08.07.09 Issue #387 Forward This Newsletter To A Colleague


Nancy Caudill
Senior Consultant
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My Adjustments Are Killing Me!

Dr. George Jewson – Case Study #312

Dr. Jewson contacted McKenzie Management seeking help. Contrary to many of the inquiries that we receive, he wasn’t concerned about the number of new patients dropping off, openings in his schedule and other common issues.  His production adjustments were out of control, in his opinion, and this was affecting the revenue of his practice.

Dr. Jewson’s practice had a monthly gross production of $83,000 and a monthly net production of $45,650.  This was production adjustments of $37,350 or 55% of his gross production.  Collections were $44,737 or 98% which appears to be excellent, but the red flag is the large amount of production adjustments.

Why are adjustments used?
Dental software programs are set up with basic adjustment codes, such as Credit and Debit Adjustments, Miscellaneous Adjustments, Refunds, Insurance adjustments, etc.  In order to improve the use of production and collection adjustments, I recommended that Dr. Jewson establish more specific adjustment codes.

Production (Credit) Adjustments

  • Employee Courtesy for Dentistry
  • Family Courtesy for Dentistry
  • Senior Courtesy
  • Cash Courtesy
  • PPO Adjustment
  • Bad Debt Write-Off (smaller balances that are uncollectible but not turned over to a collection agency)
  • Collection Write-Off (accounts that are turned over to a collection agency)
  • Small Balance Write-Off (used when a patient is not returning and their balance is less than $10)
  • Collection Agency Fee
  • Doctor Courtesy (used when the doctor elects to reduce the patient’s fee)
  • Transfer Credit to another account/family member
  • Corrected Post-credit

Collection (Debit) Adjustments

  • Refund to Patient
  • Refund to Insurance
  • Refund-no check issued (used when the credit balance is small or the patient’s mailing address is incorrect and the patient can’t be contacted)
  • NSF Check Recharge (used when a check is returned from the bank because of insufficient funds)
  • NSF Fee
  • Recharge Collection Write-Off (used when the collection agency collects on an account that was written off when turned over)
  • Transfer Debit to another account/family member (should equal the “transfer credit” totals)
  • Corrected Post-debit

Production adjustments reduce the dollar amount of the gross production. A practice collects money based on the net production of the practice.

Red Flags
Dr. Jewson was posting over 7% of his gross production to “doctor courtesy.” He was giving away 7% of his production to his friends, other professionals, or patients that he felt guilty charging his normal fee. Every doctor is different when it comes to how much he wants to give away. Dr. Jewson did not realize that he was giving away $5,810 a month!

Bad debt and collection adjustments should be no more than 2% of the gross production. Dr. Jewson’s bad debt and collection adjustments were averaging 3% of the total gross production, or $2,490 a month. Remember that he was collecting 98% and this seemed excellent?  Because the Financial Coordinator was writing off 3%, she was writing off $830 more a month than acceptable. This reflects unclear financial arrangements with his patients, as well as a lack of systems for collecting unpaid balances from patients.

PPO adjustments made up 42% of Dr. Jewson’s gross production.  This is $34,860 a month. This is a lot of lost revenue due to his participation in PPO plans. Upon further evaluation, it was evident that his Financial Coordinator was posting the insurance adjustments incorrectly. It was not possible to request additional payments from the patients, as this would be very bad for patient relations.

There is no industry standard for PPO adjustments.  Some offices have already reduced their gross production for each PPO plan, therefore requiring very little adjustments posted to accounts.  Many offices always post their office fees, requiring a much higher PPO adjustment when the insurance check is received.  What is important is to confirm that the Financial Coordinator has a total understanding of how to post adjustments correctly and collect the accurate amount from the patient. The remainder of Dr. Jewson’s adjustments were made up of the other codes.

A monthly monitor was created for Dr. Jewson that included all the information listed above. The goal was to reduce the red flag adjustments over a six-month period to allow for increased collections based on a higher net production.  A column on the monitor revealed the average over the past 12 months and the anticipated new goal for each adjustment which, in turn, will effect net production and collections. Financial arrangements were established for all the patients that would have an investment that needed to be paid, as well as improved past due collection efforts to reduce the bad debt and collection agency adjustments.

Dr. Jewson stopped giving away his dentistry and realized that his friends and patients still liked him! The Financial Coordinator spoke with various insurance representatives to learn how to properly adjust the patients’ accounts and what the patient is and is not responsible for. At the end of the first six months, the total adjustments were reduced to 32% of gross production, increasing the net production to $56,440. With collections increasing to 99%, the average collections were $55,876. This improves cash flow by $11,139 a month or $133,668 a year!

Contact McKenzie Management to learn how you can increase your revenue without working harder, longer hours.

If you would like more information on how McKenzie's Practice Enrichment Programs can help you IMPLEMENT proven strategies, email info@mckenziemgmt.com.

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