Your Adjustments Can Break Your Bank!
Your first question may be: “what is an adjustment?” And a reasonable question it is! Let’s briefly review production and collection adjustments that may take place in your office every day.
There is also the dreaded but accepted “PPO” adjustment, but I won’t go into detail about that one here. Other production adjustments come in the form of a “bad debt” write-off, “small balance” write-off, “uncollectible” write-off, etc. I would like to focus on the “bad debt” and “uncollectible” adjustments below.
You just hired Susie, who has never worked in a dental office before. She is unfamiliar with how PPO adjustments are handled, besides being told that the patient doesn’t pay the difference between the practice fee and the allowable fee. Your fee for a service was $100, and the PPO allowable fee was $80 and covered at 80%. Susie, not knowing any better due to lack of proper training, receives the insurance check for $64 (80% of the $80 PPO fee). She proceeds to adjust the remaining balance of $36, leaving the patient with either a $0 balance or a credit balance of $16, which was the 20% patient portion of the reduced fee of $80 IF it had been collected at the time of service. You are given a request for a refund for $16, at which time you send a refund check.
Another example is an inexperienced business coordinator, having not been taught how to make collection calls to delinquent accounts, sees an adjustment code called “uncollectible” and feels that it’s appropriate to write this balance off. She has sent five monthly statements with no response so it must be “uncollectible” at this point. In this scenario, the posts could add up to thousands of dollars a year.
It is also suggested that if your practice management allows, set up an adjustment code that more accurately describes the adjustment that is being posted. Examples would be: 10% Cash Courtesy, Employee Family, Employee, Posted in Error (Credit), Posted in Error (Debit), Small Credit Balance Adjustment, ABC Insurance Adjustment, Small Uncollectible Adjustment, Finance Charge Adjustment, Old Balance over 1 Year Adjustment, etc. The more categories there are, the easier it is to review the adjustments for accuracy.
Keep your production adjustments to a minimum. Monitor the percentage of adjustments compared to your gross production monthly. It should not vary much from month-to-month if properly posted.
For more information about receiving an analysis of your Business Operational Systems, contact McKenzie Management today.
McKenzie Newsletter Information:
To unsubscribe: To discontinue receiving the Sally McKenzie eManagment newsletter,
click on the link at the very bottom of this page for instant removal,
To report technical problems with this newsletter or to request technical help,
please send a descriptive email to: email@example.com
To request services, products or general inquires about The McKenzie Company activities
please send a descriptive email to: firstname.lastname@example.org
If you would like to have any of your dental practice concerns answered personally by Sally McKenzie,
please send a descriptive email to her at: email@example.com
Copyrights 1980-Present The McKenzie Company - All Rights Reserved.