Quick… off the top of your head, what’s the approximate dollar value of your practice’s accounts receivable (A/R)? Many providers (and administrators!) will say they don’t know. Our question to you is: why not? In Part 1 of this two-part series on your A/R, let’s look at some common reasons the A/R is often ignored.
You don’t receive reports. Some providers – whether their billing is in-house or outsourced – don’t receive reports. And they don’t request them either. In our many decades of practice management (don’t ask how many LOL), we’ve seen countless providers continue their work patterns in a false sense of security because checks are still coming in. They don’t stop to question if the checks are correct, how many are not being received and the state of their practice’s finances.
You don’t know what to look for. We’re so glad you asked! You can do as deep a dive as you’d like but the basics to look at are:
- Fee schedule. Before looking at the dollars you’re owed, you need to know the mark-up of your fee schedule because this forms the basis for your A/R. A good guide is the Medicare Physician Fee Schedule (MPFS), which tells you the Medicare allowable (MCA) for any service. Your biller should be able to tell you the percentage increase in your fees over the MPFS, and once you know this, you’ll be able to look at your A/R more realistically. You can also spot-check to make sure it’s a consistent mark-up by looking up the MCA for a few services and checking your fee schedule accordingly. The last thing you want is an over-inflated fee schedule – like 250% – because the A/R figures will be staggering and wholly unrealistic unless the majority of your payors pay your billed charge.
- Total accounts receivable. Have a sense of the dollar amount of your total A/R. Remember, as we explained above, if your fees are – say – double the MPFS, you need to understand that you will not generally collect the total dollar amount you’ve billed. At a minimum, based on MCA, you can discount the A/R total by 100% to give you a truer number. In addition to knowing the real A/R, look at the percentages of monies owed across different timeframes: 30-, 60-, 90- and 120+ days. Medicare pays within 14 days of claim receipt and commercial payors vary, but usually, you will see payment within 45 days. How much is lingering in longer categories? A good rule of thumb is 70% to 75% of the total A/R within the 30-day and 60-day categories with no more than 15% to 20% at 90 days and no more than 10% of the total A/R at 120 days or longer.
One challenge many practices have – when they discover large balances outstanding for a long period of time – is how do you fix them? Fixing them has to do with identifying the issues and then implementing necessary standards to keep your practice’s financial health at its peak. We’ll address that subject in Part 2 of this series.