Are Adjustments Killing Your Collections?
Are adjustments killing your collections? Your first thought may be, “Adjustments don’t affect my collections – they affect my production.” Or may be you are not sure exactly how any adjustments affect anything. You would not be alone. Collection Adjustments are adjustments that are posted to an account that increases the patient’s balance. You could call it a “debit” adjustment; it is a “plus.” Examples of these adjustments would be:
We see the Posting Error adjustment often. It tells us many things: the production was not balanced by provider at the end of the day or the production was not entered into the computer in a timely manner because the information was not provided by the clinical team. Doctors are the biggest offenders of this. They wait until the next day to tell the business team what they performed on Mrs. Smith. Some practice management software will allow you to make the change after the fact and others will not, especially if it is between the end of the month and the first of the month.
Other than the Posting Error adjustment, these adjustments reduce the amount of money that was deposited into the bank; therefore, they are considered Collection Adjustments. Another exception to the rule would be a “small credit balance adjustment.” The patient has abandoned the practice and appears to not be returning. The Business Coordinator wants to “inactivate” the patient, but the patient has a small credit balance. There are no plans to refund the patient due to the small amount, so this adjustment is posted to bring the patient’s balance to zero.
To understand how the Collection Adjustments should be applied, the difference between the total amount of cash, checks, credit and debit card payments that are deposited to the bank account MINUS the adjustments = NET collections.
Production Adjustments are all those PPO adjustments that take place, procedures that have been “downgraded” to lower reimbursing procedures, professional courtesies, cash discounts, senior discounts (we prefer to call them “courtesies”), uncompleted treatment that was posted earlier, etc. All these adjustments affect how much the patient was charged for treatment.
The difference between gross production and all the adjustments = NET production. Your practice collects the net production totals and not the gross. If there are no adjustments posted, then the gross and the net are the same figure. Since your practice collects on net production, the more that is adjusted the less is collected.
Case Study: Here is some interesting food for thought. Have you noticed that your Production Adjustments for this year have jumped up much higher by percentage than your gross production compared to last year? This could be a sign of problems in many areas. More PPO write-offs, more professional courtesies, and more denials that you won’t bill the patient for (such as professional cleanings that were performed too soon, x-rays that were taken too soon to be covered, etc.)
For example, a practice was averaging about 20% of their total gross production in production adjustments, as they were posting their office fees. All of a sudden, their adjustments jumped up to 34% of their gross production. What in the world could have happened? Professional courtesies, senior courtesies and other discounts have not changed. It was the PPO adjustments. The doctor had started performing more composite restorations opposed to amalgam restorations. Even though the fee was higher for the composites, the fee schedule was much lower and the adjustments were 50% instead of 33%. Over the course of a year, this made a huge difference in the amount the practice collected because the adjustments were higher for the resins compared to the amalgams.
Second Case Study: A client noticed that his collections had dropped off, even though his production was higher than the previous year. This made no sense! We determined that when the new financial coordinator took over, it was “assumed” that she knew what she was doing since she had worked in another dental office. Instead of collecting the patients’ portion at the time of service, she was just letting them walk out the door. When the insurance company paid, she simply wrote off the balance as a PPO adjustment. It took some detective work to figure this out, comparing EOBs to the adjustments posted and noticing that the amount of patient checks coming in compared to the previous year was much less.
As a business owner - review your monthly adjustment reports! If you don’t know how, call support for your software and ask them to go over it with you. In most cases it’s a matter of training to assure that your business team is working as productively, effectively and accurately as possible. Never assume that a new employee knows how to do something. They are bringing the same tool-box that they used in their previous office, and you need to discover what’s in there!
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