Improve Cash Flow in Your Practice
Dentist Case Study #412
The doctor’s concerns: “Collections are down in my practice and I have no idea why. I’m really struggling with cash flow and need some guidance to get my practice back on the right track.”
This is a common problem for dentists who contact McKenzie Management for help. Let’s take a look at his practice stats:
Average monthly net collections: $76,000
Breaking Down the Numbers
That wasn’t the only bad news for our doctor. The Accounts Receivable to Net Production Ratio should be 1:1 or less (this report should NOT include credit balances, as it reduces the balance and gives a false total). So Accounts Receivable / Net Production = 1.0 or less. His was at 1.63.
Now let’s look at the percentage of accounts more than 90 days old. At a healthy practice, this is less than 12%. His number? 20%.
Over-the-Counter collections (the revenue collected at the time of service for a family practice that accepts insurance assignment) should be about 45% of net production. To better determine where this doctor’s collections actually should fall, we divided his total payments less the insurance payments by total net production. So $23,625 / $87,500 = 27%, which is well below the 45% benchmark. Bottom line: The doctor is not collecting enough money at the time of service, which negatively impacts all the other numbers.
Here’s how McKenzie Management helped him correct this problem and improve cash flow in his practice:
Because this doctor accepts “assignment of benefits,” it’s important that his Financial Coordinator is trained to determine, as closely as possible, how much insurance will pay for treatment – without spending time getting the pre-authorization. Why? Waiting on pre-authorization delays the scheduling process, and if patients have to wait a few weeks to schedule, there’s a chance they may opt not to go forward with treatment.
The doctor trained his Coordinator to place calls or request information from the insurance company’s website to determine the patient’s deductibles, limitations, waiting periods and maximum. If the plan is a PPO, knowing this information, along with the fee that is allowed, makes it possible for the Coordinator to pretty closely estimate how much of the bill insurance will cover. That means the balance can be collected from patients at the time of service, improving the practice’s collections rate and increasing cash flow.
The Financial Agreement Form
-The patient’s name
The form goes in the patient’s record, along with an appointment note that indicates how much the patient has agreed to pay. This also should be included in the Guarantor/Account notes in the computer for reference, as well as on the back of the appointment card. This serves as another reminder to the patient.
The form only takes a few minutes to fill out, but ensures patients know exactly how much they’re expected to pay at the time of service. There’s no surprises or confusion. Just remember it’s also important to make it clear that the number is only an estimate; once insurance remits payment, the patient will be expected to cover any additional balance. Patients should also leave the practice knowing that if the insurance company pays more than expected, they’ll receive a refund check.
The truth is, many dentists struggle with cash flow. If you’re one of them, feel free to give us a call. We’ll give you even more guidance so you can achieve the same success.
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