Cash Flow Enhancement
Cash Flow Enhancement
Mr. Shipman helps practices improve their bottom line through Improved Efficiency, Lower Taxes, Improved Collections, and Lower Lease Rates.
Blog By:
Josh Shipman
Josh Shipman

Receivables Don’t Equal Profits!!!

8/11/2014 6:19:42 AM   |   Comments: 0   |   Views: 1001

Do you have more than $2,499 in patient accounts aged between 60-89 days? Do you have over $5,000 setting on your books older than 90 days?  The numbers don’t lie, and unfortunately having a lot of money on your books does not equal profits. In fact, the longer accounts age the less likely they are recovered at all. The problem is most practices don’t have proper benchmarks to know what good receivables look like. What if I told you there was a way to reduce receivables by 50%, while simultaneously reducing costs? No, it is not collections; it is called revenue cycle management, and includes just a few steps and automated tools your staff can easily manage.

Registration: Ensuring payment begins with verifying insurance eligibility and collecting accurate patient information before service. This step is crucial, as it is estimated that denials represent approximately fifteen percent of claims. Balances not covered by insurance are inherently the patients’ responsibility.

Communication: Whereas cash flow is the lifeblood of your business, the financial policy is the backbone. A practice needs a clearly defined financial policy to provide staff with a document they can stand behind and manage patient expectations. Once established, be consistent—staff will be more confident when discussing financial arrangements and patients will clearly understand their options and responsibilities.

Automation: File claims and bill patient balances promptly— sending no more than one or two internally generated statements. Analysts estimate that practices spend between $6 and $11 just to generate a single statement. Eventually the practice must recognize their diminishing returns and change their approach—what motivates one patient to pay will not work for another. As the old adage goes, doing the same thing over and over expecting a different result is...well, you get the idea. Using automation will help reduce internal costs while implementing a more comprehensive and progressive approach, resulting in a higher net back recovery and overall profit.

Transworld has determined that patients generally fall within one of four payer categories: Dependable Patients, Distracted Patients, Disrespectful Patients, and Deliberate Debtors. To identify each, a comprehensive approach is often necessary. Fortunately, the majority of patients fall within the first group. Dependable patients generally pay their balance within a month of receiving the initial statement. If this were your only patient population there would be no need for follow-up.

It should be no surprise that some patients accumulate other bills, and statistically, your bill has least priority. This group is categorized as Distracted Patients. One way to increase priority with this group is to increase frequency and alternate contact methods. Based on the cost associated with internally generated contacts this is generally cost prohibitive, but by automating contacts through an “early-out” program a practice can increase consistency and reduce cost.

Early-out services send multiple contacts more frequently, yet cost about the same as generating a single contact internally. Since all contacts are made in the practice’s name and payment is mailed directly from the patient, it is an economical way to generate payment without increased internal cost. The best early-out solutions alternate written correspondence with phone calls at no additional cost. Calls include your practice’s name on the patient’s caller ID and connect directly with a member of your staff. This type of correspondence is important as it allows for immediate payment. Typical reductions in receivables when using this type of service range from 60-75%. When compared to internal resource costs, the savings can be significant.

Some companies provide early-out services through an online portal while others offer direct interfacing through your current practice management software at no additional cost. Interfacing allows the ability to quickly pull data based on criteria set by the practice, without having to review pages of receivables. The real benefit is ease of use since staff can quickly identify, review, and transfer accounts with a single click of a mouse—removing any guess work or manual data entry.

The next group we categorize as Disrespectful Patients. They may not disrespect you verbally, but the fact they are ignoring you is disrespectful. Often times, this group becomes passive aggressive with the practice simply because of a misunderstanding (typically with insurance). This can be addressed if only they returned your calls. Patients who fall into this category generally will pay, however unresolved for too long they often find themselves reported to a third-party agency. The unfortunate result is the patient no longer has the option to resolve issues directly with the practice, and the practice loses 30-50% to the agency. To make matters worse, only one “third-party” letter is required to motivate payment from this category.

Just like the early-out program, automated solutions are available which cost about the same as generating a single statement internally. The main difference is contacts appear to be coming from a third-party creating a feeling of consequence. Unlike traditional third-party approaches, all correspondence and payment is directed back to the practice allowing staff to be the “good guy”. This “co-sourced” approach leaves the practice in control of patient relationships, and you keep 100% of the money recovered without percentages. Practices can expect an additional thirty percent reduction when using co-sourced solutions on accounts aged 90-120 days, at a cost of 3-4 times less than traditional approaches.

Using an automated and comprehensive approach to managing revenue cycle, a practice can preempt the need for more intensive collections by forty percent or more. However, for the Deliberate Debtors who have clearly separated themselves from the other patient payer types, a professional approach may be necessary. Professional collections agencies typically charge a contingency on amounts recovered and should only be used on accounts proven to be difficult. Agencies provide staff professionally trained in collections law and offer more sophisticated skip tracing technology. Make sure to choose an agency recognized by your industry specific association and licensed in all states where required. Ask them how they handle cell numbers and TCPA regulations. In order to stay compliant, many agencies simply kick out cell numbers, which represent more than 60% of the numbers you have on file. The best agencies have the dedicated resources to contact all numbers without placing your practice at risk.

In summary, practices need a comprehensive and cost effective approach to managing their revenue cycle. Using an automated interface with your practice management software, including a clearly defined financial policy, will help separate your feelings from sound business practices, reduce costs, increase profits, and help maintain valuable patient relationships.

Transworld Systems, Dental Collect, Collections, revenue cycle management, process improvement software solutions, tekcollect, profit recovery, patient billing

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