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How a Medical Billing Company Measures Office Financials – Part 1

April 28, 2016

MeasuringPracticeFinancials.jpgToday’s practice management software can crank out hundreds of reports to help you gauge the health of your practice, but quantity isn’t necessarily quality when it comes to practice analytics. While it’s always a good idea to keep an eye on several different metrics, there are a few numbers you should watch more closely than others. Here’s what medical billing specialists pay attention to when they measure practice financials.


1. The Accounts Receivable Aging Report

This is a good overall “barometer” of the health of the practice and how the medical billing department is performing. This macro view of your financials shows what’s been billed, what’s been collected, and how long it’s taking you to get paid. The A/R aging report works best paired with other, more granular reports such as aging and payment reports by payer, which helps you identify trends and potential problems. 

Ideally, the vast majority of your claims will be paid and resolved before 45 days, although this number may be higher if your patient population includes a high percentage of worker’s comp, auto accident, and out-of-state patients. 

A billing service checks aging by payer, as well. If one payer has a consistently higher percentage of claims unpaid after 30 days, it’s time to investigate underlying issues such as coding, documentation, prior authorization requirements, and any other issues specific to that payer that is causing claims to get hung up. Too often, practices lack the time and expertise to drill down into these rejection issues, which is where a billing consultant can be helpful to pinpoint bottlenecks and reimbursement issues. 

2. The Payer Mix Ratio

This is an especially important report to watch on a regular basis, because it helps you identify who are your most valuable insurance partnerships and which aren’t generating revenue that really impacts the bottom line. This ratio is basically the percentage each carrier contributes to your practice’s total revenue pie (individual payer receipts/total practice receipts), and it’s a useful metric when analyzed in tandem with the revenue per patient for each insurance contract. 

Why is it important to look at both? If you have a payer that represents 40% of your revenue, but revenue per patient is half that of another carrier that represents just 10% of your total, you might want to look at what adjustments you’re taking, for example, or how to increase the patient mix in favor of the higher revenue carrier. These numbers help you accurately value your insurance relationships and understand how each truly contributes to your overall financial picture. 

3. The Gross and Net Collections Ratio

This is a deceptively simple set of numbers that gives deep insight into your medical billing performance. Gross collections ratio is simply the actual amount you collect compared to total charges, and it helps you evaluate your fee schedule, especially when compared to national benchmarks for your specialty. But when you combine it with your net collections ratio, which is what you collect from each payer after deducting contractual dis-allowances. This figure is more important than ever, because it shows where you may be falling short in collecting everything you are due under a particular contract.

Related Article: 5 Medical Billing Questions You Should Know the Answers

Certain payers are notorious for disallowing charges that should be covered under the terms of your contract (Medicare, Blue Cross, Blue Shield, for example), and an experienced biller can identify problems when net collections lag and take steps to dispute and/or resolve these issues. 

In the end, the reports you run may come down to personal preference and what makes sense for your particular practice. However, no matter which you rely on, it’s important to run them regularly so you can quickly get a handle on trends and variances that affect your bottom line. 

If you have questions about your financial reports and collections, the billing experts at M-Scribe can help you identify the important metrics for your particular practice; contact us today at 888-727-4234 for a free consultation with our one of the medical billing experts. 


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