Something that’s on the mind of most practice owners is how long it takes to collect reimbursement from the various insurance carriers and Medicare.
In this quick article I’m going to share with you two simple calculations we use and that you can do yourself to see where you stand.
Calculate the Relationship Between Your AR and Your Charges
The first thing to do is to figure out the total amount of your Accounts Receivables. Get the total number, everything that’s in there no matter how old it may be. We need a completely accurate assessment.
Then you need to know how much in total charges you are billing on average each month. For this number we need a rolling three-month average.
You can determine this by looking at the charges for your practice for the last thirteen weeks and divide that number by three.
This will give us the three-month average monthly charges.
Now take that number and divide it into the total AR amount.
Multiply that number by 30.
That gives us our total average days a charge is in the receivables account.
Ideally, we want to keep this number at 30 or less.
That would mean that we are turning our accounts receivable every 30 days.
Next, We Drill Down into Insurance AR
For Insurance AR we want to calculate the total value of everything on the books less: patient balances owed, anything dealing with attorneys, and less any cash patients.
Once we take those out of the mix, we are left with a figure that reflects just the amount that the different insurance companies owe us.
Then we can perform the same calculation as above using this number in place of Total AR.
What we want to look at is the relationship between these two numbers. We want the number of days to collect our insurance money to be less than the total.
The bigger the discrepancy between these numbers the greater chance that we have something going on that’s not good.
Using the relationship, we can try to pinpoint where the problem is. Maybe, we have an issue at the front counter with our team not collecting as much cash upfront in the form of co-pays. Our cash patients might be stretching out their balances too far.
Every practice should consider the straight cash paying customer to be a great supplement to their income. It’s nice having a source of income that does not involve anyone else but you and the client, no complex insurance companies.
If your practice handles a lot of motor vehicle accident victims, you may be dealing with a lot of attorneys.
It is tough to control this cash flow since you can find yourself at the mercy of the legal system.
You really do not have a lot of control over this situation.
The trick is to minimize the amount of time it takes to receive your money from the sources that you can control and influence in the right direction.
Cash paying patients should pay for their services at the desk before they leave, and we need an organized system for our insurance billing.
Using a couple of simple calculations like these can show us where to put our attention and which of our systems is lacking as far as receiving our money in a timely fashion.
If your practice is struggling and you can’t figure out why it is taking so long to get your money, we may be able to help. We’ve been doing this a long time and have helped a ton of practice owners just like you get their payments in line.
I remember running my own practice and feeling frustrated when I was always waiting for money I had earned. I managed to solve this for myself and love sharing what I’ve found out with new clients and other physical therapists. Let me know if I can help you in any way. Even if it’s just pointing you in the right direction.Tags: Billing service, physical therapy, physical therapy billing