Your days-in-A/R report tells you how long it takes you to get paid - and the longer it takes, the more it costs. Learn how to read these reports correctly so you can fix whatever’s holding up your checks.
“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.
“I’ve seen a lot of practices look at the reports but not have any clear expectations or goals in mind. They just look at it and say, ‘This doesn’t look good’ or ‘This looks fine’ or ‘I don’t even know,’” says Hertz.
Instead, compare your data to historical measurements from your own practice. Or purchase benchmark data available by specialty in the Medical Group Management Association’s annual Cost Survey.
Look at old accounts
Next, move in for a closer analysis of the accounts that are more than 120 days old. What percentage are more than 140 days old? Older than 160?
“If 60 is good, 90 is good, but days-over-120 is huge, the reason for that is that there are accounts in there that are over a year and a half old,” says Karen Zupko, founder of Zupko & Associates.
That’s bad news:
Medicare won’t pay on any claims after a year from the date of service. Most commercial payers are much stricter. If you have lots of claims sitting out there that have passed timely filing deadlines, your only option may be to take a deep breath and write them off - and resolve to never let it happen again.
You sure can try to get commercial payers to cut you some slack before you write off ancient accounts. Zupko recently worked with a practice in North Carolina whose staff called a payer, explained that it had been victimized by a very bad employee, and got permission to get some eight-month-old claims processed. But don’t expect this sort of leniency.
If some large claims are near the deadline, make it a priority for staff to hustle those claims or appeals out the door. When working down accounts more than120 days old, “typically, we look at starting with plans that have the tightest filing and appeals deadlines. Those with tighter deadlines get priority, as do accounts with higher balances,” says Beaver.
“The intent is to make sure that accounts that are high-balance or at risk of being lost due to timely filing reasons are being addressed ahead of accounts that are not as time-sensitive or have less of an impact on the cash flow,” agrees Masoud Khorsand, MD, president of Southeastern New Mexico Internal Medicine and cofounder of Catalisse, a company offering outsourced medical billing services.
While you are in write-off mode, clear your books of accounts worth less than $25 and more than 130 days old. That doesn’t mean you have to give up on them completely. Beaver had a client who made a small balance adjustment to clean up the accounts but put an alert on all the related patient accounts. When those patients called in, the scheduler could see what they owed and told patients they couldn’t schedule another appointment until they paid. “If you are in orthopedics, that patient might never call again,” says Zupko of this strategy, “but if you are in OB/GYN, pediatrics, or internal medicine, chances are that person is going to darken your door once again.”
All this is not to say that you should blithely write off accounts as a way to feel more orderly. Hertz worked with one group whose “A/R over 120 days was awful. I told the docs they had a real problem.” An outside physician who worked as this practice’s management adviser met with Hertz and said, “I don’t see what the problem is; you just write it off at 120 days.” He wanted order. But the point, of course, is to collect that money while you can. Any write-offs should be done with much hand- wringing and a plan to make sure it doesn’t happen again.
“A/R problems point to systemic issues,” says Khorsand. “Once you have had a chance to take care of your immediate A/R needs, devote some time to analyzing why the A/R buildup happened in the first place. Maybe you had an experienced biller leave, and to fill the gap quickly you hired someone less experienced. Maybe the front desk person was inexperienced with your practice management software and entered incorrect billing information. With a process-oriented approach, you identify the problem areas and make modifications to your practice work flow to address them. It is quite common for practices to take an episodic approach to fixing their A/R problems. You can be certain that if you have not rectified your work flow, the A/R problem will rear its ugly head sooner rather than later.”
Make sure that not all the attention goes to accounts over 120 days. “I think you are far better off looking at over 90 days and lumping that all together [with accounts over 120 days],” says Hertz. “Over 90 days, you’ve got a problem. By 120 days, it’s too late - or at least close to it.”
Study by payer
Make sure to also run an aged trial balance report by payers. The goal here is to identify problem payers, problem processes, and set priorities for staff.
For example, Roberts noticed that, for one of his payers, the percentage of accounts usually collected within 30 days was suddenly out in the 31-to-60-day bucket. After a little digging, it turned out that the payer was having trouble clarifying what it needed in terms of national provider identifiers and provider numbers. Robert’s practice got a straight answer from the payer, resubmitted the claims, and got paid. That’s taking a proactive stand instead of just waiting around, and tracking A/R by payers made it possible.
Roberts even runs his report by payer and procedure or revenue line. That helped the practice realize that some payers were denying Botox injections every time, and requesting the office note. So now the staff simply sends the office note with the claim the first time, cutting at least 30 days off the payment cycle.
Roberts also challenges payers who are consistently slow at contract renewal time. “I tell them, ‘if you want to dance with us, it’s going to cost you a little more than it would someone else.’ If they are kicking back my claims or losing claims, it’s costing us money, and it should cost them money.”
Keep an eye, too, on noncontracted payers. “They are slower to pay and require a lot more information than your contracted payers to decide on a claim. Since they are usually charged a much higher rate than contracted payers, a few outstanding noncontracted accounts can translate into a large A/R balance,” Khorsand comments.
If some payers are consistently slower than others, it’s also worthwhile double-checking that your staff is reviewing error reports from all your payers every time. An error report shows claims that didn’t make it through the electronic clearinghouse. Those claims need to be immediately resubmitted. But, says Beaver, “We have multiple practices every year where someone realizes while we are there that nobody understands how to pull all the error reports. So they just sit in cyberspace. They end up in an aging report, and you suddenly realize that a payer never got a bunch of claims on one day.”
Take a hard look at your other billing processes, too. “People are perpetually surprised how much they control on the front end,” says Beaver. “They are slack on the front end and pay for it with a big A/R. It’s difficult, but it can be done.”
One of her clients, in addition to using an EMR and claim-scrubbing software, also does a manual review of each claim. Each afternoon, the physician, biller, and receptionist who review the claims catch at least five mistakes daily that wouldn’t be caught by their scrubbing software, Beaver reports. By sending squeaky-clean claims, they slashed their A/R.
Study by patient
Of course, payers aren’t the only issue in these days of huge copays, deductibles, and health savings accounts. Run your report by patient. Then start working down the large balances. If many of your patient accounts are old, you need to start collecting faster.
First, make sure your staff understand that patient collections are a priority. “I have had three practices this year - and it’s only June - where the staff just decided it was too much work to send out patient statements. They were too far behind,” Zupko says. Get those statements out.
But not too many statements. Zupko & Associates advises sending one statement right away, then a second one in your next billing cycle. After that, just send a letter saying the patient has 10 days to pay or the debt will be sent to collections.
Roberts’ office sends “three statements and then we fish or cut bait with collections. I would be draconian and cut that down. Every statement costs money.”
It’s well worth it, too, to train staff to collect at the time of service - the fastest way to get paid. Staff need to be armed with the information and skill set to get the job done, though.
The right touch can make a world of difference. Here’s one easy technique Roberts has observed at a gastroenterology practice: “They gave the secretary a roll of stamps to keep in her pocketbook. If a patient came in without a check, the receptionist reached into her own purse, put a stamp on an envelope, and said, ‘I’d really appreciate it if you’d send this to me this afternoon.’” Patients feel like they owe follow-through to an individual, not just some business.
Solutions can be that easy, or much more complex, but the only way you’ll know where to start solving problems is through analysis of your A/R reports.
Pamela Moore, PhD, is senior editor, practice management, Physicians Practice. She can be reached at firstname.lastname@example.org.
This article originally appeared in the October 2007 issue of Physicians Practice.