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Accounting for Accounts Receivable
Across the country, medical practices both large and small are ratcheting up their accounts receivables and seeing real-time cash flow continue to dwindle.
According to a 2010 report by NaviNet, 64% of surveyed provider offices indicated they are experiencing a rise in patient-based bad debt. The problem is twofold. Patients are still dogged by economic problems and high unemployment rates. With their financial security in the balance, people tend to push peripheral debts — including medical bills — to the bottom of the bill pile. Added to that is the fact that the current medical billing process is a deeply flawed system, one that doesn’t favor a consistent and reliable revenue stream — especially for smaller practices.
The Mess of Medical Billing
When it comes to a patient’s inability or unwillingness to pay, there’s only so much physician practices can do. Most smaller practices are already short-staffed, which means there’s neither manpower nor time to spare chasing down delinquent payments. So, the question becomes: How can practices make the most of a messy and often backed-up billing process to stabilize their revenue cycles and maximize payments?
Changing the process itself is the best place to start, says Dave Leja, President of Berkshire Group Services, Inc., a Massachusetts-based medical billing management company. Currently, the process for electronic claims submission is dictated by version 5010 of the Health Insurance Portability and Accountability Act (HIPAA), which went into effect in 2012.
This new standard will eventually provide the foundation for the ICD-10 coding rollout in 2014, but many in the health care industry view it as an ill-formed and incomplete offering.
Better Billing: The Retail Model
In the long run, building a more effective billing process may need to occur on the federal level. Although it does not solve the problem, the Affordable Care Act does include provisions for a possible restructuring of the current billing process under Section 1104, “Administrative Simplification.” Among these provisions are the following ideas:
What this implies — and what some thought leaders have suggested — is a more retail-oriented model for health care charges and collections. No sensible retailer would let a customer walk out of the store with an expensive product without guaranteeing payment for it, and no sensible customer would agree to pay for the product without knowing how much it costs. By moving the medical billing process closer to an automated retail model, providers would be able to clearly communicate — and collect — what a patient owes at the time the service is rendered.
- Standardizing electronic billing to allow for the use of machine-readable cards — essentially, health care credit cards — that record payment and insurance information
- Determining a patient’s financial dues at the point of care
- Keeping tabs on how quickly insurance companies are processing claims and disbursing payments
“Version 5010 dictates what HIPAA wants to see happen, but it lets the medical practices and insurance companies figure out how those edicts will be met,” Leja says. “There’s no standardization for claims software, either, and the logarithms used by insurance payer A may not be the same ones used by payer B.”
“Many ad hoc processes have been developed in health care billing, which has led to a very disparate payment process,” adds Charyl Kavner, Vice President and Senior Treasury Product Manager for Fifth Third Bank. “A practice waits for the payer to process the claim, which can take as many as 120 days, at which point there could be a secondary payer to whom it has to resubmit the claim. Only then does the practice know how much to bill the patient.”
The Buck Starts Here
Fortunately, there are a few things physician practices can do to help ensure fewer delays in both payer and patient payments. One of those is to stem the tide of claims rejections. Under pressure from HIPAA, insurance companies and clearinghouses that scrub the claims are tightening the slack on documentation. To see faster green-lighting on payer reimbursements, physician practices must enforce more stringent intake protocols. According to Leja, that begins and ends with the reception staff.
“It’s important to put qualified people at your front desk and invest the time and money to properly train them,” Leja says. “A computer can’t look at an insurance card and say, ‘This is how this plan works, and these are the steps we have to take to make sure this claim will be paid.’”
Leja says outsourcing the billing department is a smart choice for practices that can afford it. Companies such as Berkshire Group Services specialize in medical billing and have more time to stay abreast of evolving claims submission requirements.
Clarity at the Point of Care
Automation and early service cost communication with patients is key. Kavner says the best approach to increasing real-time cash flow is working with patients at the point of care. Offering flexible payment plans is a common practice that increases a patient’s likelihood to pay. Another strategy is to know ahead of time how much patients are likely to owe once insurance claims are filed.
Kavner points to Fifth Third Bank’s Web-based patient payment portal, RevLink Collect solution, which integrates with existing physician accounting systems to collect information from insurers in real time. This allows staff members at the front desk to generate an estimated bill for the patient immediately following care — and potentially collect on that bill before the patient leaves the office.
“It’s important for patients to know what they owe from the get-go,” Kavner says. “The more transparent and upfront providers are, the easier it will be to collect money from patients.”