family Physicians.
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