Think of your practice's stacks of uncollected insurance claims as piles of cash. Now imagine those piles of cash being swept into the trash. That can be the effect of not following proper accounting policies and procedures.

Here are four methods for improving your practice's efficiency and cash flow:

Update policies and procedures

Most employees hate the process of collecting unpaid bills. If policies and procedures for claims processing are not up-to-date, employees may be tempted to let collections slide. In addition to putting policies and procedures in writing, your practice should observe a formal procedure for verifying that they're followed, ensuring that all charges are entered into your system, insurance claims are filed quickly and accurately, and insurance payments are examined carefully and challenged, if necessary.

Monitor performance with statistical reports

To prevent revenue problems, you should review your financial data with daily, weekly and monthly statistical reports. These brief reports should highlight key data, such as monthly cash balances; monthly, year-to-date and prior year charges; monthly and yearly accounts receivable balances; and several ratios to help you monitor cash flow:

The net collection rate monitors the effectiveness of billing. (See “Three key financial ratios.”) If this ratio begins to go down, it may be the result of increased contractual write-offs, or it may mean that your procedures need attention or that staff members are writing off payment denials instead of appealing them. The Medical Group Management Association (MGMA) 1998 Cost Survey showed that adjusted fee-for-service collections for family practices in 1997 averaged 98.65 percent.

The gross collection rate measures the discounts or adjustments of third-party payers. The average gross fee-for-service collection rate for family practices in 1997 was 75.88 percent, according to MGMA. If your rate is less, remember that physician charges vary. If you are unsatisfied with your percentages, you may want to renegotiate your contracts.

The number of days in accounts receivable should be monitored monthly along with balances owed by your top four to five payers. If the number of days in accounts receivable begins to grow, the practice needs to quickly assess the problem. According to the MGMA survey, 6.27 percent of the average family practice's accounts receivables in 1997 were 91 to 120 days old, and 25.35 percent were more than 120 days old.

Appeal rejected claims

The hesitation of some practices to formally appeal denials of insurance claims often stems from an unfamiliarity with the appeals process. Cost-effective claims appeal methods are available through software programs. (See “Appeal your claims with a software program.”) They are particularly effective with helping to appeal denials based on medical necessity, procedural coding or timely filing issues.

Know your coding

Make sure you, other physicians in your group and your coding staff are well trained in coding and documentation. You know that insurance companies reject claims with the wrong codes or with codes that aren't supported by documentation, and a Medicare audit can result in fines or prosecution. Your clinical staff should conduct regular chart audits to ensure the quality of your coding practices. Not only can chart audits help spot and correct coding errors that may be causing rejected claims, they can identify a pattern of undercoding, which could also be hurting your bottom line.