Outsource medical billing account receivables to BOSS,

Medical billers not only review charge slips and track payments, they also analyze records to produce customized reports that show profitability or areas in need of improvement. Any reports on assessing ‘how good is medical practice function’ is always revolves around account receivables. Such reports are critical when decisions need to be made on renewing and negotiating contracts. They also advise physicians of fee structure changes, new coding practices, and ways to improve the office’s bottom line.

Handling AR is the end skilled job in the medical billing; the end result of all the departments’ effort is ‘how much is the collection for the month’. By looking at the AR days and the corresponding amounts in each day buckets one can gauge the how effective the billing department works and the knowledge they possess on revenue cycle. Outstanding claims, low payments, denials and appeals puts more strain on billing staffs and urges the department to have a separate team to handle AR again which is cost for hospitals and individual practices. Constantly growing insurance updates, patient plans and payers re-imbursement pattern puts extra burden on the billers and leaves with the question why? Insurance companies often play the traditional game of ‘hide and seek’ on re-imbursement, many practices ‘throw in their towels’ very soon when comes to insurance follow-ups. Dogging the healthcare service provider’s money is where insurance companies make profits. Calling up the insurance is a time consuming work for the billers, on an average it would take 10minutes to reach a live person to discuss about a claim which will eat up other valuables works involved for the day. So the work cycle continues with piled up on un-followed up claims, appeals and patient information which leads to alarming AR days. Here’s where BOSS can help your practice – aggressive AR calling, following up on pending claims, initiating collections, analyzing the reasons for denials, tracking outstanding receivable balances by customer and by the date when payment is due, providing periodic reports and more.

By outsourcing AR to BOSS how you can be benefited:

  • Our experience in medical billing and extend knowledge in AR helps to kill your outstanding claims
  • Our AR team can easily identify and diagnose the issues
  • We offer dedicated and aggressive AR team
  • You can cost upto 60% on your overheads comes with 24×7 round the clock support
  • We track each claim from submission to payment
  • Quality analysis team double checks on all claims entered before transmission of claims which reduces less EDI rejections and denials
  • Analyzing reason for low payments / denials and directing appropriate actions
  • Month to month review reports by insurance carrier analyzing on insurance re-imbursement behavior

BOSS knowledge and understanding on account receivable analysis and follow-ups

Accounts Receivable Management

Accounts Receivable, which is defined as the total amount of money owed to a practice for services rendered but not yet paid for, is an indicator of what is happening within the economic structure of a practice. As with almost any business, a medical practice should assess its economic health at least once a month. This is the single most important step in managing a practice’s A/R. If done regularly and consistently, it will tell you whether a practice is growing or has become stagnant. Not only will you know whether there is a problem, in many cases you will notice certain signs that allow you to recognize situations and deal with them before they become problems.

Equally important, this process allows a practice to set reasonable goals and expectations that are based on hard facts rather than on the perception that there is not enough cash flow. Ultimately, it tells a practice if it is managing it’s A/R or if the A/R is managing the practice.

A non-managed A/R, one that is out of control, can destroy the most successful practice. A practice renders the appropriate medical care to a patient and charges for it. The charge becomes an account receivable, and then the following assumptions are made. The first assumption is that the patient or a third party on behalf of the patient will pay for that charge in a reasonable amount of time. Unfortunately, A/R involves not one patient or one charge but hundred of patients and charges. An A/R that is not managed can result in a situation in which an active, busy practice has insufficient cash flow to support its needs; it may not even have enough cash in hand to cover the payroll.

Information Needed for Assessment of Accounts Receivable

To perform the most basic assessment of A/R, the following three pieces of information are necessary,

  • Monthly Charges: The charges for the month are the total amount of fees charged for patient care from the first working day through the last working day of the month,
  • Monthly Receipts: The second piece of required information is the total receipts for the month: the dollars collected for the medical care that was rendered. A receipt must correlate with a charge that was entered for the current month or in a prior month.
  • Total A/R at the end of the month. The third category of information needed to analyze a practice is the total A/R at the end of the month: the total balance that is due to the practice on the last day of the month for patient care. In reality, the total A/R should be the amount of money that can actually be collected eventually.

If one of these three pieces of information cannot be obtained without a lot of effort, the practice faces a significant challenge because this information is basic and, if missing, indicates a lack of receivables management.

Accounts Receivable Assessment

Once a practice has obtained the total monthly charges and receipts and the total A/R at the end of the month, it can begin assessing the state of its A/R. There are three methods of assessing an A/R: days outstanding, A/R ratios, and aged A/R.

Days Outstanding
Days outstanding, or the average number of days it takes for a typical charge to be paid, is the method of accountability most commonly used by hospitals, and the same principles are applicable to a physician practice. There are many ways to figure days outstanding. The simplest method is the following,

  • Take the accounts receivable of the practice on the first day of the month
  • Add to it the A/R of the practice on the last day of the month and divide by 2. This gives you an average of the A/R for the month.
  • Divide this figure by the month’s receipts and then multiply it by the number of days in the month.

The resulting figure gives you the average number of days a receivable is outstanding, or the days outstanding, for that month.

The resulting figure gives you the average number of days a receivable is outstanding, or the days outstanding, for that month.

The average account is 111 days outstanding.

Influence of Financial Classes (Patient Types) on Days Outstanding

An A/R can be categorized by financial class, or the type of financial arrangement under which the bill eventually will be paid, such as Medicare, Medicaid, Commercial Insurance, Contractual Care and Self-Pay. The financial classes within an A/R vary from one practice to another and can have a great influence on the number of outstanding is often much higher than is the case in other specialties. A large percentage of the receivables in such a practice can be categorized as “legal” because they result from accidents and can be tied up in litigation for months or years before they are paid. A practice with a large proportion of contractual care, such as a practice that sees patients under a Health Maintenance Organization (HMO) contract, can experience financial difficulties if the HMO is consistently late in its payments. There are other financial classes, including Medicaid, that have been categorized as slow to pay. If one calculates days outstanding on a monthly basis and puts that information on a graph, it will provide an indication of the direction in which the practice is going.

The following are the few examples of Patient Types,

Categorizing all Medicare Patients in one financial class – MCR
Categorizing all Medicaid Patients in one financial class – MCD
Categorizing all Blue Cross & Blue Shield Patients in one financial class – BCBS
Categorizing all Health Maintenance Organization Patients in one financial class – HMO
Categorizing all other Commercial Patients in one financial class – COM

What Should the Number Be?

The optimal range of days outstanding is 45 to 60 days. Normally this can be achieved only in a setting where accepting the payment at the time of service is commonplace. For a hospital-based practice such as radiology or anesthesia practice, 60 to 90 days outstanding is not a sterling example of receivable management but is considered acceptable. The real danger zone, whether the practice is hospital-based or not, occurs in practices in which the numbers exceed 120 days unless there is a reasonable explanation, such as a high percentage of Medicaid accounts. As a rule of thumb, any practice with 150 days or more outstanding faces a significant challenge.

A third method for measuring the economic health of a practice is applicable to practices that can divide their receivables by age into 30-days blocks. Most computer billing and accounting software allows you to break down receivables according to the month in which they were incurred. If the software cannot do this or if the A/R is not computerized, it can be done manually with some time and effort. Optimally, you are looking for an aging that, if charted, will form an inverted bell curve; this would mean that the majority of your receivables fall into the 30 – 60 days and 60 – 90 days slots. The inverted bell curve shows that you are collecting some charges at the time of service and that you do not have an overload of delinquent accounts that are over 90 days of age.

For example, a practice with a total A/R of $135,000 might have an aged A/R like the one below:

Age Dollars Owed
30 days or less 25,000
30 – 60 days 45,000
60 – 90 days 30,000
90 – 120 days 20,000
120 day and older 15,000

If charted on a bar graph, these charges would look like,

However, if the A/R ratio is 5 or above, one gets a line that runs at a 45 –degree angle from the first 30 – day aging to the last 30 – day aging, as shown in the aged A/R below,

Age Dollars Owed
30 days or less 25,000
30 – 60 days 30,000
60 – 90 days 35,000
90 – 120 days 40,000
120 days and older 45,000

If charted on a bar graph, these charges would look like,

Distribution of Aged Receivables

The ability to age a practice’s receivables is a critical element in A/R management, especially if one can age each financial class separately and identify how each one is performing. For example, there can be a big difference between the aging of commercial insurance and that of self-pay, the charge or portion of a charge for which the patient is responsible. More often than not, a practice blends the two together in the aging process. As a result, when the aged A/R shows a mass increase in the percentage of accounts over 120 days of age, it takes a lot of effort to determine whether this is the result of commercial insurance accounts, self-pay accounts or both. By tracking aging of the A/R by financial class (Patient Types), realizing that each class will have its own characteristics, you can be more accurate and efficient in spotting areas that need attention rather than attacking the entire A/R.

Many practice management experts strongly recommend that the distribution of receivables look like Table 1. As the receivables age, they should decline as a percentage of the A/R. This distribution of A/R aging may be idealistic for many practices and may depend on the distribution of the financial classes (Patient Type) of patients.

For example, a practice with an extremely high percentage of Medicaid patients and an equally high percentage of slow-paying contractual care patients will not be able to achieve this distribution, whereas an office-based practice that collects from more than 50% of its patients at the time of service will have different norms. Therefore, this distribution is idealistic from the standpoint that there are contributing factors the practice may not be able to control. An alternative to this situation can be created only when the practice understands what is affecting the distribution and whether it is controllable.

Recommended Distribution of A/R by Age

Age of Accounts Total A/R Not to Exceed
0 –30 days 40%
31 – 60 days 30%
61 – 90 days 15%
91 – 120 days 10%
More than 120 days 5%

Though the recommended distribution of an aged A/R varies from practice to practice, there are some things we know for certain. Receivables over 120 days of age should represent a constant or decreasing percentage of the total A/R. If one notes rapid growth in this area, that could indicate the following,

  • There has been a significant change in the way the mechanics of the practice are handled.
  • The dominant patient financial classes have changed.
  • The practice has acquired a contractual arrangement, which is not working.
  • There has been a significant increase in unemployment in the community or a natural disaster has disrupted the economic stream of the practice setting.

2. Reasons for A/R Ratios Get Out of Line

There are many reasons why the financial condition of a practice may suffer when A/R ratios are out of line. Let us see some of them in detailed.

  • Incorrect Information
  • Delayed Billing
  • Written Credit Policy
  • Employee Attitude
  • Payment Plans
  • Insufficient Knowledge
  • Lack of IPA information.

Methods of Payment Contract: You have to know the billing rules as per the insurance carrier contracts. You have to billing the carrier according to the contracts specification, then only you are able to get the payments in timely fashion. The following are the three types of contracts,

  • Fee-for-Service contract
  • Capitation contract
  • Case Rate billing or Episode of Care contract

Improve the Management of the A/R:

  • A/R analyst should involve the entire staff member to the discussion related to issues:
  • Having complete knowledge on insurance rejections
  • Monitoring the A/R payment ratio periodically
  • Monitoring the A/R charge ratio periodically
  • Communicating with team members and other departments regularly