Have a question for “Coding Commentary”? Tweet it to us at

Ms. Adams is a consultant with Corcoran Consulting Group. She can be reached at 1-800-399-6565 or at www.corcoranccg.com.

Whether you’re a solo practitioner or in a group practice, it’s important that you periodically review your financial metrics. Financial reports will tell you more than your net revenue. When you review metrics thoughtfully, you may be able to detect problems in your billing system.  

In this era of chronic staffing shortages, high staff burnout and constant adjustments due to COVID-19, a financial deep dive can help you spot sloppy claim processing, abusive billing or, worse, fraudulent claims or embezzlement.


Start with AR days

For the big-picture view, it may be easiest to start with accounts receivable (AR) days. AR days indicate how long it takes for a claim to be fully paid. For instance, let’s say the only insurance you accept is Medicare and your front desk employees collect all deductibles at the time of service. Medicare would pay a clean (error-free) claim in about 14 days. In this scenario, your AR days would be about 14.  

In reality, your practice accepts many insurance plans. To accurately interpret your AR days, you should first determine your payer mix. Commercial carriers usually pay a clean claim in about 30 days, but some take up to 60 days.  

A typical ophthalmology practice is about half Medicare, half commercial carriers. If your practice has a larger Medicare population, you might expect a lower AR day number (around 35). A higher percentage of commercial carriers means a higher AR days number (up to 50). If your AR days is much higher, there may be a serious problem in your billing process.  


What high AR days may mean

High AR days can signify inadequate staff training in your billing department, resulting in excessive claim denial and a need for reprocessing of claims. When a claim is denied, it will sit in AR until someone corrects and resubmits it.  If your billing staff is submitting clean claims, high AR can indicate slow collections. This problem might be with your front desk employees or billing.  

When your office collects copayments or deductibles on the date of service, your AR days will improve. Conversely, if cash is collected only after services are rendered, “the chase is on,” as one astute biller put it. Your billing employees will then have to send invoices repeatedly. This often involves calling the patient to try to collect the outstanding balance. 

Any time a claim is touched more than once, whether due to incorrect submission or a mishandling of patient responsible payments, your AR days will go up—and your revenue will go down.  


What about low AR days?

Very low AR days are also problematic unless you offer a very high percentage of cash (usually non-covered) services, and your employees collect the full self-pay fees on the date of service. Low AR days can otherwise be an indicator that billing staff are overworked and consequently adjusting off claims that should be paid.

Billers may also know the types of claims that fail to pay and inappropriately add modifiers before they submit them. That can be a trigger for Medicare audits.  

Your billing staff might also be adjusting off patient-responsible amounts—a problem that can lead to accusations of inducement. Any time you offer a service that automatically costs a patient less than the “practice down the street,” the Office of Inspector General will assume the worst: that you’re luring patients to your practice with free services. Slightly low AR days may indicate billers can’t resolve certain categories of claims (e.g., exams billed with a modifier), and thus they adjust off the claim line item before they submit it rather than try to correct it.  


Making adjustments

Once you have a handle on your AR days, you can turn to adjustments. Adjustments can be complicated. Like AR, the payer mix has significant influence on adjustments. Having a different fee schedule for each payer can be impractical, so most practices have just one. 

In general, your fee schedule should be set about 10 percent higher than your highest payer for each service. If your fee schedule is too low, you’ll lose revenue from higher-reimbursing payers. Set it too high and your adjustments will be nearly impossible to monitor. 

The upshot of a single fee schedule is that any lower-
reimbursing plans will have significant adjustments, while higher-paying plans have much lower write-offs. You should have a clear understanding of the typical adjustment rate for your practice.

If your adjustments are high, it could simply be a sign of a poorly constructed fee schedule. Or it could be a sign of claim or payment mismanagement. Overworked billing employees shouldn’t be automatically adjusting off problematic claims. The root cause of any denial needs to be corrected. In a worst-case scenario, employees who feel mistreated could be adjusting off partially paid claims and payments and pocketing the balance.  


Don’t forget monthly gross

If you haven’t been monitoring your monthly gross receipts and charges per procedure, you should add this to your financial review. Look at previous month and year reports so you can identify practice patterns. For instance, in the northern United States, gross receipts typically dip in the winter when the “snowbirds” leave for warmer climes, then bump back up in the spring. 

Understand your practice revenue patterns so you can plan appropriate staffing levels. Perhaps you could  increase scheduled annual diabetic and non-urgent exams during the cyclical drop in revenue, then scale back on them during busier times.  

A regular review of your AR days will give you a sense of your practice’s financial health. When you consistently watch your financial reports, you’ll be able to identify and correct front desk or billing problems, strategize practice growth and, best of all, reward those employees who are keeping your practice financially healthy. RS