Reducing Bad Debt
Many organizations today are running bad debt expenses in the 3 to 5 percent range, resulting in millions in lost revenue. For some organizations, the financial struggle is real. With the countless changes that our industry is facing, it is becoming more and more difficult to collect the accounts receivable (AR). Looking at industry averages, if the percentage of bad debt is less than 2 percent, you’re doing fairly well. If the percentage is above 2 percent, Comprehensive Healthcare Solutions, LeadingAge NY’s new partner sponsor, recommends that you take a look at what the underlying causes of bad debt are in your organization. There are ways to improve your collections where bad debt expenses can be reduced to 1 percent or less.
As a company that is focused on revenue cycle management, Comprehensive Healthcare Solutions knows that a key for success is ensuring a proper payer for every service provided. They see many instances where organizations end up with bad debt by lack of proper payer planning during the resident’s stay or incident of care.
Let us take a look at this case study:
Mr. John Smith was admitted to New York City Nursing Home on Nov. 10, 2019 as a Medicare resident. Mr. Smith was subsequently issued a last covered day of Feb. 1st. On Feb. 2nd, when seeing the change on census, the Medicaid coordinator started the process of gathering the financial documentation needed for the Medicaid application. Working with Mr. Smith’s primary banking institution, the Medicaid coordinator was able to obtain the necessary five years of bank transactions, only to discover via conducting a banking review that Mr. Smith had another bank account that was linked to his primary account. One account led to another, and the coordinator spent a few months tracking down all accounts and working to obtain them, with Mr. Smith providing authorization to the banking institutions to release the necessary statements for the Medicaid application along the way. The coordinator was able to secure five years of transactions for four out of the five remaining accounts. Unfortunately, Mr. Smith passed away, and the Medicaid coordinator had no way of securing the final batch of statements. Medicaid ultimately denied the application due to not receiving all requested statements. New York City Nursing Home did not have a source of payment for the duration of Feb. 2, 2020 through July 15, 2020, and the $50,000 balance was recorded as bad debt expense at year-end.
This storyline is one that Comprehensive Healthcare Solutions has seen many times when they have been called on to assist organizations in reviewing their bad debt. It is crucial for all organizations to have proper policies and procedures in place to monitor that each patient has a valid and billable payer source. All key team members in admissions, social work, and finance need to have guidelines for communicating care plan changes timely to ensure a proactive approach to securing a payment source. As you can see in the above example, had the nursing home Medicaid coordinator been informed at the time of admission that Mr. Smith was in need of long term care, he/she would have had ample time to obtain all necessary financials for the Medicaid application and ultimately been able to secure Medicaid for Mr. Smith’s stay.
Payer source planning is but one of the many challenges that organizations are facing with their AR. Here are some other AR challenges that you may have:
- Complex insurance coding guidelines and narrow timely filing rules
- Increased enrollments into managed care, which are more difficult to collect on than fee-for-service (FFS)
- Recent changes in the New York State Medicaid timely filing limits
- Challenges navigating the complexity of nursing home Medicaid financial eligibility
- Local Department of Social Services (LDSS)/county backlog with processing Medicaid applications
Aside from having proper policy and procedure for internal communication, here are some other key ways to reduce bad debt expenses:
- Properly educating the admissions department in understanding payers
- Having a billing team up to date on all insurance, Medicaid, and Medicare policy changes
- Having a strong process for claim scrubbing prior to billing
- Having ample staff in place to proactively and thoroughly work on Medicaid applications
- Having a strong health maintenance organization (HMO) case management team to ensure continued authorization for length of stay
In summary, we are facing challenging times in our industry. It’s important to narrow down the causes that are driving your bad debt expenses and to see if there are positive changes you can make.
For more information on Comprehensive Healthcare Solutions and their service offerings, please visit http://comphcs.com/.