Want to boost revenue? Mount a collections campaign

A team effort increased this family practice's profit margin by 20 percent in one year.

By Anne L. Finger
Senior Editor

Here's a puzzle: John G. Bernard, a family physician in Lafayette, LA, saw the same number of patients—642—in September 1999 as he did in September 2000. His payroll expense was dead even both years. But he took home $10,000 more in September 2000 than he did the previous September. How was that possible?

The answer: a practice-wide emphasis on accounts receivable. In 1999, expenses for Bernard's practice were 49.6 percent of net revenue; the following year, they were only 39.2 percent. The practice accomplished this not only by keeping expenses in check, but by increasing revenue, thanks to collection of old accounts. No magic was involved—just some careful matching of staff to jobs, designing work-flow systems, communicating targets and goals, and celebrating successes.

The accounts receivable turnaround at Bernard's group, Acadiana Family Physicians, began in 1998. Two years earlier, Bernard and FP Patrick A. Sonnier had joined their solo practices. (Two more physicians joined in 1997, and a fifth last year.) Staff wasn't able to keep up with the combined practice's receivables, and unpaid claims piled up. At one point, says Bernard, the practice was so backed up, they were thinking about writing off overdue accounts and just keeping up with current ones.

The physicians brought in consultant Margaret Jackson to help them with the current accounts. Jackson recalls finding "a catchall account for unpaid claims that people didn't know what to do with. There were thousands of dollars in there." With Jackson's prodding, the physicians realized that the past receivables deserved prompt attention, too. "It became obvious to the doctors when I began to talk in terms of percentages, rather than raw numbers," she says. "The A/R over 90 days was 57 percent."

And about $100,000 had been outstanding for more than 150 days. Jackson explained that the practice was losing even more because it didn't have the opportunity to invest that money: "Even if the practice just put the money in a CD, I figured it could have earned $600 a month."

Developing a staff with clear responsibilities and tangible goals

Bernard believes that personnel was the most important factor in the practice's A/R turnaround. "The key to Margaret's success is her ability to get the right people to handle the problem, and to set goals and keep everybody focused on them."

A primary goal is clean claims. The process begins with the person who schedules appointments. "We give patients the information they need: which insurers we contract with; how we can work with patients if they aren't covered by one of these; and—if the patient requests it—an estimate of what the visit will cost." But there's a determined effort not to overdo a discussion about finances when a person is first making an appointment, Jackson says. "We don't want anyone to think that AFP is more concerned about getting our money than we are about their health," she explains.

"We never tell a patient, 'We don't take that insurance,' " Jackson adds. "That's a terrible thing to say. We tell someone, 'We're not contract providers for that company, but we'll be happy to work with your out-of-network coverage to make the finances easy for you.' "

Then the receptionist takes over. "At one time, patients signed in themselves," says Paula Quebedeaux, a certified practice manager who's been with AFP since 1996. But occasionally, someone was overlooked. Now the receptionist signs everyone in and notes which physician each patient is scheduled to see. To avoid billing errors and inaccurate claims, the receptionist makes a copy of each patient's insurance card at every visit and asks whether the patient's current address and phone number have changed. If they have, or if this is a first visit, she'll enter the proper data into the computer before the patient leaves the office. That way, Jackson says, "if there's anything we're unsure of, we can check it right away." The immediate attention prevents errors like mixing up the patient with the policy's beneficiary, which could lead to something like listing the wrong gender on a breast exam claim, she says.

Each claim is sent within two days of being entered in the computer. The staff forwards batches of claims to insurance companies every day.

Employees now stay on top of other tasks, as well. The cashier keys in charges as they occur. "When she posts receipts, she is very careful about where balance billing should take place," says Jackson. With differing plans, copays, and deductibles, and some patients going out of network, valuable time can be lost tracking checks that have gone awry, she explains. And the insurance processor is responsible for ensuring that electronic billing gets through the clearinghouse. "If something happens and you don't catch it, $20,000 can just sit until you find it," Jackson says.

Bringing in an experienced collector

The key player in a successful collections effort is, of course, the collector. Enter Jacki Boone, a 21-year veteran of bill-collecting wars in the business world. As soon as Boone was hired, she began attacking the debt that was older than 150 days. "The practice does a lot of employment physicals and workers' comp work with companies that pay us directly," she says. "That's where most of the unpaid money was."

Boone discovered that the software AFP used was designed to send out only four statements—and then stop. Worse, the statements were unclear. "I think a lot of these bills just went by the wayside—sometimes because companies couldn't understand them and where the previous balance was coming from," she says.

Boone went through every account that had an outstanding balance, figured out where the balance had originated, and gave the companies copies of the original bills so they could reconcile their records with AFP's. "It was a very lengthy process," she recalls. Boone takes all the billing calls. "I explain to a lot of patients how Medicare and supplementary insurance work, and what portion of the balance they're responsible for," she says.

When payment is late, Boone gets to work after the second bill has been sent. "Most practices send four bills before they start pursuing an overdue account more aggressively," she says. "But after the fourth bill, some people say, 'I don't even remember going to the doctor.' Others have run up new medical bills and are less likely to pay attention to old ones.

"I start by making a friendly phone call or sending a reminder letter—nothing harsh: 'You've gotten two bills, and we haven't received payment. Do you need more information?' "

Boone always tries to collect the entire balance, but if the patient can't pay it, she offers three equal monthly installments. If that's still too difficult, she works out lower monthly payments. "Right now, about 30 percent of the outstanding money over 150 days old is being paid off in monthly installments," says Boone. "We bend over backward to make sure these patients can afford to keep coming back."

Tracking performance keeps everyone moving in the same direction

Another big factor in the AFP turnaround was the development of a continual staffwide emphasis on performance. With input from the physicians, Jackson established key performance indicators: total expenses, salaries, medical/office supplies as a percent of net revenue, and A/R aging.

Jackson makes a bar graph of the A/R data every month and distributes it "to anyone who will look at it," she says, but especially to Boone and Quebedeaux. "It was exciting to watch the 0-to-30-days category creep up and up, and the 120-days-and-over category creep down and down," she says. (See below for a summary of how the practice's A/R data improved over time.) Within 48 hours of the close of every day, the doctors receive a printout detailing how many dollars were billed and collected, the relationship between the two, and the adjustments and write-offs.

An insurance-pending report is another important piece of information. "Every month, we run a printout detailing how much we charged to each of the insurers we work with, and how much we received, so we can clearly see who's paying and who's not," says Jackson. If any claim has been pending for 45 days, a staffer calls the insurance company to find out whether the claim has been received, where it is, and whether AFP might have done something that caused the delay. "If it's a clean claim, we usually have a 30-day turnaround," Boone says.

Carefully cultivated personal contacts with insurance representatives pave the way for this cooperation, according to Jackson. "One of our biggest insurers will give us practically anything we need. That cooperation didn't fall out of the sky."

The number of denials and the reason for each are posted every week. Each Thursday, Boone meets with her fellow members of the financial team: the patient accounts manager, the receptionist, two cashiers, and the insurance processor. Although they discuss many topics, they often focus on why claims are being denied. Has information been entered incorrectly? How can staff members help each other make things flow smoothly for the patient?

Despite all the emphasis on preventing denials, there were 30 last November. That was far fewer than the 90 recorded during the first week of record-keeping in March 2000, but a bad month nevertheless, says Jackson. As such, it warranted the financial team's attention. The reason for the increase? The woman who keyed in the claims data at each visit was on vacation, and others weren't performing the task with comparable care. To rectify each denial takes about 15 minutes of valuable time, Jackson notes.

Jackson says management had to overcome the staff's unwillingness to confront mistakes. "We told everyone that the reason for posting the list of denied claims is so people can read what went wrong and figure out whether they were involved. We made it clear that we welcome feedback. When there are no denials three weeks in a row, we make a big point of celebrating." A Monday morning newsletter heralds the good news, and the individuals responsible for it receive visits from Quebedeaux, who praises their good work. The fewest denials for an entire month so far have been nine.

"We're not taught much about the business end of medical practice," observes Bernard. "But the idea of someone going into practice and saying, 'I want to see patients and let someone else take care of the business,' is a recipe for disaster. We have to try to get new doctors to understand that paying attention to these matters is very important."

For Bernard and his colleagues, paying attention, reviewing everything, and asking a lot of questions have paid off. As last year drew to an end, the practice was doing a good deal of celebrating. "At the beginning of 1998, only 11 percent of A/R was in the under-30-days category, and 50 percent was in the over-120-days category," says Jackson. "As of October 2000, it was 49 percent under 30 days and 16 percent over 120 days.

"The same practices, procedures, and protocols that enabled us to improve our A/R figures have bolstered the practice as a whole," she adds. "We had about $2.65 million in net revenue for the year 2000. That's 35 percent greater than in 1999. The amount isn't so remarkable, since we've added another doctor and now offer additional services. But expenses went up just 5 percent. And the four original doctors are keeping 15 percent more than they did in 1999."

A look at AFP's receivables from 1998 to 2000

 

Anne Finger. Want to boost revenue? Mount a collections campaign. Medical Economics 2001;6:68.