Insights: Article

Are You Looking at Accounts Receivable, Charges, Payments and Adjustments?

By Michele Olivier

January 22, 2018

Are You Looking at Accounts Receivable, Charges, Payments and Adjustments?
As we’ve discussed in our last two articles on days in accounts receivable and net/gross collection percentage, there are several metrics to be looking at on a monthly basis to identify issues within the revenue cycle. In this article, we are going to focus on days in accounts receivable (AR), charges, payments and adjustments.

Monthly Metric 3
AR, charges, payments and adjustment metrics are important to trend over periods of three, six and 12 months.  The fluid nature of these metrics tends to make them difficult to pinpoint on a daily basis. However, by trending over time, you can more easily understand when something is not “going right” and fix it.

The metrics themselves differ by specialty and practice because of chargemasters or fee schedules, contracts and the number of physicians versus the number of providers. Yet, simple formulas will be able to track and trend your practice and see what your “metric” should be.

Metric

Description

Typical Metric/Formula

Accounts Receivable

This metric is a direct reflection of your days in AR.

Average monthly charges

x 1.5

Charges

This is a calculation of the charges entered in the time period you are reviewing. There is no magic number that this “should be.” This is our recommendation.

(Average patient charges x Goal number of patients per day)

x Number of days provider saw patients

Total Payments

This is a calculation of patient payments plus insurance payments. This number is affected by your payer mix and charge master or fee schedule set up.

30 percent to 60 percent of your charges

Patient Payments

Copays, co-insurance, deductible and self-pay

 

Insurance Payments

Any payer/insurance company payment

 

Adjustments

All adjustments that were taken from charges. This number is affected by your payer mix and chargemaster or fee schedule set up.

40 percent to 70 percent of your charges

Contract Adj.

These are adjustments that must be taken based on your contract with insurance companies

90 percent or more of the adjustment total

Bad Debt Adj.

These are typically accounts sent to collections or written off because they are non-collectable

Equal to or less than 8 percent of adjustment total

Other Adj.

This category is for adjustment types such as: professional courtesy and other staff approved adjustments

Equal to or less than 2 percent of adjustment total

 

For example, if there is a sudden drop in charges, you would want to investigate to see if there was a charge lag problem or perhaps a provider that was on vacation or leave for an extended amount of time. Alternatively, if there is a trend downward over a three-month period of patient payments, you may need to ask questions about the front desk or checkout person’s ability to collect patient balances at time of service.

By understanding how the calculations are made and the metrics themselves, you can check on the health of your practice and feel more confident about the revenue cycle.

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