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Mitigating Write-Off Risk
Accounts receivable (A/R), the money owed to you by patients, payers, and others, is complex – much like the rest of the revenue cycle. It is important to understand who owes you money, how much it costs to collect and what actions you can take to reduce cost of collection and collect faster. Together, these A/R mitigation strategies will lift your financial performance, and when consistently applied will allow you to sustain a higher level of cash collections.
Medicare
Since Medicare may be one of your biggest payers, it is important to be mindful that this payer sequesters 2% of every payment. The best reimbursement you will receive is 98% of billings for all Medicare rates. Since this is determined at a federal level, it is non-negotiable. Do not spend any time here - but do make certain you have a 2% allowance for your Medicare A/R.
Proactively Identify Potential Write-Offs
Other than getting paid through patient financial responsibility and payer reimbursement, write-offs can be a significant bucket of money within A/R. It is important to collect patient responsibility up front to ensure 25% of your revenue cycle is collected in month zero. For example, if you are providing ongoing services such as monthly infusions or therapies, you need to follow up no more than 21 days from the initial date of service to ensure you will be paid. You can also use this time to ensure there will be no payment issues with ongoing services. This will help avoid multiple unpaid claims.
Once insurance payments and contractual obligations are known, how fast do you bill the patient for the balance? The more time between the patient visit and the patient’s receipt of the bill, the slower and less likely they will be to take care of the balance. Likewise, the less satisfied patients are, the less likely they are to pay, and they will also often pay slower.
Pre-Collections Goals
Rather than just writing off bills after the third request for payment is ignored, you may want to consider other options. It is important to set goals for accounts before they are turned over to collections. Review your data and get answers to the following questions.
- What percent is paid in month zero, month one and so forth?
- How quickly are you be collecting patient responsibility?
- What percentage of time are you presenting patients with an estimate for care before the appointment?
- What is the average time to collect by payer and payer class? And does this vary by specialty or other factors?
- Are you documenting financial conversations with the patient?
Collection Methods
Also consider the methods of collection that work for your organization. If you have a patient portal that accepts secure credit or debit card payments, how often do these methods secure collections? Look at your data to see which payment sources are trending and which are less fruitful. Calculate the ROI on the time and technology associated with each. Build strategies that capitalize on what is working and minimize what is not. And when patient-facing changes are made, it is important to communicate. In fact, over communication and re-stating the same messages in different ways and via different communication channels will help ensure understanding and make it easier for patients to pay their bills.
Write-Offs
When collection efforts fail and accounts are turned over to collections, what happens to your patients? Here are a few questions to ask yourself as policies and procedures surrounding write-offs are evaluated. Do you lock their account and require them to settle their account before they can be seen at your practice again? If you need to deny access to care due to non-payment, what alternatives can you propose to them? Does it make sense to create a relationship with a medical financing company to help patients spread out the cost of their care over time? Do you have social workers who can identify safety net programs, faith-based programs, and other resources? Are there free or low-cost commercial apps for patient self-monitoring and drug discounts that can help. While there are many resources available, their fragmented nature sometimes makes finding out about them a challenge.
Approving Write-Offs
Sometimes write-offs are needed. Because this is cash that you do not reasonably believe will ever be collected, it is important to ensure rigor and consistency. What internal controls do you have before authorizing write-offs? Here are some elements of rigor to consider as you evaluate your policies and procedures.
- Are patient financial responsibility policies signed by the patient and filed with their demographic information?
- Are you monitoring write-offs for trends?
- Are two (or more) people required to sign off before write-offs occur?
- Are you assigning a reason code for the write-offs?
- Are your reason codes standardized?
- Do you communicate specific write-offs to staff as training opportunities?
- Does your organization have visibility and awareness of the impact write-offs have on the business?
- Are your patient financial responsibility policies aligned with your write-off policy?
- Do you have clear and understandable patient communications?
- Are staff educated on ways to communicate with patients?
- How do you monitor alignment between patient and staff communications?
- When discharging patients from care is necessary due to non-payment, do you execute consistently?
There are a lot of moving parts to managing A/R. They begin before the patient steps foot into your organization and continue through to the final resolution of the account. Having trustworthy data that is fresh and always available is essential for creating highly effective A/R strategies will give your organization the best chance of optimal financial performance. Data will also be needed to monitor ongoing suggest and identify other potential areas to improve performance of your collection efforts.
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