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Improvement of cash flow generally tops the list of priorities for medical practice managers. Good management of accounts receivable operations is fundamental to improved cash flow because it can make a big difference — a big difference — in the payments received for services provided and in the financial success of the practice.


Three Essential Steps

Every medical practice should undertake three essential steps to better manage accounts receivable, steps that will reduce denial rates and result in receipt of more payments. The first step is to know the payer rules. This may be the toughest step since there are so many payers and so many rules, but it is also the most important step. Carefully review all contracts with healthcare insurers. Contractual adjustments vary greatly from contract to contract. Try to have a good relationship with someone on the staff of each payer, a person who is willing to help answer questions and guide you through the process when required.

The next step is staff education. Provide staff with the information and resources that they need, including access to up-to-date insurance reference books. Offer frequent training opportunities in the office and through workshops offered by experts on practice management, accounts receivable and collections.

There are several key areas in which staff members must be confident and proficient. These are the six "Cs" of receiving compensation for services.

Capture. Are all provided services billed? Are controls in place to ensure that all charges are captured (accounted for), entered and submitted for payment on a daily basis? Payment cannot be received if it is not billed. For example, fee tickets should be matched to appointment schedules every day to identify missing tickets. Many billing systems may handle this function automatically; be certain to use this feature if available.

Correct. Patient information must be verified and updated with each visit and entered correctly. Lack of information such as eligibility or authorizations are two major reasons for denials. Failure to obtain and provide payers with secondary payer data is one of the most frequently reported errors in claims filing.

Coding. Proper coding and thorough documentation are essential to meeting billing/reimbursement requirements. Proper coding is also a compliance issue. Check and double check for accuracy. Be certain to get it right. Correct diagnosis coding will prevent medical necessity denials. Staff training is imperative to this process.

Calculations. Errors in financial calculations can result in denials and nonpayments. Also, it is important to know the rules governing primary and secondary payers to determine accurately payments to be received from the payers and the patient. Educate staff to understand when to adjust for contractual write-offs when coordination of benefits is involved. For example, Medicare may cover a service as a secondary payer where the primary payer does not. In this event, Medicare will calculate its payment as if it were primary.

Communications. Every step of effective accounts receivable management involves frequent and clear communication. There should be clear guidelines, direction, supervision and information to ensure that claims for reimbursement and billings are accurate, filed in a timely manner and tracked. Regular concise communications need to be maintained with payers and with patients. Patient bills must be understandable.

Collections. Rather than face a collections process, practices often writeoff charges. Don't do it. Learn how to make successful collections that will bring in the money that is fairly owed to the practice. Always assume that people are honest and want to pay, but know that a patient will pay when his motivation for paying becomes stronger than his reason for not paying. The office should have clear guidelines for collections. It is imperative that the provisions of the Fair Debt Collection Practices Act be followed in the collections process. A collection agency partner can help educate your staff about these rules.

The third step in better managing accounts is to persist. Denials and nonpayments will still occur even in the well managed accounts receivable operation. Don't give up. Track the denials to see if there are consistent reasons for these denials. Make appropriate changes to fix the problem. Question denials to see what can be learned and corrected. Persistence is essential until all possibilities have been pursued for payment.

There will always be outstanding payments that must be collected. The job is challenging, especially since the rules keep changing. It requires constant attention and monitoring. However, remember that the only way a practice can receive payment for its services is through good management of accounts receivable.


Lucy R. Carter, CPA, and Sara S. Lankford, CPA, are principals of Nashville accounting firm, Carter, Lankford CPAs, PC. Carter can be contacted at lucy.carter@clcpas.com. Lankford can be contacted at sara.lankford@clcpas.com



June 2007

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