Understanding the Billing and Collection Process - AR Management
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Present E-learning Systems
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Once again, welcome to Understanding the Billing and Collection Process of podiatric medicine brought to you by present course wear. I'm Dr. John Guiliana.
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In this presentation focus will be placed on one of the most important business processes that a medical practice engages in accounts receivable management. Unlike many industries, medicine is one in which we have two wait for payment following the delivery of services. Usually that payment has to come from someone other than the recipient of those services, the insurance carrier. But accounts receivables are the monies owed to you by both your patients and insurance carriers. Responsible management of your accounts receivable is crucial for practices cash flow, the single most important financial statistic of any business.
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Management of your accounts receivable is crucial because statistically the longer it takes for you to get paid the more likely it is that you will never get paid. Time is of the essence and later on I'll be discussing some of the time elements that you need to measure to determine if your accounts receivable management process is efficient.
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Take a look at this statistical graph, you can see that claim that is outstanding for 30 days is all most a 90% chance of getting paid. A claim that is outstanding for 120 days however, has only a 55% chance of ever getting paid. Diligently staying on top of these accounts is critical for the financial help of a medical practice. Yet, most doctors never invest enough resources into it.
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At many medical staff seminars that I speak at I ask this question: who here is involved in accounts receivable management? Inevitably, only a few hands go up, often those who are billing and collection personnel within the practice. But in reality everyone is somehow involved in the management of monies owed to the practice.
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Even the front desk staff whose job description might be telephone management has a vital role in what is the starting point of good accounts receivable management.
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When entering a prospective patient call, the front desk staff must be sure to accurately capture the patient's name, their address, date of birth, telephone number, insurance carrier and ID number. They must assess whether the patient need a referral to see a specialist and if there's a co-pay due at the time of service. Proactively, informing patients that a co-pay is due upon service can be accomplished by asking the patient how they will be paying for the co-pay. Efficiency can even be optimized by having new patient forms available on your website so the patient can arrive with the necessary documents already completed.
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Once the patient arrives it might be the front desks’ staff who again is responsible for copying the necessary documents such as the patient's insurance card and photo ID. They must have the patient sign the required HIPAA forms and the practice’s financial policy statement. The staff must collect all co-pays, process the referrals, and keep all information about the patient current.
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Even the front desk staff whose job description might be telephone management has a vital role in what is the starting point of good accounts receivable management.
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Someone is going to have to be responsible for the process of a preauthorization. Many services provided by physicians need preapproval from the insurance carrier. Having a well-trained staff member accountable for this duty is crucial. This person needs to keep an accurate account of the conversation between your office and the insurer. Taking notes as well as the first name and last initial of the insurance representative is important for future reference, particularly if the carrier denies a service that was previously approved.
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Then comes entering the charges after the doctor sees the patient, usually this process involves the doctor filling out a super bill or charge slip to indicate what services were provided to the patient. The staff responsible for this must be able to accurately capture all the charges on the charge slip and transcribed them into the billing software on the computer. I have seen this process get delayed for one reason or another. Some practices simply don't enter the charges in a timely manner. Charges should be entered the very same day that the patient encounter takes place.
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Before moving on, let take a look at the top five reasons that insurance companies often deny medical claims. The first reason involves improper demographics captured at your front desk or over the telephone. The second most common reason involves the wrong insurance being provided by the patient. The third reason is not following the correct coding initiatives such as matching up the CPT code billed with the appropriate ICD9. Untimely submissions make up the fourth reason for the denials. Many insurance carriers have a policy to always automatically deny claims that are older than the prescribed deadline such as six months. And the fifth reason for denials often involves stall tactic by the insurance carriers designed to hold onto your money for as long as possible. While you can't do much about this fifth reason, the previous four are most certainly within your control and require good attention to the account receivable management process.
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When it comes to account receivable management, it's a game of beat the clock. Remember the longer it takes you to get a claim paid the more likely it is that the claim will never get paid. The first time element that I often ask doctors to measure is the time lapse between the patient encounter and the charge entry. The charges should be entered the very same day as the patient encounter.
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The next question is: what is the time lapse between charges posted and claim submission? So post the charges and they wait till the end of a week to submit the claims electronically is simply not prudent. Submission of claims should be placed daily.
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The next question is the time I was between claims submitted and payment received. I'll be discussing ways to facilitate the payment of claims a bit later.
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What is the time lapse between payment received and payment posted? In some practices the mail sits on someone's desk before the payments are posted to the appropriate accounts. This often delays the next measurable which involves patient billing.
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What is the time lapse between payment posted and the patient receiving an invoice for their portion of the balance? It might also be necessary to appeal a claim if it was not paid according to your contracted fee schedule.
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Since insurance carriers often pay practices incorrectly all practices must have an appeals process as part of their accounts receivable management process. When payments arrive it's up to your billing office to scrutinize the payments on the explanation of benefits and compare it to your practices agreed-upon fee schedule with that particular carrier. This action mandates that your practice obtains your updated fee schedule from each of your top insurance carriers every year.
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It’s important for your billing and collection staff to follow prescribed collection policy. This policy should serve as a guideline for them to follow along the course of a claim’s lifespan. What action should be taken when a claim reaches 30 days old? How about 60 days old? 90 days old? Whether you outsource your collections through a billing and collection company or perform this function in-house, you should have control of this policy and it should be well known by the staff involved. Take a moment to review the example of a collection policy shown here.
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It’s helpful to use industry benchmarks to assess the effectiveness of your accounts receivable management. Two commonly used benchmarks involve total accounts receivables as well as aged claims. Your total accounts receivable should never be more than two months gross charges. In other words, if you bill out $50,000 per month the total monies go to your practice by your patients and insurance carriers should never be more than $100,000. Your aged claims, that is claims over 90 days old, should never be more than 15% of your total accounts receivables.
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Some additional accounts receivable ratios include days in receivables. Days in receivables defines how long your average claims are taking to be paid. It's determined by looking at your total accounts receivable and dividing into that you're gross charges for the year multiplying that number by 360 will give you a number that should not be more than 45 days. This number indicates how long your average claim across all of your payers is taking for your practice to collect your money.
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Your net collection ratio is determined by looking at your collections and comparing that to what you've billed after you subtract out your contractually obligated write offs dictated by your insurance carriers. This ratio should be at least 97%.
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Another measurable ratio should be your OTC or over-the-counter collection ratio. This number is not examined as a raw number but by looking at its trend. It tells you how effective your front desk is in collecting outstanding balances and co-pays at the time of service. The ratio should be measured quarterly and should be compared to the same quarter of the prior year.
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If you're accounts receivable statistics fall below the previous benchmarks there are often some common root causes that can be addressed. Often I find that a practice has no former billing and collection policy that was previously discussed. Actions are not being taken along the lifespan of a claim. The second root cause may have to do with claims that are not clean. A clean claim is defined by accuracy and all its components such as patient demographics, correct insurance and ID number, correct use of modifiers and correct coding initiatives. Someone should be responsible for examining the claims, known as the scrubbing of claims, to be sure that they are being sent out clean. Failure to do so will result in a higher claim rejection rate and time wasted. Lastly, once claims are received if your staff is not writing off the contractual balance based upon your contract with the carrier your accounts receivable report may appear to high. But it's falsely elevated. You're write offs should be performed up to the allowable amount by contract prior to billing the patient their designated balance. By doing this, your accounts receivable report is accurate and not falsely ominous looking.
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Periodically, your billing staff should perform an internal audit of your billing process. This audit takes place by examining at least 25 randomly selected charts on patients seen at least four months ago. From these charts they should be sure that each patient received a charge slip for that date of service. The charge slips should then be compared to that chart notes to be certain that everything on the charge slip has been documented in the patient's medical record and vice versa. The charge slip is then compared to the patient's ledger in the computer system. Were any charges on the charge slip missed in the transcription into the computer? Were all modifiers accurately transcribed? Lastly, the explanation of benefits should be analyzed on each patient to assess proper payment was ultimately made by the carrier and that all patients balances were paid.
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Some tips to maximize your accounts receivable process, your practice must have policies. These policies should be part of a practice manual that all employees are familiar with. The same policy should be part of your financial statement that patients sign on their initial visit to your practice. All communication with your insurance representative must be documented. Patient invoices must be sent out at least monthly. For patients that arrive at your office with no means of paying there were co-pays and balances, your staff should provide them with an updated invoice as well as a self-addressed stamped envelope to facilitate the payments. For overdue balances instruct your staff to ask questions. Why is this account not being paid? Could the patient be facing unfortunate circumstances that might make you handle this delinquency differently? Consider informing patients for every invoice after the second in which a payment is not made a $10-$15 rebilling fee, will be assessed. Be sure that your staff is prepared to accept credit cards over the phone when calling patients who are delinquent in their accounts.
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One effective strategy for collecting patient balances is to proactively review the weekly schedule of patients. Patients owing over a certain amount should be called the day before their appointment to remind them of their balances. This can then be collected upon their arrival.
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When patients ignore their balances and have no circumstances that are preventing them from paying, practices often initiate a more aggressive action such as turning the amount over to a collection agency or even filing a legal action with the small claims court. In my opinion, these actions should be preceded by a certified letter stating these actions will take place should this account not be paid within 48 hours.
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In this practice management prime run account receivable in cash flow, I would be remised if I didn't discuss two important financial statements that you need to understand and interpret as a prudent business manager. They are the profit and loss statement and the balance sheet.
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A profit and loss statement also sometimes called an income statement is a financial document for companies that indicate how revenues which are monies received from services before expenses are taken out is transformed into net income or profits.
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The purpose of the income statement is to show managers whether their company made or lost money during the period being reported. It reports the revenue and then itemizes the expenses into a variety of categories such as payroll, medical supplies, advertising, etc. The difference between the revenues and the total expenses is known as the bottom line or profit. The important thing to remember about an income statement is that it represents a period of time. This contrasts with the balance sheet which represents a single moment in time.
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A balance sheet is often described as a snapshot of a company's financial condition. The balance sheet is the only financial statement which applies to a single point in time and not a period of time such as a quarter or year like the profit and loss statement does. A company's balance sheet has three parts: assets or what you own, liabilities or the debts against those assets such as long as, and ownership equity.
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The main categories of assets are usually listed first and are followed by the liabilities. The difference between assets and the liabilities is known as equity or the net assets or the net worth of the company. According to the accounting equation net worth must equal assets minus liabilities.
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Many physicians make the mistake of believing that they must participate with every manage care plan out there. This often leads to the signing of contracts that are less than profitable. I would like to review practice dynamics and help you understand some principles in the due diligence that needs to be performed when offered a contract of participation.
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Many seasoned physicians are feeling as though they are working harder and harder for less and less. This does not have to be the case. There's an old proverb that states that volume overcomes a multitude a sins. This is not always true, particularly in the environment of reduced reimbursements. As practices become busier and busier the revenue and the expenses increase. Up to a certain point the revenue rate of growth outpaces the expenses rate of growth and therefore profitability increases. When in some point in volume rate of growth of the expenses begins to outpace the revenues and the profit per unit volume begins to decline. Each additional patient will actually shrink the profit per patient even further. This follows what is commonly known as the law of diminishing marginal returns. For this reason, contracts need to be evaluated carefully to be sure that with the higher volume they will create their reimbursement level will offset the new expenses that they also cause.
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In evaluating a contract, some of the important pieces of data that need to be researched include: the reimbursement for your top 15 CPT codes; an estimate of the number of patients insured under the plan in your geographic area; an estimate of what portion of those patients your practice might be expected to capture in other words, their utilization rate; an estimate of how that higher volume will affect your costs, such as payroll and medical supplies; and lastly, a comparison of those new expenses to the additional revenue that's estimated this managed care contract will bring in.
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The future of podiatric medicine is ideally positioned for our aging population with more active lifestyles than ever as well as an unfortunate diabetes epidemic. The future is indeed bright along with the responsibility of helping patients improve the quality their lives. We will all face the ever-increasing pressure of providing high-quality care in a cost effective manner. This will demand that physicians become more fiscally responsible with regard to the business of healthcare delivery.
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It’s my hope that this presentation brought to you by present course wear will serve as the spark that ignites your interest in this vital ingredient of being a successful practitioner. For present course wear I'm Dr. John Guiliana.