23 Mar Is Your Medical Practice Financially Healthy?
Elizabeth Woodcock, the founder and principal of Woodcock & Associates sat down with us to discuss some benchmarks that practice managers and physicians should look at to gauge the financial healthiness of their practice. Below is some important information she shared with us.
As a medical practice, your goal is to care for patients and keep them healthy. You track their healthcare progress closely and keep detailed records to try to prevent complications from arising in the future. Can the same be said about keeping your practice financially healthy?
With healthcare changing and revenue cycle management becoming more challenging, physicians often wonder if they could be doing a better job in this area. Below are four reports to take a look at that can help you determine the financial health of your practice, so you can decide if changes need to be made.
Denial Reports – No matter how hard you try, there are going to be denials over which you have no control. These are called “uncontrolled denials” related to payer policy decisions as opposed to biller errors. A good measurement is to calculate the percentages of controlled denials and uncontrolled denials to see how your practice is doing. Denied claims are often due to error, but if your billing staff is experienced, they can begin to build a strategy on how to handle denials and observe any patterns that can help reduce denials in the long run.
Days in Accounts Receivable – The average amount of days in Accounts Receivable (A/R) is a very important metric to evaluate because it measures how long it generally takes on average for you to receive payment for your services. When calculating your average days, you need to be sure to subtract all credits from these overall charges. Once calculated, you need to take a look at the percentage of charges that are greater than 120 days in A/R, and evaluate further to see if you can pinpoint where billing problems are occurring.
Relative Value Unit (RVU) – Even for an independent practice, calculating the work RVU is a good metric for evaluating the financial health of your practice and it can provide some helpful insights into your overall performance as a practice. The physician work RVU includes the time and the medical skill necessary for the physician to treat a patient during a visit and can be useful in measuring your productivity as a physician and as a practice. Work RVUs are a very helpful tool because you truly compare apples to apples and take out other variables that can come into play if, for example, you are comparing payments across providers.
Clearinghouse Rejections – Despite your best efforts, not every claim is going to be 100% error free. That is where an effective clearinghouse comes in, as they can help you catch a lot of these errors before the claim is sent to the payer. It is important for a practice to evaluate the root of any rejections and whether a claim was rejected due to front-end clearinghouse edits or was a bounce back from the payer. Determining the root cause of these issues will allow you to correct some of these barriers to clean claim submission, resulting in financial performance improvement for your practice.
Elizabeth Woodcock is the founder and principal of Woodcock & Associates, having focused on medical group operations and revenue cycle management for more than 25 years. The author or co-author of 17 books, including the best-selling Physician Billing Process: Avoiding Potholes in the Road to Getting Paid, she is a nationally recognized practice management speaker and trainer. Elizabeth is a Fellow in the American College of Medical Practice Executives and a Certified Professional Coder. In addition to a Bachelor of Arts from Duke University, she completed a Master of Business Administration in healthcare management from The Wharton School of Business of the University of Pennsylvania.