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Kyle Goldammer: How to Improve ASC Cash Flow in 30 Minutes

A recent study conducted by MGMA showed that independent physician clinics are only collecting 75 percent of the revenue they deserve due to poor revenue cycle management practices. These poor practices include inaccurate demographic information at time of admission, an inadequate charge master, below market rate payer contracts, poor coding, denied claims, antiquated claims management and electronic claims submission, and a lack of follow up on aging receivables. 

Although all of these issues cannot be addressed in 30 minutes, a simple 30 minute exercise can lead to improved cash flow through revenue cycle management process improvement. Although ambulatory surgery centers are most likely not leaving 25 percent of potential revenue on the table, anecdotal evidence suggests that most ASCs are leaving at least a portion of this 25 percent, and sometimes over half of the 25 percent is left behind.

There are literally dozens of ratios you can look at to determine if your accounts receivable is being managed appropriately. The most common is days in accounts receivable (use gross rather than net days — net days can be manipulated or inaccurate due to manipulation of allowances). Days in A/R is one very important metric but it does not tell the whole revenue cycle management story.

A better strategy is to perform a 30 minute review of your accounts receivable aging analysis, which can immediately point you towards problem areas. Whether you manage your A/R in house or use an outsourced agency, it is important for the CEO/administrator and chief financial officer to take 30 minutes a month to understand, and, more importantly, question the management of what is most often the largest current asset on the balance sheet — your A/R.

How to prioritize your A/R analysis

The first area to examine is the over 90-day and over 180-day A/R by payor.  Typically, the amount that is over 90 days in A/R should not exceed 20 percent of your total A/R, and the over 180 days should be less than 7.5 percent of the A/R. If your administrative team and board are interested in graphs, these are two easy data points to track on a monthly or quarterly basis. If the A/R is aging, shown on the graph as the over 90-day and over 180-day amounts increasing, you have an issue to investigate. 

A good place to start is to examine each payor category to see if the issue is payor or staff specific. If the problem is payor specific, i.e., Medicare doing a system upgrade, then frankly, there is not a lot that can be done with that. If the issue is related to the staff person working that specific payer which is causing the delay, then you'll need to read the articles in Becker's ASC Review that deal with corrective action and motivation of said employee.

Handling a systemic revenue cycle issue within the ASC

If the issue is not payor-specific, then a systemic issue is evolving. If this is the case, then despite what we have read regarding various management concepts, micromanagement now becomes the preferred course of action. As a first step, ask to see the detail listing of the accounts over 180 days with the collector's notes specifying when the account was last "worked." All accounts should be touched on a monthly basis. Most often, the issue is simply a missing modifier or incorrect demographic data, which can easily be rectified once the problem is discovered. If the collector does not investigate the reason for the delay, the account will languish and could eventually fall victim to timely filing limitations.
If the over 90-day or 180-day account is a self-pay account, then make sure the patient is making the regularly scheduled payments, and also gain assurances that the self-pay protocol established by your facility is being followed. This first step in the 30 minute process should turn old A/R into new cash.

Dealing with 30- and 60-day aging

Working backwards from the 180-day and over 90-day accounts receivable "buckets," now take a look at the 30- and 60-day aging categories. Logically, the 60-day category should be less than the 30-day category. If this is not the case, ask those in charge of the RCM process why. Is it taking 15 or more days to drop the claim due to operative note, chart completion and coding delays? It should take no more than five to seven days in a worst case scenario — and less time if you use an EHR. What is the percentage of denied claims, and what is causing these denials? Is there an issue with your software communicating with your electronic claims submitter? If you are using a large number of implants, is there an issue with the ASCs time and materials tracking mechanism? Tightening up any of these delays can lead to a vastly improved cash collection process.

Lastly, look in your "current" category. If gross charges (on an accrual basis) for the month were $1 million, and your current category of accounts receivable shows $750,000, is this a good thing or a bad thing? The answer depends on whether the $250,000 difference is attributable to the cash being collected in the same month in which the patient was treated, or if the $250,000 is attributable to the charts sitting on a biller's desk waiting for the charges to be entered and verified. Obviously, these are entirely two different ends of the spectrum. 

If the charges are being collected in the same month in which they were incurred, you will most likely not have issues with the over 90- and 180-day aging categories. If the $250,000 in charges is due to the charges not being entered, then see paragraph five referencing disciplining and motivating employees. Delays in getting a bill out the door most likely also indicate an issue with the admissions, coding, billing and potentially even the clinical processes in place and how each of these key functions affects the revenue cycle management function.

Taking 30 minutes a month to perform a cursory review of the accounts receivable analysis can lead to almost immediate improvement of cash flow.  The review can point to problem areas in the revenue cycle management process. Smoothing the rough edges off of these processes can lead to the ultimate goal of turning A/R into cash.

This article was submitted by Kyle Goldammer, CEO of Partners Medical Consulting. Partners Medical Consulting specializes in improving cash flow in 30 minutes (though sometimes it takes a bit longer).

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