Smooth Flow

Managing the payment cycle well is a key component of a successful practice.

By Charles R Felder, PT, DPT, SCS, MBA

Payers are getting more aggressive about delaying, denying, reducing, and even refusing payment while requiring more administrative burdens. They have shifted much of their cost to the provider.

This allows them to keep the payments low, keep the premium money in hand longer, and earn higher profits.

We have to be more aggressive about our approach to the payers. They may seem to be in control, but you have the relationship with the patient, and the patient has the relationship with the payer. Use the patient to assist in getting the payer to act responsibly.

These important steps will help you get on the right path whether you perform these functions in-house or outsource them. There are advantages to both methods. If you choose the in-house method, be sure you allow adequate time to supervise the process, hire and train a strong staff, and be prepared for the inevitable ups and downs. If you choose to outsource these functions communication between your staff and the outsource provider is the key. Expect and demand appropriate reporting and education in either situation.

Everything starts with a complete and accurate intake process. Make sure you have all the applicable payer information from the patient. Ideally you should verify benefits and record any authorization requirements. Confirm the patient’s identity (there have been multiple cases of medical insurance identify theft). Get everything entered into the correct place in the billing software. Use your experience with claim rejections to improve this process so you get “clean” registrations every time.

During the first visit, scan both sides of the insurance card and the driver’s license if possible. We recommend scanning this information and storing it in your electronic medical record (EMR) system or on your computer for easy access. Any scanner will work, but there are specific card scanners available which take less desk space.

Review and confirm the payer information and set the stage for the financial side by outlining the patient’s financial responsibilities and having them sign the form. No one likes surprises at the end of care.

Collect all copay or coinsurance amounts (estimated if needed) at each date of service, or at least once a week. With the rising patient responsibilities, these payments are critical to your financial success. Some practices choose to store credit card information and automatically bill the patient for each date of service. If you choose this method, make sure you have appropriate electronic and physical security measures to protect the credit card information.

Therapists must complete documentation and charge coding in a timely manner, ideally the same day as the visit. Make sure any administrative burdens (Physician Quality Reporting System [PQRS], functional limitation reporting [FLR], authorizations, payer-mandated forms, and outcomes measures) imposed by the payer are included as needed.

Most billing software or clearinghouses “scrub” the claims to help ensure that they will not get rejected for basic issues. Watch for any timely filing issues and make sure you can prove when claims were initially submitted. Perform daily monitoring of the claims rejection reports from the billing software or clearinghouse. Review any correspondence, via snail mail, or electronic and act on these promptly.

We encourage owners to view a few explanations of benefits (EOBs) on a periodic basis as this helps them stay on top of any payer issues. Perform at least spot monitoring of your therapists to ensure they are coding properly. Watch for any payer rules that require special handling.

Ensure each month is closed before you start the next month’s work. (Closing a month means all charges and payments from a previous month are posted prior to entering any charges or payments for the current month.) Then run and review at least the key reports listed below, every month. Saving the reports in PDF format makes it easy to keep track of them and saves paper.

Use the reports to calculate Days in Accounts Receivable (DAR) so you know the average length of time it takes to get a claim paid. Calculate DAR as the Net A/R divided by the average daily charge over the last three months. Net A/R refers to removing any liens from the Total A/R so that your calculations reflect the money you expected to collect in a timely manner. Based on our Physical Therapy (PT) Benchmark results over the last 12 years this number has dropped from around 60 to around 35 days as electronic claim submission and electronic payment have been widely implemented.

The average DAR from our physical therapy Benchmark 2014 Report was 39. We believe a goal of 35 or less is reasonable if the whole system is working well. Of course this can vary significantly depending on your payer mix and your charges compared to your expected contract payments. We believe that it is best to charge all payers the same rate and make the contractual adjustments at the time of payment posting. This keeps the A/R consistent despite changes in the payer mix.

One thing all practice owners experience is significant variation in cash flow. This can be due to changes in volume, claim submission, claim follow-up, or payer issues. One way you can predict the next month’s cash flow is by calculating your collection rate and then multiplying it by the previous month’s charges. The collection rate is calculated by totaling the most recent three months, collections divided by the total charges for the same time period:

Assume that you submitted charges of $35,000 for November. Therefore, you could reasonably expect to collect $17,500 in December ($35,000 * 50%). If your DAR is close to 30 this would be a reasonable expectation. If your DAR is closer to 60 you should probably expand the collection rate calculation to cover at least the most recent four months and then multiply the collection rate by the average of the charges for the most recent two months to account for the longer collection timeframe.

In our experience, the collection success rate should be around 100 percent every month over time. This rate is calculated by measuring the actual collections as a percentage of the predicated collections for any given month. Due to multiple factors we have seen it range from 50 percent to 150 percent in any given month. Using the numbers from above:

Using these concepts can help you manage your A/R and maximize your cash flow while making it more predictable. We track a number of key lead measures every week to make sure that the payment cycle is on track. Then each month, we look at key lag measures to make sure the business is moving in the right direction.

Compare this performance to your business plan and budget to help you improve the business aspect of your practice. Monitoring key metrics every month, and making appropriate changes, should be one of your key activities every month. Track it over time in a dashboard so you can see any patterns and respond in a timely manner.

Charles R Felder, PT, DPT, SCS, MBA, is a PPS member and owner of HCS Consulting in Corona, California. He can be reached at CFelder@HCSconsulting.com.