According to a research conducted by the Medical Group Management Association, better performing practices generate more revenue, create operational efficiency, ensure provider productivity and collect receivables quickly compared to their peers.
It is important to review the AR on a regular basis to ensure the practice is collecting payment for services that were billed in a timely manner. From the net collection rate and gross collection rate to AR turnover and average days receivable, every single factor needs to be reviewed. Many physicians across the US are struggling with pending AR and billing challenges. According to experts, physicians are always frustrated with their pending AR because the staff responsible for managing AR at the practice doesn’t know how to use the relevant benchmarks for measuring performance. Experts believe that monitoring the overall performance of AR efforts isn’t difficult and doing it on a monthly basis can really help the physicians prepare for potential collection problems.
How do you calculate days in receivables?
DSO is often determined on a monthly, quarterly or annual basis and can be calculated by dividing the amount of accounts receivable during a given period by the total value of credit sales during the same period, and multiplying the result by the number of days in the period measured.
AR Report:
When the AR report indicates that revenue has not been collected within 30 days of the patient’s discharge date, this is a warning to management that there is a risk to the financial state of the medical office. Depending on the length of time the claim remains unpaid, management needs to make critical decisions on how to turn these accounts from an unpaid status to a paid status.
Most AR reports are set up to demonstrate aged claims in the following way:
0 – 30 Days: Insurance claims should be billed within 72 hours of the discharge date. Claims unpaid during this period should be pending payment or denial from the insurance company. The electronic submission report should be reviewed daily to see which claims have been accepted and which have been rejected. Claims that have been rejected should be researched to find out why.
Corrections should be made right away so the claim can be resubmitted.
Initial contact with the insurance payers should also be made within the first 30 days. Follow up for electronic claims should be made seven days after the claim has been accepted and paper claims should be follow-up after 14 days.
31 – 60 Days: Claims that remain unpaid within this period have the greatest chance of being paid.
61 – 90 Days: Although unpaid claims between 31 – 60 days are easier to collect, unpaid claims between 61 – 90 days should be the number one priority. These claims are at risk for becoming uncollected. This is a critical time for medical billers to make certain that unbilled claims are filed in order to meet timely filing deadlines or resubmit denied claims.
Over 90 Days: Once claims have remained unpaid for over 90 days, the chances of being collected drop from 95 – 98 percent collectable to under 75 percent collectable.
Payers are required to respond to medical claims within 30 days of receiving them. During this time, if the claim hasn’t been paid, the payer is required to respond to the claim in some way. Usually, you will receive documentation with the following information:
- Request for more information from the provider.
- Notification that more information has been requested from the patient.
- Notification that the claim needs further review.