The Importance of Accounts Receivable Ratios.

Today I want to discuss a topic that one would assume all practice administrators should have an intimate knowledge of; that is the importance of accounts receivable ratios to the success of their practice. However, over the past few years, as I've brought on many a struggling client, it has become painfully clear that there are a great many administrators out there that do not understand the basic concept of ratios, let alone their immense impact on the profitability of their practice.

First I'll give an explanation of an accounts receivable ratio. The ratio simply means the dollar amount of uncollected claims that is currently on your accounts receivable report divided by the amount of claims billed in the last 30 days.

Now, why this is such an important tool, and how it can be effectively used to make your practice more profitable. The industry standard guidelines for AR ratios set forth by the MGMA states that a physician's accounts receivable should be at or less than twice the amount of claims billed in a 30 day period. Now, even for practice managers that understand the basic ideas of AR ratios, this guideline has the ability to have a drastically negative effect on the profitability of the practice! Here's why: Per MGMA standards, it is acceptable for a physician that bills out $100,000.00 per month to carry double that amount on their AR-$200,000.00! This equates to an AR ratio of 2 (the balance is twice the amount of the last 30 days worth of claims billed by the physician).

In my opinion, a ratio of 2 is too high!

Tracking ratios has many positive consequences. The most important is that it allows you to have a clearer understanding of how clean your AR really is. Then it allows you to set new, more meaningful goals for your AR.

Let me explain how I use ratios to help my clients become more profitable. Every single day I review all my clients' ratios to determine if they meet my standards (I have set an AR ratio goal of 1.10, not a 2!). Then, I can more accurately review the reports to determine any causes as to why a certain ratio may not be at that goal. Then I can react accordingly and get that money coming into the practice. Yes, there is more to it than that, but this is the basic concept.

I can't tell you how many times I have had a new client tell me that a ratio of 1.10 was impossible. It is possible, if we change our paradigms of what is acceptable in our practices. It is possible if we understand how to effectively track our AR balances and stop "reacting" and start "pro acting" to get the results that we desire. This is really the essence of this particular blog; to show that by having a clear understanding of AR management principles, we can have a clear vision, a clear plan, and ultimately become pro-actors instead or reactors to our success.

I am proud to say that over the years we have taken practices that had ratios of 2 and above and cleaned them up to our standards. Many have ratios of a 1 or less! Think about that. If a client has a ratio of 1, this means that the AR is extremely clean, with the majority of the claims well within the "clean collections" time frame.

Success is pro-action, not reaction.

Thanks for reading! Have a great day!

Sharon

Overworked Physicians/A New Paradigm

Every physician in America is aware of the report that was released recently by the Physician's Foundation that states that many of America's physicians (specifically family practice and internal medicine) are overworked and feeling stress.

What I'm sure we're all thinking is, "No, really?"

I have been fortunate enough to work with many physicians over the years, and I have to say that the intense stress and feelings of being overworked aren't just felt by family practice and internal medicine. It may be more so among FP and IM physicians due to the apparent shortage of new physicians going into these realms of practice, but the demands of being a physician burden every discipline of medicine.

The thing I find frustrating with the study, though, is the fact that it simply states that the biggest cause in all this stress is the paperwork. Yes, I agree that having to deal with a stack of charts on your desk at the end of the day is extremely frustrating, demoralizing even, but that is just one of many factors that cause the stress. The study left out the facts that physicians are small business owners who have to deal with staff, which includes interpersonal conflicts among those they've hired to make the work go smoother. Even with a great office manager the task of creating a great team can be extremely difficult. Physicians have to ensure their practices stay profitable, maintaining a good steady flow of good patients (their client base), while culling out all the drug seekers or difficult patients who won't cooperate with the physician to ensure they get well. They have to stay focused with a myriad of interruptions so that they can give the highest level of service to their patients. They have to do all this and much, much more while ensuring that they don't get sued by someone in our increasingly litigious society.

Now add to these the fact that physicians must do all this while ensuring that they stay in compliance with Medicare and can get Big Insurance to pay up in a timely manner.

Also add to that the fact that many physicians don't get to spend that good quality time with family, or time alone doing whatever it is that allows them to get back to center, no wonder many physicians want to retire early or quite all together.

Now, the study suggests that EMR will go along way to reduce cost and work levels.
Let's be clear about this. EMR will help reduce work done with patient charts. But the cost for a good EMR system is still quite a lot to swallow. I also feel that EMR doesn't do anything with all the other factors I've just listed.

EMR is one important piece of the solution to reducing the stress that today's physicians' feel. It will take a comprehensive change of behavior, or at least a change in the paradigms that keep all of us in the healthcare community running at a breakneck pace.

What it will take to make life easier on physicians is a change in expectations from all of us who deal with them. Specifically, a physician should expect that his/her life be simplified as much as possible by those they do business with. They should expect that their practice run as smoothly as humanly possible. They should expect that those who do business with them will conduct business in a completely transparent and principled manner. They should expect those of us who do business with them to become partners in helping create a successful practice that allows them to focus on patients. And, they should expect that this kind of relationship will not cost them an exorbitant amount of their hard-earned money.

At Revolution Medical Billing, it is our mission to support our physicians by giving transparent and principled service that goes well beyond industry standard expectations. It is our mission to provide this service at below industry standard fees. We understand the issues that our clients face and are prepared and ready to take an active and leading role in helping reduce the workload and stress that they feel.

I hope everyone has a wonderful day!

Sharon

Why Revolution Medical Billing

Hello!

Thanks for visiting my blog. My goal for this blog will be to introduce you to myself and my company, Revolution Medical Billing.
I am Sharon Wattenbarger, and I have over 20 years worth of experience in the medical billing industry. For years I worked in the billing department of a hospital where the practices and policies pretty much ensured that physicians would never completely reap what they were sowing.
For example, I was assinged, as all of the billers and collectors were, multiple physicians that I was responsible for. On a daily basis I was responsible for entering in all charges that the physician generated (after ensuring they were coded correctly), posting any payments that may have been collected for the day, and calling on thier outstanding accounts receivable. These tasks were to be done on top of answering patient calls, calls from the physians' staff, etc. Needless to say, none of the collectors came anywhere close to accomplishing all these tasks in an efficient manner.
I understood that while all of the above tasks are essential in bringing about good collection rates, the single most important thing I could do for the physician is to aggressively work thier accounts receivable. In most billing companies, calling on claims takes a backseat to all other tasks. Most billing companies tend to collect the "easy" money.
I became frustrated with management's extremely inefficient status quo philosophy. So, I decided to found my own medical billing company that put an emphasis on efficiency and superior service.
At Revolution Medical Billing, we do not assign a client to an already overworked and inefficient collector. I have founded my company of the principles of efficiency, superior service, and a high degree of excellence.
I founded Revolution Medical Billing with a mission of collecting as much money as I can for my clients. I do this by using a revolutionary approach that ensures that you our clients aren't one of many, but one a few select clients. Also, you will never have to worry about your accounts not being worked because you have been passed off to an overworked collector who may have three or more clients.
I hope that I have given a good introduction to my company, and I look forward to hearing from you.

Sharon