How NOT to get financially suckered

It is true.  You are a doctor.  You have spent far more time learning far more important (and life saving) things than how to work on your office revenues.  But even the greatest minds in the world need to be bankrolled, and even the most brilliant physician will be out of business in short order, if they don’t pay attention to their office finances.

Having worked with doctors for a while now, it never ceases to amaze me how many of them believe in the purity of human nature.  Too many times, this very admirable trait gets taken advantage of much to their own detriment.  In a small way, following some of the steps outlined below, will help at least hold the fort down in your office, which is the single largest source of your income.

Where does your revenue come from?

The first step in financially tracking your office and your career is to identify where you make your money.  Obviously you make your money seeing patients. 

But where do you see your patients?  You could see 100% of your patients in your office, or you might have a good percentage of your patients in the Hospital or Nursing Home or Assisted Living Facility etc.  It is always good to know where your money comes from, and what percentage of your billing for each source is getting paid. 

Why is this important?  You only have so many hours in a day.  If you find that you are getting only a small percentage of your income from a Nursing Home that is a 45-minute drive away, you will definitely be better off trying to improve your presence somewhere else with better returns than wasting your time on this source.  There is also the question of revenue analysis, such as are the CPT (E&M) codes I am charging getting paid?  Am I overusing or under using a code? Etc. that is critical for you to address.  More on this in a separate article, but this is something to keep in mind.

Who is responsible for the revenue cycle?

Simple answer – You (the doctor) are.  It does not matter if you have a biller par excellence or an office manager extraordinaire.  You are responsible for the revenue cycle. 

What do I mean by the revenue cycle?  The processes of generating a bill, submission to the clearinghouse/insurance carrier, follow up on open bills (collection calls), receiving and posting payments and the patient billing cycle is the overall revenue cycle. 

Does this mean you should do all the work yourself?  Not at all.  The idea here is that on any given day, you better have a darn good idea of your outstanding receivables (in the 30, 60, 90+ buckets) and your average cash flow (how much you collect versus how much you spend per month).  Your employees will do the work, but you will have to carefully review the data and supervise the work. 

How do you do that?  Not that difficult really.  Any good billing software package (PM) should have reports at least on the following:

Aging (Receivables – how much money is owed to you and how much is current – less than 30 days old, and how much is overdue – more than 30 days old)

Collections (how much money did you collect in a given timeframe)

Write offs (how much was written off)

The aging report allows you to figure out if you are doing a good job as far as how much work is being billed out.  If you are not generating enough revenue to keep your practice going, your aging will look ‘slim’.  There are further trends you should also keep an eye on in aging.  If you notice that your more than 60 and more than 90 days buckets are growing, it is a clear indication that there is a collection problem.  You will need to then do further analysis by looking at the aging for each insurance company to see if one of them is not paying well or perhaps your collections person is not making the calls.  If you happen to notice that your current billing is a little lower than normal, that could be indicative that bills are not getting sent out on time.

The Collections report shows you how much you are collecting.  If you notice that collections are below average, that is something you should investigate immediately.  If you notice that there is a change in the form of collections (a sudden spike in Credit Card collections with a drop in cash collections), that is also something that should draw your attention.  A subset of the collection report is the Day Sheet that concentrates on collections per day.  This is critical to look at every day.  In fact, we advise all clients to print out and retain copies of the day sheet.  If there is any suspected fraudulent activity, looking at these day sheets will very quickly highlight it for you.

Write offs.  Let’s face it - there will be a ton of write offs for different reasons.  Typically doctors may charge a standard amount for a service knowing full well that each insurance carrier will pay a different lesser amount than charged.  So there will be write offs.  However, it is critical to track unusual activity here to make sure that there is no untoward event such as ‘lazy’ write offs (I am just going to write this off instead of making a couple of calls to collect on this) or true fraud.

When the heck do I do all this?  I barely have time to practice!

Think of it this way – if you are able to run an efficient and careful operation, you can make as much money as you are making, with a lot less work!  If you are able to collect anything over 77% of your expected collections (insurance and patients), you are above industry average.  If you can get it to anything in the 80s, you will see a significant boost in your income.  You should make it a point to go through this review of reports and processes at least once every 2 weeks.

Will this cure all the financial ills in your office?  Probably not, but at the very least, these steps will help you spot any problems at least in the long run.  The first step you should take is to call up your software vendor to discuss the financial management reports I have listed above and ask them for suggestions on the specific reports to look at.  This may be the best time you ever spend for your practice!  There are more ways to lose money than to make money in this business, so be aware to your own benefit.