“This is a nickel-and-dime business, and we have to know where every nickel and dime is,” says Dave Fairbrook, one of two primary care physicians at the Clinic at Panorama City in Lacey, Wash. “We can’t be waiting around 60 days to get paid.”
Fairbrook should know. His practice lost $30,000 in revenue one year, thanks to poor billing. He learned fast to know where his money is and changed billing systems and priorities to get back on track.
Previously, 40 percent to half of the practice’s accounts receivable (A/R) were older than 90 days. Now, only about 10 percent falls into that bucket, says office manager Rita Miller.
Every practice needs fiscal transparency. The standard tools for the job: A/R reports generated by a practice management system.
The days-in-A/R report shows a snapshot of how long it’s taking you, on average, to get paid [total A/R ÷ (annual gross charges ÷ 365)]. The A/R-per-physician report shows how much each physician still has in the “yet to be collected” pile (hint: if it’s more than 2.5 times your monthly charges, you’ve got some work to do).
But the mack daddy of A/R reports is the aged trial balance, an overview of what percentage of your accounts falls into aging buckets: 0-30 days old, 31-60, 61-90, 90-120, and more than 120.
These buckets matter because the older the account, the harder it is to collect, and because you want your money as fast as possible to balance out all those bills rolling in.
Understanding this report is the key to focusing staff on the right issues and keeping your financial head above water.
Here’s what you need to know about your aged-trial-balance report and what to do to fix it if the report looks terrible.
Start at a high level
It’s OK to start your review at 10,000 feet. First of all, run the aged-trial-balance report to reflect a rolling 12-month period, as well as the month-by-month alternative in many systems. This is good standard practice for most A/R reports.
“When you do the days-in-A/R for any one month, it fluctuates wildly, so people get all freaked out,” warns Jennifer Beaver, a management consultant with Chicago-based Karen Zupko & Associates. “But if the doctor was out, or there was something strange with Medicare, there can be any number of reasons why days-in-A/R might be off in any one month.”
Watch to see if money moves from one aging bucket (31 to 60 days) to the next (61 to 90) without changing substantially, suggests Lucien Roberts, chief operating officer of The Neurological Institute, a Charlotte, N.C.-based neurology practice.
Medical Group Management Association senior consultant Ken Hertz agrees. “Watch that A/R aging bucket creep. If you look at it over time, you can see that trending, and it helps you to understand that your staff isn’t dealing with the accounts earlier on. Some wait 60 days to attack an account,” he says.
Also, look at what percentage of accounts is in which bucket, and have some expectations for what the percentages should be.
