Four Steps for Improving Efficiency and Cash Flow
You can avoid revenue problems with up-to-date policies, statistical reports, claims appeal processes and proper coding.
Fam Pract Manag. 1999 Oct;6(9):14-15.
Think of your practice's stacks of uncollected insurance claims as piles of cash. Now imagine those piles of cash being swept into the trash. That can be the effect of not following proper accounting policies and procedures.
Here are four methods for improving your practice's efficiency and cash flow:
Update policies and procedures
Most employees hate the process of collecting unpaid bills. If policies and procedures for claims processing are not up-to-date, employees may be tempted to let collections slide. In addition to putting policies and procedures in writing, your practice should observe a formal procedure for verifying that they're followed, ensuring that all charges are entered into your system, insurance claims are filed quickly and accurately, and insurance payments are examined carefully and challenged, if necessary.
Monitor performance with statistical reports
To prevent revenue problems, you should review your financial data with daily, weekly and monthly statistical reports. These brief reports should highlight key data, such as monthly cash balances; monthly, year-to-date and prior year charges; monthly and yearly accounts receivable balances; and several ratios to help you monitor cash flow:
The net collection rate monitors the effectiveness of billing. (See “Three key financial ratios.”) If this ratio begins to go down, it may be the result of increased contractual write-offs, or it may mean that your procedures need attention or that staff members are writing off payment denials instead of appealing them. The Medical Group Management Association (MGMA) 1998 Cost Survey showed that adjusted fee-for-service collections for family practices in 1997 averaged 98.65 percent.
The gross collection rate measures the discounts or adjustments of third-party payers. The average gross fee-for-service collection rate for family practices in 1997 was 75.88 percent, according to MGMA. If your rate is less, remember that physician charges vary. If you are unsatisfied with your percentages, you may want to renegotiate your contracts.
The number of days in accounts receivable should be monitored monthly along with balances owed by your top four to five payers. If the number of days in accounts receivable begins to grow, the practice needs to quickly assess the problem. According to the MGMA survey, 6.27 percent of the average family practice's accounts receivables in 1997 were 91 to 120 days old, and 25.35 percent were more than 120 days old.
Three key financial ratios
When examining the following ratios, it's best to look at a rolling average of 12 months to reduce the effect of monthly variances. For example, October 1999 ratios would reflect November 1998 to October 1999 performance.
Net collection rate
Total Collections/(Total Charges - Adjustments)
Gross collection rate
Total Collections/Total Charges
Number of days in accounts receivable
Accounts Receivable/Average Daily Charges
Appeal rejected claims
The hesitation of some practices to formally appeal denials of insurance claims often stems from an unfamiliarity with the appeals process. Cost-effective claims appeal methods are available through software programs. (See “Appeal your claims with a software program.”) They are particularly effective with helping to appeal denials based on medical necessity, procedural coding or timely filing issues.
Know your coding
Make sure you, other physicians in your group and your coding staff are well trained in coding and documentation. You know that insurance companies reject claims with the wrong codes or with codes that aren't supported by documentation, and a Medicare audit can result in fines or prosecution. Your clinical staff should conduct regular chart audits to ensure the quality of your coding practices. Not only can chart audits help spot and correct coding errors that may be causing rejected claims, they can identify a pattern of undercoding, which could also be hurting your bottom line.
Appeal your claims with a software program
The following companies tout their ability to help appeal claims denials due to medical necessity, improper coding or late filing. While Appeal Solutions supplies case law and state statutes to support appeals, Computerized Business Systems will walk you through appeals from reconsideration to judicial review with accompanying addresses and HCFA forms.
Power of Appeals
Computerized Business Systems*
*Currently in development, but expected to be released in November 1999.
Copyright © 1999 by the American Academy of Family Physicians.
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