Patient accounts receivable (A/R) has a direct correlation to a medical practice’s cash flow. Without prompt, positive cash flow, a medical practice will go into the business equivalent of cardiac arrest.
Most physicians are unaware exactly how their A/R works. But even those who know the outstanding A/R to the penny, get ready: Your world is changing.
More and more of your patients have High Deductible Health Plans or HDHPs, and the number is growing. According to several industry studies, this will be the predominant form of health plan you’ll be dealing with very soon as more employers shift the burden of payment to their employees and others are forced to provide their own insurance. One survey found that 70 percent of large employers will offer this type of plan during 2013. In the northeastern states as much as 50 percent of the patient population already are in an HDHP. Other parts of the country report 20 percent of patients are so covered, but the rate will inexorably climb up and up such that it becomes, in effect, the plan of the land.
Most medical practices look to insurance companies for the bulk of their revenue; generally speaking, as much as 85 percent. It comes in with the reliability of the ocean’s tides in consistent cycles. The time between submission of a bill or claim to an insurance provider and your receipt of a check from that company is typically a couple of weeks.
However, with HDHPs much more of your A/R will sit in patient balances. You can expect to see insurance company payments shift from representing 85 percent to 50 percent. The remaining 50 percent will need to be secured from patients.
Granted, the insurance provider will continue to pay in a consistent time but no such speed or certainty can be expected from patients, especially at the start of a plan year when just about everything will “contribute to the deductible;” a nice way of saying it’s owed to the doctor. More troubling, you don’t even know if or how much a patient owes your practice until the insurance company has adjudicated the office visit claim, which can take a couple of weeks after the appointment. Add in the use of paper statements sent through the mail, and suddenly your A/R aging goes from an average of 30 days to two or three times as long … and cash flow has slowed to a trickle.
A solution for practices to help with the shifting landscape is to use an online service that issues bills to patients faster in a way that lets them understand what’s due, when it’s due, pay online and settle their obligations quickly. Among the advantages:
- An online service cuts in half the time and cost to issue bills;
- It automates the arduous reconciliation process eliminating errors once payments have been received;
- It provides the capability to produce A/R reports by office, by practice area, by doctor in whatever manner you wish gives you meaningful insight into your patient bills and balances.