Financial Rounds

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Financial Rounds

Jeffrey N. Hausfeld, MD, MBA President of FMS Financial Solutions

In the current healthcare environment, we are facing decreased payer reimbursements, as the market is generally at Medicare level or some comparable rate based on it. We are also seeing increased payer claim edits and controls, as well as more complicated payment and authorization processing. This has led many healthcare economists to the conclusion that the billing cycles in physicians' offices are the most complicated revenue cycles in American business today.

Like any other small business, it is vital that a medical practice understands the importance of cash. Practices with a reliable cash flow are healthy ones. It is incumbent on you to look at how cash flows in and out of your practice in relation to patient service revenues and the payment of salaries and expenses. Changing the direction of cash flow requires diligent and persistent management of the entire process. Areas that you should begin to examine are: 1) Accounts payable: How do you pay

your vendors? 2) Inventory: Who is in control of order-

ing and who keeps track of medical and general office supplies? 3) Bank services: What fees are presently charged on a monthly basis to do business with your bank? Does the bank provide you with an electronic check scanner so you need not physically deposit checks into your bank account, and also gets the funds to work for you the same day? 4) Accounts receivable: Do you do a monthly review of your accounts receivable process? 5) Delinquent debt: The most often overlooked and under-served portions of your accounts receivable. How can you recover some of this "lost profit" from services you have already rendered to patients?

You are left with several distinct avenues for potential action in order to increase revenues: see more patients, add

new contracts, and provide additional and/or different services. You can try to decrease expenses by cutting personnel costs or cutting operating costs. Lastly, you should look at how to maximize your current revenue by collecting more on existing business.

Defining the terms

Accounts receivable is money that is owed to a company by a customer for products and services provided on credit. While cash at the time of transaction is obviously preferred, competition forces firms to offer credit terms. Accounts receivable is revenue earned but not collected. A sale or service is treated as a receivable after the payer is sent an invoice. What we fail to realize often is that as time lapses, the risk of non-payment increases significantly. The problem with accounts receivable is relatively straightforward; if the account is never collected, then the revenue is never realized, and that has adverse financial consequences to your practice. The solution is the careful monitoring of the accounts receivable for early detection and intervention.

Accounts receivable: A quick review

For example, a managing partner of a ten-physician single specialty surgical practice was concerned about the decreasing revenue of the firm over the previous three months. The practice administrator has not performed an accounts receivable analysis for more than six months. FMS Financial Solutions prepared a detailed analysis of their accounts receivable, which revealed some unusual financial transactions approximately a year before. At that time, the accounts receivable of 150 days or more dropped from 30 percent to 12 percent over a two-month period. There was no corresponding change in the collection noted from this reduction, making this non-contractual "write-off" appear very unusual.

Further analysis showed that more than 50 percent of the patients' accounts receivable was over 90 days old, two to three times the industry average for that type of practice. The group decided to hire a healthcare consultant, who performed an extensive practice

profile, including a detailed Explanation of Benefits (EOB) review. An EOB review is used to develop denial pattern analysis and understand any nuances in the fee schedule or billing procedures that needed to be addressed. A best practice process review was done through interviews with key billing staff, analyzing the billing, posting, and collection activities of the group and comparing them against best practice performers in the region.

You can find out how your practice is performing against others by contacting MGMA (), and by using information from the Association of Otolaryngology Administrators' () database. Beginning with the accounts receivable analysis, this practice was ultimately able to increase revenues by seven percent. Improved handling of their delinquent accounts increased their "lost profit" recovery from collection efforts ten-fold!

ENTRI, the for-profit subsidiary of the AAO-HNS, has teamed with FMS Financial Solutions to form an affinity program for our members. This program is designed to procure elite services for member physicians, while assisting AAO-HNS to reach its goal of supporting its members and advancing otolaryngology.

Dr. Hausfield is President of FMS Financial Solutions, and Associate Clinical Professor of Surgery at George Washington University School of Health Sciences. FMS specializes in implementing a state-of-theart debt collection solution that gives physicians and their staffs the ability to submit debt electronically, track collection progress, and manage accounts with ease. FMS collectors are specially trained to understand the delicate balance between effective collections and maintaining the doctor-patient relationship.

For a complimentary accounts-receivable analysis or to jump-start your medical collection efforts, contact FMS at: AAO-HNS, or call 1-800-486-7677

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