How to Stop Losing Money to Poor Billing Practices: 5 Metrics to Watch
Learn how to stop losing money by improving the billing practices at your specialty medical clinic. For more details, watch the full webinar
If you and your practice manager have ever asked each other: “why aren’t we getting paid?” you’re not alone.
One of the top reasons for specialty practices to lose money is due to poor billing practices. It can be frustrating to have what seems to be a busy practice but your numbers tell a different story.
What can you do about it?
In the latest episode of our Growth-Driven Practice Series, we had the pleasure of speaking with two revenue cycle management (RCM) thought-leaders from Gentem Health. Led and backed by industry experts, Gentem Health is on a mission to help private practices run thriving businesses and remain independent through advanced payments, billing, and RCM solutions. While the webinar is a must-watch, here’s a brief run-down of the top things you need to know in order to stop losing money to poor billing practices.
5 Must-Know Metrics to Stop Losing Money to Poor Billing Practices
#1 - Aging Analysis and Accounts Receivable (AR) Days
An aging analysis report determines the value of your AR. This metric is key because it indicates the amount billed, the length of time without payments, and helps you identify opportunities to improve cash flow. It also helps your practice determine where timeliness limitations are reaching critical stages (i.e., timely filing requirements).
Here are some of the main pitfalls from not closely monitoring your AR days:
• Higher AR days are linked to lower payment amounts.
• You have a lower chance of getting paid when claims stay in AR.
• Poor management also leads to a lower collection rate.
#2 - Net Collection Percentage
Net Collection Percentage is the revenue your practice receives (actual collections) divided by its total charges less contractual and other adjustments. Profitable practices typically have a Net Collection Percentage of 90% or higher. Net Collection Percentage is closely related to an underpayment analysis and is a better, more detailed metric than Gross Collection Rate alone (revenue received / total charges).
Here are some of the main pitfalls from not closely monitoring your Net Collection Percentage:
• You will miss the opportunity to catch underpayments from insurance companies.
• You have no visibility into the efficiency of your operation.
• It’s a leading indicator of the financial health of your practice.
#3 - Denial Rate
Your Denial Rate is the percentage of claims denied by payers divided by overall claim submissions. This metric shows you how effective your practice is at submitting clean claims. High Denial Rates indicate a problem; they increase AR days and reduce collections. Your practice needs to be able to pin down the root causes of denials and address them immediately. A low Denial Rate means healthy revenues, cash flows, and administrative expenses for your practice.
Here are some of the main pitfalls from not closely monitoring your Denial Rate:
• It adds to the administrative burden of getting paid, meaning higher costs to collect.
• As delinquent claims accumulate, staff members become overwhelmed and lose track of claims that can be resubmitted – ultimately leading to lost revenue.
• Poor management increases the amount of money written off at the end of year.
#4 - Days Cash on Hand
This metric is the number of days you can continue paying the operating expenses of your practice. Days Cash on Hand highlights the difference between revenue and cash. As a practice owner, you can’t assume your charged amounts (what you bill) match your cash on hand dollar for dollar. Your primary focus should be on cash – rather than revenue generation alone – because cash enables your practice to make payroll and pay the bills.
Here are some of the main pitfalls from not closely monitoring your Days Cash on Hand:
• In the event of an unforeseeable decrease in volume, your practice might be forced to file for bankruptcy or furlough workers because sufficient cash reserves are not available.
• You may fall short on the cash necessary to hire new staff or equipment required to expand into new service lines.
• The profitability of your practice is directly related to Days Cash on Hand; it doesn’t matter if your starting bank account balance is $10k or $100k. If your cost to operate exceeds your revenue from the operation, your Days Cash on Hand suffers over time.
#5 - Unbilled Days and Days to Submit
The adage and universal truth “time is money” especially applies to this metric. If your claims are not being submitted efficiently, you’re leaving money on the table. Unbilled Days refer to bills not yet being coded and sent. Days to Submit refers to the time it takes to code and charge a final bill or claim.
The earlier a final bill is produced and sent; the earlier your practice’s payment is received. Reducing your Unbilled Days and Days to Submit improves the aging of AR and cash flow.
Here are some of the main pitfalls from not closely monitoring your Unbilled Days and Days to Submit:
• Traditional billers prioritize the low-hanging fruit which can delay submission for difficult or lower value claims.
• They can be a hidden contributor to high AR days.
• You get no insight into the speed and efficiency of your billing operations.
Tracking Metrics & Taking Action
As Omar and Voncil emphasized in the webinar, the first step in making sure you track these metrics is to set up a unified dashboard for your revenue cycle. This will not only help your practice track these must-know metrics, but it will keep your staff aware and aligned. Awareness and alignment are just the beginning. If you really want to get intentional about improving your billing practices, zoom out to the revenue cycle overall.
Here is how your practice may operate in a traditional cycle compared with how it may operate in a streamlined cycle, according to Gentem.
Practicing medicine and operating a medical practice are two very different challenges.
One is hard enough but doing both at the same time is wildly difficult. You and your staff members work too hard serving your patients to lose money to poor billing practices.
Start tracking these metrics with intentionality and turn your unpaid bills into profits.
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