Altruis Blog

Medical Billing Revenue Cycle Management: Are Gross Versus Net Margins Hurting Your Mission?

Mar 14, 2023 7:05:00 AM / by Chris Caspar, CEO

A man tries to understand medical billing collection rates

When it comes to medical billing collection rates, the phrase “no margin, no mission” can ring too true. After all, if a care center doesn’t bring in enough revenue to keep things running, any higher purpose they have is meaningless. That’s why you devote so much time to keeping your center or federally qualified health center afloat. But it’s important to remember that the reverse of this well-known phrase 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 medical billing revenue cycle management (RCM) will bolster your center’s economic stability. The ability of any provider—whether they have a safety net or not—to receive payments for billed services promptly keeps profit margins healthy, and it also 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?

Here’s what you need to know about revenue cycle management as a strategy to get beyond the stress of cash flow and get back into the exam room.

Revenue Cycle Management: The Secret to a Short, Happy (AR) Life

When medical bills are submitted for payment, how long does it take you to get your money? The sooner a patient’s account is marked “paid,” the better it is for everyone involved—and the more likely your center is to recoup their costs from treatment.

Here’s the truth: 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 this account will be paid in full.

Billing and accounts receivable teams are like safety net providers. In collecting these payments, they keep things running. These safety net providers need to aim for a revenue cycle timespan of fewer than 60 days to maximize intake; you need to keep the money flowing.

Measure What Matters: Net, Not Gross Margins 

Is your center spending too much time measuring your gross collection rate? Here’s a secret: The gross collection rate isn’t really that important. It simply reflects the ratio between what you charge and what the payer allows.

All this figure amounts to is the total payments received over a specific period divided by your total charges without write-offs. It doesn’t mean much in real world application.

Here’s an example of why your gross collection rate doesn’t have that much impact on whether or not you can keep the lights on, so to speak: If you charge $1,000 for services provided and you receive a payment of $650, you have a 65 percent gross collection rate. However, if the payer’s rate is set at $650 and you charge $650, your gross collection rate is 100 percent. The gross collection percentage is higher, but it doesn’t affect anything in execution.

A gross collection rate of 100 percent sounds good in theory, but it doesn’t do much for your bottom line. And more importantly, if you have a high Medicaid/Medicare payer mix, it really doesn’t matter what you charge—you’ll get paid a set amount. So, why spend valuable time focusing on this figure?

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. To come up with the net collection rate, you examine all your payments received from a particular time period and divide these total payments received by the charges after adjustments, equaling the total net collection rate. 

How does this work? Here’s an example. If your total payments received are $500,000 and your charges after adjustments are $550,000, you divide $500,000 by $550,000, totaling a net collection rate of 91 percent.

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

Medical Billing Revenue Cycle Management: 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 providers’ ability to maintain a competitive edge.

Is It Time to Outsource Medical Billing?

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

A full-service revenue cycle management solution can provide the foundation to address both margin and mission in one. You can build on this foundation to foster improved administrative performance, better compliance, new patient services, more strategic use of your staff, and better 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 with outsourced medical billing services. We resolve the immediate issue, which starts bringing in money sooner. At the same time, we address systemic issues, which helps keep revenue flowing.

Here are the results for one Altruis client:

  • 75% reduction in AR Days from 115 to 29
  • Medicaid AR Days at an all-time low of 22
  • Overall AR Days below the national standard of 45
  • Reduction from 48% of AR over 90 Days to 20% of AR over 90 Days
  • 10% increase in Cash Collection, up $2.54M from the prior year
  • Net Collection improvement from 71% to 95%

While the numbers speak for themselves, our client also had rave reviews about what outsourcing medical billing did for their operations as a whole:

“We have used the services of Altruis and were very satisfied with their results. We have found them to be efficient, accurate, and trustworthy. Having confidence in their services took a huge weight off of our shoulders. They not only file fast and accurately, but they never give up on a claim and work it for every dollar they can get. I would highly recommend their services to any medical professional or practice.”

Calm Patient Fears Regarding Payment for Treatment

Investing in medical billing revenue cycle management allows you to reach more patients—especially those who avoid care because of financial constraints. Care providers know all too well that when patients delay care because of cost concerns, their conditions often worsen and their medical costs become even greater. We can help here, too. Our customized solutions can allow patients to pay at a pace that is comfortable for them. That means they not only end up paying their medical bills (which means more incoming revenue for you), but they also get access to the healthcare they need (which means better care for your patients).

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.

Optimize Retroactive Medicaid Reimbursements

We’ve all heard about states trying to abolish retroactive Medicaid through the passage of Section 1115 demonstration waivers. This is a serious threat to providing great patient care. However, as long as retroactive Medicaid is still allowed, Altruis remains committed to helping clients collect those funds and turn potential write-offs into meaningful revenue.

The truth about retroactive Medicaid? 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 regularly analyzes all of your self-pay encounters for the last year to identify when a patient has qualified to receive Medicaid coverage. Once a patient is enrolled, their eligibility is applied retroactively to cover the costs of previously provided care as per the retroactive eligibility rules in each state. Altruis then bills Medicaid for these encounters and collects for previously uncompensated care, bringing in revenue that may have otherwise never come to fruition.

Improve 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 more important than ever to laser-focus your efforts on providing quality patient care.

Outsourcing medical billing and collection lets you do just this, while, at the same time, improving cash flow and increasing income, improving your medical billing collection rates, and fueling your mission. At Altruis, we can work with your existing systems and tailor our partnership to your needs. 

We understand your needs. We’ll handle the margin. You take care of the mission.

Request a Free Needs Assessment with Altruis

 

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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