It’s no secret that the DME industry is currently in a challenging reimbursement environment. The need to chase down more and more documentation to keep up with a flood of insurance payer audits—even as reimbursement rates decrease—can lead to an unproductive frenzy within a DME reimbursement department. You’re required to do more and more to get the job done right and keep the cash flowing, but hiring more people isn’t financially feasible. When this happens, it becomes easy to slip into a reactive management mode. It’s difficult to keep the house in order when it seems like you’re putting out fires all day every day. In this business, a proactive management style is one in which a manager can effectively understand where the next fire is likely to break out, and calmly make a plan to contain it before the fire is raging out of control. The unfortunate fact is that it is unlikely that you can actually address, in the moment, every single challenge you face right now. And you certainly can’t address problems that you’re not aware of until the damage is done. However, maximizing cash flow can be an excellent contributor to minimizing the future burdens of a weary DME business owner. So, my typical bias is to get proactive around reimbursement and collections processes first. The question then becomes, how can you adopt a proactive management style in the face of the vast challenges the industry is encountering? The answer is data and metrics. Whether you call it a business scorecard, an executive dashboard or simply key performance indicators (KPIs), data and metrics are the key to proactive management. They will reliably guide you to understanding where the low-hanging fruit is located, and help you focus on the areas that need immediate attention. When determining which KPIs you will choose, it’s important to remember that they should be meaningful to the goal you are trying to accomplish (maximizing collections) and easy to measure (so you don’t spend more time than necessary to collect the data). There are a few foolproof KPIs you can measure weekly to understand where to focus billing and collection staff efforts. Target collections goal—Set it, at a minimum, to 95-100 percent of the previous month’s net revenue. Keep in mind that if your collections never exceed 100 percent, your previous month’s net revenue outstanding AR will not decrease. Percentage to collections target as measured weekly—Determined by the number of collection days in the month. If you’re at 25 percent of the collections target when 25 percent of the month’s payment days have passed, 50 percent the next and so on, then you are on track for reaching your goal at the end of the monthly billing and collections cycle. If you are not on track to meet the goal, you’ll want to dig deeper and try to determine why so you can address the problem. Denial rate—The actual rate minus meaningless denials such as “billed over the allowable,” or “sequestration reductions.” Dig deeper to understand the top three to five types of denials you’re experiencing right now. Then implement a plan to reduce them by adjusting processes. In future weeks you can determine if your plan worked, and adjust if necessary. If your proactive management is successful those denials will be minimized and new denial reasons will move to the top to get the same attention. Accounts receivable more than 60 days by payer group or category—Run an AR report and create a pivot table by payer to determine your company’s most relevant payer categories based on total billing. For some companies it will be the standard categories such as Medicare, Medicaid, Commercial Insurance and Patient. For others it might be Medicare, Blue Cross/Blue Shield payers, all other commercial payers and Patient. Understand that if you are on top of working and responding to denials, this AR that is more than 60 days represents AR that was not resolved when the denial was worked. Now determine which payer category to focus collections efforts on right now to get the most bang for the labor buck, work it from high balance to low and keep your collections on target to meet your goal. These are some simple metrics to watch and act on in order to foster a proactive billing and collections management style. Even if the metrics look scary, when you begin tracking and reviewing them on a weekly basis, you’re bound to be encouraged as you see them improve.
