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?
Production (Credit) Adjustments
Collection (Debit) Adjustments
Production adjustments reduce the dollar amount of the gross production. A practice collects money based on the net production of the practice.
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.
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