Coding & Billing

Financial Management

By: Judith English

Published: 10/10/2007

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Accounts Receivable 101


Judith L. English Accounts receivable means different things to different people.

  • To the CPA, A/R is an asset;
  • to the governing body, A/R is a way to measure the success or failure of the administrator;
  • to the administrator, A/R denotes whether the collections specialist is performing her job properly;
  • and to the collector, A/R is the standard by which she measures her daily accomplishments.

Judith L. English Ins and outs of A/R
Here are some tips for measuring and collecting the money that's owed to your surgical facility.

  • Measuring your days in A/R. One of the most common ways to gauge the efficiency of your A/R system is to measure the average amount of time a billed charge remains in A/R before you collect it. The goal, of course, is to keep this number as low as possible.

First, add the last three months or six months of your total billed charges to obtain a rolling average, and then divide that number by the calendar or business days in that time period. This will provide you with your average daily charge. Next, divide your current A/R balance by that average daily charge. This tells you the amount of days a charge remains in your system, and from there you can set a goal. For example, if you find that your average number of days spent in A/R is 67, aim to decrease that amount to fewer than 50 days in your future collections.

  • Trend-spotting. A look at A/R can help you analyze your system for trends and weaknesses, pinpointing specific areas where you should concentrate your collection efforts. To organize your data, check your billing software package - most will let you measure your A/R by payer, physician provider or specialty. You can also export data from the software into a spreadsheet, and from there, manipulate it to fit your needs.

Once your information is clearly laid out, you can easily spot trends: Have there been a series of Medicaid non-payments due to a computer problem? Are implants not being paid for specific procedures? Has the average reimbursement for ENTs dipped due to decreased volumes or improper payments?

Money Matters

? THREE FEWER CODES HCPCS Codes 50559 (renal endoscopy/radiotracer), 50959 (urethral endoscopy) and 50978 (urethral endoscopy) will be deleted from the ASC list effective Jan. 1. The reason: CMS is deleting these codes from the CPT 2005 code book.

? A PENNY FOR YOUR BAD DEBT If you've got a file cabinet full of aged accounts receivable that you've charged-off and deemed worthless, there's a company that's willing to buy them - for a penny on the dollar. Senex (www.senexco.com) is a bad-debt-purchasing service that has bought more than $250 million in hospital bad debt accounts and is now offering its services to the ambulatory surgery center market.

? CPT 66984 Medicare reimbursement to a hospital for the most commonly billed cataract procedure, CPT 66984, will be more than 36 percent higher than the ASC payment in 2005, according to a MedPAC report. The unadjusted national fee for CPT 66984 to an ASC will be $973 in 2005, while the corresponding hospital payment will be $1,329.

When you've zeroed in on your problem areas, create a denial log to record errors that cause delayed claims - such as form errors, coding errors or clearinghouse errors. Once you've identified these errors, you can quickly fix them and resume the reimbursement flow. It also helps to maintain a delinquent operative notes log so your staff can quickly spot and report trends to you.

  • Divide and conquer. If looking at your A/R balance as a whole is overwhelming, dividing it into smaller categories can make both analysis and day-to-day collections far less daunting. Grouping the balance into buckets or categories denoting length of time since the date of service can also make it easier to determine if there is a weakness in one of the assigned areas of collection. It also exposes problem accounts.

Divide your balance into groups according to their length of time in A/R - 30 days, 60 days, 90 days and more than 120 days. The goal of your collection staff should be to touch each account at least once a month - twice a month for those problem 120-days plus accounts. Hopefully, however, you won't have too many of those problem accounts: According to the national benchmarking MGMA ASC Performance Survey of 2003, the 120-days plus portion of your total A/R should be no more than 15 percent.

Medicare Increases Payment Rates for Hospital Outpatient Services

Hospital outpatient departments will receive higher payments starting Jan. 1, courtesy of a final rule published in the Nov. 15 Federal Register by the CMS. The rule provides for a 3.3 percent inflation update in payment rates for outpatient services, higher payments for cancer screenings and setting rates for brachytherapy on charges adjusted to cost. In addition, CMS will pay a projected aggregate increase of 4 percent in physician's fees in 2005. However, qualifying for outlier payments will get a little tougher.

CMS's rule change for outliers - additional payments for unexpectedly high costs - applies a fixed-dollar threshold in addition to the current percentage-based threshold. So to be eligible for an outlier payment in the outpatient setting, the cost of the procedure would have to exceed both thresholds: For 2005, these thresholds are 1.75 times the payment of the APC and $1,175 over the APC payment rate.

Among the procedures that will receive payment increases over and above the 3.3 percent general increase are screening colonoscopy, which will get an extra 8.3 percent, and screening flexible sigmoidoscopies (6.8). The increase means that HOPDs will now receive higher payments than ASCs for colonoscopies, which are paid at the Medicare Group 2 level (formerly $446 for ASCs and $412.85 for the hospital).

"Hopefully this will save money in healthcare down the road," says Don May, the vice president of policy for the American Hospital Association. "The higher payments will help to cover the costs hospitals incur. Colonoscopies can be done in multiple settings, so the most expensive patients are coming to hospitals - those with comorbidities or complications - the higher payments are necessary for more complex patients."

Melody Knapp, RN, BSN, MBA, manager of decision support for Southern Ohio Medical Center in Portsmouth, Ohio recommends administrators develop a true costing system to capture accurate expenses of each procedure done at a hospital. "Really drill down to each procedure to see how much it costs," she says. "That's harder to do in a hospital than a freestanding center because of overhead costs and bad debt."

Ms. Knapp recommends administrators look at 100 cases to determine an average time and cost per procedure. Staff requirements and time spent in the OR will be much different across cases; you can't lump different procedures together to calculate a general surgical expense per case. Also take the time to update your costing system every time a new procedure is developed or a new supply is used. - Daniel Cook

Have your collections specialist focus on one bucket each week of the month. For example, the first week's target could be those accounts languishing unpaid for 90 days to 120 days, while the second week's focus are those totaling 45 days to 60 days. In the third week, the collector can then move on to the 15-day and 30-day accounts. Finally, she should devote the fourth week to revisiting those 90- and 120-day-plus accounts she touched in the first week.

For another collections option, section out your A/R by payer. Have your collection specialist concentrate on a quarter of these each week - this way, she can discuss all outstanding claims, regardless of age, with one phone call to a particular payer.

  • Set your goals and reward your people. Setting goals is an important aspect of collections; it stands as a definitive method for measuring your collection efforts. To estimate a monthly goal, start with your current budget for monthly collections, and add an additional percentage for A/R more than 120 days old (you can arrive at this figure by calculating the difference between the national benchmark average of 15 percent and your own 120-day plus percentage). Be sure to provide your collection specialists with a spreadsheet that presents an ongoing comparison of the daily goal versus their actual collection results. Also, post charts showing weekly, monthly or quarterly progress.

When your collectors meet their goals, reward them. How you do this is up to you: monetary rewards, gift certificates or extra vacation days.

Also, be sure to recognize the worker's success in the presence of her peers - a little pat on the back can go a long way toward promoting continued success.

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