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Reimbursement and Practice Management

Business Office Essentials

Even if you're hitting your accounts receivable benchmarks and don't think you have a billing problem, review the physician’s role in the process, anyway. Why? The revenue cycle is affected in unexpected ways by inaccurate coding, delays in documentation and charge capture problems. And, none of these problems impact days in receivable outstanding, the aged trial balance, your collection rate, or any other normal measures of revenue cycle success. These measures reflect charges – yet some vital information might not get counted because it doesn’t even get entered into the system.

After reading this article you will be able to:

  • Identify key business concepts
    • ATB
    • DRO
    • Credits
    • Fee Schedules

View related pearls

If you only have time to pick up one billing report, let it be the aged trial balance (ATB). This is the report that breaks down receivables by payer based on time, as well as reporting the total outstanding receivables. Typically, the report presents the data in dollars, as well as percentages. Watch for receivables still sitting in the “over 120” bucket, and monitor the patient-pay category to gauge the effectiveness of time-of-service collection protocols. On monthly basis, sit down your with the business office manager or biller to seek explanations for trends, discuss opportunities, and outline an action plan to improve the ATB.

To calculate days in receivables outstanding (DRO), physicians, practice managers and industry stakeholders adhere to the definition from the Medical Group Management Association (MGMA), which is:

DRO = Total current accounts receivable divided by your average daily charge, wherein the average daily charge equals your gross charges over the past 12 months divided by 365 days

Total current A/R, net of credits = $100,000
Gross charges (during the past 12 months): $500,000

In this example, the result is not an ideal outcome; your DRO should be 40 or less, unless there are extenuating circumstances (e.g., a significant amount of Workers’ Compensation). Notably, some change the denominator of the ratio to be the past 60 or 90 days’ worth of gross charges. This is fine, but be sure to measure it consistently over time in order to monitor group performance.

Perhaps the most significant – and often unrecognized – consequence of credits – is their impact on accounts receivables (A/R) management reports. Credits are listed on receivables reports as a “negative” amount (i.e., money owed to someone). They offset receivables, which are carried on reports as a positive amount (i.e., someone owes you). Because management reports summarize the activities of all accounts, the numbers may offset one another. In sum, credits deflate the receivables. They can make your financial performance look better than it really is. Regardless of whether credits are “good” or “bad” ones, they do not allow an accurate picture of receivables performance. To make matters worse, practice management systems commonly list credits as “current” accounts, that is, less than 30 days old. If credits are high, they will skew your aged trial balance reports by making the current category proportionately higher than the rest of the categories (31 to 60 days, 61 to 90 days, etc.). This skewing will mask the true performance of managing ageing accounts. The bottom line? Report your key performance indicators – days in receivables outstanding, aged trial balance and total receivables – net of credits.

Most practices with incentive plans for collections focus only on the business office. However, couldn't medical assistants also help out? They need to know how important it is to capture all charges, particularly for the supplies, injections, labs or other services they perform or facilitate. Shouldn't the front office be encouraged to do a good job of collecting from patients? Incent everyone on staff but keep the formula simple, such as setting a goal for overall practice collections for the month. If the practice reaches the goal, all employees will receive an agreed-upon bonus amount. Often, a gift card from a major retailer or a gas company – or even a pizza party – is all you need to provide.

Basing fees on what competing physicians' charge is illegal. Instead, base fees on the national and regional benchmarks of physician charges available from consultants, medical societies and practice management publications.

A physician was considering hiring more employees. Though his staff-to-physician ratio meets national benchmarks, his employees were constantly complaining that they are too busy. How can you tell if your employees really are overworked, are working inefficiently, or just being difficult? It's human nature to fill time at work -- whether with genuine tasks or busy work. One way to make sure time is well spent by your employees is to observe, measure and monitor what is actually getting done. Start by asking each what he or she does — then ask the employee to "walk you through it." You may be surprised by what your employees are spending time doing.

Even if you're hitting your accounts receivable benchmarks and don't think there is a billing problem, you should review the physician’s role in the process. Why? Because the revenue cycle is affected in unexpected ways by inaccurate coding, delays in documentation and charge capture problems. These problems do not impact days in receivable outstanding, the aged trial balance, the collection rate, or any other normal measures of revenue cycle success. That's because the receivables reflect charges that have been entered in to the system. If providers forget to record the code for one of the services during an encounter, or leave the card to record a patient's hospital stay in the pocket of their lab coat, it never hits the books. So while it's money you're failing to collect, it doesn't become part of your receivables, and you can't really track it. On the flip side, it’s often difficult to acknowledge the extra resources you might be spending on managing your bad habits. Either way, there’s definitely a problem you should more closely examine.

Pearl: Well Stated

If you're in the habit of sending multiple statements (>5) before getting serious about collections, you're supporting the U.S. Postal Service but not your bottom line. Send two statements followed by a letter at the 75-day past-due mark to announce the account is going to collections unless it is paid or other arrangements are made with 30 days. Research demonstrates the payment rate on the fourth and subsequent correspondences is so negligible that it's worthless to continue pursuing.

Pearl: Well Adjusted

Non-contractual adjustments are the single greatest opportunity to collect more. When an insurance company reimburses you for a service, it rarely pays your charge. The difference between your charge and the allowance an insurer permits based on the fee schedule outlined in your contract is a “contractual adjustment.” These adjustments are not only common, but a necessary cost of doing business as a participating provider with an insurer. There are reasons for additional monies to be written off, however; for example, an insurer’s filing deadline is missed by a biller. These non-contractual adjustments must be tracked and monitored separately in order to identify opportunities to close the gap of unrecoverable monies. Don’t bury these controllable losses as contractual adjustments; ensure that the employees and the billing system have a method to record all adjustments.

Pearl: CCOF

Many businesses accept credit card numbers to pre-pay for products or services; so too can your practice. In fact, you've likely done this yourself. When you've purchased a retail item that's on back order: You gave them your credit card number, but they didn't charge you until the item shipped. Medical practices now have access to technology to securely store information for credit or debit cards. Look for “credit-card-on-file” vendors who will set up secure, Web-based services for your staff to administer payment plans. This gives your practice the opportunity to securely and efficiently collect payment information, while also managing the payment terms.

Pearl: Allowed

Develop a process to collect more than just the copayment from guarantors. Review your payer contracts to determine whether you can collect coinsurance and deductibles at the time of service. This may increase the transaction time at check-out - but the five minutes it takes to look up the patient's allowable and calculate 20 percent of it will be well worth it. If it's impossible to obtain every patient's allowable at the check-out desk, develop a table showing the allowables for common office visit codes. Even if you narrow your effort to the 10 most common codes in the office setting - 99201-99205 and 99211-99215 - you'll be capturing a significant amount of the patient financial responsibility that you are due to receive.

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