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Getting the Last 10 Percent: Fixing Billing and Collection Performance, Part 2
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Last time, we took a look at the difference between mediocre and outstanding billing and collection results, identifying exactly where you should apply extra attention to increase your practice’s collection of receivables.

This month, we continue discussing improvements, beginning with accounts receivable (A/R) follow-up.


1. A/R follow-up. How well your staff manages all the preceding components discussed last month dictates the volume of A/R follow-up that will be required. Alleviating errors wherever possible gives staff the time to pursue complicated problems and manage practice receivables more effectively, especially during follow-up. A/R follow-up falls into two categories: insurance-carrier issues and collection of patient balances.
  • Insurance carrier issues. Your practice should not have a large volume of unpaid claims to pursue; the bulk of those claims should have been caught and corrected at some stage in the billing and submission process. It is critical to pursue rejected and unpaid insurance claims quickly and vigorously in order to maximize your income potential. Properly designing your insurance-claim follow-up process is instrumental in identifying claims that require action. 
    • Establish filters for each insurance carrier that determine when a claim requires pursuit. 
      • Given the speed at which Medicare claims are electronically submitted and processed, 21 days is a reasonable time period (filter) for beginning to pursue unpaid Medicare claims.
      • The filter for HMO and preferred provider organization claims may be 30 to 45 days depending on how quickly each individual carrier normally pays.
      • Carriers that are abnormally slow — for example, some state Medicaid programs or independent physicians association (IPA)-processed claims with a 45- to 90-day hold — should have their filters set accordingly.
    • Make the most of your practice management system. It should be able to use predetermined filters to compile claims to be worked on each week. Each and every claim queued for follow-up should be dealt with each and every month.
    • Ensure you have adequate staff. Because the work of the billers is not defined by the presence of patients, practices sometimes assign one or more billers to fill in during staffing shortages, especially if the biller is cross-trained. Although sometimes necessary, this can be very costly to the practice if abused.

  • Collect patient balances promptly. Effective collection of patient balances begins by avoiding them when at all possible — by collecting the patient portion of charges at the time of service. These balances include copayments, deductibles, noncovered services and patient responsibility for “80/20” plans, such as Medicare without a supplement. When you need to collect the balance, the following tools can minimize the work and maximize the yield from patient billing.
    • Implement a statement fee. Insert a clear clause in your financial policies stating that patient payments are due at the time of service and that if one or more statements are required, there will be a fee for each one. Lay out a definitive statement plan and clear timeline. 
      • The first statement should be sent as soon as the balance is known. For copayments and refractions, statements should be sent no later than the next business day following the service.

      • For balances that require claims adjudication, a statement should be sent within five days of receiving an explanation of benefits.
    • Follow a regular statement schedule. 
      • The first statement should include the balance due, any statement fee your practice assesses and a message that no further appointments can be scheduled until payment is received. Some practices choose to waive the statement fee if the account is paid before the second statement is sent. If you choose to do this, your policy should be noted on the first statement.

      • The second statement should include the balance, the first and second statement fees and a notice that sending the patient’s account to collections is being considered.

      • The third statement should include the three statement fees plus a notice that the account may be sent to collections.

      • If no payment is received after the third statement, you can consider the next course of action. Your staff shouldn’t make any appointments for accounts that are being considered either for collections or for discharge from the practice.
    • Create a policy for handling small balances. Establish a threshold — as low as $10 or as high as $30 (or even higher) — below which only one statement is sent. Include a note in the patient’s account that prevents scheduling another appointment until the balance is paid.
    • Establish guidelines for financial hardship cases. You can certainly make patient-specific exceptions to the patient-balance policy based on financial hardship. Note any exceptions in the chart in sufficient detail so that anyone looking at the account is very clear about its status.
2. Review management reports monthly. As a physician, most of the steps discussed in this article should be delegated to your staff. However, the practice administrator and/or managing partner of the practice should review monthly management and operational reports to assess collection performance, days in A/R and any appropriate adjustments to A/R. Key metrics to assess include:
  • Collection performance, the percentage of contracted or allowed amounts that are collectible. There should be at least a four-month offset between the last date of service in the period analyzed and the date of the report to allow adequate time for all collections. You should routinely review aged A/R by insurance carrier to monitor trends for each carrier, such that: 
    • A/R over 90 days is less than 15 percent of the carrier total and
    • A/R buckets are being resolved effectively — that is, that the majority of the receivables are in the current bucket and the percentages in the succeeding buckets fall dramatically.
  • Days in A/R, which puts the total A/R amount in the context of the average charges generated by the practice. A good benchmark is 30 to 45 days, depending on the practice’s payer mix and the characteristics of the individual payers. If the practice has payers with built-in payment lags, such as an IPA that holds claims for 90 days, you may want to evaluate days in A/R excluding those outlier carriers.
  • Adjustments to A/R; you should make sure that your A/R accurately reflects uncollected claims. You should be confident that the AR numbers are not artificially lowered by adjusted-off collectible balances. This will be reflected in lower than expected collection performance. You should regularly analyze adjustments to determine if unexpectedly high levels of adjustments are being posted.
3. Evaluate overall staffing. Don’t make the common mistake of understaffing your billing department. Determining the number of billing staff required is similar to the calculation of ophthalmic technicians required. In that case, if adding a technician can increase the number of patients seen daily by four, you can compare the average income per patient to the technician’s salary and see that it is false economy to try to get by with fewer technicians. Similarly, an understaffed billing office that cannot complete all necessary follow-up each month costs the practice far more in lost income than an additional biller’s salary.

Depending on your insurance carriers, your billing and collections process may require additional components beyond those discussed here. Capitated plans, for example, require a different kind of management and monitoring. However, most billing and collections activities for insurance claims will fit within this described process.

A benefit of implementing this level of monitoring and management is that problems become apparent sooner. You and your staff should spot any breakdown in provider credentialing, contracting or any other component of the process almost immediately, rather than when it is too late to rebill claims. We’ve seen many cases of practices losing several months of Medicare payments due to insufficient surveillance of denials, credentialing changes and prolonged resolution of these problems. To prevent revenue losses, you must quickly address any disruption in payments or claim receipts.

Implementing, monitoring and managing these workflow components should optimize your practice’s billing and collection performance. Overlooking or inadequately monitoring any of the steps in the process can affect your practice’s receivables negatively.

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About the author: This article is an adaption of the original version, which appeared in the American Academy of Ophthalmic Executives (AAOE) April 2012 Executive Update. It was written by Ron Rosenberg, a member of the AAOE Consultant Directory and president of the Practice Management Resource Group. This firm specializes in the financial performance of ophthalmology practices across all subspecialties. Their consulting engagements are designed to assess business process and workflow, as well as collection performance. They also offer outsourced billing services that are exclusive to ophthalmology.

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