Is your healthcare practice's cash flow suffering from clogged arteries? Take our checkup and find out.
Open Your Mouth and Say "Aargh!"
Most practitioners enter the healthcare field because they want to help people, not because they want to run a business. But failing to observe good business practices can create cash-flow problems that impede your practice's ability to provide quality care. Furthermore, insurance reimbursements and a thicket of regulations make healthcare an especially complicated business.
The complexity starts with third-party billing systems, which have become as much a part of healthcare as jokes about hospital food. Any healthcare provider who accepts insurance as payment is required to submit a bill with a current procedural terminology (CPT) code to the billing department. While larger hospitals typically have an in-house billing department, most smaller practices outsource that responsibility to a third party.
CPT codes have essentially created a universal language for healthcare providers, billing services and insurance companies. That's why it's vital for providers to be fluent in that language, even if they aren't directly involved in billing.
If the provider miscodes the procedure on a bill, bad things can happen. Let's say the provider performs an MRI but accidentally uses the billing code for a simple X-ray instead. If the error goes undetected, the insurance company will reimburse the provider for significantly less money than the provider is due. And if the insurance company detects the error (which is more likely), they'll kick the bill back to be resubmitted with the appropriate code.
Those delays add to a collection cycle that's already longer than you'd find at a typical small business. It's no wonder many healthcare practitioners run into cash-flow issues.
In most businesses, a collection cycle that's 60 days out would be a bright red flag. In healthcare practices, it's not uncommon.
Warning signs of problems with medical accounts receivable include:
- Growing balances when visits are stable
- Receivables over 120 days old exceeding 25% of total accounts receivable
- More than 60 days in accounts receivable
Practices that don't understand and monitor the revenue process can easily end up with cash-flow issues.
We'll See You Again in a Month
Many healthcare practitioners are turning to outsourced booking services to meet these challenges. A good bookkeeper reviews billing reports at the end of every month to make sure the revenue that has been recorded on the books matches what has been billed through the medical billing system.
In addition, the bookkeeper monitors cash collected and compares that number to what the third-party billing system reports as being collected and what remains outstanding. In other words, the bookkeeper monitors the practice's receivables, just like he or she would with any other business.
A competent bookkeeper will also transition the practitioner to a cloud-based system that transfers funds electronically. Any practice that's still getting insurance reimbursements in the form of paper checks is subjecting itself to needless delays.We've barely scratched the surface of what makes healthcare billing and reimbursement so complex. (Don't get us started on copays, HIPAA compliance and the fact that every state has different regulations.) But at least we've given you a simple prescription that you can use to rehabilitate your practice's cash flow, starting today.