What are your dental practice’s guidelines for accounts receivables (AR)? Do those guidelines make sure your practice collects what you’re owed? This front office manager shares her expertise for getting AR up to speed.
As office manager, you’re responsible for verifying that your office collects from both insurance companies and patients, and is paid for work completed.
A good collection ratio for a dental office is 95% to 99%. This means the month-to-month collections might vary depending on many factors, but over a 12-month period the office collects nearly all of what is produced. This is not the case in some practices. Why is that?
There are many reasons why dental offices don’t get paid in full.
- Insurance does not pay what is expected.
- The patient leaves a balance.
- The patient stops making payments toward the agreed-upon payment plan.
The goal should be to keep accounts receivable (AR)—the amount of money the practice has outstanding—no higher than the dollar amount of its average monthly production.
If the practice produces an average of $30,000 a month, then the AR should never be greater than $30,000. Furthermore, there should be nothing in AR that is older than 30 days.
I didn’t make up these guidelines. They’re well known in our industry and shared among advisors, consultants, and accountants. I use them as a baseline for my office and try to meet them every month, however, that does not always happen.
As a dental office manager, I know the reality is that sometimes things get out of hand and don’t receive enough attention.
Whether you’re new to an office with a large AR issue, or you’ve been there awhile and you’re finally ready to address AR, you need to devise a plan of attack. With everything else that goes on in the office each day, you must be realistic about what to address first and what will have the biggest impact and bring down the AR.
Here are some guidelines from an office manager’s perspective.
Know your situation – Look at the total dollar amount that is outstanding and determine what is 30, 60, or more than 90 days old. Next, look at how much is owed by each party. Is the money owed by the insurance company or the patient? Know where you’re starting so once you work on the issue you can see improvement along the way.
Start with the oldest and largest – Both will have a big impact on reducing your AR and improving the bottom line on the report. Because there is only so much time in each day, you will need to work on these two simultaneously, but with different intentions.
• Largest – These owe your office the largest amount of money and will potentially be the hardest to collect in full, but once you collect they will have a significant impact on lowering the office AR. The large balance likely comes from unpaid insurance claims. Patients may not understand where the balance is coming from, or they might be upset about their outstanding balance. See if there are outstanding claims to be paid and get those addressed as soon as possible by the insurance company.
It is vital to figure out where the patient balance is coming from and to be prepared to explain it clearly to the patient. Patients need to understand they must pay, and you can help them figure out a payment plan.
• Oldest – These are over 90 days old. If the balance is overdue because of insurance, get on the phone as soon as possible with the insurance company and determine what they need to get the balance paid.
There is only a certain period during which an insurance company will consider paying a claim after the treatment is complete, so you want to make sure to address it before the expiration date. If the old balance is the patient’s responsibility, determine why it has been sitting unpaid for so long and what your office can do about it.
You have a choice: either get serious about going after them to get the bill paid, or consider writing it off. Once balances are unpaid for a long period, the chances of your office collecting on them drop significantly. Either way, decide what you want to do with these accounts and then get them off your books.
Orthodontic patients – If your office handles ortho, patients frequently end up with a large balance over 90 days, because your office is waiting for ortho payments from the insurance company.
Identify these patients, mark them as such, and make sure that the balance they owe is only for orthodontics. If they owe more than what is expected from insurance, collect the remaining balance so it does not sit unpaid until the patient is finished with the ortho.
Once you have completed your review of the large balances and balances that are over 90 days, follow the same process for the 60-day and 30-day overdue. Address the 60- and 30-day balances only after you have finished handling the 90 days overdue because the dentistry was done more recently and your office has a greater chance of collecting them.
To ensure this is not an ongoing problem in your office, make sure you have systems, policies, and training in place to prevent your AR from getting out of hand again.
Enter insurance correctly in the beginning to get best estimates possible.
Get signed treatment plans from patients that clearly state that the insurance is just an estimate and they ultimately owe if the insurance does not pay.
Submit insurance in a timely manner with the right documentation needed to get paid.
Train staff how to collect from patients and handle billing questions.
Implement systems to make sure claims are being followed up on in a timely manner and being paid.
Have a collections plan to make sure patients receive statements and calls as soon as they acquire a balance so the office can be paid quickly and balances do not sit inactive for more than 30 days.