Cash flow issues in healthcare provider settings occur when cash received does not convert to cash within an acceptable time period. The most common causes for this include slow insurance payments, high level of denials, limited bottom-line efforts on biller’s parts, poor patient payment collection efforts, and poor revenue cycle performance tracking. The issues delay cash coming into the business while expenses still occur. This causes financial stress for a business, even one that is fully booked for patients. To correct cash flow problems, billing efficiency will have to be increased, claims will have to be screened more accurately, collections will have to be improved, and revenue cycle performance will have to be tracked in a more disciplined manner.
At the medicator’s, we provide services that help providers stabilise their cash flow by performing structured revenue cycle management, denial control, and complete billing services for any type of provider. This guide will introduce you to cash flow breaks and provide you with step-by-step instructions on how to repair them.
What Cash Flow Problems Mean in Medical Practices
Cash flow refers to the actual cash that is received by your practice after services have been rendered. This is different than any revenues that are billed to you for services rendered / expected to be paid for services rendered.
A practice can look good on paper in terms of revenues, yet still have a cash flow problem due to delayed, denied, and/or uncollected payments.
- How cash flow impacts:
- Salaries and payroll
- Rent and utilities
- Medical supplies used in patient service delivery
- Purchase of equipment
- Daily operations
When the inflow of cash slows this creates instability in daily operations, even when there are high patient volumes.
- Slow Insurance Reimbursements
One of the major disruptions of cash flow occurs when insurance payment delays occur; that is, payment does not occur immediately after service has been provided.
There are numerous reasons for delayed payments from the payer:
- Late Submission of Claims
- Errors in Claim Submission that Require Corrections
- Payers Processing Claims
- Requesting for Additional Documents
- Using Manual Billing Systems
It takes an average of 14 to 45 days from the date of claim submission for a clean claim to receive payment; any errors in submitted claims will cause additional delays.
As an example, if a clinic is two weeks late in submitting their claims, what could be received in 30 days will now take 60 days to be received. The Clinic continues to incur expenses that normally would have received timely payments.
Solutions to the Problem:
- Submit claims within 24 to 48 hours after providing the service
- Utilize Electronic Claim Submissions
- Track Payer Turnaround Times
- Follow-Up on Outstanding Claims on a Weekly Basis
- Verify that Claims are Clean Prior to Submission.
- High Claim Denial Rates
Claim denials keep cash from entering the practice’s financials. Denied claims will delay the inflow of cash until they have been corrected or appealed.
Common Denial Reasons Include:
- Inaccurate Coding
- Missing Documents
- Eligibility Problems
- Authorization Issues
- Timely Filing Violations
Denials create a lot of rework and lengthen the reimbursement cycle.
As an example of how the need to constantly remanage a previously denied claim:
A group of claims is denied because there were missing modifiers from the claims submitted to the payer. Having to fix and resubmit the claim will delay previous payments by weeks.
Solutions to the Problem:
- Identify consistent denial reasons
- Fix root causes instead of individual claims
- Improve the accuracy of the coding used
- Strengthen the documentation standards
- Utilize Denial Management.
- Poor Patient Payment Collection
Collecting patient payments has become a huge source of revenue for practices. Delays in collecting patient payments create cash gaps.
Common collection issues for practices are:
- Copays charged at visit but not collected
- Deductibles owed but not paid
- No patient payment reminders
- Weak follow-up on unpaid balances
As patient cost shares increase (i.e. deductibles and copays), the amount not collected will compound.
Example:
Patients don’t pay the copay when they leave and we wait months to collect once we send an invoice with inconsistent follow-up.
Solutions to Collect Payment:
- Collect the copy when the patient is checked in to the practice.
- Clearly communicate your costs for services before providing treatment.
- Provide the option to collect the copay electronically by using digital payment options.
- Send automated reminders (via email or text) to the patient for upcoming payments.
- Clearly communicate to the patient your billing policies.
- Weak Revenue Cycle Management
When revenue cycle processes fail during the course of billing, it negatively impacts cash flow at all stages of the billing process.
Commonly impacted areas that slow down the cash flow of a practice are:
- Mistakes during patient registration
- Failure to verify patient eligibility with insurance
- Mistakes in coding charges
- Delayed processing of claims
- Failure to post payments correctly
- Poor follow up to collect on outstanding invoices.
- When any area fails, it limits the flow of cash for the entire billing process.
Example:
Once services were rendered, it took days for the practice to bill for these services due to problems in workflow or processes. Therefore, revenue is not billed until days after the services were provided.
Solutions to Improve Revenue Cycle:
- Create a detailed workflow map of the entire revenue cycle.
- Assign one person to be responsible for each step of the revenue cycle.
- Automate the entire billing workflow process.
- Establish the ability to track claims throughout the entire revenue cycle.
- Eliminate manual processes wherever possible.
- Coding and Documentation Errors
Incorrect Coding and Inadequate Documentation can both greatly reduce or delay reimbursement. The most common issues include the following:
- Wrong CPT/ICD Codes
- Missing Clinical Justification
- Incomplete Patient Records
- Lack of Procedure Detail.
Insurance companies rely on documentation to approve payments.
An example of this would be when a complex patient’s visit is coded as a “simple office visit” because there was insufficient documentation from the provider, resulting in a lower payment to the provider than what was owed.
Ways to remedy these problems:
- Use structured templates for documentation
- Align Diagnosis with Procedure Codes for accurate coding.
- Train Staff members on accuracy pertaining to coding.
- Conduct audits on a regular basis.
- Use certified coders for coding of claims.
- Inefficient Billing Systems and Technology Gaps
Outdated billing systems and information technology result in substantial delays in billing operations and increased errors. These two factors can have an adverse effect on the collection of and the accuracy of billing and are common problems that occur in many practices:
All of the above-stated manual processes (including) manual entry of claims will lead to repeated errors, delayed processing of claims, and rejection of many claims.
Ways to remedy these problems:
- Upgrade to integrated EHR and Billing systems.
- Automate the submission of claims.
- Use real-time dashboards to provide practice with visibility into the status of their claims.
- Eliminate manual entry points.
- Provide for the electronic posting of payments received.
- Lack of Financial Tracking and Reporting
Lack of Financial Tracking and Reporting Without knowing the condition of your financial situation, you’re unlikely to know when cash flow issues have arisen until these problems become serious. The most frequent problems include:
- You are unable to track how many claims were denied
- You are unable to monitor the age of your accounts receivable
- You are unable to analyze your collections
- You are unable to evaluate the performance of your payers
Denial Rates Have Increased for Several Months, but You Had No Way to Know, and Your Revenues Are Being Impacted Without Your Knowledge.
Solution – Track Your Key Performance Indicators Monthly
Monitor The Age Of All Accounts Receivable, and Review The Performance of Your Payers Regularly.
- Use Dashboards for Financial Visibility
- Use Financial Benchmarks
- High Accounts Receivable (AR) Aging
The age of your AR indicates how long it has been since payment has been made for services. The older your accounts receivables, the more difficult they are to collect.
Issues related to AR Aging Include:
- Claims That Have Not Been Paid After 30, 60, or even 90 Days from the Date of Service
- Denials That Have Not Been Followed-Up On by You
- Patient Balances That You Have Not Followed-Up
90 Days After Claims Were Submitted, You Are Unable to Collect Payment Forever, Resulting in Permanent Revenue Loss.
Solution – Follow Up on Claims on a Weekly Basis
- Prioritize Old Accounts Receivable First
- Successfully Develop Job Descriptions For Your Accounts Receivable Positions
- Track Payer Response Times
- Write Off Uncollectible Collections Correctly
- Staffing and Workflow Inefficiencies
Insufficient Staff and Undefined Workflow Lead to Inefficient Billing Procedures.
The Problems with Staff-Workflow Include the Following:
- Too Much Work to Do
- Not Enough Follow-Up
- Inconsistent Processes
- No Accountability
A Staff Member Performing Billing, Verification, and Follow-Up Will Cause Delays in Billing Procedures.
- Solution – Define Roles
- Separate Billing Responsibility
- Train Staff Properly
- Standardize Workflow
- Outsource When Necessary
- Weak Contract and Payer Management
Weak management of payer contracts can cause your facility to be underpaid for services provided, resulting in decreased revenue.
Common problems:
- Low reimbursement rates
- No contract reviews
- Underpayments not identified
- Lack of comparison among payers
Example
A payer consistently underpays claims submitted for services rendered; however, no one has performed an audit to uncover this issue.
Fix:
- Management should conduct regular reviews of contract terms.
- Management should also conduct audits of the total amounts billed for services, compared with the amounts received.
- Management should identify instances of underpayments from payers.
- Management should renegotiate with payers to receive equitable payments for services rendered.
- Management should monitor payer performance on a regular basis.
How The Medicator’s Helps Fix Cash Flow Problems
Medicator’s will help you strengthen every aspect of your revenue cycle and will improve your cash flow’s stability. When you use Medicator’s, you’ll benefit from:
- Timely submission and turnaround of insurance claims
- Tracking and recovering insured denial of payments
- Assistance verifying insurance eligibility
- Accurate coding and documentation of services performed
- Timely tracking and reporting of your accounts receivables (AR)
- Visibility into real-time information regarding your revenue cycle.
By using Medicator’s, it will reduce delays in the payment of your services; it will improve collections, and provide you with a predictable monthly cash inflow.
Final Insight
Cash flow issues do not come from low patient volume, they come from poorly organized systems of billing and collecting. When claims are held up, denied, or not tracked at the proper time, it will take a practice with high patient volumes just as long to achieve cash flow breakeven as it would to have the same amount of cash flow with few patients. Fix the system, and predicted, stable cash flow will occur.
FAQs
1. What causes cash flow problems in medical practices?
The major sources of cash flow problems in medical practices include late payment of insurance, a high number of claims that are denied, slow billing operations, poor patient collection, and ineffective management of accounts receivable.
2. How do claim denials affect cash flow?
When claim denials occur there is a halt or a delay in payment. When a claim is denied it has to be corrected and resubmitted; hence, the time frame for receiving payment from that claim lengthens, and as a result your cash flow decreases.
3. What is the fastest way to improve cash flow in a clinic?
You can quickly improve cash flow at a clinic by speeding up the submission of claims, decreasing your claim denials, collecting copayments from patients at the time of service, and following up on all unpaid claims on a weekly basis.
4. How does accounts receivable affect cash flow?
Old accounts receivable cannot be used to generate revenue. The longer your claim remains unpaid, the more difficult it will be to collect that debt and therein has a direct impact on your available cash.
5. Can insurance verification improve cash flow?
Yes! By verifying coverage, you reduce the number of claims you will have to resubmit and you also ensure claims are valid prior to providing service. This will lead to faster payments.
6. Why do medical practices struggle with patient collections?
The issues related to the difficulty that medical practices experience when trying to collect from patients include:
- patients do not understand what their financial responsibility will be
- they do not pay the copayment when they present for the appointment
- there are inadequate and/or inconsistent follow-up systems in place.
- Does outsourcing medical billing help cash flow?
Yes! Outsourcing improves the accuracy of your claims, reduces your claim denials and increases the speed at which you can bill and collect from your patients. All of these lead to improvements in cash flow.
