Progress Notes

Monitoring Accounts Receivable Made Easier

Monitoring the accounts receivable (AR) is a primary responsibility of management. The process of converting charges into cash is essential to sustaining the viability of a healthcare business and embodies the life blood of operations. The Better Performing Practices (all specialties) reporting to the MGMA Cost Survey demonstrate success by achieving superior results.[1]  The efficiency of those designated practices with respects to the AR process is evidenced by five key performance measurements. These five measurements are:

• Adjusted (Net) collection ratio = Greater than 96%
• Average months FFS charges in receivables = Less than 1.5 months
• Percentage of total receivables aged less than 60 days = Between 60-75%
• Percentage of total receivables aged greater than 120 days = Less than  15%
• Percentage of co-pays collected at the time of service = greater than 96%

Monitoring these key measurements on a frequent (no less than monthly) basis is essential to effectively managing the AR. In addition, the trends associated with these measurements are as important as the measurements themselves. A spreadsheet used by many practices to track these performance measurements and monitor trends is available to members at www.KaMMCO.com under the Practice Management “Resources” section. 

The spreadsheet is a management tool that allows a practice to set its own benchmarks for various performance measurements and monitor the AR. The benchmarks are referenced in the worksheets labeled “AR Analysis” and “AR Aging”.  

The “AR Analysis “ tool tracks monthly charges, adjustments, receipts, bad debt, miscellaneous adjustments and credit balances. Formulas embedded in the worksheet automatically calculate the gross collection ratio, the net collection ratio and the average months of FFS charges in receivables for a running 6-month average. When a productivity measure, such as, MTD Charges, fails to meet the benchmark, the color of the cell will turn red.  

The second worksheet, labeled “AR Aging”, allows a practice to display its aged accounts receivable for multiple monthly periods both by “Service Date” and “Bill Date”. Formulas within the worksheet calculate each aged category as a percentage of total AR to facilitate an easy comparison to the benchmarks set by the practice. The cells here will also turn red when the performance measure fails to meet the benchmark.  

For the busy administrator this tool will provide a quick and easy way to monitor the clinic’s accounts receivable process. Practices can enter up to four years of performance data in the workbook and manage the viewable and printable area using the Hide and Unhide commands. We invite you to review the instructions in the spreadsheet and try using this tool in your practice. Please give us your feedback on how it works for you and what can be improved.

Disclaimer:
KaMMCO acknowledges the tools, resources and articles provided on our website are intended for general information purposes only. The information provided is not intended to constitute legal advice. The reader must consult independent legal counsel to determine how this information may or may not apply to their specific circumstances.