Managing accounts receivable (AR) can be one of the toughest challenges for dermatology practices. With industry benchmarks indicating that AR over 90 days (from DOS) should account for no more than 15% of your insurance AR, it’s essential to have the right systems in place. If your AR percentage is higher than this benchmark, it’s time to implement a Plan-of-Action (POA) and regain control.
Steps to Achieve AR Management Excellence
To bring your insurance AR under control, certain elements are essential:
Knowledgeable Staff
Ensure your team has the necessary number of trained professionals dedicated to AR.
Accurate Data
Use up-to-date reports to track and manage AR effectively and efficiently.
Monitoring Mechanisms
Implement a structured plan for regular progress tracking. Assign responsibilities, establish monitoring frequency, and keep a record of both positive and negative results. Implement corrective actions where needed.
While larger practices may have the resources to employ a full billing team, smaller practices face the challenge of limited staff making it difficult to address every aspect of billing.
In dermatology, CPT and ICD-10 coding is often complex due to the scope of services provided. These range from routine skin exams to more advanced procedures like Mohs surgery, flaps and grafts. Ensuring that correct claims are submitted is crucial. Missteps in coding can lead to higher AR due to claim rejections or delays.
Why Managing Your AR Is Critical
Steady Cash Flow
Effective AR management ensures financial stability and prevents cash flow issues.
Bad Debt Reduction
By controlling AR, the risk of uncollectable debts is significantly lessened.
Timely Filing and Quality Claims
The quicker and more accurately you file claims, the higher your chances of prompt payment.
Patient Balance Collections
Promptly and consistently billing patients increases the likelihood of receiving payments.
The above Aging Breakdown chart visually demonstrates how the practice’s AR is distributed across different aging “buckets”. The goal for practices is to maintain the 90+ day “bucket” at 10% or less of the total AR. The importance of focusing on timely payments and preventing accounts from aging past 90 days can significantly impact cash flow and bad debt.
For dermatology practices, specific coding challenges related to biopsy, excision, and repair procedures can cause delays in payment. Correct documentation and using the appropriate modifiers, particularly in complex surgical procedures, are essential for getting claims paid quickly.
Overcoming Common Challenges in Recovering Aging AR
Consistent monitoring of unpaid insurance claims is crucial for healthy practice finances. Focus on the following:
Claim Status
Regularly check on outstanding claims to understand where they are in the process with the carriers.
35 Days
Check on unpaid claims that have not been paid no later than 35 days after the last filing.
The above graph demonstrates how following up on claims significantly increases the likelihood of getting paid by the carriers. Outstanding claims, that have not been adjudicated within 35 days of the date-of-service, need immediate attention. As the data shows, collection percentages drop dramatically after 35 days, underscoring the importance of timely AR management.
Run Date-of-Service Reports
Use these reports to identify which claims need attention and avoid re-working old claims repeatedly.
Understand Denial Causes
Knowing why claims are delayed or denied helps in resubmitting them accurately.
Effective Strategies for Managing Insurance AR
1. Assign AR Work Tasks
Designate specific team members to handle AR. Without clear responsibility, ARs often get neglected, especially in smaller practices where staff wear many hats.
2. Prioritize Unpaid Claims
- Focus on Claims over 35 Days
Generate a report for unpaid claims and address those that have not been paid within 35 days from the date-of-service. This cannot be stressed enough. - Run Reports by Date-of-Service
Don’t prioritize by when the claim was last worked but instead by when the service was provided. - Address High-Dollar Claims First
Configure reports to highlight the claims with the largest amounts first. These claims should take priority each month. - Focus on Actionable Claims
Don’t waste time on the oldest claims that are unlikely to be paid. Concentrate on claims that have the best chance of being resolved successfully. - Track Progress
Document every step in the patient’s account, including how the status of unpaid claims was determined (e.g., online status checks or phone calls to insurance reps). - Refiling Claims
Ensure any necessary documents, such as medical notes, are resubmitted appropriately and note whether the claim was sent via email, fax, or mail. - Work the Entire Report
All claims need to be addressed monthly. Once you have worked the priority claims, the rest of the report must be worked in its entirety. You can run reports by carrier, by balances from high to low, etc. Bottom line, every outstanding claims over 35 days must be addressed each month.
3. Patient-Owed Balances
Patient-owed balances are a significant part of AR. With rising inflation and increasing healthcare costs, it’s vital to collect these balances early, ideally at the time-of-service. Even collecting a portion of the balance (e.g., $30 or so) at the time of the visit can reduce the burden of sending multiple statements.
The chart above highlights the sharp decline in patient collection success rates as more time passes. Practices have a 70% success rate when collecting at the time-of-service, but this drops
to just 10% by the time a third statement is sent. By focusing on collection at the time-of-service, practices can greatly improve their overall collection rates and reduce unpaid patient balances.
Key Tactics for Patient and Carrier Collections:
- Educate Patients
Inform patients about their financial responsibilities when they schedule appointments. - Update Insurance Information
Confirm patient insurance at every visit, as changes in coverage can delay payment. - Avoid Payment Plans
These often fail after the first few payments. Patients wanting installment payments should use their credit cards. If they do not have a credit card, this should be a sign that the patient may not have good credit or is financially challenged. - Collect Outstanding Balances
Require patients to settle prior balances before or at the time of their next appointment. - Use a Collection Agency
After three statements, if a patient hasn’t paid, turn their account over to collections.
Specific to dermatology: Dermatology patients frequently return for multiple follow-ups, such as those receiving treatments for chronic conditions like acne or psoriasis. It is important to set clear expectations about payments at the outset to avoid unpaid balances accumulating over time.
4. Write off Uncollectable Balances
Writing off uncollectable balances allows staff to focus on claims that have a higher likelihood of payment. This also prevents unnecessary work on claims that have already been deemed non-collectable.
Statistics That Highlight Key Trends
- Gallup: 21% of millennials change jobs three times more often than non-millennials, impacting their insurance coverage continuity.
- Indeed for Employers: On average, millennials switch jobs every two years and three months, compared to non-millennials who change at four years and one month.
- NAIC.org: 61% of Gen Z pay for their own insurance, highlighting a trend toward patient responsibility for coverage.
- Academy of Healthcare Revenues: Practices have a 70% chance of collecting from patients who understand their financial responsibility and pay at-the-time of service. Once a patient leaves the office, the likelihood of payment drops to 30%.
For dermatology practices, where patients may return periodically for skin checks or cosmetic treatments, this statistic is especially relevant. Encouraging payment at the time-of-service can significantly reduce unpaid balances.
Legal Risks of Failing to Collect Patient Balances
Failing to collect patient balances is not only financially detrimental but can also result in legal repercussions:
False Claims Act
Not collecting balances after insurance has been paid, is unlawful and can be considered fraudulent under federal law.
Fairness
Writing off some patients’ balances while aggressively pursuing others is unethical and rewards bad financial behavior.
Final Thoughts
Successful AR management is not just about submitting claims, but also about maintaining a consistent and effective policy for collecting patient balances. With the right staff, accurate data, and a clear monitoring plan, practices can achieve over 95% collection on claims. By prioritizing both insurance and patient collections, practices can ensure financial stability and reduce the burden of bad debt.
Your success in collecting for your services is up to you, your team, and your patients’ understanding of their responsibilities. Consistency is key in every aspect of AR management.
