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Medical Billing- A Case Study in AR Management

The Problem

The state of a medical practices accounts receivables (AR) is an indicator of its profitability (or lack thereof). Some signs that there may be cash leakage because of AR include:

• Invoices stay too many days in AR before they are paid
• There are too many accounts over 90 days
• Cash flow has decreased
• There is too much money in AR
• Bills are not being paid on a timely basis

Chicago Lake Shore Medical Associates had some of these problems. In fact, a big indicator for them was that the average accounts receivable outstanding was at 55 days. The industry norm is 40 to 45 days.

In addition, over 33% of their electronic claims submissions had to be re-billed. In the industry, 5% of submitted claims getting rejected is considered a decent number.

The multi-specialty physician group of 43, partnered with RMK 123 in an effort to improve their cash flow via their accounts receivables.

The Diagnosis

RMK soon discovered that the office staff was overwhelmed with their main duty of scheduling appointments. This made accurately entering data difficult including verifying insurance information (where even the patients can get confused about their insurance plans). This was the root of the AR problems.

The Solution

RMK implemented a variety of processes including:

• Requiring new patients to contact RMK's insurance verification department. When they did so, patient insurance information was verified and updated.
• Contact patients with past due balances. Prior to the next appointment, the patient's (those with balances over 90 days) were contacted.  payment options were arranged. That information was then forwarded to Chicago Lake Shore Medical Associates.
• Shift to a batch eligibility verification practice. The way this works is that a list of all patient information was sent to the insurance carrier two days prior to each patient's appointment. A report came back listing current coverage status. Any inaccurate information was immediately corrected.
• Accept credit card and online bill payments. This included the storing of credit card information to cover any past due amounts, future deductibles and coinsurance.

The basic concept in RMK's approach became to keep patients aware of their financial obligations. This would encourage them to pay for their services promptly.

The Results

The days in accounts receivable improved 34.5%, going from 55 to a very acceptable 36 days. What was even more impressive was that the 33% of claims that used to be rejected, got reduced to less than 1%.

These RMK process dramatically improved cash flow for the physicians group at Chicago Lake Shore Medical Associates.

About the Author

Prior to the founding of RMK, Ronald McLaughlin was President/CEO-Founder of McMaid Total Home Care, one of the largest providers of home care services in the nation. From 1975 through 1979, he developed and grew the business from a three person enterprise to an organization that operated in five states with more than 3,000 employees. McLaughlin sold the business to Wright Market in 1979.

McLaughlin founded RMK in 1980 as a financial management company. With two employees and a few small accounts, he developed the business that has collected and processed more than $100 million in debt collections since its inception.

The business was diversified to focus on medical billing, revenue management, accounts receivable management, collections, subrogation, revenue enhancement reviews, and billing office-staffing analysis in addition to its full collection agency service programs.

 

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