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Improving Your Practice’s Receivables Collections

Reed TinsleyBy Reed Tinsley, CPA

There are many causes, and indicators, of problems in this area. Some offices lack either a defined collection system or their collection duties are delegated among employees. In other practices, collection activities take a back seat to a myriad of other daily office activities. In larger practices, the sheer volume of revenue tends to mask certain collection inefficiencies within the billing and collection department. In other words, when cash flow is good, most offices do not pay much attention to potential problems that might be occurring within the collection department. Here, for your use, is a review of some of the principal causes and actions needed for improved collection performance and cash flow.

Information First!

It is important to remember that accounts receivable management STARTS with information. In other words, a practice must adopt the policy of printing and reviewing accounts receivable aging reports in detail each month. This is the only real way to assess how well the office’s collection efforts are doing. However, many offices have a lax attitude towards this simple issue – even large practices. In addition to the simple aging report, a practice should also print and review an aging by insurance company and, separately, for patient receivables and insurance receivables. Without good information about a practice’s receivables, it is almost impossible to adequately manage its overdue accounts. You should make sure these reports are being printed and reviewed on a regular basis. Many times one gets so consumed with so many other practice issues that simple basics, such as making sure accounts receivable are not getting out of hand, are ignored.

Patients’ Account Statements

A number of offices do not send out patient statements consistently each month. You cannot just assume that the statements are going out or all of them are going out. Consider sending statements no later than the 25th of every month so that the statements will arrive before the first of the next month, when most patients typically pay their bills. In larger practices, statements usually are sent out weekly in batched cycles. This is done either by the age of the accounts or in cycles using the patients’ last names. Investigate how many patient statements are doing out for small accounts each month. You could be wasting money here.

The 10 Day Collection Letter

Instead of sending multiple statements, consider this – send one statement showing the patient balance and then stop and send the 10-day collection letter. The letter basically tells the patient that (1) The account is seriously overdue, (2) 2. The practice is understanding and thus is willing to work with the patient to come up with a mutually favorable payment plan and (3)  The patient should call the office within ten days to discuss the account; otherwise the office will have to pursue a more serious form of collection effort. If a patient does not call within the ten-day period, he or she probably is not going to pay the account. Send these accounts to a collection agency immediately.

The office visit collection problem

A major collection-policy goal for a practice should be to collect something from every patient who comes to the office for an appointment, unless payment is not allowed by law. You need to conduct a periodic check of the front-desk collection activity to determine if the front-desk employee is collecting the necessary monies. Remember: If payment is collected at the front desk, it does not become a receivable!!

Unpaid Insurance Claims

Every week the collection employee should identify unpaid insurance claims that are at least 25 days old. You should be able to print a report that lists these claims. Some billing systems can even print this report by individual payor. For each claim that is at least 25 days old, the collection employee should place a call to each insurance company. This conversation must always be documented in the computer. The employee should include the name of the contact at the insurance company, why the claim has not been paid, and when payment can be expected. The reason for starting with claims that are 25 days old is because the office must find out as soon as possible whether claim forms even got to the insurance companies and were entered into their computers. A chronic problem for many practices is that insurance companies will say they have no record of receiving claims. By starting with claims that are 25 days old, the collection employee can refile claims early. In addition, the earlier the employee starts the follow up process, the quicker claims will be paid on balance. A major goal of every medical practice is to obtain payment within 30 days to 45 days for all insurance claim forms filed for all payors. Is your practice meeting this benchmark?

Other collection options

Some offices utilize two other collection strategies: small claims court and the collection bureau. The first option is small claims court. The practice files a lawsuit against the patient for the amount owed (Note: there is a maximum amount per claim). Used to be that many physicians did not like to use this approach because they fear this may cause patients to consider some type of malpractice claims against them. This is no longer the case. The next collection method is to turn the bad-debt information over to a collection bureau. By doing this, the bad debt goes on the patient’s own credit record. A patient faced with bad credit will often attempt at some point in the future to contact the office regarding settling his or her delinquent account.

Reed Tinsley, CPA is a Houston-based CPA, Certified Valuation Analyst, and certified healthcare consultant. His entire practice is concentrated in the health care industry. Please visit www.rtacpa.com

One comment

  1. I have thousands of providers that collect a credit card signature-on-file up front when the patient is in the office (for patients with the capacity to pay). They get paid even before they send the invoice! After the EOB is received, these providers merely recall the patients’ credit card information (stored in secure files)…and process a payment for the post-adjudication amount due. The software even sends an email to the patient…so the provider doesn’t have to print and mail anything to the patient! What could be faster and simpler? How do the patients like it? About 80% will accept it with no problem after a letter is sent announcing the new policy. The other 20% will ask to be billed, but if the provider points out that he/she has eliminated billing to maintain current fee levels (as opposed to raising them), the objection goes away in most cases. What providers don’t realize is that patients that owe money don’t come back…but paid up patients do!!!

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