Get Cash Fit - Best Practices for Accounts Receivable
Most practices have formal Accounts Receivable policies that dictate when to bill the insurance companies, when to collect the patient portion and when to follow-up on old claims. Unfortunately, not all practices enforce those policies effectively – or even adopt the right processes at all. In many cases, it comes down to culture. Practices that prioritize production often fall into the trap of extending credit to customers, taking large insurance discounts or ignoring payment terms if it means increased production.
Some may argue this is no big deal, but the truth isn’t so simple. If a practice needs to borrow money to meet its obligations because patients or insurance companies are paying late, it could incur losses on the financing charges alone. Even if that’s not the case, carrying overdue accounts receivable still has a cost. It puts you on a cash flow tightrope. Rather than having free capital to invest in growth opportunities, increase shareholder payouts, buy new equipment or introduce new products, your money is still in your patient’s pockets.
Here are some Best Practices to help you keep your Accounts Receivable under control:
Establish a responsible party to review the detailed A/R aging report on a weekly basis
Set up some metrics to get a clear picture of the receivables. For example:
90% of insurance receivables should be less than 30 days old and none should be older than 90 days.
If you collect the patient portion at date of service (or earlier), your patient receivables should be a negative amount.
If you choose to bill the patient after insurance payment (not recommended), your patient receivables should not be older than 90 days.
Create standards for patient portions and stick with them. For example:
Collect the patient portion of new patient exams and routine hygiene appointments when the patient makes the appointment (like an airline).
Set up a payment plan option with the patient when booking larger cases. You can use financing options like CareCredit and CompassionateFinance to handle payment plans and unburden your staff from monthly collection calls.
Fix the previous errors that let A/R get out of control by creating follow-up protocols.
Set a dollar limit due (ex - $500) on claims over 90 days and have staff send a letter with a 5 day follow-up call. If no response within 10 days of the call, write-off the account or use collection agency like AbellaAR to collect a portion of the amount due. You likely won’t see payment on anything older than 120 days, so don’t waste much staff time on follow-up.
Patients with account balances under your dollar limit due should receive a letter notifying them of a 15-day deadline before they are sent to collections.
Anything not collected within 6 months is dead money and should be adjusted out of your system as an adjustment against collections.
Whether you need to reconceive your entire Accounts Receivable processes or simply want to improve on existing policies, the process begins by understanding the current state of your A/R and conducting a gap analysis to determine how your performance compares to industry peers, competitors and best practices. From there, you can identify the steps you need to take to close those gaps.
Beyond simply helping you identify areas for improvement, JNG Advisors staff will work with you and your front desk staff to tactically implement new processes, monitor and track your performance and share specific action items your staff can take to optimize your accounts receivable processes. You work hard to earn your cash. Isn’t it time to get your cash working hard for you?