Practice Pointers: Tame the accounts receivable beast

November 22, 2002

Try these tips for boosting revenue and shrinking the A/R backlog.

PRACTICE POINTERS

Tame the accounts receivable beast

Jump to:Choose article section...Private payer collection timetableThird-party payer collection timetable*

Try these tips for boosting revenue and shrinking the A/R backlog.

By Michael D. Brown

My consulting firm gets many unusual phone calls. Among the most surprising was one from a prospective client who'd put up $350,000 in accounts receivable as collateral to secure a large loan. This solo practitioner, it turned out, didn't have enough cash on hand to meet his payroll. In essence, he'd been working for free.

The practice had no effective collection or financial policies. It focused on seeing a large volume of patients and working hard—which is noble—but no one was watching the money. As a result, the practice was almost bankrupt.

To slash this practice's A/R, we developed a step-by-step system that called for increasingly stringent measures as private and third-party accounts aged. Within 90 days, we were able to collect about three-quarters of the money owed. The charts below give you the timetable we set up for both private-pay patients and third-party carriers. You can adapt them for your practice.

As accounts receivable age, collection becomes increasingly difficult. A viable collection process should generate an A/R aging profile that looks something like the chart below.

Your accounts receivable shouldn't exceed two months worth of charges. A higher amount indicates that you need to sharpen or overhaul your collection policy. If you don't, you may develop a cash-flow crunch. Having to draw on a credit line, passing up discounts offered for making payments by a certain date, and being unable to meet payroll are among the signs of inadequate cash flow.

To help minimize accounts receivable and avoid these problems, I urge all my clients to:

• Develop new A/R protocols and put them in writing for the benefit of current and future staffers.
• Divide A/R duties among staff.
• Train staff to collect cash due from patients, file insurance claims properly, and follow up when claims are denied.
• Reconcile A/R daily and monthly, and monitor cash flow carefully.
• Speed up insurance collections by keeping patients' signatures on file.
• Thank staffers when they meet collection goals. Better yet, provide an incentive for them to do so: Pay them, say, 1 percent of collections if they take in a certain amount by a specified time.

Take particular care to train and reward your billing staffers, because they're your first line of defense in the battle to attain rock-bottom A/R. Staffers need to understand that they must enforce the collection process if the practice is to receive payment from patients and insurance carriers.

Collecting from third-party payers is almost a full-time job in itself. Make sure you assign this task to someone who'll be persistent, will obtain the necessary referrals or precertifications, and who understands E&M coding. As for patients' out-of-pocket outlays, staff should collect at least 80 percent of copayments, deductibles, small balances, and other fees via cash, check, or credit card at the time of service. It's important not to let patients get into the habit of not paying you.

Indeed, when patients with outstanding balances call to schedule an appointment, staffers should ask them to pay some or all of the amount they owe when they come in. Such patients are more likely to pay doctor bills when they're not feeling well. Once they begin feeling better, paying the doctor can easily slip to the bottom of their priority list.

Patients who claim they can't afford to pay should be asked to supply proof of indigence and perhaps be given information on how to apply for Medicaid and other forms of public assistance. Those who can afford to pay but don't should be terminated after a specified period of time. Write such patients a letter indicating that they're being discharged from your practice for failure to pay their bills, and tell them they have 30 days to find a new physician. Send the letter by certified mail and request a return receipt.

The author is president of Health Care Economics in Indianapolis and an editorial consultant to this magazine.

Private payer collection timetable

Day

Action

• Give the patient a statement and specify when payment is expected.
• Make a notation in the patient’s financial record.

• Mail a statement to the patient indicating that payment is either pending with the insurance carrier or the balance is now due.

• Telephone the patient to ascertain the reason for nonpayment.
• Ask the patient for a specific amount by a certain date (not to exceed 10 days).
• Send a confirmation letter to the patient.

• Send a letter to the patient/guarantor indicating that collection action may be initiated.

• Send a final collection letter to the patient, and follow up with a telephone call.

• Prepare the account for outside collection.

 

Third-party payer collection timetable*

Day

Action

• Mail or electronically submit the CMS-1500 claim to the appropriate payer.

• Review the account. If no third-party payment has been made, telephone the carrier. Be sure to obtain the name of the person with whom you are speaking and the status of the claim.
• If the carrier indicates that the claim hasn’t been received, confirm the address and refile the claim to the attention of the representative you spoke with.
• Verify that the new claim has been received.
• Request a statement showing the status of the account.

• Send the patient a letter stating that payment has not been received from his carrier and the practice is requesting assistance in obtaining payment.
• Determine if the account will be referred to an outside source for follow-up with the insurance company and/or the patient.

• Telephone the patient to discuss payment arrangements. Send the patient a written affirmation of any agreement.

• Send the patient a past-due letter.

• Send a final collection letter to the patient, and follow up with a telephone call.
• Prepare the account for outside collection. 

*If a claim is rejected or payment of less than the anticipated amount is received at any time, contact the insurance carrier via telephone to ascertain the reason.

 

Accounts receivable

Days outstanding

Percentage

0-3050%
31-6025
61-9015
91-12010

with collection agency/
written off

 

Michael Brown. Practice Pointers: Tame the accounts receivable beast. Medical Economics 2002;22:64.