Medical Practices: Reducing Accounts Receivable

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For a medical practice to run efficiently, financials are as important as care delivery. One step to improving that financial health is by reducing accounts receivable (A/R). However, with increased pressures like pressures to collect more money while reducing medical expenses, reducing A/R can be challenging.

Accounts receivable receivable refers to the outstanding invoices a company has. Another way to think of it is the money the company is owed from its clients. In a dental or medical practice has rights to money because it delivered medical services.

If account receivable is reported as income but the money is not collected from the patient, this becomes bad debt.

Practice mix is typically 80% insurance and 20% self-pay. The self-pay cash collection cycle is about 30 days and insurance is about 4 weeks.

5-10% of AR is paid in 60 days. Usually the delay in A/R past 30 days is due to internal office issues – untrained office manager (lack of tracking) incorrect paper work submitted by the office to insurance, writing the wrong subscriber ID on the insurance form .

Large insurance claims need more information than smaller insurance claims – more information needs to be submitted by the office – Xrays, documentation, etc. In fact, only 70% of claims are paid the first time they’re submitted according to the Centers for Medicare and Medicaid Services (CMS)

Looking for tips on reducing accounts receivable? Follow these tips:

Do your front work.

You must have a firm understanding of the patients insurance benefits BEFORE they come to your office. This payer contract management keeps track of the complex contracts that each patient signs — i.e. three patients can come in for the same procedure but owe three different amounts after services.

It sometimes takes more time upfront to sufficiently dig through patients’ insurance benefits information, but it saves headaches down the road. Why? By screening patients 1-2 days before they come to visit your dental or medical office on their first visit, you understand patient rights and insurance. Further, it allows you to bill appropriately at the time of the visit.

Understand the co-pay schedule and collect the co-pay at visit one.

Consider dedicating a staff member whose job is to only collecting information on insurance benefits of the patients. This might be harder for smaller practices. When this is the case, consider outsourcing.

Dental Revenue Group is one such outsourcing company. They charge a fee, but they do a deep dive into insurance benefits and watch your A/R very closely.

Looking reduce A/R even further, make sure your doctor is credentialed with the insurance provider.

Pay attention to days in A/R.

Paying attention to how many days it takes to collect payments due to the practice. The following benchmarks can be used to understand where your practice sits:

  • 30 days or less for high performing medical billing department
  • 40-50 days for an average performing medical billing department
  • 60 days for a below average medical billing department

Overall, watch your A/R on a macro level and look at the individual cases to see why A/R is delayed. Follow the tips above, and let us know any other pointers in the comments below.

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