Practice Management Alert

A/R reports can be a pain in the neck, but with careful planning they can help you maximize collections and position your practice to prosper in the future.

For example, you can generate reports that "allow you to see and track specific details regarding your payer mix," says Stephanie Jones, NR-CMA, NR-CAHA, CPC, vice president of operations at Aztec Medical Systems, Miami. "This information where your revenue is coming from (or not coming from) allows you to plan quickly for other business activities such as targeted marketing and proactive collections."

There are several ways your practice can prioritize how you enter information into your system and how you run your A/R reports. No matter which system you choose, print reports based on a combination of the following:

1. Aging of Account. The older the receivable, the less valuable it is, according to "Mastering the Reimbursement Process," published by the AMA.

To determine the value of your receivables, sort the accounts into age groups (30, 60, 90 or 120, etc.) so you can focus on the account with the greatest number of days elapsed since payment was due.

Sorting by age is helpful because the older an account, the more difficult collection becomes. For example, an account that is 60 days overdue has a 90 percent chance of being recovered, while an account that is 180 days overdue has a 30 percent chance of collection.

"Make it a goal for your office not to let any account age past 60 or 90 days without someone checking on it," says Sarah F. Mountford, BA, CPC, A/R manager for Physicians Business Network, a multispecialty practice group with more than 36 physicians in Overland Park, Kan. She recommends that you run a list of your 90-day-old balances and call the insurance companies that owe your practice money. "It's much easier to collect at 90 days than it is a year later," Mountford adds. "Many insurance companies now have online access, making it much easier to follow up on your 'no response' claims."

2. Balance Due. If you quickly focus on the claims that have the highest overdue balances, you will increase your opportunity to recover the money through rebilling and finding out what the problem is before it is too late.

"In most practices, balances under $10 wind up being less than 1 percent of the total A/R, so concentrating on the larger balances is key," Mountford says. A good model to follow when prioritizing outstanding balances is:

1. Greater than $3,000
2. $2,000 to $2,999
3. $1,000 to $1,999
4. $500 to $999
5. $100 to $499
6. $50 to $99
7. $10 to $49.

Remember that a large A/R may result in the need to borrow money to cover a cash-flow deficit. You can calculate how much this loan costs the practice by multiplying the amount owed by the days owed. For example, if $100 is owed for 120 days at a rate of 3 percent annually, the amount you have left, if collected today, is 100 x 120/365 x 0.03 = $0.99 (about 1 percent of the bill's total amount).

So, if a practice grosses $300,000 and it's collected after 120 days, you are losing at least $3,000 annually. However, according to Mountford, "if the $300,000 never ages past 120 days, in theory no money has been lost. Also, if 50 percent of your charges are billed to Medicaid, the actual collectable value of your A/R is much lower than it appears on paper."

3. Financial Responsibility. You can separate the patient responsibility from insurance responsibility. This is a good option to choose because "it allows you to seek collections immediately from the correct party, which not only expedites the collections process but avoids wasting time and effort, and enforces your position as a professionally run practice," Jones says.

4. Insurance Provider. Commit to keeping your insurance information current by regularly updating any insurance plan changes, because they frequently change payment policies.

"Tracking the type of insurance is extremely important," Mountford says, because it allows you to "go after your large payers first, and then tackle the smaller payers." In turn, it makes collection much more effective.

"We use the 80/20 rule when running reports and working A/R," Mountford says. "This means that 80 percent of your A/R is with 20 percent of your payers. You will spend less time collecting your money if you pursue the 20 percent of the payers with the majority of your money than if you go after the 80 percent of the payers that have only 20 percent of the money."

You can determine which combination is best for your practice by running as many report formats as your software program offers, Jones says. Once you are fully familiar with your program's capabilities, you can hone in on the specific areas that affect your practice.

Consider running reports based on adjustment categorization, suggests John Leskiw, CPA, CHBME, CEO of Quadax Inc., a receivable management company and software solutions developer for the medical billing industry in Cleveland. You might base your reports on:

1. Medicare allowance
2. Medicaid allowance
3. Blue Cross & Blue Shield allowance
4. Unique contractual allowances
5. Timely filing denials by contract
6. Bad debt write-offs
7. Small balances not pursued.

"By categorizing adjustments, you can effectively measure the recoverable value and gross value of write-offs for each reporting period for different insurance arrangements or contracts entered into," Leskiw says.

"A good combination is the 80/20 rule (previously defined), aging and balance due," Mountford says. "If you started collecting A/R with the high-dollar, insurance-responsible claims that are over 60 days old from your largest payer and moved on from there, you would be on the right track." $ $ $