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Toward an ideal accounts receivable process

By Donna M. Sherwin, CPA

One of the most frequently discussed topics among health care administrators is ever-increasing third party regulations and the negative impact they have had on the accounts receivable process. These increased regulations have not only led to financial constraints, but they necessitate a higher level of staffing at a time of very low unemployment, and therefore a scarcity of accounts receivable experts. Thus, to effectively and, more importantly, efficiently manage accounts receivable may require a change in the current thought process regarding third party follow up.

Billing vs. Collections

Traditionally we have viewed the collection process as independent of other billing tasks. In fact, a common term used in the industry is “billing and collections,” which implies that billing and collections are discrete functions. In most organizations, billing and collection personnel report through different supervisory and/or management channels. In light of the limitations discussed above, holding on to this philosophy may hinder the search for creative solutions to accounts receivable management. It may be more advantageous to think of the collection process as a continuum of duties beginning with front desk functions and ending with the final resolution of an account receivable. In other words the collector should not be the only one held accountable for minimizing AR balances and maximizing cash flow.

In most organizations the front desk position does not even report to the billing office manager. However, there are a number of ways in which the front desk position as well as the other “billing” positions impact the collection process. For example, when the front desk person neglects to inform the patient of his/her financial obligation or if he/she neglects to inform an HMO patient to bring a referral to the appointment, collection issues will be created. When the registrar collects incomplete data or enters the data incorrectly, a collection issue is created. When charges are entered incorrectly, when payments are posted incorrectly, when balances are not “moved’ to the appropriate payer, when inaccurate or incomplete claim forms are submitted, collection problems are created.

Appointment schedulers, registrars, charge entry personnel, payment posters and claims reviewers are far easier to find and train than qualified accounts receivable personnel. In order to mitigate the collections process, it will be necessary to ensure that each of these billing related functions is being performed with the objective of collecting on the account in the least possible amount of time. To make this happen, standards and measures should be established and monitored.

Establishing Standards

Each position or function should be analyzed to determine how it affects the collection process, and then standards and measures specific to that function should be defined and documented. For example, you might establish the standard that 100 percent of co-pays will be collected at time of service. To implement the standard you might develop a script to be read to all patients when making an appointment. The script would include information about what to expect at the time of service relative to the patient’s financial obligation, referral information, etc. To measure the effectiveness of the standard you would analyze aged AR reports. If you find that all co-pays are not being collected, you may periodically monitor calls to verify that the script is being read appropriately.

To avoid the problems associated with patient enrollment (see below) you may want to set a standard of a maximum two percent error rate for registrars. To implement the standard you will need to distribute registrations in a way that they can be traced to the responsible registrar. For example you may have the registrar initial the system or the registration sheet from which he or she took the information. Further, you will need to develop a procedure for identifying errors. That is, you might create a change form to be used by individuals when they identify inaccurate data. The change form would be reviewed by the supervisor and the appropriate registrar would be counseled. These procedures may be unnecessary for larger facilities since there are practice management systems that can automatically track the error rate of registrars.

When this same concept is employed for each function of the billing process, you will minimize or eliminate the need for a collector.

Stretching Limited Resources

Once appropriate measures have been taken to ensure that the collection process is minimized, the task becomes how to best utilize your available account follow up resources. In the June 1998 edition of the Medical Office Biller, patient enrollment problems were cited as the reason that 64.1 percent of claims are pended or rejected. While these denials result in collection activity, these are certainly not collection issues that require a highly paid, and often difficult to find accounts receivable guru. Even if you can’t eliminate this problem entirely through proper training of front end staff and/or by establishing and enforcing standards, a junior level individual may be able to follow up on these and other types of rejections.

You should also consider using a team approach in which highly skilled A/R personnel work closely with a support group of junior level individuals. These individuals can use the audio response system to check the status of claims and then follow up on more routine issues, such as rebills. The support group may also be responsible for entering notes into the system, gathering support documentation, filing, copying, etc. This will free the more highly compensated and scarce accounts receivable personnel to concentrate on complex denials such as specialty specific/coding type rejections. It may even provide them with enough time to perform pre-submission claim review, which is rarely performed by A/R personnel, if it is performed at all.

Team Benefits

This proactive step will obviously have a positive impact on cash flow since problems that would normally be identified thirty to sixty days after claim submission will be corrected prior to submitting the claim. Another benefit is that there will be less finger pointing and greater accountability when it comes to resolving an account, when the collector has confidence that a clean claim has been submitted.

Developing vs. Hiring

Although training is hardly the ideal alternative to an experienced third party collector, it may have its place in the current environment. Depending on the responsibilities of the payment posters in your organization, they may already have many of the skills and technical knowledge needed by A/R personnel. Therefore, the learning curve will be reduced. They know how to read EOBs and they may already know how to move balances in your practice management system. They are also familiar with certain rejection types.

You may find that you can provide a complete system of upward mobility by promoting your payment posters to junior level collectors, then filling the posting positions with charge entry personnel. This way you are able to hire entry level individuals to fill your charge entry positions at much lower salaries. Additionally , you will be able to train your entire staff from the ground up. No longer will you need to break old habits.

If you maintain that the only way to resolve A/R balances is with high level experienced collectors, you may find yourself in a no-win situation. The old saying that “necessity is the mother of invention” certainly applies here. We need to invent new ways of solving this old problem. While none of the above recommended solutions is ideal, they are at least positive steps towards addressing the issue. Further, if and when implemented they may provide you with some additional benefits such as improved accountability and increased job satisfaction for your staff.

Donna M. Sherwin, CPA, is president of Physician Billing Solutions, Inc. in Wayne PA.

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