Private Practice 101: How to survive the future
Physician practices are constantly faced with financial change and challenges, driven by a wide variety of factors, ranging from the implementation of the Affordable Care Act, to increasing private and public payer requirements such as ICD-10 and the shift to consumer-driven payment models. The conventional wisdom, often covered by the mainstream media, is that the rate of change and the significance of the challenges are creating insurmountable barriers for independent practices, forcing some practices into selling prematurely or witnessing the early retirement of influential physician partners.
There is clear evidence that the future will be filled with numerous challenges and physician practices will need to be prepared as these changes occur. Those who are interested in a better future must take necessary steps for their practice to ensure that they can successfully manage the transition in the coming years to emerge as strong, successful, independent, patient-centered practices.
The place to start is the most critical function for any practice — its financial condition and operations. The best method is to conduct a data benchmarking overview of the practice. Very few practices collect all of their billed revenue and even fewer do so through an efficient billing process. Billing metrics are among the most important to understand and manage in a practice. Whether your current processes are internal or outsourced, the measurements remain the same.
Below are the 5 most important factors that will determine your practices survival;
- Net Collection Rate overall should be greater than 95 percent. If it is less than this, a practice has one or more billing issues that must be resolved to ensure financial success.
- Days Sales Outstanding (DSO) should average less than 45 days. Longer time periods mean a practice has to carry too much working capital to cover ongoing costs and points to an ineffective billing process.
- Accounts received over 120 days from date of service should be less than 15 percent on average.
- Days from service to bill (Billing Lag) should average less than three days, with most claims billing in one day to two days. Again, longer periods point to an inefficient process.
- Claim denial rate should be less than 5 percent monthly. This is essential in both achieving a collection rate greater than 95 percent, but also to avoid unnecessary administrative costs managing denials.
What does it mean to the practice?
There are many benefits to running an efficient and productive financial center. First and foremost is the longevity of the practice itself. Others include
- Improved cash Flow
- Decrease in back logs
- Decrease in bad debt
- Redistribution of administrative staff
- More dollars to the bottom line
If a practice generates 5 million in gross billing with a projected 2.5 million in revenue and the current practices net collections rate is 70%, increasing to Proximal's average collection rate of 98% adds about $60K a month or $720K a year in cash.
What can Proximal do for you?
Proximal is a full service revenue cycle and practice management company. We have consistently achieved above average results for our clients annually. Proximal’s results have created hundreds of thousands of extra dollars to our clients, with no additional efforts of our providers.
Proximal achieves;
Average Net collection rates of 98%
Average DSO 43 days
Accounts Receivables over 120 11% (All Insurances)
Average Days From service to billing 1.5 days
Claim Denial rate 2.5%
Call us today for a complimentary consultation
Proximal’s goal is simple; we want to partner with your practice to add value to your bottom line. We make the process very easy for the practice and providers by offering the most comprehensive revenue cycle management services, along with the most competitive pricing in the region. We offer creative individualized solution with minimal or no upfront cost.
No matter the direction you choose—in-house billing or a billing service partnership—your medical practice can be a great business and an exceptional place to provide healthcare services to your patients. Just remember, as your business needs change, the decisions you make today may need to change as well. Always stay open to the possibilities and make choices that allow for flexibility in the future.