Regardless of size, every company is concerned with cash today. After all, paying bills is dependent upon cash—growing the business is dependent upon cash and staying in business is dependent upon cash. That’s why your computer system’s executive dashboard shows you cash by the day, if not by the minute.
So how do you grow—or stay in—your business by growing/collecting your cash? In this article I will address the trends and measures seen in many successful HME companies that result in increased cash. Reduce excess and avoid bad habits by identifying what it really takes to get paid. You can then more efficiently move forward in maximizing cash collections.
The Front End
When looking at your operation for the best ways to maximize cash collections, you first need to look at the front end of your organization. It is the intake process that determines payments. When asked, successful HME providers all stated that documentation on the front end is the key to both getting and keeping their money.
As is the case with every provider today, audits are paralyzing HME businesses big and small. Due to the scrutiny placed on HME providers many companies are gathering all documentation up front, and only once all documentation is secured will an item be dispensed. Rather than focusing on service first, you now have to make sure you are paid first and then you can provide the needed item.
For example, for oxygen patients you must be able to prove there were other treatments tried before the oxygen will be paid. Chart/progress notes will typically show this, but you will need this in an audit. After all, the notes and justification you obtain up front will result in cash that you will receive and keep later.
Regardless of the type of item and its cost, Medicare will not accept one single medical necessity document in the event of an audit. Minimally, you need a progress or chart note in addition to the written order. As a result, you should obtain all this information for every new item ordered for a Medicare patient. I recommend that you have your intake department request this information prior to dispensing product. Set a goal of how often you should be able to obtain it (this will vary by product category) and measure against this by way of an internal audit. Based on results of the audit, train/retrain as necessary.
Track and trend results for comparison purposes. For a wheelchair, for example, ensure that you have proof of insufficient, inadequate MRADL performance without use of the chair. Make sure there’s an explanation for why a cane, crutches or a walker will not suffice. Finally, ensure that there is documentation of a verbal home assessment taken prior to delivery.
This is just a smattering of what you will need per product to ensure you will pass an audit for a manual wheelchair (use the DME MAC Cert Error List of Items to determine your percentage threshold for obtaining this information). Some HME providers also find the DME MACs’ Documentation Checklists helpful. Remember that if you don’t pass an audit but you persist and your documentation is clean and complete, you should be able to keep your money on appeal.
Expect the process to take an extensive period of time—Administrative Law Judge (ALJ) appeals can take a year or more—and this is the real shame since small companies may not be able to withstand this type of lengthy process.
Measuring Effectiveness
The amount of money you keep in an audit is not the only measure of success; another is how much cash you bring in the first time you bill. How do you measure this? For receivable dollars, this is simple and objective: measure and work denials daily and work your accounts receivable buckets by payer.
For example, take your payer types and create an aged accounts receivable report by each payer category. First run the report by receivables in the 120-plus day column. If this represents 30-plus percent of your total A/R, run an aging of 120, 150, 180 days, etc. If necessary, expand the days until you hit the representative mix of the 120-plus day column. Set a goal to work X number of accounts per day.
Caution: staff loves to dwell on minutia, so ensure that they stay on task. In other words, the typical employee will state that the reason they can’t meet their goals is because there are too many interruptions such as patient calls or coworker questions. Remove those obstacles by staggering patient calls or eliminate them from the staff’s responsibilities altogether. Also ensure that denials are worked daily so that you maintain control over this area. Moreover, use denials as training tools for prevention.
Work denials by dollar amount, reason and/or item/HCPC. Since you are working them daily, you should no longer encounter timely appeals process deadline challenges. By measuring A/R and denials you are essentially touching the majority of outstanding receivables. As you complete your 120-plus column on the aging reports, move the target to the left. In the end, if you are working all receivables 60 days and newer as well as denials, you have created a win-win situation.
This is the ultimate goal and, if achieved, it should be rewarded. After all, by working all receivables 60 days and newer in addition to resolving daily denials, you should see a marked increase in cash collections.
Solid Staffing
Invariably, proper staffing is a contributing factor in managing receivables and maximizing collectability. In most companies, staff is divided by payer. In other words, billers/collectors typically work in a select group, by payer. As companies grow, the payer team grows (and may have to be further segregated by alpha split within the payer).
Today, as Medicaid payers are changing to managed care plans, staff will be split by managed care groups. When working receivables, it is clear that working with a third-party payer is significantly different than working with patient pay collections. Third-party collectors are typically very matter of fact and persistent people. If the insurance company doesn’t pay by a specific date, the payer is called and asked for the check number and/or a date by when to expect payment.
Patient collections staff, on the other hand, must be discerning and understanding but clear and steadfast when necessary. Negotiating a discount with a customer, for example, requires a different skillset than checking payment status with Blue Cross.
For patient collections, the employee must have the right mix of compassion and tough love. They need to understand and relate to people while keeping in mind the chief objective of collecting what you are owed. After all, we all go to the doctor and solidify financial arrangements before we ever see the physician. DME companies cannot be any different if we intend to maximize cash collections.
Collecting Copays
As mentioned, collecting money from a patient requires a special person. Moreover, timing is everything. Collecting copay portions up front is really the key to gaining control over the patient pay receivable. As is often said, the problem is not collecting the first payment up front. The real challenge is collecting subsequent months’ payments from rental patients. Many companies rely on auto-debiting (with written permission, of course). For supply patients, it is quite simply a matter of collecting outstanding balances and copays before relinquishing, or drop shipping, more supplies.
The control is actually yours in this case. This requires consistency and constant attention to patient portion/pay receivables. The law of diminishing return applies to outstanding patient receivables and thus you should be wary of allowing these receivables to grow beyond 60-90 days. Establish a goal of working patient balances timely or prepare to outsource this function.
Using a generic collection agency is typically ineffective, but using an automated HME private pay invoicing/collection solution usually results in increased patient pay collections. Otherwise, if neither of these approaches is used, anticipate hefty write-offs.
Search your talent pool for the right candidate as described above to handle this function and set achievable goals. As you know, cash is still king.
Adopting Automation
It goes without saying that automation is essential for the billing department. After all, most payers today accept electronic claims. As a goal, aim for 95-plus percent of all claims to be submitted electronically. As more managed care companies contract with Medicare and Medicaid, they may not initially be able to accept electronic claims, especially for secondary payment. This is a costly consequence of the continued infiltration of managed care payers.
Nonetheless, check with these payers regularly for electronic transmission potential as many will eventually add it. Specifically, if you are currently submitting 80 percent of all claims electronically, work to improve this number. If you are already billing your claims electronically, work on auto posting—this imposes EFT/ERN—and automated denial tracking.
As mentioned, sort denials to work in categories—by denial reason, by HCPC, date, dollar, etc. Have your software set up to automatically write off small dollar balances. For collection projects, have your software track cash by date of service to learn how much money you obtain directly from your collection efforts on old outstanding receivables. Measure this against projections.
Finally, measure your cash as a percentage of net billed—lag 30-45 days depending on contract terms. Seek a minimum of 85-90 percent payment receipt within this period of time (some use a 60-day term) to maximize cash collections.
Targeted Training
As is evident, goals and measures are integral to the success of your company’s billing/collection effort. Measuring DSO (day’s sales outstanding), cash as a percentage of net billed, denials, write-offs and A/R by payer and age are typical measures seen throughout the HME industry.
By setting goals based on these measures and quantifying results, you should know quite easily who needs training. If you expect your low performers to show improvement, provide training directed at their weaknesses. This type of training will help you determine whether or not the staff is equipped to handle their job responsibilities. The low performers will either rise to meet the middle or high performers’ achievement levels or they will be coached into other positions within the company or leave.
Goals and training are the true indicators of your accomplishments and allow you to set new benchmarks. Together, the company should realize improved productivity and cash collections.
Cash-Based Conclusions
In summary, by examining the six issues addressed here, you should find trends and measures in your office to maximize reimbursement. Evaluate your front end and employ the right staff to equip your back end for maximum productivity. You should then be poised to set goals and benchmarks. Ensure that you include up front copay collections, create efficiencies through automation initiatives and promote remediation through training. In several months you should begin to see a difference in your DSO and your overall receivable collections.
A persistent, determined and vigilant focus on receivables management should help you seize and maintain control over the key element of a business that not only survives but thrives—cash!
Sidebar
Defusing Denials
Since timely filing denials are most often irreversible, it behooves you to consider working these denials first. If this is a persistent problem, you should create a timeline/schedule for all your major payers by timely filing deadline. Do this for both initial claim submission and appeals process. For example, for Medicare you have one year to submit your initial claim but you only have 120 days to appeal a denial. After polling many HME providers about their top A/R collection practices, their top 10 responses are listed below:
1) Get all your documentation up front to secure and safeguard your payments.
2) Verify insurance. Make sure staff knows exactly what to look for when verifying insurance, and do this routinely to catch insurance changes.
3) Work denials as soon as they come in (daily) to ensure they not only get done but they are completed in a timely manner.
4) Start working A/R on or before day 60. Collecting A/R after six months is synonymous with working uncollectibles.
5) To find your real A/R problems, tap into your intake department—they are responsible for the bulk of all errors.
6) Post cash receipts timely and write-off uncollectible receivables to ensure accurate A/R—auto-posting helps.
7) Work from a top-50 account list (accounts with largest outstanding dollars), since this promotes direction and goal orientation.
8) Set goals by payer and segregate tasks by payer.
9) Ensure that all billing/collection staff understands how much money is in their “book of business”—they should know how much A/R are they responsible for.
10) Set and review goals and performance weekly and/or monthly to be sure staff stays on task and you continually measure A/R effectiveness.
Sidebar
DSO Calculation Review
- Net revenue for period / number of days in period = daily net revenue
- Ending A/R balance / daily net revenue = DSO
| Item | Payer | Documentation Requirements/ Rules Engine (*list of requirements may not be all-inclusive; check Medicare website for complete list) |
| Standard Wheelchair | Medicare | MRADL insufficiencies, why walker, cane, crutch won’t be adequate, verbal home assessment, ability to use wheelchair in the home, same/similar check, patient discharged, not in home health/nursing home stay, eligibility check, written order, chart notes, length of need |
| Oxygen | Medicare | Qualifying blood gas/oximetry test (in chronic stable state or within two days of discharge) – include date and time of test (three tests in same session for testing on exercise), previous treatment tried (e.g. Lasix), prescription/written order to include route of administration and liter flow and duration, (e.g. 2 LPM 24 hours/day via nasal cannula), may use section C of CMN for prescription info, chart notes, length of need, must see doctor within 30 days of initial need, CMN to be complete and accurate |
Sidebar
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