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Assess Medical Billing Services Performance Audit in Medical Practices

May 24, 2016

Assess-Medical-Billing-Services-1.jpgYour billing performance is one of the most important metrics to measure your practice’s overall financial health. Unfortunately, in many practices, not as much attention is given to billing and collections as to big picture numbers like revenue and provider productivity. 

But your collections numbers show you how effective your billing department is in getting you reimbursed for the services you provide, and you should be looking at them on a monthly basis. Whether you manage billing in house or contract it out to a service, here’s what you should be doing to assess your billing performance and audit your collections efforts. 

Collect the Right Data

To really understand your billing performance, you need to get accurate data points for the following:

  • Total charges
  • Contractual adjustments
  • Total collections
  • Day sales outstanding (DSO)
  • Total Accounts Receivable
  • A/R aging (0-30, 31-60, 61-90, 91-120, and more than 120 days)
  • Patient encounters

Collect the information for a 12-month period so you can better identify trends and spot potential trouble areas.

Create a Visual Roadmap

Choose your favorite analytics tool; in many cases, a simple spreadsheet program does the job well. You need a way to visualize your data so it tells a “story” all your stakeholders can understand. Previously, we discussed important ratios and metrics to help you drill down into your financial data, and you can plug these formulas into your spreadsheet to come up with benchmark data you can use to compare your practice to national averages. This lets you easily find variance from healthy ranges and identify opportunities for improvement. 

For example, national benchmarks for Dermatology show that total A/R should be about 150% of monthly charges; if your practice metrics are significantly higher than industry benchmarks for this marker, it points to a problem with collections. 

Compare Your Performance with Industry Benchmarks

Most billing services maintain data on key performance indicators by medical specialty; if you are working with one, or considering outsourcing your billing, you can and should ask for information about how your practice KPIs compare. If you don’t currently use a service, you can check with professional practice management associations such as the Medical Group Management Association (MGMA) for industry benchmark reports to get an idea of your group’s financial health. 

For example, if your DSO is hovering at 60 day or more, when industry benchmarks are more in the 25 to 30 day range, you may have a problem with your electronic claims. 

Know What the Data Shows

Pulling your data and comparing your performance to industry benchmarks is only useful if you know what the data mean. For example, if your practice has gross charges of $6 million, but you’re writing off $3 million and the industry benchmark for your specialty is about 35%, it suggests one of the following may be an issue:

  • A heavier than normal number of patients in capitated contracts. 
  • Coding or documentation issues leading to incorrect adjustments.
  • Too many write-offs for unpaid claims or uncollected coinsurance.

In this same scenario, what if your collection ratio after adjustments was just 50% or 60%? Besides pointing to a whole lot of money left on the table, data like this point to real problems with your billing department, such as:

  • Failing to process claims in a timely manner
  • Lack of resources to follow up on claims and collections.
  • Failing to collect copayments and coinsurance at time of service.

If you’re not sure how your billing department or service is performing, or want more information on how to audit your collections, contact the medical billing professionals at M-Scribe today for a consultation. We can help you improve your practice KPIs with good revenue cycle management policies.


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