Practice Financial Analysis - Part 3 - Unpaid Receivables (A/R)

Unpaid insurance receivables (A/R): What causes them, how to address them and what following up can do

As you know, I have been focusing on a high-level financial analysis of your practice.

Part of this analysis involves looking into your collections and related gross collection percentages. However, collections do not always meet expectations and there are a few possible reasons you should look for:

1. Shift in your payer mix (click here for last week's article)

2. Decline in reimbursement rates

3. Poor follow-up on unpaid insurance receivables (Insurance A/R)

4. Poor front desk collections

5. Poor claim filings

6. Not sending out patient statements

7. Poor patient receivables management (Patient A/R)

8. Possible embezzlement

This week I will be focusing on the third reason : Poor follow-up on unpaid insurance receivables.

The most common problem practices face when filing claims to insurance companies are payers who may try to delay payment or an error made by the office resulting in a rejected or delayed payment. Though practices have little control on payers, rejected or delayed payments can be resolved by follow ups.

However, follow ups do not just mean “following up, for the sake of it” as follow ups should be timely. Timely follow-up is something that everyone knows should be done. Providers, Office Managers and billers all know this. Yet, a breakdown in practice workflow is extremely common and is overlooked. It is easy to blame systems and technology than internal personnel and processes. The end result of course is that it negatively affects cashflow.

It will be helpful to keep in mind that the average time for receiving payments must be 45 days from date-of-service; not date-of-filing. Submitting claims to insurance companies is the easiest part of billing. The bigger problem is securing payment. Knowing what the holdup is may be half your battle. Yet, many practices, for various reasons don’t file claims in a timely manner. Claims must be filed the same day as the date of service.

Delay in managing this process and delay in payments from insurance companies affects monthly collections. The resulting fluctuations affects cash management and therefore owners and providers may have to dip into their personal reserves.

The overall objective is always to have a consistent cash flow from month to month. The biggest enemy of any business is unpredictability.

How to work your outstanding claims and denials?

Knowing why claims are not paid is the first step. Here are some of the most common reasons why claims may be unpaid/rejected/denied.

  1. Wrong information: Get the correct information from the insured patient. People sometimes forget that Billing really starts at the Front desk. Diligence in recording the correct patient demographics and verifying the insurance for every patient at every visit is the most critical task that a practice should do.

  2. Insurance Eligibility and Insurance coordination of benefits: Know which insurance is primary and how much the secondary insurance will pay, as per coordination of benefits. Front desk must ask patients and verify the details. Billers must know this before filing a claim.

  3. Depending on your location, insurance participation and specialty, you may be required to get a referral. Failure to do so will result in non-payment. Here too, the front desk staff plays a critical role.

  4. Missing authorization number for procedures – in-office as well as services performed at a hospital. There are ways to follow-up if a claim was rejected. If there is no authorization number on file and the insurance company requires it to pay the claim, you can submit an appeal letter with medical notes. If the insurance company denies the claim for no authorization, you cannot bill the patient; you have no choice but to write off the claim as a loss, even if you followed up on time. That is why all work upfront is important.

  5. Claim was submitted to the wrong insurance company: Expedient follow up can correct this error.

  6. Incorrect ICD-10 or CPT® code: Incorrect coding usually happens because diagnosis and procedure codes change every year in October, after ICD-10, HCPCS Level II, and CPT® code books are released for the following year. Make sure your billing system is updated with latest codes.

  7. Other: There are lots of other reasons for denials, including: invalid patient name, invalid subscriber number, wrong date of birth, wrong date of service, wrong place of service code, etc.

Following up Process-Back to Basics

If a practice has in-house biller, make sure that person is dedicated and the task of follow up is the most important – which takes precedence over any other task.

It can be difficult to follow up on claims on a regular basis, if that person is dealing with many other roles. Practices make the mistake of dumping too much work on critical employees and ask them to multi-task. This can and will take a toll on payment follow-up.

Thorough and regular follow-up on unpaid claims will result in fewer losses and more revenue.