RX FOR THE BOTTOM LINE: How to Improve Collections on Louisiana Medical News

RX FOR THE BOTTOM LINE: How to Improve Collections

By: LYNNE JETER and MARCEA NEITMAN

Understand Key Indicators: Net Collections Ratio, Accounts Receivable Days

Two key indicators provide the beacon medical practices need to improve collections: net collection ratio and accounts receivable (A/R) days, according to Todd Warren, executive director of Medical Practice Solutions in Jackson.

“The net collection ratio formula is total net collections, which represents collections less patient refunds, divided by gross charges less contractual adjustments” explained Warren. “Net collection ratio shows the percentage of total collections after factoring in contractual adjustments and refunds, and is a great way to see if you’re collecting everything you possibly can.”

The Medical Group Management Association (MGMA) net collection ratio is 98 percent for median numbers covering all specialties.

The A/R days formula, also known as days in accounts receivable, represents total accounts receivable divided by the average daily charges for the past 90 days, or rather the previous three months in charges divided by total number of working days during that period.

“The A/R days formula shows how long it takes to collect your money once you’ve seen the patient and filed the claim,” Warren explained.

Benchmark data from the MGMA for A/R days is 42, representing median numbers and covering all specialties. Trends impacting A/R days include payor mix, inconsistent charges, and swings in monthly collections.

“There are several ways to improve your net collection ratio and A/R days,” said Warren, outlining an action plan for healthcare providers:

At check-in: Make sure patient demographic data is collected, verified, and updated on every visit. This includes phone number, mailing address, and all insurance information. “If you don’t have the right information from the beginning, you’re fighting an uphill battle,” said Warren.
At check-out: Verify that all services performed are marked on the fee ticket and charged, and that the proper diagnoses are marked related to the CPT code. Collect the patient co-pay or co-insurance, as well as any past due balance or patient deductibles due.
Claim filing: File claims routinely and monitor denied claims immediately. Research errors, correct the errors, and re-file the claim.
Claims processing: Post paid claims promptly and update accounts. Work any errors or prepare appeals to denials as needed.
Finally, develop a routine for sending patient statements and determining when to turn over delinquent accounts to a collection agency. “For example, after three patient statements and a collection notice, you should decide to transfer the account to a collection agency or write-off the balance,” said Warren.

“Each step is important,” Warren emphasized. “Do all five and you’ll see improvements.”