6.3.16 Issue #743 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter

Nancy Caudill
Senior Consultant
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Are Production Adjustments Hurting Your Practice?
By Nancy Caudill, Senior Consultant

You probably don’t spend a lot of time thinking about production adjustments and how they impact your practice. You make adjustments when you need to and expect team members to do the same. The problem is, it’s easy for these adjustments to get out of control and really start eating into practice revenue.

What exactly are production adjustments? They can be made from your practice management software with codes that cover Credit Card and Debit Adjustments, Miscellaneous Adjustments, as well as Refund and Insurance Adjustments, to name a few. These adjustments reduce gross production; your practice collects money based on net production.

If your practice makes too many production adjustments or doesn’t use them correctly, it could cost you thousands of dollars every month. So what can you do to avoid this in your practice? Here’s an overview of how these adjustments can lead to problems, and tips to keep them from hurting your bottom line.

You Give Away Too Much Dentistry
If you’re like many dentists, you offer free or discounted dentistry to family, friends and other professionals, or simply because you feel guilty charging a patient full price. While it’s nice to offer free services when you can, too many of these “doctor courtesy” adjustments could really hurt your practice.

Most dentists have no idea how much dentistry they give away each month. Decide just how much free dentistry you can afford to offer and then stick to that number, no matter how many family and friends ask for a discount.

Bad Debt and Collection Adjustments Are Too High
These adjustments should be no more than 2% of gross production. If yours are more than this, it indicates a problem. It likely means you’ve made unclear financial arrangements with your patients, and/or that your system for collecting unpaid balances is broken. I suggest taking a look at these systems and determining how to make improvements, whether that means providing more training for your Financial Coordinator, developing and distributing a detailed payment policy, or creating scripts to help make collection calls more successful.

Incorrect Insurance Adjustments
If PPO adjustments seem high in your practice, it’s probably because your Financial Coordinator is posting the adjustments incorrectly—a mistake that could be costing you big.

While there is no industry standard for PPO adjustments, some offices reduce their gross production for each PPO plan so very few adjustments need to be made to posted accounts. Other practices post their office fees, which requires a much higher PPO adjustment once the insurance check is received.

It’s important to make sure your Financial Coordinator understands how to correctly post adjustments as well as how much to collect from each patient. Provide the proper training and encourage this team member to speak with insurance representatives. This will help him or her learn how to properly adjust patient accounts and determine exactly what patients are expected to pay. 

To help avoid problems with adjustments and improve how you use production and collection adjustments, I suggest creating more specific adjustment codes. Here are some examples:

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 doesn’t return and has a balance 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
I also suggest creating a monthly monitoring system to identify and reduce these red flag adjustments that are costing you money. This will give you more net production, allowing for increased collections. Include the average adjustment over the last 12 months and the new goal.

It’s important to know how much money you’re losing to adjustments each month. Follow these tips to get adjustments under control and start bringing in more revenue.

If you would like more information on how McKenzie's Consulting Coaching Programs can help you implement proven strategies, email info@mckenziemgmt.com

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