First Aid for Receivables: Interpret the Aging Report [2 of 3]
“My Business Office Manger keeps telling me that everything is great, but how can I tell for myself?”
When we get a call from someone who thinks they may need help with their receivables, the first thing we ask for is an aging report. Why an aging report? Quite simply, the aging report is usually the best snapshot of the state of your facility’s billing and collections success available. By reviewing your aging report, you can make a good initial assessment of just how successful your business office has been at billing and collections.
Unfortunately, administrators and management often don’t really know how to zero in on the information they need from an aging report.
This is the second in our series on “First Aid for Receivables”. In the first installment “First Aid for Receivables: Where do you Start?” we covered how to fix you an aging report for clarity and accuracy. In this installment you’ll learn how use that same aging report to get a good picture where to proceed next in your “First Aid” treatment. The third installment will focus on how to attack and collect the troublesome accounts and payer types you have identified to make sure you are not “bleeding” cash.
Even a good aging report from a facility with an excellent billing track record can be huge and intimidating. Don’t let yourself get bogged down by the pages and pages of names and balances that make up a full detailed aging report. The first thing you need to do is decide just what you want to find out about your business office’s billing practices and your cash flow prospects. The most common questions are:
- Are all of the claims being billed and submitted timely?
- Are there any problem payer types?
- Are there any specific Insurance or Managed Care plans we are having problems with?
- What are our worst accounts? Highest balances? Oldest outstanding balances?
To answer the first two questions, look at your outstanding balances by payer type. This will list the balances for Medicare, Medicaid, Private, Insurance, Coinsurance, etc. The actual categories may be called something else in your A/R system.
Looking at the totals by payer can give you an idea of what your regular monthly billing totals are. You should be able to tell pretty quickly if you have a problem with a payer type. Start by checking the amounts in the current column for one payer type at a time, and compare the totals for each column. When the claims are billed and followed up on regularly, the totals in each column should be significantly less each month when looking at the older aging columns. This comparison is one way to quickly tell if you are billing and collecting your money in a timely manner. For example, if you are looking at your Medicare B totals and see the current balance is $50,000, 30 day balance is $45,000, 60 day balance is$45,000 and so on, you need to take a serious look at it. When the totals are essentially unchanged like this, the claims are either not being billed or not billed correctly and your denials and rejects are most likely being ignored.
To answer the third question, you need more detailed information about individual payers. Run an aging report listing all of your individual payers. This may list 10 or more plans for one company like your local Blue Cross/Blue Shield, so it is definitely a longer list. Doing the same analysis as above will give you a quick and accurate listing of payers to take a deeper look at. There are some business offices that do a good job of billing most of their claims, but there may be some plans they don’t have much luck with. This can mean that 95% of your claims in a category are billed quickly, but the rest are left for later and often forgotten.
To answer the fourth question, which seeks to identify problem accounts, you should check the aging detail by individual resident. Start by identifying the highest balance accounts and the ones with the oldest balances. It is our experience that the majority of your total receivables will be made up by only 15-20% of your accounts. By identifying your priority accounts you can put your initial efforts into them and quickly see a dramatic reduction in outstanding balances.
You will want to focus on the older balances first. With timely filing limits for Medicare and others getting shorter and shorter, you need to be sure to get your claims submitted into the system. With so many different timely filing limits and guidelines out there, it is crucial to know them. Your HMO limits are usually defined in your contract. We have actually had clients with HMO timely filing limits as low as 60 days. This means you have no time to waste. You need to make absolutely sure that your claims are submitted long before the timely filing limits are a factor.
So now you know which payer types, payers and accounts you need your business office staff to attack. By systematically attacking these balances, you should see significant improvement in your aging report and your bottom line. Make sure they document everything that happens with the claims and make sure to follow up when it is needed.
As you are attacking your largest and oldest balances, you want to start focusing on the payers and payer types your aging shows need some work. Here are some tips for Private Pay or Medicaid Pending issues.
We hope this helps a little. We understand that it can be hard for an “outsider” to the business office like the administrator, to get a good and clear understanding of their facility’s billing practices and the state of the receivables. Now you have the tools to identify your priority accounts.
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