09.01.06 - Issue # 234 Forward This Newsletter To A Colleague

Computer Reports: Your Practice ‘GPS’
by Sally McKenzie CEO
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Technology is amazing. Take global positioning systems, for example. If you are a runner, walker, or biker, you can purchase a GPS to wear on your wrist. This handy little device not only helps you map out your course and guides you home if you’re lost, it will monitor your heart rate and determine if you’re over or under exerting yourself. It will analyze and customize your workouts. It can be your virtual training partner, tracking your time, your pace, your distance, and your goals. It will even race you against a digital competitor. Amazing.

Wouldn’t it be great if you had a GPS for your practice. Strap the instrument on to your wrist, it will monitor your production, overhead, collections. Check your scheduling efficiency. Provide regular reports on patient retention. Sound the alarm when the hygiene department is producing below its specific goal and so on.  

To a certain extent, your computer software system is rather like a practice GPS. No you can’t fasten it to your wrist, but the reports - if you pay attention to them - can give you a good idea where you are, if you’re on course, heading off course, and, if so, just how far astray you’ve gone. The key is to regularly check your status. And therein lies the challenge. Most practices have access to key reports and data but many don’t use the information to monitor and adjust practice systems.

For example, accounts receivable. Are you familiar with this report? As important as it is to the financial health of the practice, few dentists really know what their accounts receivable is. Yet the AR report shows how much money is owed to the practice from patients, insurance companies, or other third parties - a rather important detail.

It should never be more than one month’s production. In other words, if you typically produce $80,000 per month, patients/insurance should never owe you more than that amount at any given time, and preferably, they owe you less.  If patients owe you more than one month’s production, your alarms should be sounding and your heart rate should be increasing.

“Oh yes, Sally, I checked my accounts receivable and my practice is just fine.” Okay, you looked at the numbers, but did you do the math? Let me explain. Before you take those figures at face value, make sure you are reading them correctly. Otherwise, you may be thinking you’re heading due north when your practice is goin’ south. 

 To give you a truly accurate picture of where your practice stands, the report should include every account with an outstanding balance, the date of last payment, and a note indicating if payment was from the patient or the insurance company. To ensure you have the complete picture run the Outstanding Insurance Claims report. This report is exactly what the name indicates – it lists all those insurance claims that haven’t been paid and are just sitting there. If a claim has been denied, zero it out, so that it goes off the report. Otherwise, you’re getting faulty information. 

The AR report also should “age” the receivables showing the “current” column, which is revenues produced in the last 29 days that have not been collected, as well as a breakdown of accounts that are 30, 60, and 90 days past due. The goal is to have a minimum of 45% over-the-counter collections for the month, and no more than 55% in the current column awaiting insurance reimbursement.  If you don’t accept insurance assignment, you should be collecting 100%.

Be sure to add credit balances back to the total accounts receivable. Finally, total all monies over 90 days delinquent. The percentage should not be over 12% of your total accounts receivable. If accounts receivable exceeds your monthly production, that’s a red flag to you and your Financial Coordinator indicating that problems need to be addressed promptly in one or more of the following areas:

• Insurance system
• Billing system
• Financial policy
• Presentation of financial arrangements
• Inability of Financial Coordinator to ask for money

Not only is the information essential for the doctor to monitor cash flow, the accounts receivables report provides the Financial Coordinator with necessary information that enables her/him to customize the messages on patient statements and when making necessary collection phone calls.

Next week, what else are those reports trying to tell you? 

Interested in speaking to Sally about your practice concerns? Email her at sallymck@mckenziemgmt.com.

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