The Third Lever of Practice Profitability: Accounts Receivable

Once services have been rendered to patients and bills have been generated, the money owed to your practice is now deemed “Accounts Receivable” (AR). Although different tactics are needed to collect these outstanding claims, AR includes money due from both insurance companies and patients. Poor coding, high claims denials, and low resubmission rates, coupled with weak upfront cash collections, can result in as much as two-thirds of physician practice revenue lost to billing inefficiencies. Strong AR management can help your practice optimize revenue.

Know Your Numbers

There are many metrics available to evaluate and manage AR. The options are endless and often overwhelming. Knowing which specific metrics are right for your practice may depend on your local market, managed care contracts, or payer mix. Days in Accounts Receivable is a great basic starting point, but you must dig deeper for the whole story. While all practices share the same goal of bringing cash in, we must understand why it’s not coming in to address areas in need of improvement.

Managing Patient AR

With an estimated 25% of all healthcare revenue now the patient’s responsibility, practices must proactively manage this aspect of AR with a similar approach and importance as their payer accounts. A strong patient collections policy must be in place so that staff members know how to effectively communicate with patients about their financial responsibilities. Cash collections from patients must start with the very first patient contact by obtaining valid insurance information. Once claims have been submitted and processed, any remaining patient balance can now be billed. Effective patient billing practices such as indicating that payments are “due now,” offering a variety of payment options (credit card and online payments), and establishing consistent policies for placing accounts into collections will assist in effectively managing patient AR.

Managing Payer AR

Payer AR typically represent a much larger portion of a practice’s total outstanding accounts, thus having a much greater impact on your practice’s bottom line. Additionally, payer accounts can often be much more complex to recover. Key metrics to consider for managing payer AR might include:

  • First pass resolution rates
  • Denial rates
  • Resubmission rates
  • Aged accounts receivable by days outstanding, compared to prior years

What’s more, drilling down into these metrics at the individual payer level may provide keen insight into technical issues related to specific managed care contracts. Since payer requirements for claims submission change frequently, these insights may lead to training opportunities for staff to implement new procedures when submitting claims in the future.

Time is Money

Once the metrics for patients and payers are evaluated and focus areas are identified, the practice should develop strategies for quickly prioritizing and addressing receivables. These strategies may include implementing stronger upfront cash collection processes, training staff on better understanding payer contracts, or reevaluating the priority levels assigned to outstanding accounts.

The experts at Practice Partners Inc. can help drill down into your data to evaluate the metrics that are right for your specific practice and recommend procedures to improve AR efficiency. Contact us to learn more about how we can help improve your practice’s bottom line.