In your healthcare practice, your margins are likely at risk of thinning and you’re struggling with operational efficiency. For most, it’s a never-ending executive push and pull to increase practice revenue, decrease costs, and shore up staff for smooth operations.
Of all the revenue cycle management (RCM) tactics that improve the financial performance of any healthcare organization, increasing net collection rates is at the top of the list.
How to Increase Net Collection Rates
A robust revenue cycle is the lifeblood of any medical practice, and increasing net collection rates is the most direct path to improving overall revenue. By effectively managing accounts receivable, reducing denials, and optimizing patient payments, healthcare providers can ensure financial stability, invest in essential resources, and ultimately deliver higher quality patient care.
Collecting Current Accounts Receivable (A/R)
The first step to determining how much additional revenue you can collect for your medical practice requires understanding these areas of potential and monitoring your performance.
- Net Collection Rate: Calculate this statistic by dividing payments (net of credits) by total charges (net of approved contractual adjustments). Then multiply by 100 and get a percentage value. This metric reveals the percentage of payments received after adjusting for write-offs. Example: ($100,000/$120,000)*100=83.3%
- Calculate Average Daily Charges: Add up all charges for a specific period, subtract any credits, and divide by the total number of days in that period. For example, you could add up charges for the last 6 months and divide by 180. $120,000/180=$666
- Calculate Days in AR: Divide total receivables by the average daily charges. This metric indicates how long it takes a practice to collect payments. Aim for a benchmark below 50, but 30 – 40 days is the ultimate goal. Over 50 days indicates concern and requires focused attention. $20,000/$666=30
- Total A/R over 120 Days: Divide the total amount of A/R over 120 days by the total amount of A/R that’s outstanding. Multiply the result by 100. You should try to keep this number below 20% and monitor – if it’s growing this is a concern that must be addressed. $30,000/$100,000=30%
This KPI tracks unpaid claims outstanding for more than four months. Ideally, this number should be minimal. Having a significant amount of AR over 120 days indicates a need for more concentrated collection efforts.
Download UnisLink’s e-book, 7 Performance Benchmarks Every Practice Must Know, to understand and calculate the most critical KPIs that measure your revenue cycle efficiency.
How to Tackle Insurance A/R
Insurance accounts receivable (AR) represent a significant portion of a healthcare practice’s revenue. Efficiently managing and collecting these claims is crucial for maintaining financial stability and growth. By focusing on strategies to reduce insurance AR days outstanding and increase reimbursement rates, practices can significantly improve their bottom line and reinvest in patient care.
- Insurance AR over 120 Days: Similar to the previous metric, this KPI focuses specifically on unpaid insurance claims exceeding four months. Aim to minimize this amount to ensure timely reimbursements.
- Rejections Rate: Rejections occur when insurance companies refuse to process claims due to missing information or errors. A low rejection rate, typically below 2%, demonstrates clean claim submission and reduces delays.
- Denial Rate: Denied claims are rejected based on policy exclusions or medical necessity questions. Strive for a denial rate of around 5% or lower. Analyze denied claims to identify patterns and improve documentation or coding practices.
Steps to Reduce Insurance Denials
- Improved Coding: Accurate coding is crucial for proper reimbursement. High functioning RCM teams engage with ongoing coder training, implement coding audits, and utilize advanced coding software for enhanced accuracy.
- Eligibility Verification: Prior to each visit, verify patient eligibility and benefits with the payer to avoid denied claims due to coverage issues.
- Benefit Verification: Double-check specific procedures and services to ensure coverage under the patient’s plan to prevent unexpected denials.
- Pre-authorizations: Obtain pre-authorizations for procedures requiring them to avoid denial headaches later.
- Insurance Discovery: Ensure accurate patient insurance information is collected and updated regularly. Consider offering online portals for patients to update their insurance details.
- Claims Edits: Leverage claims edits catch diagnosis issues, zero charges, missing modifiers, bundling issues and Medically Unlikely Edits (MUEs).
Learn how UnisLink’s expert RCM team reduces coding errors and improves insurance collection rates for medical practices.
Enhance Healthcare Payer Reimbursement
- Negotiate Better Contracts: Review and renegotiate contracts with payers to secure more favorable reimbursement rates. Partner with medical billing specialists with expertise in contract negotiations.
- Drop Bad Payers: Consider dropping payers with consistently low reimbursement rates or those causing undue administrative burdens.
- Improve Payer Mix: A healthy payer mix includes a balance of government payers (Medicare, Medicaid) and private insurers. Analyze your payer mix and focus on attracting patients with higher-paying insurance plans.
How to Manage Patient A/R
With patient responsibility for healthcare costs steadily increasing—in some cases, reaching up to 30% of a practice’s revenue—efficiently managing and collecting patient balances is more critical than ever. [Source: Xtelligent RCM]
A strong patient A/R strategy not only safeguards the practice’s bottom line but also enhances patient satisfaction through clear communication and convenient payment options.
- Patient AR Over 120 Days: Just like with insurance AR, monitor the amount of unpaid patient balances exceeding four months.
Strategies to Increase Patient Collections
- Write-off Policy Review: Revisit your write-off policies with your RCM team to ensure they are balanced and effective. It’s better to implement RCM best practices to recover bad debt whenever possible, instead of writing it off.
- Accepting Multiple Payment Options: Provide patients with a variety of payment methods, including credit cards, debit cards, and online payments.
- Reviewing Late Payment and Interest Fee Policies: Clearly outline late payment penalties and interest charges to discourage delinquent payments.
- Statement and Patient Correspondence:
- Ensure statements are clear, concise, and easy to understand.
- Eliminate confusing aging boxes that can overwhelm patients.
- Consider changing the statement date to the due date for improved clarity.
- Review the tone and content of patient communications to be informative and respectful.
- Reviewing Collection Agency Policies: Partner with reputable collection agencies and carefully monitor their performance.
- Improve Financial Clearance Policies: Implement thorough financial clearance processes before each visit to ensure patients understand their potential financial responsibility.
- Patient Estimation: Provide patients with accurate estimates of their expected out-of-pocket costs before procedures.
- Transparency about Prices: Clearly communicate service pricing upfront to prevent unexpected bills and patient dissatisfaction.
- Collection by Schedulers: Offer to collect a copay, deductible, and balance due at the time of scheduling or upon arrival.
- Reviewing Upfront Patient Collection Policies: Analyze the effectiveness of your upfront collection policies to strike a balance between ensuring payment and creating a positive patient experience. Patients respect transparency and clear communication. Give your front counter team a goal for collections with patient experience training.
- Patient Financing and Payment Plans: Offer flexible payment plans or financing options to make healthcare more accessible and encourage timely payments.
Other Considerations for Collecting on Patient A/R
- Patient Financing and Payment Plans: Offering flexible payment plans and financing options can significantly improve patient satisfaction and reduce outstanding balances. Consider partnering with reputable financing companies to provide patients with affordable payment plans.
- Credit Card on File: Implement a system to securely store patient credit card information for future payments.
- Credit Checks: For larger balances and prior to procedures, consider conducting credit checks to assess a patient’s creditworthiness and discuss options for payment plans and acceptance of credit cards.
- Improve Patient Satisfaction: A positive patient experience is crucial for timely payments and referrals. Patients are more happy to pay for medical services when they have a strong bond with the provider and positive experience with staff. Focus on building strong patient relationships through excellent communication, transparency, and efficient billing processes.
Learn how UnisLink accelerates patient payments and improves net collection rates for medical practices.
Implement Best Practices to Increase Net Collections
By implementing these best practices, healthcare practices can significantly improve net collections, reduce denials, and enhance overall financial performance. A well-structured revenue cycle not only ensures timely reimbursement but also optimizes cash flow and minimizes write-offs.
Remember, a robust revenue cycle is not a one-time fix but an ongoing process that requires continuous monitoring, analysis, and adaptation. By investing time and resources into refining your revenue cycle management strategies, you can ensure the long-term financial stability and success of your practice.
- Regular KPI Monitoring: Continuously track and analyze key performance indicators to identify areas for improvement and measure the effectiveness of your revenue cycle strategies.
- Staff Training: Invest in comprehensive training for your staff to ensure they have the knowledge and skills to optimize the revenue cycle.
- Technology Adoption: Leverage advanced revenue cycle management software and tools to automate tasks, improve efficiency, and reduce errors.
- Regular Audits: Conduct internal and external audits to identify and address potential revenue cycle issues.
UnisLink Helps Practices Increase Revenues and Reduce Costs
Are you ready to take your revenue cycle management to the next level? UnisLink is expert at revenue recovery and patient collections with comprehensive RCM solutions that help healthcare practices achieve their financial goals.
We offer a free practice revenue opportunity assessment so you can see how much money you’re not collecting and how we can bridge that gap.
Contact us today for more information on net collection rates and how to start realizing more profits immediately.