With reimbursement in the managed care environment plummeting, it is not unusual for doctors to wait six, nine, 12 months or more for payment. According to the POMIS1 report, typical medical offices have an average Days Sales Outstanding (DSO) of 52 days, and more than 20% of their A/R balance are120+ days out. Higher DSO numbers translate to increased A/R balances and this negatively impacts cash flow. Since its inception, Desert Sun Pediatrics' A/R numbers have always looked good.

Like most executives using MGMA (Medical Group Management Association) survey data to understand how their practices perform compared to similar practices, we used these findings to perform an internal review to determine how these positive outcomes were being achieved.

Brought in by Desert Sun Pediatrics to review their practice, Donna Cunningham, a practice success strategist with Medical Operations came away impressed with the results.

Claims coding error rates were exceptionally low, resulting in very low third party payer rejection. And, though the practice was performing just ahead of the MGMA standard for a comparable practice on 30 days-out receivables, Desert Sun Pediatrics showed extremely positive results with claims left outstanding at 120 days. MGMA's2 benchmark for 120 days in A/R for a well run practice is about 3.16% of practice revenues, and Desert Sun came in under a quarter of a percent, .21%. For the average practitioner, this would mean over $60,000 in freed up cash flow.

"I am astonished by the ability of the practice to maximize reimbursement while keeping their A/R at such a low level," Cunningham said."By preserving their cash-flow, the practice has been able to invest the added dollars into themselves

Donna Knapper, who owns DRK Billing Specialists, helps to manage the billing for Desert Sun Pediatrics and was one of the first to provide an early explanation as to how the numbers could be so low. While a simple explanation could have been that this third-party billing service was writing everything off, in five years Desert Sun Pediatrics had only sent 10 patient accounts to collections. "In reality," Knapper said, "it was with the help of my practice management solution, AdvancedMD (www.advancedmd.com), that I am able to achieve such results."

"This was not a clean-up issue," Knapper continued. "Desert Sun Pediatrics has always been financially stable - they just needed to see how it was possible to build upon their success."

Knapper began utilizing AdvancedMD's revenue-cycle management and time-saving technology for Desert Sun Pediatrics in 2001. "Since that time, the rising trend of software as a service (SAAS) has been a positive factor in their success," Knapper said.

"With this Web-based software, even one physician may use the program with features that - in the past - only big businesses could afford. This software has become a working tool utilized by practice managers to monitor its operations and determine whether the practice's goals are being met."

Reports and other key performance indicators provide a daily, weekly, monthly and quarterly picture, allowing management to properly monitor operations and make quick adjustments when an emerging trend is identified.

We know exactly what's going on "real-time" rather than waiting for monthly financial reports. Our concerns over using a third-party billing company have completely melted away. Because the software is web-based, DRK has 100% access to the information they need to submit bills accurately and timely. Management also has 100% access to the status of billing and collections.

According to Knapper, "a robust claims inspector should be an integral part of any practice management solution and is critical to driving down that rejected claims rate." On average, 30% of claims submitted to insurance companies for payment are rejected. According to the POMIS Report, a single physician practice can expect an average of 69 rejected claims monthly - due in large part to coding errors. Industry experts state that the costs to simply resend a rejected claim to a payer exceed $4.40. When calculating the additional costs of phone inquiries, duplications and extra administrative expenses, resubmissions may skyrocket to as much as $57.46 per claim. "Over a monthly period rejected claims may cost a typical single provider practice $3,965 per month just in follow-up costs," said Cunningham "That's more than $47,500 per year."

The claim inspector in AdvancedMD scrubs each claim by checking over 4.5 million coding combinations and procedure codes and then prompts the administrator to correct any errors before they are submitted. "It's better to know if a claim needs a correction before it's submitted, rather than waiting 60 or 90 days to get a denial from the insurance company," Knapper said. "Take into account all the costs involved when resubmitting rejected claims and the positive financial impact is substantial," remarked Cunningham.

Practices should also have a system in place that will make sure certain outstanding claims are recorded correctly, approved, and received in a timely fashion. AdvancedMD's "notes" function feature provides a check-and-balance system against claims that are just sitting out there.

After being in business for just over six years, the proper financial management of receivables at Desert Sun Pediatrics has led to greater profitability. With the goal of adding to the bottom line by keeping an eye on A/R and using the right internal tools to manage the entire revenue cycle, Desert Sun Pediatrics is in the middle of an expansion project - doubling the size of their practice and bringing on other practitioners as well. Now that is success!

Biography: Larry Donnelly has worked for over 20 years as a healthcare professional. His experience includes: creating and executing strategic plans, developing and implementing new products and services, improving physician relationships, increasing physician referrals, negotiating managed care agreements, marketing, finance, and improving clinical and operational systems in hospitals as well as clinics - both for-profit and not-for-profit.

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1The POMIS Report from Jewson Enterprises (POMIS stands for "physician's office management and medical information systems") http://www.jewsonenterprises.com/jewsonproducts/thepomisreport.html

2The Medical Group Management Association (MGMA) and its certification and standard-setting body are committed to the advancement of medical professionals. Reports are annual surveys that focus on revenues/expenses, provider compensation and production, management compensation and group performance for medical practices. http://www.mgma.com

3Medical Operations is an innovative healthcare consulting and operations management organization designed to ensure financial and clinical success. http://medicalbluebook.com/Practice_Success.html