Are you closely reviewing your practice’s bad debt?

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Have you been reviewing your practice revenue situation before the insurance AR turns out to be bad debt or write off amount? Is your current billing vendor appraising you on your AR backlog? And explains the reasons? Remember, it is hard to collect payments and increases manual effort as the claims get older.

Most medical billing software provides a basic insurance AR backlog report that will indicate how revenue is categorized in a time bucket. Anything more than 120+ days, it becomes Doubtful Debt (money that predicted to be uncollected and turn into bad debt).

Here is where your billing vendor plays a vital role. And as a practice owner or manager, you also play a critical role in ensuring your billing vendor prevents bad debt. In an ideal situation, claims would get paid within 30-45 days from the date of submission. For the rest, follow a systematic process as indicated below. As the healthcare reimbursement rules changes very frequently it is important that this prevention process is a continuous activity in the revenue cycle process.

1. Start from the claims that are 120 days+ older, categorize them by high dollar claims
2. Look at the denial code received from insurance. If the denial code can be addressed by the billing team themselves, create a resolution category and flag those claims under that resolution category. If not, call the insurance customer service for more details.
3. In parallel, have another team working on the resolutions. Find all the claims across all aging time buckets with the same denial code and fix the claims. This will prevent any new claims coming into a higher aging time bucket.
4. Then work backward on the aging categories to address all the claims by following step 2 and 3
5. Document the resolution as a lesson learned and close the feedback loop with the team that submits the claims. This will not only prevent bad debt but also increases the claims' first pass rate.

To have a healthy cash flow and prevent bad debt to occur, it is important that practices' measure and monitor the following key revenue metrics

Account Receivable Trend 

• Due from insurance
• Due from patients
• Total account receivable

Days in A/R - Indicates average time it takes a claim to be paid

Percentage of A/R over 120 days

Thank you.