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May 27 2018
Home Best Of Categories Compliance Future of Healthcare Life as a Scribe Quality, Efficiency, Utilization General Authors Michael Murphy, MD Sarah Lamb Justin Wilson, MBA Deanna Shah Videos Contact Us
News Revenue Cycle 6: How Minimizing A/R Days Maximizes Cash Flow We’ve said it before on this very blog, but it’s a critical notion that bears repeating: Every day that a claim sits in a payor’s system is a day that your practice, physicians or facility doesn’t get paid. These claims awaiting payment are called accounts receivable (A/R), and each day a claim is in A/R is costing you. And it could be costing youpotentially tens of thousands of dollars a year. That might sound like a scare tactic, but it’s reality for many hospitals, facilities and providers. Your situation might not be so extreme, but do you really know the extent to which A/R days are costing you? Read on for a primer on how to calculate A/R days, understanding the financial costs of extra days, and some tips for minimizing the wait.
Calculating your A/R days Before you can figure out how much A/R days cost, the first step is calculating your claims’ average days in A/R. To calculate days in AR, compute the average daily charges for the past several months — add the charges posted for the last six months and divide by the total number of days in those months. Divide the total accounts receivable by the average daily charges. The result is the days in accounts receivable. To simplify, you might want to set up a chart like this: Figure_1
If your coding and billing department is doing well, days in A/R should be fewer than 50 — although 30 to 40 days is preferable. Some experts might say you should aim for under 30 days in A/R, but that may be unrealistic for most care settings, particularly hospitals and emergency departments. In any case, average A/R of 60 days or longer is considered below standard.
How days in A/R cost you Now that you know your days in A/R, you can better understand the financial impact of having this money floating around a payor’s system. To do this, you have to do a little digging to determine the cost of your borrowing — you’ll need to know the interest rates on loans (such as the mortgage on the facility, or loans for capital equipment), because not paying these down is what’s costing you money. Again, here’s a chart to help you visualize the calculations: Figure_2
In this hypothetical example, each day that goes by where those claims are unpaid costs the practice about $1700. That’s enough to get ahead on the loan interest that drains your facility or practice’s value — or to pay for another coding and billing person or a medical scribe who alleviates the physician workload.
Overview of strategies that can help Thankfully, there are steps you can take to minimize days in A/R, such as collecting accurate and thorough patient information from the front office, getting patient co-pays up front, effective charge capture, maximizing the use and features of your information systems and ensuring clean codes are generated. You can read in more depth about these strategies here. Submitting clean claims may be the most important of these. Real-time coding, performed at the point of service by providers fully trained in and facile with ICD-10, can help ensure the right level of detail is recorded, to guide your back-office coding and billing staff in creating valid codes and submitting clean claims. Clean claims are the key to more timely payments and keep you from having to engage in the appeals process — which costs you both time and money (not to mention your peace of mind). In addition, point-of-service coding means you can get claims off to payors within hours, rather than days. Timely, clean claims can shave days off A/R, freeing your cash flow to invest in your facility or practice according to your priorities.
Michael Murphy, MD Dr. Michael Murphy is co-founder and Chief Executive Officer of ScribeAmerica, LLC. He co-founded ScribeAmerica in 2004, and it is now the country’s largest and most successful medical scribe company with a staff exceeding 7200 employees operating in over 46 states nationwide. Today, ScribeAmerica is the recognized leader of the medical scribe industry and remains at the forefront of professional scribe education, training, and program management nationally. Dr. Murphy served as an Army Ranger for the 1st Ranger Battalion in Savannah, Georgia, which allowed him to gain various leadership skills along with the ability to develop standard operating procedures. He applies this to his daily duties for ScribeAmerica. Dr. Murphy has been a leader on multiple issues including scribe policy, hospital throughput, electronic medical record implementation and optimization of provider to patient ratios. His goals are to continue making all medical practice locations an environment built for an exceptional patient experience that allows providers to focus solely on patient care. Dr. Murphy received his Doctor of Medicine from St. George's University and completed his residency training in Emergency Medicine at the University of Medicine and Dentistry of New Jersey in Newark. He has co-authored one textbook and is involved in 3 peer review articles. Visit Michael Murphy, MD's website Posted In: General, Quality, Efficiency, Utilization On: Tuesday, 1 March, 2016
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