Posts

Thinking On the Run

Thinking On the RunPhysical Therapy Software

by Erez Lirov

Stretching expectations to find an ideal solution

Can Shannon find a credit card processing system that will meet her definition of excellence?

Mike and Shannon rounded the bend of the track through the park. The weather had kept them from running for a couple of weeks, and Shannon was enjoying the feeling of getting out in the fresh air and moving through the beautiful scenery.

“Isn’t this great?” Mike asked, puffing a bit. “I love getting into the moment and not thinking for a while.”

“How can you do that?” Shannon asked, slowing to a walk. “I think even more when I’m running. In fact, that’s one of the benefits. I can think more deeply as I run.”

watch the workflow webinar recodring now

“What’s on your mind?” Mike asked, slowing to match her pace.

“Credit card processing,” Shannon answered quickly. “I know I need to do some research to find the best system for the center, so I’ve been organizing my thoughts. Can I try it out on you?”

“Sure.” Mike plopped down on a bench that gave a view of the park.

“Stretch out first!” Shannon urged him. “Cool down!”

Mike stretched out flat on the bench with his arms and legs hanging down. “This is the only kind of stretching I plan to do. Now tell me your credit card processing ideas.”

“Okay,” Shannon agreed, pulling her nose to one knee. Her hair fell down to the ground, but Mike could still hear her as she continued, “I figure the least a system would have to do for it to be worth the trouble of changing would be to help us catch errors.” She drew her nose to her other knee. “If it would post the payments automatically to the patient accounts, charge the accounts back if the payment got declined, and send us a report at the end of the day, that would make it worthwhile. I figure it takes a full day over the course of a month for us to take care of those things, and I don’t see why a computer couldn’t do it.”

Mike nodded. “It sounds like that would help quite a bit.”

“Right, and it should also let us charge products to the patient accounts. That seems completely realistic.” Shannon pulled her arms behind her, stretching out her chest. “Next level up, if it would notice when recurring payment information we keep on file is about to expire, and maybe alert patients about expirations and if a payment is declined so they can take care of it. It would have to alert us, too. And it could alert us when someone is getting behind, too. That would not only prevent a lot of the errors we face, but it would also improve customer service.”

watch the workflow webinar recodring now

Mike sat up and swiveled to look over the park. “Okay, That’s the fair-to-middling solution. What does it take to reach excellence?”

“If the payment system would send out invoices automatically and let us accept payments electronically, we’d shorten the billing cycle and save a lot of time.”

“People prefer to pay bills electronically, anyway,” Mike pointed out. “Most of us are used to paying our bills that way by now.”

Shannon pulled Mike up from the bench and they headed back toward their car.

“So this paragon of a payment system,” Mike asked, “what’s it going to cost?”

“That’s part two,” Shannon laughed. “If I can find a system that meets my definition of excellence, then I’ll just have to see whether I can afford it. But I think that a system like that could result in some real savings just because of the efficiency, so it’s worth spending some time in research.”

Can Shannon find a credit card processing system that will meet her definition of excellence?

watch the workflow webinar recodring now

Boxed In?

Boxed In?

by Erez Lirov

Breaking things down helps indentify needs, avenue to expore

Will Shannon’s lack of knowledge keep her trapped in credit card inefficiency? How can she find the change she needs?

“Why Shannon, you look radiant!” Theresa said as Shannon stepped into the office. Theresa was cutting down cardboard boxes. “Taking a little break with your husband really perks you up!”

“I think that this time it’s adrenaline,” Shannon said. “I’m feeling very motivated to fix the issues with our credit cards.”

watch the workflow webinar recodring now

“Issues?” Theresa cocked an eyebrow. “Like high fees, errors, and the time we spend on this stuff?”

“Exactly. I know you said we should shop around for a better rate, and Mike had some ideas, but do we have to have special HIPAA-compliant processing?”

“The compliance standard for credit card processing is called ‘PCI.’ I know we’re responsible for it and that the rules change sometimes, but I don’t know how we make sure we’re up to date on that. I have heard that penalties for noncompliance are high, though — you remember when Target had a security breach? They paid more than a billion dollars in fines.” Theresa shook her head and stacked the flattened boxes. “It’s no different for health care. Besides, look at all these boxes! This is from merchandise we sell. We’re making good money from that retail area. We should get a POS — a point-of-sale system — so we can check people out easily.”

“Hold on,” Shannon objected. “I’m trying to make things simpler here.”

“It could be like the practice management software. That seemed complicated when we were just thinking about doing it, but it has actually simplified our lives a lot — and saved us money.”

“That’s true. There might be an integrated system for credit cards.”

watch the workflow webinar recodring now

Theresa agreed. “If we were able to reduce errors, we’d probably save enough to pay for it. I heard that something like 8 percent of recurring payments get declined, and I’m not sure we catch all those.”

“I’m completely convinced that errors and efficiency are enough of a reason to make changes, but do you think we can do anything about the size of the credit card processing fees?”

Theresa thought, her eyes on the pile of cardboard at her feet. “I still think it would make sense to shop around, but I know that the fees are based at least in part on how much volume we have. Maybe making the process easier would encourage people to use their credit cards more.”

“If it’s about volume, though…” Shannon shook her head. “We’re never going to have the kind of volume Target has. Or even Mike’s rest

aurant. A lot of people pay by check and of course insurance is a big part of our income, too.”

“Maybe we could get group rates, like with insurance,” Theresa suggested.

Shannon laughed. “I think we need to do some research. At least now we know what we don’t know! Come on, I’ll help you get all this out to the recycling bin.”

Will Shannon’s lack of knowledge keep her trapped in credit card inefficiency? How can she find the change she needs?

watch the workflow webinar recodring now

ICD-10 | Five Building Blocks | bestPT Webinar | Q&A

PQRS Q&A

As you get your practice ready for the ICD-10 changeover, you are bound to have questions regarding documentation and compliance. To help you get the answers you need, we have compiled all questions that were asked during our recent webinar “ICD-10 | Five Building Blocks,” along with the presenter’s responses. Feel free to add any new questions in the comment section below.

watch the workflow webinar recodring now

Q: Where can I find CMS guidelines in written form?

A: On CMS.gov, click on the Medicare link and you will find a link for both local and national coverage determinations.

Q: When can I start finding ICD-10 codes within your software and submitting them?

A: Our software already has all the ICD-10 codes listed; we are building the crosswalk now. We recently completed ICD-10 testing with Medicare, and were successful with our front-end edits. We are looking to have this available to practices by June, to really start testing and crosswalking. At this point, payers are not accepting claims in ICD-10; they are not coming over until October 1, but we are testing with payers and clearinghouses directly.

Enjoy this ICD-10 webinar?

button (4)

Sorting It Out

Sorting It OutiStock_000015493750XSmall

by Erez Lirov

Credit cards can create a variety of compliance issues for practices

What are Shannon’s next steps to sort out her credit card system?

“Mike!” Shannon checked everything in the physical therapy facility with a practiced eye as she walked across the carpeted floor. She loved to see everyone busy and engaged, and things were going well at the moment. She had a word with the receptionist and steered her husband out the door.

watch the workflow webinar recodring now

“I was hoping you’d have time to come for a walk,” Mike said. “I needed to get away from the restaurant for a bit.”

“Problems?” Shannon’s voice was concerned.

“No, just a need for a change of scenery, a breath of air.” Mike took his wife’s hand. “It looks as though things are going well at your place, too.”

“Definitely,” Shannon agreed. “I know it won’t last –”

Mike laughed. With two small businesses in the family, there were bound to be plenty of problems to discuss.

“Seriously,” Shannon continued, “I want your advice about something. It’s not really a problem, but I think I could cut costs if I made some changes with the credit cards.”

“Now you’re talking!” Mike threw his arms wide. “I can’t believe you guys post everything manually!”

“I never really thought about it before,” said Shannon, “but today I was watching and it just seems so complicated. We take cash, checks, credit cards, and debit cards for deductibles, balances, all the things we sell at the counter… And we take the information over the phone or copy it off the card. Tana took the info via text today.”

“I’d have thought that might be a HIPAA issue,” Mike said with one eyebrow raised.

watch the workflow webinar recodring now

“I think it might be all kinds of an issue,” Shannon confirmed. “Plus, since we have so many different things going on, I can really see how there could be errors. Theresa said she wasn’t sure we always know when a card is declined, or if we always follow up on those cases to get alternate forms of payment, and I can believe it. It seems like practically everyone in the place took a payment at some point this morning. I don’t see how we could keep track of everything.”

“At the restaurant, the server picks up the card at the end of the meal. One type of transaction, and we know exactly who did it and when. It doesn’t sound like that’s true for you.”

“Exactly. I wonder, too, whether there isn’t a bit of psychological barrier in having to pull out that credit card.” Shannon checked her watch. “I’d better get back to work. Thanks for listening.”

“I’m happy to listen,” Mike said, turning back. “What’s your next step? I could hook you up with the company that supplied our credit card terminal.”

“I don’t know whether that’s what we need or not,” Shannon said. “Do you think we have to have something different  to be HIPAA compliant?”

“I don’t think I can answer that question,” Mike said. “Time for me to get back to my own credit card machine.”

What are Shannon’s next steps to sort out her credit card system?

watch the workflow webinar recodring now

A Missing Piece

A Missing Piece Fortis is integrated into bestPTbilling software.

by Erez Lirov

In the budget of a busy practice, credit card fees can add up.

Could Shannon handle credit cards better in her physical therapy practice?

Getting the family out the door in the morning was always a challenge for Mike and Shannon, but they felt like they had a great system. Each child had a hook for a jacket and a cubby for shoes at the door. Homework went in the cubby, too, and lunches were packed and lined up on the counter. The kids knew they had to stand touching the car door till Mom or Dad arrived to unlock it, and then they scrambled into their seats and waited patiently to be strapped in with seat belts before taking off. It was noisy and it sometimes felt chaotic, but things always went pretty smoothly and everybody got where they were supposed to go.

watch the workflow webinar recodring now

Once Shannon dropped off their youngest at daycare, she headed on into the office, thinking about that system. She knew that Mike would get the older kids to school on time before he went to the restaurant. Sometimes his schedule was different so they divided things up differently, but it always felt like good teamwork, and she loved that feeling.

Things had been going more smoothly at work, too. Shannon thought back to her conversation with Mike that morning as they both got ready for work. “It seems like you’ve got your team back together,” he had said, and that was just how it felt.

With that issue off her plate, Shannon could think about some of the other matters that had been on the back burner for a while. She knew the facility needed updating, for example, but that was going to need funds, so Shannon was looking at her expenses closely to see where she could cut costs and free up some cash.

It wouldn’t take much, she thought as she parked and walked into the building. There were bound to be areas where she could streamline things a little bit and achieve some savings.

She asked Theresa’s opinion as soon as she got inside, and Theresa immediately had an answer. “Credit cards.”

watch the workflow webinar recodring now

Shannon was surprised. She had been thinking the free coffee in the staff room might be an avoidable expense, or that marketing costs could be cut. “What do you mean?”

“I think the fees are higher than they should they be,” Theresa said. “I know it’s a basic cost of doing business, but maybe we could shop around and see if there’s a cheaper alternative.”

Shannon nodded. They really hadn’t compared prices; when she first set up the practice, she had basically just asked the guy who installed their telephones for a recommendation, and they hadn’t revisited the question since.

“Plus, since we post all the payments manually, there’s a possibility for error. We’re all careful, of course, but I can’t swear that we catch every time when a card is declined, for example. Sometimes the person who takes the information is not the same person who posts the payment, and some are sort of automatic.”

“Sort of automatic?” Shannon hadn’t realized things were so shaky in this area.

“Well, we have clients who have set up an automatic bank draft or we have all their information in the system already, and some who are new…” Theresa’s voice trailed off. “I guess there are a lot of variables in the way we take payments.”

It was a lot like the way they got their family out the door in the morning, Shannon thought, but in this case every little extra bit of chaos could mean extra costs, not just extra noise.

“This might be the last piece of the puzzle,” Shannon said. “Or at least the next one. It sounds like a real opportunity for improvement.”

“And we could finally get some new paint in here?” Theresa joked.

Shannon smiled. “The first few hundred we save goes straight into the redecorating fund,” she promised.

Could Shannon handle credit cards better in her physical therapy practice?

watch the workflow webinar recodring now

Stop Your Staff From Fighting | bestPT Webinar | Q&A

PQRS Q&A

Does your office staff argue about who is responsible for completing tasks generated by your patient visits?

How do you assign those tasks to your staff?

How can you see if the tasks have been completed?

Can you track those tasks automatically?

Do you micro-manage your staff?

How can you foster staff teamwork, promote staff autonomy and reduce the time you spend on staff management?

These are questions that each physical therapy practice owner has to answer. Each patient visit generates a list of tasks that need to be completed. Each patient needs an account set-up with their complete demographic information, their insurance information and other details you need to file insurance claims and to collect cash or co-payments.

If you break those tasks into a step-by-step list, then how do you assign those tasks to a member of your staff? How do you determine if every task has been completed for every patient? What happens if steps are forgotten? How will your patients judge your mental health practice if your staff forgets something? Would your patients think your office is unorganized?

watch the workflow webinar recodring now

Q: What’s the problem?

A: Office staff including the front desk, the office manager and any employee physical therapists are supposed to make life easier for the practice owner. However they often inadvertently create additional challenges regarding patient retention, revenue and compliance. Many of these challenges are related to issues that the practice owner simply doesn’t have time for. If your staff goes on vacation or calls in sick then a backlog of tasks is created, resulting in tasks being forgotten about and mistakes being made. Every member of your staff needs to be managed and be held accountable to ensure that each task is completed correctly.

Q: Why is this problem important:

A: The short answer is Cost, Compliance and Patient Attrition.

  • Cost – Front office tasks prevent the practice owner from seeing patients, which is the only billable time for your practice. Mishandling of billing and collections results in lost revenue with denied claims and delayed payments. Ineffective patient relationship management leads to attrition.
  • Compliance – Includes incomplete/incorrect documentation, interrupted care plans, incorrect CPT/Diagnosis codes, staff unfamiliarity with procedures and staff failure to collect copays leads to overpayment by the Payers.
  • Patient Attrition – Failure by staff to follow-up on no shows, incomplete care plans and patients with no future appointments.

Q: Why is this problem difficult to solve?

A: There’s high front office staff turnover which could be due to poor training, lack of knowledge and unorganized micro-management. Some staff have a poor attitude towards training on new procedures and systems and they’re more comfortable with the old way of doing things. There’s also a lack of redundancy leaving tasks undone when somebody is absent and the ultimate responsibility falls to the practice owner.

watch the workflow webinar recodring now

Q: What’s bestPT’s approach or solution?

A: A complete practice management solution for your office.

  • Improve staff teamwork with effective training to ensure optimal practice performance.
  • Improve teamwork and staff autonomy with automatic checklists of tasks that need to be completed when patients are checked-in.
  • Track practice goals to more easily improve the number of patient visits, increase revenue, submit every insurance claim, follow-up with every no show and schedule patients with no future appointments.
  • Manage staff remotely on your laptop or your smart phone by tracking task completion.
  • bestPT is a complete practice management solution that includes:
    • office workflow
    • patient relationship management
    • staff management
    • while also incorporating everything else you need like:
      • scheduling
      • billing
      • EHR
      • claim scrubbing
      • claim submission
      • claim follow-up
      • staff task checklists
      • training, etc.
    • bestPT also includes a Coach to ensure your practice uses everything in the most efficient way possible.

    Enjoy this office workflow webinar?

    button (4)

Physical Therapy Billing | Would you pay for your services?

Physical Therapy Profitability: Jack-LalannePhysical therapy profitability really depends to a great extent on how much your patients value and like your services.Harvey Schmiedeke, President of Survival Strategies and author of Keys to Private Practice Success used to have a client in a northern US border area (p. 134). “Canada as you know has socialized healthcare, supposedly offering everything for free. The large majority of his client’s patients were Canadians. They would go through the hassle of clearing customs and drive hours to pay him $78 US cash for treatment they supposedly could get for free in their own country. Why? Because he had the reputation of handling headaches and they knew if they went to him they’d be seen immediately and they’d get better!”

In every industry, regardless of geography, referrals, word of mouth are the strongest and most valuable source of customers and patients.

What services could you offer to:

  1. differentiate and elevate your physical therapy practice above the competition?
  2. attract highly motivated and loyal patients?
  3. cause patients to rave about your services to their friends and families?
  4. add significant revenue to your pt practice?

For instance, can you offer any one or a combination of these products:

  1. Equipment, supplies, or supplements
  2. Massage
  3. Wellness and Fitness Program
  4. Sports Enhancements Program
  5. Injury Prevention and Ergonomic Re-Design
  6. Vestibular Balance Program
  7. Weight loss Program

What are the steps to discover or invent a program that would really work in your area while increasing the profitability of your physical therapy practice?

Some coaches and practice management consultants suggest surveys are effective means of discovery– but do they really work?

I doubt Harvey’s client surveyed his Canadian neighbors prior to offering his headache handling services. Ford’s notorious quote is: “If I asked my clients what they want, they would ask for a faster horse.” Steve Jobs too is famous for NOT doing any surveys and trusting his intuition.

Apple Computer president Michael Scott in 1980 wrote a memo announcing that “EFFECTIVE IMMEDIATELY!! NO MORE TYPEWRITERS ARE TO BE PURCHASED, LEASED, etc., etc.” by the computer company, with a goal to eliminate typewriters by 1 January 1981.

In 1988, Microsoft manager Paul Maritz sent Brian Valentine, test manager for Microsoft LAN Manager, an email titled “Eating our own Dogfood”, challenging him to increase internal usage of the company’s product. The idea behind “dogfooding” is that if you expect customers to buy your products, you should also be willing to use them. Some people call this “do what you preach.”

Dogfooding needs to be transparent and honest: “watered-down examples, such as auto dealers’ policy of making salespeople drive the brands they sell, or Coca-Cola allowing no Pepsi products in corporate offices … are irrelevant.” (Wikipedia) A perceived advantage beyond marketing is that it should allow employees to test the products in real, complex scenarios, and it gives management pre-launch a sense of progress as the product is being used in practice.

“Microsoft’s use of Windows and .NET would be irrelevant except for one thing: Its software project leads and on-line services managers do have the freedom to choose.”

If you think about it, patients, like customers, seldom know what they really need or want. Surveys only help those who sell survey management services.

When it comes to your physical therapy billing and profitability, you and your staff need to be the final judge of your services. Steve Jobs wanted a computer that he would want to use instead of the typewriter. Ford wanted a car that he would want to drive instead of riding a horse. I want a software service that my staff and I would WANT to use to manage our company.  I want a blog that I choose to read it, that would teach me something new.

Think about it – if you cannot use it, why would anybody else want to use it? If you offered an weight loss program while you weighed 250 pounds, do you think you would attract any patients?

On the other hand, if your program was that good that you used it yourself, how easy would it be to tell your story and get paid for the your services? Would it really matter if insurance covered it?

Trust your intuition and you will have happy patients who tell their friends about your physical therapy services!

Physical Therapy Profitability | Staff Compensation Strategies – Part III

incentives for physical therapy practice employeesHow to Select the Right Incentives to Improve Your Bottom Line

By Yuval Lirov, PhD, Dave Macolino, and Kevin McGovern, DPT

“So, why don’t we move all of my staff on commission?” asked Peter.

“That’s the right business approach,” responded Alicia, “except most people do not have self-confidence and productivity to work on pure commission. For instance, would your biller agree to work on 100% commission of your insurance collections? Most likely, she wouldn’t, because she needs to pay her mortgage and other fixed costs and she cannot make her income dependent on your patient flow and the insurance companies. She expects a steady check regardless of your revenue, which depends on her performance. Actually, do you have ways to measure her performance? If you discovered under-performance, what would you do?”

“Today, I pay her regardless of her or my practice performance. That’s not a healthy relationship,” lamented Peter, “It’s hurting the business.”

“The good news is that, like Katherine’s office, there are companies that work on commission-only arrangement,” said Alicia, “outsourcing your physical therapy billing would make more sense because a specialized billing company would have processes to manage their employee performance, including correct incentive methods. Actually, if you talk to an outsourcing company, always ask them how do they compensate their employees? Are they all on commission? If not, then you will end up with the same problem with even less control.”

“Actually, no matter how big or small my physical therapy practice is, all of its parts must work together to succeed. If administrative staff allows too many cancellations and doesn’t help with referrals, patient visits will suffer and the revenue will decline,” said Peter.

“A Pay- for-Performance pay scale rewards the staff who produce and penalizes those who don’t. As a practice owner, I am always on Pay-for-Performance pay scale. You pay yourself less when the company’s revenue is down. Why shouldn’t the staff’s income be on the same path? Tomorrow, I will change my compensation setup for my employees,” Peter sounded really excited.

“Slow down, Peter,” said Alicia. “Before you make any changes, review them with a Human Resource and Compliance specialist to get sound advice,” warned Alicia. “We don’t need a lawsuit because we missed a legal requirement to make the changes we want.”

What do you think? Is Alicia right in her reasoning?

Do you know of a PT-specific staffing system that could make Alicia’s and Peter’s dreams come true?

Physical Therapy Profitability | Staff Compensation Strategies – Part II

physical therapy staff compensationBy Yuval Lirov, PhD, Dave Macolino, and Kevin McGovern, DPT

 

Peter went to college with Katherine. They graduated together and were good friends. Katherine opened her physical therapy practice four years ago and was in the process of opening her fourth location. She was averaging 800 patient visits a week.  

 

“We didn’t speak for long because she was about to take her golfing lesson but in the few minutes we spoke, I thought of an idea,” said Alicia.
“I couldn’t even consider taking a day off to golf,” thought Peter to himself. “OK Alicia, what did you come up with?” Peter relented.  

 

“You know, she pays her physical therapy practice staff based on performance. Let’s start with some facts. Employee salaries vary in three ways: type of service, years of experience, and location. For instance you can see in (“2011 Staff Salary Survey” Physicians Practice):

 2 Years Experience – South East 20 Years Experience – North East
 Front Desk Staff $22,147 $41,147
 PTA $45,243 $72,165
 Billing Staff $26,995 $42,625

 

There are four kinds of basic staff compensation: hourly, monthly, base salary plus performance bonus, and profit sharing or pure commission,” said Alicia, handing the table to Peter. “Employee compensation is a cost of doing business. If you had no employees, you would eliminate that cost but if you spend time greeting patients and chasing insurance claims, you have no time to treat patient and manage referral relationships. So to grow, you need help.”

 

“So, you hire staff to treat patients, to greet them and schedule their visits, and to chase insurance payments. The problem is motivation. Can you tell me what are the costs of unmotivated front office staff?”

 

“Well, Alicia,” said Peter, “A careless front office person might get patients upset, forget to collect co-pays, not follow up on a missed appointment. They could also get other office staff upset because they would not work together as a team. The cost of unmotivated front office person in terms of physical therapy profitability could be increased patient attrition, impact cash-flow, and the bottom line ultimately. The cost of an unmotivated hire is much more expensive than a few more dollars per hour…”

 

“So, Alicia,” Peter sparked up in spite of the late hour, “Should we look for more qualified front office staff and pay $15, or maybe, $18 per hour?”

 

“Not so fast.” said Alicia. “If you pay more per hour, you will reduce turnover because fewer practices around will compete with your compensation, but you will still have the same motivation problems, regardless if you pay $12 or $20 per hour. Tell me, what’s the problem with paying hourly wages to staff that needs people interaction skills? What is the ultimate goal that your font office staff must meet?”

 

“I get it now!” Peter didn’t notice his voice rising. “The physical therapy front office staff is responsible for patient loyalty and referrals. Working with people requires attention to detail and interest in their problems. Especially when you work with injured or sick people. It’s hard work, people feel burnt out.  So, compensation and incentives must acknowledge their results, such as new referrals, fewer missed appointments, fewer missed co-pays. I could structure the front office salary so that they get minimal pay for standard work and a percentage of collections to give them incentive to grow referrals and keep patients compliant with their plan of care.  Since more referrals, fewer missed appointments, efficient collection of cop-pays and balances increases collections, they could work more and make more than the best paid staff around!

 

“Right,” said Alicia, “and not every person will be ready for this kind of compensation. But that’s OK too: why waste time hiring a wrong person for the job and then discovering that they lack the skills and motivation to do the hard work?”

 

“So, what about the PTA? Should I also pay him a bonus? but for what?” asked Peter.

 

“Sure, you do not want to pay him for idle hours during no-shows, and you do want to pay him proportionally to the number of patients he sees and for better plans of care. That’s called profit sharing,” said Alicia.

 

“…or commission,” continued Peter her thought. “OK, I get it – commission and bonus helps people focus on the result of their work and not on its difficulty. The compensation structure helps motivating my staff and improve teamwork, avoiding problems and contributing more to my bottom line.”

 

“So, why don’t we move all of my staff on commission?” asked Peter.

To be continued.

Physical Therapy Billing | Understanding AR | Gain a Peace of Mind and Double Your Profitability

Yuval Lirov, PhD and Eldad De-Medonsa, PhD

Physical Therapy clinic owners complain about nightmares and headaches because of lack of control and low predictability of their cash-flow. Without the ability to predict your cash-flow, you cannot measure or control your profitability.

Your cash-flow fluctuates from month to month because of uneven patient flow and charge differences between various patient conditions. More importantly, your cash-flow fluctuates because of payers delay and underpay reimbursements.

A diligent and disciplined billing process helps reduce payer delay and underpayments. It starts with the ability to measure your accounts receivable (AR).  This article shows how to use simple calculations to reliably predict your cash-flow based on your earlier charges. Once we are able to predict it, we also show a simple and effective path to double your profitability.

Some practice owners approximate their next month payment expectations by averaging previous months’ payments. This method is flawed as it ignores the charge fluctuations due to month-to-month differences in patient visits.  Others extrapolate their next month payments by computing a ratio of payments to charges over previous months and applying it to the current month. This method is flawed too as it ignores month-to-month changes in billing performance.

The method described below avoids this flaw by computing a ratio of payments to charges over previous months and applying it to the current month extrapolation.

1. % AR > 120 – Definition

Insurance companies delay their payments to PT practices. According to the PTB-12 survey, insurance payment delay has the following distribution:

Physical Therapy Billing_chart

There are two ways to look at this chart:

  1. When will you get paid for the charges you posted this month?
  2. How much will you get paid this month for the charges posted in the previous months?

The table below illustrates both ways of interpreting the chart above and the impact of the payment delay:
physical therapy billing_AR

For instance, this month you will get paid 46% of the current month payments, 18% of previous month’s, 9% of the earlier month, and 6% of 3 months ago. The remaining 21% of 4 months and above will probably not get paid ever.

For this reason, the AR beyond 120 days is a reliable proxy for overall billing performance.  The Percent AR>120 is the percentage of charges not paid for over 120 days as part the overall AR.

2. How to compute monthly payments?

Ignoring the AR beyond 120 days that is unlikely to get paid, we arrive at a convenient way to predict our payments, given the past history of your charges:

01

3. Why a Reduction of %AR>120 is Important to Your Bottom Line?

To answer this question, let’s see what’s sensitivity of your bottom line to billing performance fluctuations. To this end, let’s take a change of 1% in %AR>120 and see what difference it makes to your collections.

1. Calculate sensitivity

02

2. Calculate the impact of significant performance improvement

03

physical therapy billing_AR120_Chart

 

physical therapy billing_AR120_Closeup

 

4. How Does an improvement on %AR>120 Impact Your Profitability?

Our research shows that industry average profit of a practice is 14.4%.

04

Returning to the example in the earlier section, the impact of reducing %AR>120 down to 9% is 15% in collection or $9,288 in added revenue. The extra $9,288 is all profit since all expenses were already paid. Therefore, the new monthly profit is a sum of the previous profit ($8805) plus the new addition due to improved billing performance:

05

physical therapy billing_profit