Your scheduling coordinator tells you that a trauma patient is coming in. You immediately get that familiar feeling in the pit of your stomach. Yes, you are concerned about the patient and how you will care for him but you also know that there is a really good chance that you may never get paid for your services. Because you are a health care provider, you treat the patient.

This fee, along with so many others, may sit in Accounts Receivable for months or even years to come. The cost to you is higher than you realize because of the time value of money and other costs.

There are four common factors that affect the time value of money. The effect of interest rates is probably the most well known. If rates decrease, a dollar in your hand today will have more value than a dollar at a later date. Less known is the opportunity lost.¹ If you had that same dollar in your hand today, you could purchase what you want or what you might need. In addition, you could invest it and earn interest on it. If you didn’t have that dollar, you could not have earned anything more. The third risk is the collection factor. You may receive your fees later than what you were promised or you may never receive them at all. Keep in mind that this risk increases with the time that the fees are outstanding. Lastly, inflation plays a role. If prices are rising, you will be able to buy less with that dollar at a later date than you could today. Let us assume for the sake of this article that the time value of money today is six percent. The cost of a $50,000.00 Accounts Receivable would be $3000.00.

The costs listed above are the more obvious ones associated with maintaining an Accounts Receivable. There are hidden costs involved that are rarely considered. Let’s again assume that your accounts receivable is $50,000.00. As I will show, when all costs are taken into consideration over the course of one year, the costs of maintaining the accounts receivable can come close to or even exceed half of the total A.R..

If this $50,000.00 is unavailable to you, then you are denied the ability to use those funds to service the debt of the practice. Let us estimate that this will cost you at least $1,000.00 in interest in a year’s time. Then there are the patients who will never pay you. You can count on about two percent who fall into that category.² Two percent of $50,000.00 is $1000.00.

You must consider the cost of the supplies and labor that service the billing system. It is estimated that the cost of each statement sent is $7.00 to $10.00 and this includes the labor, cost of the statements, envelopes, printing, and postage, or your fees for electronic billing.³ If your practice sends out one hundred fifty statements per month, that in turn totals one thousand eight hundred statements for the year. You will have incurred an additional $12,600.00 to $18,000.00 in costs.

Payroll must also be considered. If your financial coordinator spends one hour per week (and this is a very conservative estimate) working on collection calls and related paper work and the per hour wage for this staff member is $18.00, you will have paid an estimate of $936.00 over the course of the year.

There are two additional dilemmas associated with the cost of maintaining Accounts Receivable. It is known that many patients who owe money that is past due will not return to your practice. Two Recare appointments that might total a conservative fee of $90.00 each, times an estimate of five lost patients, will result in a loss of $900.00 per year. Broken appointments are most often caused by patients who owe money and this can easily cost you another $900.00 per year. In addition, these patients will rarely refer patients to you and this can cost an estimate of at least $1000.00 in lost fees.

As we calculate the total of all of these estimated hidden costs, we can see that having an Accounts Receivable balance of $50,000.00 can be quite expensive. The estimated costs shown here total $21,336.00 to $26,736.00 for the year.

One solution to lowering costly accounts receivable involves filing dental procedures with medical third party carriers. Filing medically eligible dental procedures with medical insurance plans can increase practice revenue and reduce the costs associated with handling the Accounts Receivable. Dental-medical cross coding may be part of your answer!

Implementing a dental-medical cross coding system in your practice does not have to be difficult. Please review my article “Medical Billing Basics for Dental Practices” that appeared in the November/December issue of Insurance Solutions Newsletter for detailed information on this system.

Once medical claims are filed, they must be tracked just as dental claims. When benefits are received, it is very important to carefully review the calculation of benefits. Payers may reduce payment levels, or they may combine procedures. Denials may occur for no apparent reason or they may deny because they state that it is a dental claim. You must appeal and advise them that it is a medical claim. When submitting an appeal, it is crucial that you insist that they provide you with the plan rules that their decision was based upon. Encourage your patients to handle their own appeals, especially if they believe that the appeal failed unjustly and the patient’s insurance commissioner needs to be contacted. The patient is the one with the authority to deal with the insurance company, as the contract is between them alone.

Probably, the most important step to keeping Accounts Receivable down is to collect payment in full at the time of service, especially with medical claims. Patients should kindly be reminded that claims will be processed as a courtesy to them and inform them that any benefits received will promptly be refunded to them. If this is not your policy with patients for whom you file dental claims, then I recommend that you do make it your policy with those for whom you file medical claims.

It can definitely be worth your time and effort to implement a dental-medical cross coding system for the medically billable procedures that are part of the periodontal, surgical, trauma, TMD, sleep apnea, and radiographic procedures that you perform. You will be adding a valued service for your patient. In addition, you can increase practice revenue, thus helping to decrease that very costly Accounts Receivable.

1. McCormick Jr., Edmund J.: The Hidden Costs of Accounts Receivables, Healthcare
   Financial Management, November 1993
2. Manji, Imitiaz: The Hidden Costs of Accounts Receivables, Dental Practice Report,
   July/August 2003
3. Mann, Les: Will That Be Cash or Credit Card?, Dental Economics, July 1997