With the New Year in full swing have you implemented A/R practices that will allow you to meet the goals you have ahead? Do you have your “finger on the pulse” of your business? And what will you be measuring this year? Many DME companies are feeling the pressure with increased audits and competitive bidding putting a squeeze on margins so the questions is, how do we as an industry survive and in fact blossom in these conditions? Measuring business metrics, implementing best practice processes and having an action plan are key to success.
Which metrics are you monitoring? The famous adage of “what gets measured gets done” is equally relevant to A/R practices. Any agency reporting more than 20% in the over 90 days in aging has an A/R problem. Most agencies monitor DSO and held A/R without measuring other details that focus on managing those numbers and results. Other important metrics to monitor include:
- Average time until delivery is verified/confirmed depending on your system
- Average days to bill, longer it takes you to get claim out the days add to your DSO
- Average follow up time for unsigned orders or documentation requests, initial requests should be completed within 48 hours and follow up in 7 days
- Bad debt, our industry should be less than 2%
- What are your Revenue to FTE ratios? On average $110-$120k / FTE but the agencies operating most efficient are $120k- and higher
- How much revenue to each biller/collector? Industry standard here is $500-750k
- What is your revenue payer mix? This calculation is important to provide picture of what requirements are needed to get paid, authorization, additional paperwork, paper submission etc. Knowing both the payer mix and product mix is essential to determine staff needs
Best practices in A/R are best identified and implemented through completing an evaluation of your individual agency, how many touches from the referral to the last dollar collected. Follow that process through to identify potential areas of efficiency and ask questions; Is there a way to automate? Is there a report to run to help reduce time spent on the task? Is the software being utilized to its optimal? Or do you need new software?
The number one best practice and is not being done in many agencies is asking for payment.
From the time of referral your agency has to educate your patient on their benefit, what the financial responsibility is and then ask for payment. By implementing this simple question tactfully you set the stage that payment is expected and improve your collection activity. Not only should you send your statements out within 30 days, have a process to make phone contact on day 45 and a set time point going forward to follow up. If you don’t have staff to make calls on every one of those accounts implement a priority list of a dollar amount that will be called on. Collection letters should be brief, to the point, please remit or let us know if there is a problem and then thank them for their business. Accepting credit card and debit cards as a form of payment also improves cash flow.
The second most important practice is to have a plan.
Develop your process and stick to it, week after week, and keep monitoring. Each biller must have a systematic approach to touching those accounts, top 20, top 10 oldest accounts, working 100% of denials, working underpayments and working aging that is hitting 45 days. Don’t’ wait for you’re A/R to hit 90 days, in electronic claims and even paper claim if payment isn’t made within 45 days follow up is needed. Managing A/R and implementing collection practices apply to every payer source not just your private pay and this is where most agencies I see are struggling. Reports are run and metrics reported on but no action plan for the problems those numbers indicate. In response to that problem many agencies outsource their billing however the problem still exists.
Effective A/R management will monitor these reports, utilize the data and implement action plans that focus not only on getting your agency paid but resolving why it occurred. Whether your agency outsources or manages A/R in house strong A/R management is key to success. Your A/R manager should analyze denials and identify trends and take those trends to identify where potential areas of risk begin in the process. An example I have recently seen, an agency removed a QA process from ticket confirmation in order to reduce time has cost time and money. By eliminating this task tickets have been confirmed to the wrong insurance, ID number errors, MD selection errors and the list goes on creating mounds of denials and slowed cash flow. Be careful while looking for efficiencies, they are not all equal.
Identify problem areas and where your staff lacks experience and then obtain the experience. In some cases it may be a class, outsourcing, hiring a new staff member, or contracting with a consultant to help you through the process.