1. What are our days in A/R (and why does it matter)?
The days in A/R ratio measures the average collection time for your A/R — the longer the collection time, the higher the risk that there are operational issues. The calculation uses gross A/R as the numerator and average daily charges (over a 60-90 day period) as the denominator. The following can be used as a general guideline:
Less than 45 days: Excellent
45-60 days: Average
60-75 days: Marginal
More than 75 days: Poor
Graphing the collection period on a month-by-month basis can be extremely helpful. This will help identify payment slowdowns or if efficiencies are occurring through operational changes.
2. How do you ensure accurate coding for compliance and revenue generation?
The best way to ensure accurate and complete coding is to make sure your coding staff is certified. The nuances of facility coding, especially for surgical hospitals, can create compliance and financial issues. This is especially true when clinic coders are coding for the surgical facility but have not had the appropriate education or training.
As part of the facility’s compliance plan, the facility should have a policy regarding coding audits. If the facility has more than one coder, an internal audit can be performed quarterly. If the facility only has one coder, an external audit should be performed semi-annually. The audit will help to ensure compliance, as well as identify any revenue lost due to inadequate coding.
3. Are we being reimbursed at market rates for our managed care contracts?
You only have one chance to make a good impression. Or, in this case, if you are a start-up facility, you only have one chance to negotiate a fair contract. In many instances, facilities accept starter contracts that are woefully inadequate in terms of reimbursement. Unfortunately, once these contracts are signed, it is difficult to get more than a nominal increase in any given year.
Other issues to monitor: Make sure to negotiate pass-thru payments for expensive supplies, note any late filing penalties, do an explanation of benefits test to ensure that you are being paid correctly and make sure the contract is reviewed on an annual basis and renegotiated as needed.
4. What is our average time to drop a claim?
There are a number of factors that can affect the time it takes to process a claim. First, the admissions staff must accurately gather and enter the data. If the input data is incorrect, the claim will be denied or, at the very least, be delayed. The next step is for the physician to dictate or enter the operative report (if an EHR is being used). Medical records or the transcriptionist must compile the chart for coding. After the codes are determined, the charges must be entered and the claim must be filed.
A bottleneck at any point in the process can adversely affect the collection process.
5. What can I learn from our aged A/R report?
The aged A/R provides valuable data regarding your facilities A/R. You can identify slow payors by analyzing each payor class. As an example, workers’ compensation may represent 6 percent of your charges, but 12 percent of your A/R. Staff can determine operational changes to move workers’ compensation claims through the system in a more effective manner.
Pay special attention to accounts more than 90 days old. Accounts more than 90 days should represent less than 20 percent of your total A/R — and the lower the percentage, the better your staff is turning A/R to cash. Also, any accounts more than 90 days should be reviewed to see if there were claim filing errors, denials or other preventable delays.
6. Who is our third-party clearinghouse? What percent of claims do we drop to paper?
Electronic claims filing is the single most effective way to improve the collection period — if the clearinghouse is working effectively. The third party clearinghouse should have an effective edit system that catches any errors and reports them to you before the claim is passed through to the payor. Your claims processor should be able to communicate with 90-95 percent of your payors so the need to drop claims to paper (except where required) is avoided.
Lastly, your claims denial rate should be monitored on a monthly basis and business office staff will need to identify if the denial is attributable to poor data provided by the facility or errors within the electronic claims processors software.
7. Is our bad debt and charity care policy appropriate?
Bad debt and charity care has become as much of a political issue as it is a business issue. Filing liens against patients for non-payment of medical bills has become a publicity nightmare for many facilities. However, for a facility to maintain a viable business, the bill must, when possible, be collected.
Your business office should provide every chance for the patient to pay and it is recommended that a pre-collection program be used before the patient is turned over to full collections. Regarding charity care, a formal policy outlining the requirements for qualifying for a charity write-off should be in place. Usually a multiple of the federal poverty level is the economic barometer for determining charity care.
8. Do we manually post payments or are they posted electronically?
Many payors are providing a “data dump” that will automatically post payments to your A/R software. Quite often, for this system to be effective, a change may be necessary in the way the facility posts charges. If these procedural changes can be made, and your software is capable of posting via data transmission, literally hundreds of hours of data entry time will be saved.
Additionally, your business office should be accepting payments electronically via electronic funds transfer (EFT) or automated clearing house (ACH) payments. If all of your payments are received via paper check, you are increasing your collection period unnecessarily.
9. Are we charging the correct amount for our procedures?
There are numerous methodologies for setting procedure pricing. Percent mark-up over cost, market data analysis via state mandated Web sites, charge master data from industry associations, percent over Medicare fee schedule and percent over previous years fee schedule are just a few . No matter which methodology is used, it is important for the facility to be consistent with pricing.
Procedures within the same APC grouper should be priced consistently. Additionally, examine your fee schedules to make sure your pricing is not below that which is allowed by the payor as most contracts will pay you the lower of charges or fee schedule. Lastly, make sure your compliance plan addresses “bundling” and “unbundling” of charges to avoid regulatory issues.
10. Should we outsource our A/R management?
Admittedly, this is probably not a question to ask your business office manager. There is a certain feeling of loss of control when you outsource functions previously performed by the center.
However, in some cases, the strategy of outsourcing can pay huge financial dividends. If the outsource A/R firm can decrease collection time, renegotiate poor managed care contracts, improve the coding and repair an outdated chargemaster, they will more than make up for their fee. Typically, this fee will range from 4-10 percent of net revenues based on the level of services provided and the volume of claims to be processed. If you can achieve breakeven, it is probably worth taking a look at making a change.
Summary
A/R is quite often the largest asset on a facilities balance sheet. It takes a certain level of expertise, and constant monitoring, to assure that A/R is converted to cash in a timely fashion. Additionally, there are plenty of pitfalls that can affect the appropriate management of A/R: inadequate operational policies and procedures, poor managed care contracts, lack of staff time or expertise to analyze charges and payments, compliance concerns and poor use of technology can all affect A/R.
Make sure your business office staff is effectively managing A/R by asking a few questions and analyzing the data. A diligent approach to A/R management will immediately improve the facilities cash flow.
— Kyle Goldammer is senior vice president of finance for Surgical Management Professionals (SMP). SMP purchases, develops and manages ASCs and Surgical Hospitals. Additionally, SMP provides billing and coding services for Hospitals, ASCs and Clinics. Mr. Goldammer has more than twenty years experience in healthcare finance in 501(c) 3 organizations as well as physician-owned facilities. Contact him at kgold@sfsurgical.com.
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