To keep your accounts receivable up to date, run an aging-of-accounts report regularly and know how to respond to patients’ excuses

How true are your accounts receivable? Statistics say that any figure higher than 2½ times your usual monthly services rendered amount is a collection problem. In other words, if you average $20,000 in services per month, your accounts receivable (the balance-owing portion left on the books), should not be more than $50,000. Amounts more than 2½ times should be a red flag for concern.

Taking into consideration that most offices have a lag time in insurance pays ranging from 4 to 6 weeks, and some have third-party auto accidents that can stay on the books for months at a time, an accounts-receivable figure can be deceiving. Also figuring in the issue of collectible amounts, as opposed to charged amounts, a true balance due may appear larger than what will actually be received. If the office participated in several managed-care programs, Medicare, and workers’ comp programs, there is likely to be hundreds of dollars in write-offs and noncollectible amounts hiding within the balance.

Years ago, in the good old days of indemnity policies when insurance paid 80/20, a great measuring tool for a successful practice was if the collection rate was higher than 90%, meaning that the office had little to no write-offs. What was produced in services rendered was collected. Today, there are built-in deductions on nearly every charge. The bottom line is that doctors rarely get paid what they bill, no matter how great their insurance clerks’ skills.

Managed care is a generic name for contractually obligated controlled reimbursement; and whether the doctor participates or not, he or she is seldom able to collect the normal fee. That fact, along with general insurance policies capping reimbursement, increasing noncovered services and high deductibles, Medicare guidelines, workers’ comp fees, and tort reform affecting accident claims and settlements, what once was only slow-pay problems now equals no-pay policies. An accounts-receivable cleanup is a must.

Age Is Not Beauty
Unlike people or fine wine, money on the books does not age to perfection. As a matter of fact, the older the money, the less value it has. The process of “aging accounts” is simply determining how old each portion of the bill is in comparison to when the actual service was rendered. The normal terminology is “30-60-90-120,” which means what portion of the accounts-receivable balance has been rendered within the past 30 days, 60 days, 90 days, or is older than 120 days. Some experts say that every 60 days, the value amount of the money is 25% less, or 25 cents per dollar. This takes into consideration the cost of trying to collect the amount (employee time, paper, or postage, for example) and the loss of the use of the money in your own bank account (interest and buying power).

Given these statistics, $10,000 on your books that is more than 120 days old is really only worth about $5,000. Or if a patient owes you $100 and you continually bill that patient for 8 months for that $100, after 8 months you are not only not getting the $100, it is costing you more than the $100 to keep billing the patient.

It is important to do an aging of accounts monthly. Most insurance software programs have an aging-of-accounts report. The insurance clerk must run this report at the beginning of each month and address accounts that are falling past 60 days. These are the accounts that must be called on, rebilled, sent to collections, or written off.

Know When to Say No
Equally important is to always reconcile your patients’ accounts with each insurance statement and to know when to “write off” a bad debt. Each claim should be fully examined to determine if the amount is collectible (by resubmitting to the carrier or transferring the balance to patient portion), and what amount must be written off per a contractual agreement. Doing contractual write-offs with each statement also gives the office documentation for reason for reduction and keeps accounts receivable true to date.

Sometimes, writing off a bad debt can be good business. With small account balances, it is more economical to write off the bill than to keep sending statements. There may also be times when writing off a moderate to large account will pay off in good will to the patient, who will return under another classification (workers’ comp or auto accident) or refer several other patients.

Old accounts and write-off amounts make accounts-receivable amounts appear to be a healthy sum of money, when in reality they are a sign of a very sick business. Money on the books is not real money, and in some cases it can make doctors think that they are on the road to riches when actually they have a serious collection problem and may be on the brink of bankruptcy.

Keep Current
Payment at time of service is the absolute best solution to an accounts-receivable problem. However, very few clinics operate on a cash basis. Therefore collection uncertainty becomes part of doing business. To minimize an accounts-receivable problem, have a strong collection procedure in place at the front desk (collecting patient portions daily or weekly); and have an insurance clerk who knows how to file, follow up, and age accounts.

Most CAs do not enjoy collecting past-due accounts, and even less are good at it. Collection gets tougher each time you have to call a patient regarding his or her delinquent bill. The best thing to do is to get a commitment on the first call. Getting commitments means that the experienced collector knows the difference between an excuse and a stall, and has a comeback for both.

Excuses such as, “We just don’t have the money. Things are tight,” should have a solutional response like, “I understand. However, to keep your account current, you will need to make at least a partial payment this week.” Once the excuse has been dissolved, the collector must set a time deadline.

Another favorite excuse from patients is, “We thought the insurance would pay this.” The experienced CA knows to respond with, “Very few insurance plans pay the whole bill. Yours helped with a lot of it; this balance is your responsibility. You need to mail a check before Friday.”

One of the best-known stall tactics is the “bill me” comment: “Just send me a statement.” And, of course, your response is usually, “We have already sent several.” Add the time deadline: “You need to mail your check today.”

Whether you are dealing with an excuse or a stall, don’t buy into their game. If they absolutely can’t send a full payment this week, settle for half. Be cautious not to give in too easily. Do not accept tiny payments, or you will be dealing with these same patients month after month. Follow up immediately when a payment is late more than 1 day. Don’t rehash the original agreement. The health of your accounts receivable depends on your office’s strong commitment to a collection policy

Consider Compassion
Trust that your patients have all good intentions of paying their bills but may have temporarily fallen on hard times. While you should never accept a stall or excuse, some compassion can go a long way.

Always remember that any collection action can have its disadvantages. Some patients may take offense at even receiving a bill in the mail. Patients who are offended become defensive. Patients who do not want to pay their bill will try to find a reason why they should not have to pay. Be aware that some forcible collection action can result in unwarranted malpractice claims; error on the side of good judgment and caution in handling your accounts receivable.

Ces Soyring, CA, is cofounder of the National Academy of Chiropractic Assistants (www.naca-online.com) and a chiropractic consultant. Contact her at naca_csoyring@yahoo.com.