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Medical billing collection rates: Is gross vs net margin hurting your mission?

Jun 4, 2019 7:03:00 AM / by Chris Caspar, CEO

A man tries to understand medical billing collection ratesWhen it comes to medical billing collection rates, we’ve all heard “no margin, no mission.” That’s why you devote so much time to keeping your center afloat. But the reverse is also true: no mission, no margin. If you’re devoting too much time to the billing side of your practice, it’s the patients who suffer.

Of course, effective revenue cycle management (RCM) will bolster your center’s economic stability. The ability of any provider--safety net or otherwise--to receive payments for billed services in a timely manner keeps profit margins healthy and allows them to deliver higher levels of care to their patients.

But it’s that last bit that’s so important. Are you making enough time for your mission-- your patients?

We’re going to discuss a few finance-related topics and then offer you a way to get beyond the stress of cash flow and into the exam room.

A short, happy (AR) life

How long does it take you to get your money? The sooner a patient account is marked “paid,” the better for everyone involved. Once an account has gone 60 days past due, it has only a 70 percent chance of ever being recovered. And after six months of not being paid, there is only a 30 percent chance it will be paid in full.

This means safety net providers need to aim for a revenue cycle time span of well under 60 days. You need to keep the money flowing.

Measure what matters: net, not gross

Are you measuring your gross collection rate? It’s not really that important. It simply reflects the ratio between what you charge and what the payer allows.

It’s the total payments received over a specific period divided by your total charges without write-offs.

Here’s an example. If you charge $1000 for services provided and you receive a payment of $650, you have a 65% gross collection rate. If the payer’s rate is set at $650 and you only charge $650 your gross collection rate is 100%.

Sounds good, but it doesn’t do much for your bottom line. And as is obvious, if you have a high Medicaid/Medicare payer mix, it really doesn’t matter what you charge--you’ll get paid the same.

In contrast, the net--or adjusted--rate collection rate is more telling. That’s the total payments for the period divided by the total charges after the write-offs or adjustments have been made. You would take a particular time period, divide your total payments received--say, $500,000--by your charges after adjustments--let’s use $550,000--which equals a net collection rate of 91 percent.

The net rate collection is a true reflection of your overall financial performance, and we think it should be at least 90 percent. If you aren’t hitting that mark--or if you’re having trouble figuring it out--we can help with that, too.

Is your quest for margin hurting your mission?

Understandably, many providers believe devoting more time to revenue cycle management is the way to advance their mission. Unfortunately, though, the more time they devote toward their billing procedures, the less they have to focus on other core operations, such as managing their employees, ensuring compliance with government programs, performing crucial administrative tasks and, of course, caring for patients.

Even centers with their own internal billing departments struggle to stay up to date with the latest regulatory changes. By streamlining billing processes with outsourced revenue cycle management, it’s possible to establish an efficient billing solution that not only reduces overhead costs but also helps the centers to stay aligned with industry changes; this further boosts provider’s ability to maintain a competitive edge.

It may be time to outsource

If you want to improve medical billing collection rates and keep your AR lifespan short, it may be time to outsource.

A full-cycle revenue cycle management solution can provide the foundation and address both margin and mission. You can build on that foundation, and realize improved administrative performance, better compliance, new patient services, more strategic use of your staff and increased levels of quality patient care.

Outsourcing RCM ensures claims are submitted correctly the first time. It decreases collection expenses by taking advantage of procedures that reduce the overall revenue cycle process. And when claims are rejected, you can analyze them to ensure future denials are minimized--or to make a solid case for appeal.

Whether you need a temporary billing solution, a complete AR overhaul or help appealing denials, Altruis can help. We resolve the immediate issue, which starts bringing in money sooner. At the same time, we address systemic issues, which helps keep the revenues flowing.

Here are the results for one client:

  • 68% reduction in AR Days from 115 to 37
  • Medicaid AR Days at an all-time low of 22
  • Overall AR Days below national standard of 45
  • Reduction from 48% of AR over 90 Days to 20% of AR over 90 Days
  • 2% increase in Cash Collection, up $2.54M from the prior year
  • 3% Overall Cash Collection
  • 3% Managed Care collection rate
  • 1% Medicaid collection rate
  • 9% increase per claim payment

Bringing back patients

Investing in revenue cycle management also allows you to reach more patients--especially those who avoid care because of financial constraints. We can help here, too. Our customized solutions can be implemented to allow patients to pay at a pace that is comfortable for them. That means they not only end up paying their medical bills, but they also access the healthcare they so desperately need.

With the right RCM solution, providers can improve outreach to patients who have missed their appointments and let them know they can still make their visits even when they have an outstanding balance.

Optimizing Medicaid Reimbursements

We’ve all heard about states trying to abolish retroactive Medicaid through the passage of Section 1115 demonstration waivers. It’s a serious threat, but as long as we’re allowed to do it, we’re going to help you collect those funds and turn potential write-offs into meaningful revenue. Most, if not all, unpaid encounters go unchecked for retroactive Medicaid eligibility simply because of the lack of time and resources in the center. Asking your existing staff to manually review the eligibility status of every unpaid encounter, and bill them, is not only impractical, it’s virtually impossible.

Here’s how it works: Altruis analyzes all of your self-pay encounters on a regular basis to identify when a patient has been qualified to receive coverage. Once the patient is enrolled, their eligibility is applied retroactively to cover the costs of previously provided care as per the retroactive eligibility rules in your state. We then bill the encounters and collect for previously uncompensated care.

It all improves your medical billing collection rates

We get it. You’re overloaded, and so is your staff. Your patients are getting older and sicker. You have a shrinking pool of providers from which to hire. It’s now more important than ever to laser focus your efforts on providing quality patient care.

Outsourcing lets you do that, while, at the same time, improving cash flow and increasing income, improving your medical billing collection rates, fueling your mission. We can work with your existing systems to tailor our partnership to your needs. We also offer an array of services to support chronic care management and behavioral health efforts.

We understand your needs. We’ll handle the margin. You do the mission.

Topics: FQHC, medicare chronic care management, medicare reimbursement, Revenue Cycle Management, Chronic Care Management, Medicare, denials, reducing hospital readmissions

Chris Caspar, CEO

Written by Chris Caspar, CEO

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