Simple changes to billing procedures, hiring policies, purchasing, patient relations, and other daily activities can have a positive impact on your practice’s bottom line. Here are 21 ways you can quickly boost practice profitability.
1. Name a reimbursement coordinator
To get all the reimbursement possible, hire or appoint someone to be a reimbursement coordinator. It can be a part-time or full-time position and, either way, it pays for itself.
The coordinator keeps track of the minutia of the money trail – billing, coding, payer requirements, contract provisions, and so on. Lost revenues are searched out as are errors that can create lost revenues. Every money portal is scrutinized so nothing is missed.
The coordinator does all the things affecting the billing department, from overseeing the data collected at the front desk to tracking the EOBs (explanation of benefits) to overseeing the payment requirements for each payer to negotiating contracts.
A good coordinator can bring in a tremendous amount of otherwise lost income.
2. Watch these three money leaks
Here are three ways to keep from losing money:
• Track the fee adjustments. Some payers withhold a percentage of payments until the end of the year. Don’t rely on the payer’s math. Keep track of the adjustments and reconcile the year-end payment with the income from that payer.
• Take a hard look at the payments made to a billing service. It could be far cheaper to give staff advanced training so they can do the billing and collection work in-house.
• Stagger bonus payments. When there’s a year-end bonus, people who are going to resign often wait till year’s end and collect the money and run. It’s easy to avoid that loss by spreading the payments out during the year.
3. Save money on new hires
Here are two ways to save money on hiring:
• As soon as it becomes obvious a new hire isn’t going to work out, fire.
• Don’t pay a new employee the full salary during the probation period.
Because a newcomer isn’t working at full speed during that time, pay perhaps 70 to 90 percent of the full amount. Similarly, wait 90 days before giving a new employee benefits or sick days.
4. Put a stop to embezzlement
The safeguards to set up
Embezzlement is easy in a medical office because little amounts come through every day, many of them in cash, and $5 here or $10 there doesn’t get missed.
The scheme can be as simple as a staffer walking off with a bit of cash now and then. But it can also be elaborate. Somebody sets up a fictitious vendor and writes checks to it. Or somebody sets up a bank account in the name of the practice and deposits some of the checks into it instead of into the real account.
The only prevention is separation of duties so that no one person has control of the money. Set up these rules:
• At least two people handle the receivables. One opens the mail and lists the payments; the other posts the money to the account.
• One person authorizes write-offs and another posts them.
• Every employee who handles cash is bonded.
• Every check has to have an approved invoice attached before it can be signed.
• Everybody has to take a least one continuous week of vacation each year. During the absence, another staffer has to take over the job.
• Tally the balance sheet and income statement every month.
• Pre-number the superbills and account for them at the end of the day. That way, nobody can destroy a superbill and pocket the payment.
• Reconcile the sign-in sheet with the appointment book and with the charges and payments posted each day. Every cash payment must have a receipt, and the receipt has to be included in the reconciliation.
How to catch the culprit red-handed
When the manager suspects embezzlement, she or he should make a surprise visit to the billing department and say, “We’re going to run all the statements right now and mail them out today.” Include a letter with each bill that reads, “Please verify your balance, and if there is any discrepancy, call Person A.”
If checks have been diverted to a secret account, there will be calls from people who have paid but whose payments have not been posted.
Another approach: Compare the payments to the EOBs. This will show if the contractual write-offs are being manipulated.
Yet another: Call some of the patients whose accounts have been written off and verify that they did not pay. This will show if their checks are being deposited elsewhere and their accounts written off.
5. Get money from the EOBs
To throw away EOBs is to throw away money.
Keep them in chronological order by payer. Then when there’s a payment increase on some service, the office can show the payer exactly how much is owed.
The EOB file also lets the office answer patients’ questions about deductibles and coinsurance. Patients usually get copies of their EOBs, but most people don’t keep them.
6. Cut the purchasing costs
• Join other offices for group discounts. Let one manager run purchasing for a year and then pass the job along to another manager. Because the group represents a lot of business, it can tell a vendor it will use it exclusively in exchange for an overall discount. It can also get individual discounts on large orders.
• Ask each vendor for a prompt payment discount. Some will give a discount for paying within a specified short period of time.
• One manager divided staff into groups and made each one responsible for the costs in one area such as medical supplies, linen, and office supplies. The manager told staff that the office had to cut costs and didn’t want the cuts to come from salaries, so the groups had a strong incentive to get the best prices. They don’t hesitate to tell a vendor, “We need to save money here or we’ll have to go elsewhere.” At every staff meeting, they report on their results and discuss ways to cut costs even further.
• With equipment purchases, look past the price tag. Just as important are the supplies and labor required. For example, one copier might require toner that costs $75 while a less expensive copier needs a $250 toner.
Check the contract, too. Don’t accept a provision that the office has to get supplies or service from the vendor. Tell the company the office will buy the equipment only if it can use other suppliers.
7. Fund the annual expenses
To keep from getting hit with large annual expenses such as malpractice premiums, set the money aside. The most painless way is to divide the amount by 12 and deposit that into a separate account each month. Do that for every expense that isn’t monthly such as equipment maintenance or life insurance. Then the money is always there when the office needs it, and the cash flow doesn’t get interrupted.
8. Check the cash flow
Here’s an easy way to evaluate the cash flow.
• Calculate the average daily revenue. A good time frame to use is three or four months.
• Total the receivables.
• Divide the receivables by the average daily revenue.
The result is the number of days outstanding. If it’s 30 to 45, the office is doing well. More than that, the billing system needs improvement.
9. A stamped envelope at exit
One office has a standard response to any patient who can’t pay at the time of service.
It gives the patient the bill plus a stamped, self-addressed envelope and asks the patient to mail the check the next day.
Most patients do just that.
10. Weigh leasing versus buying
Be aware of the pros and cons of leasing versus buying.
On the negative side, a lease usually requires a commitment of three to five years. The office may be able to trade up during that time, but almost always with extra cost. Also, a lease can be more expensive than a purchase, because it’s based on full retail price while a purchase is usually for a discounted price. As a rule of thumb, for anything costing no more than $5,000, purchasing is the better deal.
On the positive side, a lease can give the office a tax break, and that can make it less expensive than purchasing. If the office does decide to lease, find out if it has to pay part of the interest if it trades up before the lease ends. Find out too if it’s possible to buy the equipment at the end of the lease, though the equipment may be obsolete by then.
Finally, recognize that a lease is a loan. It may be far cheaper to get a bank loan and buy the item.
11. Keep the A/Rs youthful
Collection work is something that can’t wait, because a dollar of receivables doesn’t stay a dollar for long. The dollar the office bills this month will be worth only 50 cents six months from now. In a year, it will be worth no more than 23 cents and probably more in the range of 19 to 20 cents. After two years, a 5-cent recovery is about the best any office can expect. Much of the loss comes from the fact that people move; after a year, as many as 25 percent of the bills in collections will go to the wrong address.
One manager keeps the receivables from aging by giving the doctors quarterly printouts of the all the accounts that are 120 days old or older. It shows the doctor in charge the amount due, how long it has been due, and what payments or payment arrangements have been made. The doctors are required to check off what they want done with each of their accounts—write it off, turn it over to a collection agency, or send it to small claims court. The outcome is that the office has reduced the average age of its accounts from 65 days to 31 days.
12. Make the bill readable
The way the bill looks plays a lead role in when and also whether the office gets paid. Here are some pay boosters.
• Include a return envelope with the bill. That makes it easier for the patient to pay and also ensures the payment is addressed correctly.
• Use colored return envelopes. They make the bill stand out from the other papers the patient is looking at.
• Include a credit card form. This reminds the patient that cards are an option and also makes it easy to pay by card.
• The bill itself has to be readable. When the patient says, “I don’t understand this,” the bill doesn’t get paid. Use a form that explains the charge and tells the patient what to do.
• Show the name of the treating physician. The patient may not know the name of the group. What’s more, the patient is ready to pay the doctor, not a corporation.
• Show the date of the visit. If the only date is the billing date and the patient didn’t come in at that time, why pay? If there have been several visits, show their individual dates.
• Tell what each visit was for so the patient knows what services are being covered.
• Tell the patient to pay. And do it in lay terms such as, “The amount of your bill is $X. Your insurance has paid $Y. Now you owe $Z.” That’s far easier to understand than wading through terms such as balance forward, maximum copay, or negotiated rate.
• Show the status of the account, again in plain language. If the account is still in the insurance process, say, “We are now billing your insurance company. No payment is due at this time.”
• Set up a readable template for each type of payer. For the bill to make sense to the patient, it has to show the copay and deductible arrangement.
• Show the credits in lay language: “We owe you.” And then put the check in with the bill. The patient shouldn’t have to call and ask for it.
• Tell the patient what else to do in clear terms. “Please return your workers’ compensation form” is far easier to understand than “Government regulations require that the patient procure and direct . . .”
13. Payment coupons
For payment arrangements, one manager has improved results by giving patients a book of payment coupons with addressed return envelopes. They look exactly like car and mortgage payment books, because patients are used to those.
On the cover is the name of the practice. And on the first page is the office’s address and phone number plus blanks for the patient’s name, account number, the monthly payment amount, and the date of the month when the payment is due. The office fills in those spaces.
The tickets are perforated and carry the address and phone number of the office plus blanks for the patient’s name and account number, the amount due, and the amount paid. The patient or the patient representative fills in those spaces on all the tickets.
Each patient gets no more than a year’s worth of coupons. At year’s end, the office calls the patient to reevaluate the financial situation. It’s often possible to increase the payment amount at that time, particularly if someone was previously out of work but now is employed.
14. Automatic monthly payments
Another payment plan approach is to schedule automatic credit or debit card payments or automatic bank withdrawals.
For expensive procedures, tell the patient how much the insurance will cover and how much the patient will have to pay, and then ask for the automatic payments.
Or for overdue amounts that reach, say, $300, call and say, “You owe $X, so what we need to do is see what you can afford to pay and set up a payment arrangement with a credit card or bank account.”
Always phrase it in a way that shows the office is on the patient’s side, for example, “We want to come up with an arrangement you can afford” or “We don’t want to burden you, so anything over $X we can put on your card in small payments. What is a reasonable amount for you?”
15. A kind reprieve
One manager says “the nicest thing the office ever did” was to give patients a little leeway with their payment schedules.
When it sets up a payment schedule, it tells the patient, “We know you have months when your bills are high, so if that happens, just let us know and we’ll put your scheduled payment on hold for a month.”
Patients appreciate the understanding, the manager says. Most even pay in full before the agreed date.
16. Advance payment notice
To make sure it gets paid for non-covered services, one office uses Medicare’s advance notice for all patients.
It simply says that the insurance company will only pay for services it determines to be medically necessary. It lists services Medicare doesn’t cover as well as services the commercial payers often don’t cover, such as physical exams.
The doctor explains that there may not be coverage, and the patient then signs a statement accepting responsibility for the payment. If the service is refused, the patient signs a statement of “I am refusing the following lab tests or procedures.”
The form is filed in the record.
If the patient later asks why the payer says the service was unnecessary, the office can show the agreement.
What’s more, there’s malpractice protection. If the doctor recommends, say, a PSA test for a 50-year-old man who has no symptoms of prostate disorder and the patient refuses it, the office has written documentation that the test was recommended and that the patient opted not to have it.
17. Write a strong collection letter
To write an effective collection letter, do this:
• Make it short. Limit the letter to one page. Limit the paragraphs to two sentences. Limit the sentences to 22 words. And limit the words to three syllables. Do that and the message will be concise, direct, and powerful.
• Don’t start a sentence with first person. Instead of “our records indicate” or “I am writing to tell you” or “it has come to my attention,” use second person, as in “your account is past due.” Or, instead of “we need you to pay now,” make it “you need to pay your bill now.” Follow with a second-person reason to pay: “so we can continue to keep you as our patient.”
• Don’t give a payment time with an -ly word such as immediately or promptly. To the patient, immediately may mean next month. Be specific: “Your bill needs to be paid no later than June 1.” This says, “We’re going to sit here and wait for your payment.”
• In some offices, the treating physician signs the letters, and the response is good. When the patient realizes the doctor knows about the nonpayment, the embarrassment factor steps in.
18. A last-ditch effort
One office gets good results with a last-chance letter before sending an account to collections. The letter offers options:
Before your account is submitted to a collection agency, and to give you the opportunity to protect your valuable credit rating, please indicate your preference of the following:
• I prefer to settle this amount in full at this time. My check is enclosed.
• I will make 12 monthly payments, each for one-twelfth of the balance. My check for the first installment of $X is enclosed.
• I will use a credit card to pay the entire amount due. (A credit card form is enclosed.)
• I will pay directly from my bank account. (Online payment details are enclosed).
• You may assign this account to a collection agency.
If we do not hear from you within 10 days, we will assume the last choice is your preference and will send your account to collections.
19. Making a collection call
What to say and how to answer
A collection call should never be offensive. But it does need to be firm.
Begin by putting the patient on the spot, though without being confrontational, perhaps, “We haven’t received payment for this bill we sent you 30 days ago” or “I was reviewing our accounts receivable and saw you have $X that is three months late. I’m calling to check on the status of it.”
Stop right there. If there’s silence, let there be silence. Put the burden of breaking the silence on the patient. There’s a good chance the patient will explain why the payment is late and will be willing to resolve the matter.
If the answer is, “I don’t have the money,” offer an alternative: “I can understand that. But let’s talk about how we can retire this bill.” Then suggest an amount: “Can you make monthly payments of $X until the bill is paid?”
If the patient agrees, emphasize the seriousness of the arrangement: “I’m going to draft an agreement.” Say that the office will send it by certified mail for the patient to sign. Then wrap up by getting a commitment: “So we can expect your first payment by Thursday?”
The standard excuses and what to say in response:
• “I’ll take care of that.” Pin the patient down with “When will you send the check?” Then call on that date and ask if it’s been sent.
• “I’ve already sent a check.” Ask for the check number and the date. That forces the patient to admit any nonpayment.
• Any expression of anger. Don’t join in. Respond with negativity, and the patient has an excuse not to pay at all. Say instead, “Please let me call you again when you can think about this rationally.” Then call a week later and pretend there never was any unpleasantness.
When to stop calling
When a patient says, “Don’t call me anymore,” can the office continue to make collection calls?
Not if the patient also says, “I’m not going to pay this bill.”
The purpose of a collection call is to collect a debt, and when the debtor says, “I’m not paying,” that purpose vanishes. The collection has now become a legal matter, and the calls begin to look like harassment.
20. Get into the credit
Use a collection agency that reports to a credit bureau, and preferably to all three national bureaus. Then when the patient applies for a mortgage or other credit, the office’s bill has to be satisfied first.
21. How to use a collection agency
To get the best results from a collection agency, turn the accounts over to the agency when they are 90 days past due. At that point, there’s been ample opportunity to pay and the account is still new enough that the patient can usually be located and the money collected.
The longer the office holds on to its old accounts, the less success the agency will have collecting the money. At 120 or 150 days, many people have left town or have other agencies calling them. What’s more, people who have managed to get by for a long time without paying invariably assume they can continue to do so.
