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How to keep the cash coming in

When the office is busy but the cash flow is slow and the work isn’t translating into net income for the physicians, look first to the billing and collections work.

Almost always, that’s where the failing lies. To keep the cash flowing, the office has to keep constant tabs on those two operations. Yet most offices don’t. They just wait until they run out of cash.

Here is how to stay in control of both the billing and collections for the best revenue outcome.

The billing starts with the fees

With the billing, what the office needs to follow most closely is the fee schedule. It’s there that most practices lose money, mainly because they don’t update their fees often enough. Some go several years without even looking at the schedule. Yet the office has to be sure to keep its fees higher than its contractual amounts because payers pay the lesser of the two.

The hitch, of course, is that payers won’t reveal their schedules. But that’s easy enough to get past just by comparing the fee amount to the reimbursement. Wherever the office gets the full fee amount, assume that the contractual amount is higher and it’s time to raise the fee for that procedure.

Set up a regular EOB (explanation of benefits) payment check. It’s not necessary to check every EOB, just the ones for the office’s top procedures. Make a list of what each payer pays and set the fees higher than that.

A too-low payment is a permanent loss of revenue. The office can never get that money back.

It’s not uncommon to see tens of thousands of dollars lost to that one error. Even in the best-run offices, losses are rampant. Almost always, there is at least one procedure that is priced too low. While it’s all but impossible to get a payer’s complete payment schedule, it’s worth the effort to ask for the payment amounts for the top 20 codes.

A few more billable items to watch

Beyond the fee schedule, these are the items that most often cause cash problems.

• Not tracking the denials. The billing department needs to look at the reasons for denials and, where possible, take steps to prevent recurrence. Sometimes the issue is inexcusable. At one client practice 61 percent of the denials were due to nothing more than incorrect patient demographic data collected at the front desk.

• Not auditing the codes. Incorrect codes are another common culprit, and the best safeguard is coding audits. They can be done in-house, and they don’t have to be elaborate. Just an annual sampling of 10 encounters for each physician is enough to identify the most significant gaps and mistakes. Coder training is a small expense compared to the amount of cash that can be lost or gained from the coding.

• Not auditing the bills. Incomplete billing such as failure to bill for secondary insurance causes further losses. Again, the solution is periodic audits, this time to make sure the billers are capturing all the charges.

• Waylaid encounter forms. It’s easy for an encounter form to get pulled out perhaps because the patient needs to schedule a consult, and then it gets lost in the shuffle. It’s easy too for the difficult ones to end up in a drawer. Either account for all the numbers on the forms at the end of the day or reconcile them to the schedule to make sure there’s one for every patient.

The collections start with the rates

On the collection side, what needs tracking most is the collection rates. There are two of them to watch. First is the gross collection rate. That’s the percentage of charges the office is bringing in, or the receipts divided by the charges. For example, if Payer A pays $50 for a service and the office’s charge is $100, the gross rate is 50 percent.

That rate will vary by payer, so watch for trends by individual payer. If the rate starts to go up or down, something is going on. The payer may not be paying the full contractual amount or the office may not be collecting all it should or the fee schedule may need to be updated.

The second collection rate to track is the net collections, which is a good guide to see if the office is getting what it’s entitled to get. That’s the percentage of what the office expects to get, or what the payer actually pays divided by the contractual or adjusted charges. Suppose Payer A’s contractual amount is $50. If Payer A pays the full $50 as it should, the net collection rate is 100 percent. The net rate will bobble a bit depending on when the money gets paid and also how many claims have been filed during the previous contract period. Even so, it should stay very close to 100 percent. If it drops significantly, the payer is not paying what it should.

More collectable items to watch

Past tracking the gross and net rates, watch out for these collection foibles.

• Ignoring the account aging. The office should set its own targets for aging – that no more than 15 percent of the receivables can be in the 60-day range or whatever. Keep those targets in sight. If they slip, search out the reason.

• Working for nothing. Make sure the revenue reflects the activity. When the money is slow, there should be some noticeable reduction in services such as one physician being on vacation. Similarly, if the office is busy or has added a new physician, there ought to be more money coming in.

• Laying off the wrong people. When the cash flow drops to the point that the office has to make cutbacks, never make the cuts in the billing and collection staff. Reducing their numbers will only mean the office sees even less cash. In one client office, the manager pulled a collection person to cover for a front-desk staffer who was on maternity leave. That move saved the expense of a hiring replacement, but the cash flow suffered.

• Overusing the line of credit. Finally, use the line of credit only to cover a temporary cash flow issue. Don’t rely on it to finance the operational expenses. Dip into the credit regularly, and the interest starts to build until eventually the office isn’t able to pay it back. When an office has to use its line of credit constantly, take that as a sign that either the billing or the collection side of the practice has heavy failings.









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