How healthy are your practice financials?
It’s important to regularly evaluate the health of your medical practice by examining cash flow, or the money and resources moving through your practice. One way to do this is through revenue cycle management (RCM), which includes tracking claims, verifying that payments are received, and following up on denied claims.
You can evaluate your RCM through several key metrics:
- Time of service collections. Collecting money on the day of the patient visit can be awkward for those at the front desk, but it’s extremely important. Many practices now have a policy of collecting copays and deductibles in the office at the time of service. Collect a deposit from those who do not carry insurance. And don’t forget to collect any previous patient balances.
- Collecting money due from patients. When statements are sent to the patient, they should say “due upon receipt.” Make it easy for them to pay by accepting multiple forms of payment, including online. Have interest bearing installment plans available for those that need to pay over time.
- Days from time of service until billing. How long does it take your practice to get a bill out after the time of service? This should not take more than a day or two, and is easy if you automate the process.
- Adjustments. Know what write-offs can be made, such as contractual adjustments, discounts, and denials.
- Average days in AR. Your accounts receivable (AR) are a vital metric to be aware of. The average number of days it takes a practice to collect payments due for services rendered and billed should be minimized. Payments due from patients, payers or others are considered AR. The lower this number is, the faster the practice is obtaining payments, and this can positively affect cash flow. Typically, the longer an account goes unpaid, the less likely it will ever be paid. In fact, according to 2016 The Burden of Medical Debt report, 1 in 4 adult Americans admitted to having difficulty paying medical bills in the 2015. Collecting on AR is increasingly difficult as more patients have high deductible health plans and are responsible for more balances due.
A recent QuestDiagnostics survey asked physicians how many days on average typically lapse between patient visit and reimbursement:
According the American Academy of Family Physicians (AAFP), the average number of days it takes a practice to get paid should not exceed 50 days, and reducing that window is more desirable.
To calculate your practice’s average days in AR:
- Add all of the charges posted for a given period (3 months, 6 months, 12 months)
- Subtract all credits received from the total number of charges
- Divide the total charges, less credits received, by the total number of days in the selected period (30 days, 90 days, 120 days, etc.)
- Calculate the days in AR by dividing the total receivables by the average daily charges
One step you can take to monitor these financial metrics, decrease days in AR, and improve your practice’s financial health is to use an RCM service. RCM handles collection of patient payments and oversees claim reviews from insurance companies. It can help prevent many of the problems physicians typically deal with in the revenue cycle.
To learn more about RCM for your practice call 1.888.491.7900, or read our white paper, How to improve practice financials: A practical guide to revenue cycle management.