A short case study involving a common problem for practices. Your production in a practice is a certain amount, say $80,000 per month. If you maintain that performance over time, you would reasonably expect to collect somewhere near $80,000 on a monthly basis. What do you do if those numbers don't match up? Perhaps this illustrative case study can give you some helpful information.
Dateline: Milwaukee, Wisconsin
The situation: A 3 office practice generating $130,000 per month in new patient contracts was collecting $70,000 per month. Of the contracts being signed, about half of that was turning into collections. Clearly, this was not acceptable to
the doctor and staff. The practice had 8 employees -- 3 business staff, 5 clinical staff -- who all worked in an office on a patient day and moved from location to location.
What we did: We went through a progression of potential causes of the problem and implemented the solutions. Here are what we checked out, what we found and the solution implemented.
What we checked: Of the patients that signed contracts, were those people coming back to actually start treatment? Signing contracts is great, but if the patient doesn't start, you won't be able to utilize your treatment skills and you cannot get paid. Essentially, you've lost time and money in bringing that patient in, presenting the case and closing it. The patient needs to start treatment.
What we found: Of the 37 contracts signed per month, 24 of them were starting treatment. That means that almost 30% of all patients who signed a contract simply disappeared into the wind. Keep in mind that at the time of the signing, these people were signed and ready to go.
What we did: First, we contacted as many patients as possible who signed contracts, but did not start. Of those contacted, 40% told us that they never heard from the office again, 40% said they did not want to have to come back to the office so soon after their consultation to get started and 20% told us that they did not feel like they had the financial resources to pay for treatment. To remedy the problem, we first instituted a procedure for the front desk person with the best phone presence to make regular (at least twice weekly), friendly, follow up calls for patients to do what was necessary to get them in treatment. Can't come until 7 pm? No problem, we'll make arrangements to be here. Need internet access so you can get work done while your child is starting? We've got you covered. Second, if possible, we allowed new patients in need to start on the day they signed their contracts. This took some effort because the practice generally had some full patient days, but by allowing a patient to hang around, go shopping next door and come back a bit later to get their banding done, we were able to get another 2-3 bandings per month. For those who had issues with financial resources, we set up a number of different structures to allow those patients to be able to get the treatment they wanted while still working within their monthly budget.
What we checked: Of the patients that started treatment, were patients and/or their insurer making payments? This is certainly a fundamental question you need to answer no matter what practice you have. Any type of past due report needs to be checked at least monthly, if not more often to see who owes you money and how much. Then, you begin the process of collecting that money.
What we found: This practice worked with a substantial number of patients with insurance. Of the 37 new patients per month, around 10 had some sort of issue with insurance. Claims were rejected because of lack of paperwork. Certain patients marked as Medicaid patients did not qualify for benefits. For others, the insurance company held funds pending answers to several questions.
What we did: We started by communicating with the insurers to resolve any administrative issues. If paperwork needed to be provided, we handled it. Questions were asked and answered. There are a number of insurance experts out there and a number of them are very, very good, but in a lot of cases, dealing with insurance companies is simply a matter of staying on top of issues and handling the routine requests they may have. Of much more significance from our perspective, we instituted a system for reviewing past due reports and acting on them. One person was given responsibility for working the past due report and she was asked to ensure that she reviewed at least 25% of the list each week. If an insurer appeared to be delinquent, she would contact them and get any issues resolved. For past due patients, a consistent system of letter writing and phone calls was instituted. Initially, the communication was soft and friendly with the tone becoming firmer with each successive communication as the patient became more delinquent. For the Medicaid patients that did not qualify, the doctor reviewed the cases one more time. If they still did not qualify and were unable to make payments as a private payor, the doctor generally made the decision not to start treatment on new patients, but to finish treatment on any of those that had started. That added some cost, but the doctor felt an obligation to finish what had been started even without payment. Procedures to properly check Medicaid eligibility from that point forward were instituted to avoid future issues.
What we checked: Bank reconciliation. You hate to make any negative assumptions going in, but we felt that it was necessary to take steps to ensure that any funds paid by patients or insurers was entered into the practice management software and got into the bank. Bank reconciliations are a basic part of the monthly practice process, and this practice had not been doing them. We also took a closer look at patients that had not paid an amount commensurate with their term of treatment, but did not appear to be past due.
What we found: Doing deposit reconciliations (simply making sure that what was entered into the practice management software had a corresponding deposit in the bank) revealed that some cash payments were, indeed, missing. Even though the relative amount was small, these were funds that were due to the practice and should have remained within the practice. Also, theft creates a negative working environment that can lead to other unfavorable practice effects.
What we did: We instituted a policy of deposit reconciliations to be done by someone not responsible for handling payments. With this separation of duties, we added another level of control to the process. We also began to send monthly statements to active patients listing their financial activity for the month. Between those and the past due calls made, a number of patients were able to provide payment information for amounts not recorded in the practice management software or the bank. Unfortunately for the practice, those amounts were lost. But in the future, they would not be. The employee responsible for the missing cash was terminated. At the behest of the doctor, authorities were not called, but that certainly would have been an option that would have sent a strong message to the staff.
The end result: With these simple changes, monthly collections increased from $70,000 per month to $111,000 per month over a 12 month period. Our goal here is $117,000 per month (90% of the new contract amount). We feel this can be achieved with an improved rate of contracts turning into startups and working closely with patients to ensure that payments begin at the time treatment starts.
Do you have a situation like this in your practice? Would you like to discuss it in more detail? If so, contact us.
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