Medical Practice Management
Sep 21

Musings on billing, collection, and profitability

So you’ve got a handle on your accounts receivable (A/R) and you know roughly how long it takes to get paid once you submit a bill. Congratulations — now you’re ready to get started.


Getting a handle on your days in A/R is only half the battle. You can’t have any A/R unless you actually bill something. So you need to know how long it takes your practice to bill for services after you provide them. You also need to measure whether you’re billing all the services you provide.


That’s why you need to measure your “gross charges,” which are the total amount of money you bill every month. You should be figuring out that number every month and comparing it against the previous year’s number for the same month. If the doctor looks busy, but the charges are going down or are stagnant, you may have a problem. Sometimes this means you’re not billing all the services your doctor provides due to a coding problem.


But also, you may not be getting out the charges adequately. A healthy standard is to post all office visits or charges within 24 hours after the date of service, and all other services within five working days. Any practice that can’t get an office visit claim out the next day has something terribly wrong. It’s that simple.


Many practices either don’t measure things like days in A/R or gross charges, or else they don’t know what to do with those numbers once they have them.


The next thing to track is collections. If your charges are going up but your collections are going down, you need to investigate why (Can you say the word “reimbursement”?). If your practice has declining profitability, don’t succumb to the temptation to cut staff. If anything, this may be a signal that you need to hire an extra person to speed up billing or work on collections. When you start cutting out overhead as a knee jerk reaction to profitability, you are harming the practice. You can nickel and dime overhead but you can’t significantly cut it without harming the practice. The whole focus of management should be how to grow the top line.


Create a long-term plan to address the issue of declining profitability by identifying the real issues your practice is facing and creating ways to tackle them — rather than using “Band-Aid solutions.”

About Reed Tinsley, CPA

As a top advisor to physicians, I help increase practice profits by delivering hands-on, expert medical accounting/tax support, practice counsel, and revenue-building strategies. Read more →