Production Adjustments Out of Control? Here’s How to Fix It
Dentist Case Study #367
The doctor’s concerns: “Production adjustments in my practice are out of control and hurting my revenues. I need to find a way to reduce the adjustments so I can start bringing in more money.”
This dentist had no idea how he got into this situation or how to fix it, which is why he called McKenzie Management for help.
Let’s take a look at the practice facts:
-These numbers equated to production adjustments of $37,350, or 55% of gross production.
-Collections were at $44,737, or 98%. Seems pretty good, right? Not so fast. The large amount of production adjustments the practice was experiencing served as a tell-tale sign the doctor had a problem that needed to be addressed.
OK, so how did he get here? To start, this doctor was posting more than 7% of his gross production to doctor courtesy – which means he was giving away 7% of his production to family, friends and anyone else he deemed worthy of a discount. That might not seem like a huge number, but it added up to nearly $6,000 a month!
This doctor’s bad debt and collection adjustments sat at 3% of gross production, or $2,500 a month. They should only be 2%. So while collections reached 98%, the Financial Coordinator was writing off 3%. That works out to more than $800 a month over the acceptable amount. The culprit? Unclear patient financial arrangements and a lack of systems in place to collect unpaid balances.
Now let’s look at PPO adjustments. Those made up 42% of the doc’s gross production, or $34,860 a month. That’s a lot of lost revenue. When we took a closer look, it became clear the Financial Coordinator wasn’t posting insurance adjustments correctly. To make matters worse, the doctor opted not to request the additional payment due from his patients. Why? He was afraid it would upset them enough to start looking for a new dentist. So that money was never collected, hurting the practice’s bottom line.
There is no industry standard for PPO adjustments. Some offices reduce their gross production for each PPO plan, therefore requiring very few adjustments. Others post their fees and require a much higher PPO adjustment when the insurance check is received. Either way, it’s important to train your Financial Coordinator to properly post adjustments and collect the accurate amount from each patient.
Production (Credit) Adjustments
Collection (Debit) Adjustments
Beyond that, we also created a monthly monitor for the doctor that included all the codes. Our goal? To reduce what I call “red flag adjustments” over the next few months, allowing for increased collections based on higher net production. We also encouraged the doctor to stop giving away dentistry to family and friends. Once he realized how much he was losing each month in free dentistry, it was an easy sell. The good news? Because he provides high-quality dentistry and a top-notch patient experience, family and friends still come to see him, and are happy to pay full price.
The Financial Coordinator received additional training, and spent time speaking with various insurance representatives to learn how to properly adjust patients’ accounts and determine what portion of the payment they’re responsible for. This team member also started working with patients who owed money to the practice, and established protocols to reduce bad debt and collection agency adjustments.
After six months, the doctor reduced total adjustments to 32% of gross production. That led to a new net production of $56,440. With collections increasing to 99%, average collections came to $55,876. This improved cash flow by $11,139 a month or $133,668 a year. Not bad!
If you’d like to see revenue increases like this in your practice, give McKenzie Management a call. We’ll help you get started.
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