P.J. Cloud-Moulds

Often major decisions are made based upon knee-jerk reactions to data generated by well-meaning employees.  But if you are only looking at data on a monthly basis, not a quarterly or annually, you could be hurting your business more than you think.

Each month has a different number of working days and this is something you need to take into consideration.  For example for this year, here are the number of working days:

January: 22 working days
February: 20 working days
March: 22 working days
April: 21 working days
May: 22 working days
June: 21 working days
July: 21 working days
August: 23 working days
September: 19 working days
October: 23 working days
November: 19-20 working days (some companies shut down for both Thursday and Friday for Thanksgiving)
December: 20 working days

These can obviously change if your company shuts down for more than just the major holidays, or no holidays at all.

So looking at March, August and October your monthly data will look like you are performing much better than if you made decisions based upon data generated on September, February and December.  This is particularly important for projecting your inflow, paying out bonuses and payroll, and making sure you have enough to make ends meet. 

Of course review your monthly data, but keep in mind that some months will look bette. Looking at your information quarterly or even comparing to this time last year is your best bet.  It also much easier to plan capital equipment, raises, or even hiring more employees based upon your ability to project out based upon working days.   

I think this is an area that often get overlooked, as several practices often complain about how volatile the market is from month to month.  Sure based upon your practice type, you could have seasonal business.  If your are an orthopedic surgeon, summer and fall are most likely your busiest times of the year since people are more active and kids are back in school and playing more sports. 

Depending upon location can also be a contributing factor.  Perhaps you rely on tourism or the weather plays a factor.  All of these areas are things to keep in mind, and know that you will have ebb and flow within your business.  Just taking a step back and finding perspective when reviewing your information can provide you a less stressful review knowing that your business is not failing or employees are not performing.

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It’s so important to step back, get off the emotional rollercoaster, and find perspective when it comes to monthly data.

Practice Metrics: Working Days vs Calendar Days

I often ask the question, “What are your projections for inflow this month?” Often, I get a glazed over blank stare or a stammering of excuses why they don’t know. Can you imagine how an employee would feel if they did not know how much money they were going to make on their next pay period?  How on earth would they be able to budget their expenses?  They wouldn’t know if their mortgage was going to be paid, or if they were going to be able to provide for their family. So why is it that so many practice owners just don’t know how much inflow will be coming in for the month?

It's actually very common within industry that the people keeping track of the money coming in really just roll the dice and “hope” they get paid from insurance companies.  Everyone feels like their hands are tied, give up and just become complacent and “trust” they will be paid. There is a much better way, and it will help practice owners sleep better at night. 

Projecting your inflow is very easy. It is based upon your current daily inflow and the number of working days in the month.  But before we get to that formula, here are some areas that will need to be addressed right away to make sure you are getting your money as quickly as possible.

• If you have staff that complete their notes over the weekend instead of the day the patient was in, get that habit changed immediately.  

, it is critical staff complete all of their notes that will be charged out the same day the patient was seen.  This will decrease the number of days out that you will be paid, and make it much more accurate to predict your monthly inflow.

• Bill claims out every day.  It may seem like a lot of work, but it's really only minutes per day and the constant flow of income into your bank account will make it easier for you to stay on-point with your budget.  Not only do you want to send claims out on a daily basis, but tighten that belt a bit further and bill claims out the same day the patient was seen.  Yes, it's possible and the rewards are too great to pass up.

• Post monies coming in the same day they are received.  This will keep your A/R in check, and you’ll be able to better understand the paying habits of your payers.  Why is this important?  Well, Medicare has 14 days from the time they receive the claim to pay it.  If you have any Medicare A/R over thirty days, that’s a problem for you, look into why that’s happening.  Blue Cross, Aetna, and sometimes Blue Shield pay within a week.  Healthnet and Cigna will pay within about ten days.  All of this is important so that you can tailor your follow-up process based upon payer and know if they are paying on time.

Now that you have your items to follow up with and your process in place, it’s time to project out what your Inflow will be for the month.  You will need to calculate your average inflow per day and multiple that by the number of working days in the month.

Average Inflow Per Day = $21,000
Month of February has 20 working days
Projected Inflow for February is $420,000 ($21,000 * 20)

Based upon how much money is posted on a daily basis, this number will fluctuate and this is why it's so important to send out claims daily and post daily.  But once you have a better idea of what you’ll be bringing in for the month, you’ll be able to better budget your expenses.

You don’t know how much money you have in the bank. What if I told you, you can calculate a projection of your inflow for this month?

Why Practice Owners Should Project Inflow Monthly 

Today, I want to talk about DSO (Days Sales Outstanding).  This is the time frame in number of days it takes for you to see a patient and get the final payment posted into your billing system.

Do you know what your average DSO is?  Do you know why it's important to know this?  Do you know how to calculate it?

Let's start with knowing the number.  If you have billing software that can calculate this out for you, great!  Half of the work is done.  If you don't see it and have a third-party billing company, it is well within your right to ask this question. 

Why is it so important to know this number?  It's the overall health of your company's A/R. This determines cash flow, which helps you budget and plan.  If you are like most private practices, every penny counts and knowing you will be able to function as a business is very important.  Your employees depend upon you for their paycheck.  If you are one of those providers or administrators that "sort of guesses," you are playing with fire.

I work with a provider whose DSO is 14-17 days.  This is really, really healthy and they thrive knowing that their inflow will be consistent and always available as a resource.  This number includes liens that are one-to-three years old, so there really isn't an excuse for a high DSO.  It's all about follow up.  There are many providers who work off of a 90-day DSO.  I'm quite perplexed how they stay in business.  Most of them trust others with their outstanding A/R and think this is "normal."  It could very well be industry standard, but do you want to skip along just getting by, or do you want to thrive in this industry?

It's your choice, but I highly recommend you start by calculating your DSO yourself and see what you get.  Remember the higher your DSO, the more working capital you have to cough up to manage your business.  Here's the formula:

TOTAL A/R / TOTAL CHARGES * DAYS            

$360,928.51 / $814,665.78 * 30 = 13.29 DSO

So I took the total A/R and divided that by the total charges and multiplied that by the 30 days I used to get the charges.  So you have your DSO, now what?  Well, if it's over 60 days, you have some work to do.  Here are some areas you can look at to clean this up quickly:

 If you are sending claims out monthly, you are skating a fine line.  If the claim is sent out 30 days after the patient is seen, you've already increased your DSO by 30-days.  If you get a delay or denial, the DSO is only going to increase.  Check with your billing department to find out just how often claims get sent out.
• 

Run your DSO on a monthly basis, consistently. 

 This way, as you start to clean up areas, you will be able to see the results of your efforts.
• 

Run your A/R reports at least every 20-30 days and clean up any outstanding claims. 

 You should be able to follow up on claims at the very least every 30 days.  Most payers have a timeframe that they are required to pay in per contract.  Know those number of days and make a note to follow up on any unpaid claims after that date.
• 

If you have a high lien A/R make a plan to follow up with attorneys on a quarterly basis.

  You'll find that some clients are no longer with the firm, they've been paid all of their money and were supposed to pay you (and never did), or the attorney lost the case.  In any of these situations, you are able to go directly to the patient for payment.
• 

Have a dedicated person following up on unpaid claims. 

 Payers have a tendency to "drop" claims that are batched with hundreds of others.  Following up on one or two dates of service may seem like its not cost effective, but not following up with these allows payers to keep what is rightfully yours.
•

Yes, the WHOLE A/R.  Review each patient account, decide if it is still worth attempting to collect.  If it is not, you will have to make the necessary adjustments to remove it from your A/R.  Leaving it on there is not going to serve you in any way.

DSO is one metric that is critical for you to know, and takes very little time to calculate.  It will certainly provide you with the necessary insight to make small changes within your organization that will make a huge impact.

Instead of funneling a bunch of capital into your practice on a monthly basis, how about cleaning up your DSO?

An Important Financial Metric Your Practice Should Track

, I wanted to touch on worth and value.  Those are two words you should be focusing on when it comes to your business.  Let me explain the difference between the two and how they are intrinsically entwined.

Worth is a term used to denote how much something will cost or how much an item will sell for. For example, one appointment block is worth $85.00+. The monetary value attached to any particular item is an item's worth.

Value is a broad term that encompasses emotion as well as cost. Value can be used to describe items that don't necessarily have a dollar value attached to them, like the value of your time.

Having recently spent hours of time reviewing data from 2017, I found that a client had 8,650 cancellations and 1,758 no-shows.  By looking at their appointment worth, they lost nearly one million dollars in inflow (payment from the insurance company and patients).  It’s worth noting that of the 10,408 missed appointments total, only 26 were charged the small cancellation fee of $40. Of the 26, two of those were dismissed by the provider because the patient was "upset" having assessed the fee, which meant only 24 were charged.

This year, the client will be sharing their company and provider worth and value far better than they ever have.  This will be in the form of communicating, training, supporting and charging patients for these missed visits. It is important to note at this point that they have increased the missed appointment cost to $50 per incident. Yes, they are still losing money on the missed appointment, but they are teaching the patient that their worth and value are very important. They are helping patients understand that providers are professionals who deserve the respect of a phone call 24 hours in advance so that they can utilize their wait-list and fill that appointment block.

I’d like you to quickly review you cancellation policy. If you don’t have one, feel free to use this one: If a patient calls prior to 24 hours of their appointment, the appointment can be deleted and the appointment block filled with another patient.  If a patient calls inside of 24 hours and cancels their appointment, CANCEL will be chosen in your EHR with the reason for the cancellation.  A cash case will be created by the front-office staff, and the therapist will be informed of the cancellation so they can use the new CANCEL5 code in their EHR to assess the $50 cancel charge.  This charge will also be assessed to all patient NO-SHOWS using the same CANCEL5 code in your EHR.  This time slot on the schedule will now be filled with another patient from your waitlist, a new patient evaluation, or someone calling looking for an appointment. 

In addition to the next-level cancellation fee are their CASH rates. On the updated fee schedule I emailed out to them earlier this week, they found we have added to their VALUE by increasing cash rates to a minimum of $75/visit. If you have patients paying less right now, inform them of the increase. If they are in a financial hardship scenario, they can go on a payment plan that will allow them to pay over time.  Your time is valuable and you are worth it.  Remember those hours of studying, your student loans, and hours away from loved ones while earning that degree.  Your time is valuable and you are worth the cost of minimum $75/visit.

You have a high level of education. On top of that, your experience allows you to assess patients at a very high level. Your staff all have different interests, which makes them very accessible to patients. They can relate to similar experiences and this results in patients staying compliant to their plan of care, and respecting your staff's time by showing up to their appointment. 

As you explain the cancellation policy to each new patient, be very clear why you have a $50 fee for missed appointments. Start them understanding this on that first appointment and set them up to succeed with their treatment, while respecting your time. Don’t be shy about this, it’s very important.

Taking a serious look at your worth and value might have your head spinning, but it’s worth it.

Author | P.J. Cloud-Moulds

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