The Most Expensive Report You're Not Looking At

The most expensive report in your practice is the one you're not opening: the AR report.

This episode unpacks why your old AR keeps piling up and how to clean it up without losing patients or overwhelming the front desk. You'll learn how to collect what you're owed (and when to let go), spot problems before they spiral, and build systems that keep it from happening again.

Topics discussed:

• AR system failures and how to prevent them
• Collecting old AR without losing patients
• Patient AR vs. insurance AR
• The "zero statement" practice (and how to build one)
• Weekly metrics every owner should be tracking

This episode was produced by Podcast Boutique https://www.podcastboutique.com

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Transcript

The Hidden Cost Of Old Balances

Paul Etchison 0:02

Sometimes the biggest profitability problem in your practice is not the dentistry that you're doing. It's the dentistry you already did and never got paid for. And if that's you, that's okay because you're busy, your schedule is full, the team is working hard, the patients are saying yes. But if the systems are not there to collect accurately, follow up consistently, and actually watch what is aging, man, you can really end up with a huge amount of money just sitting there that should have been collected and unfortunately is going to be very difficult to get. And a lot of practice owners, man, that don't realize it until the AR report finally gets opened, and everybody has that moment of how the hell did this happen? And who the hell is responsible for this? Why did we let it get this bad? So today we are talking about accounts receivable, how practices accidentally let old balances pile up, what systems should exist to prevent it, and how to clean it up without creating a complete mess inside your office. Now you are listening to the Dental Practice Heroes podcast, where we help dentists get out of the day-to-day chaos, build stronger teams, and create practices that are actually worth owning and that are enjoyable to be part of. I'm your host, Dr. Paul Edgeson. I'm a practicing dentist. I'm an author of two books on dental practice management, dental coach, and the owner of a multi-doctor dental practice in the south suburbs of Chicago. And for the past several years, I have been helping dentists create more profitable and systematized practices without sacrificing their time, relationships, or sanity in the process. And today I am joined by both of my DPH coaches, Dr. Steven Markowitz and Dr. Henry Ernst. Both of these guys have large teams, large practices, and they walk the walk. They have been managing their teams, they know what they're doing, they know how to inspire their teams, they know how to create change, and they know how to get through just about any single problem that has been thrown at them. So whatever's going on in your practice or my practice or any practice in the world, I assure you, these guys know what to do. And I am so thankful to be able to share the mic with them. So today we're talking about accounts receivable. Oh my gosh, everybody needs to hear this one. Let's dive in.

Why AR Gets Ignored

Paul Etchison 2:22

Hey, welcome back to the podcast. I'm joined by my DPH coaches, Dr. Steve Markowitz and Dr. Henry Ernst, both large practice owners. Steve, a multi-practice owner, and people that are sitting in the business seat of their practices, trying to manage it and, you know, keep this thing afloat that we call our dental practices, as we like to say. Now, today we're gonna talk about something that we see often, and I see it often with my coaching clients, is that we peel back the layer of the metrics, which a lot of people are not looking at. And I think you've got, I mean, you gotta, if you're gonna run a business, you gotta look at some metrics. You can't just be flying in the dark here. But we look at it and we find a lot of old AR all the time. I mean, Henry, have you ever had that happen?

Henry Ernst 3:04

I have seen it with clients. Yes. Same exact thing you're talking about. And it's an oh shit moment.

Paul Etchison 3:10

Yeah. And they're like, what do you mean I didn't get paid for this stuff? And a lot of times I feel like it's often this, oh my God, I didn't know. And then sometimes it's almost like the defense of the AR. Well, that's not really what it means. What it says is not what it means. It's not as bad as it looks. I'm like, well, it looks bad. So what do we do? How do we get through this? And now there's a bunch of listeners that said, I don't know if I've checked my AR. But AR is a very easy fixed problem, I think. But I'm gonna pass it to you, Henry.

Henry Ernst 3:38

Okay. Well, yeah, it's a common thing. A lot of people don't check it. Or you ask somebody, can I see your AR reports? Uh how do I get that? What is that? Right. So I recently had this experience with working with somebody, and it was boom, it was a big, unexpected thing that was caught. And I think there's different layers to the onion here. Like the first thing is you have to point the finger at yourself. As the doctor, it's usually a situation where your systems are not in line. So first thing is I call it like, let's stop things right now. So A, let's make sure we our collection is at where we're supposed to be. At the time of service, most of the time these things are insurance kind of situations. So A, make sure we're collecting what we're supposed to collect, when we're supposed to collect it. Two, this is a recommendation I have. I don't know how you guys feel about this, is we underestimate everything. So if insurance says they're going to pay 50% for something, we assume 40% and down the line. We assume 10% all the way down the line. So if and when insurance gets paid, then I would rather be the office that doesn't have any statements that we owe people money. And I would much rather be in charge of that, right? And have to give them back money than to be in charge. So number one is make sure you're estimating correctly, make sure your systems are correct as far as collecting. As a doctor, audit the stuff, right? Every day when I write my notes, I look at did the patient pay. And if they didn't, why? Second, when insurance, this is probably one major point that people make mistakes on. When insurance payments come in, what are we doing after that? Most offices, there'll be a balance, there'll be something left over, and they do nothing about it. Or they send a statement and they never have any follow-up. Now you're letting that AR get bigger and bigger, and it goes down the road. Now it all gets into the 90-day category. The other thing you have to do is you have this shit hits the fan moment, you gotta schedule something with whoever's in charge of this and have a weekly session. Like, hey, we're gonna look at this report every week and we're gonna get this 90-day thing down to almost nothing, which or an exible amount. So you're gonna have some of these accounts that maybe some of them are two years old, and maybe they're just sitting there. You may just have decisions to make. You say, listen, we're just gonna write this off. It's we're never gonna collect it. We're done with this. Maybe there's some of them that have insurances that are still valid that you can still go after, but eventually you're gonna have to just make decisions. And I tell the person that it was in this situation, I said, listen, some of these are two and a half years old. Write it off, call the patient, maybe try to get some goodwill and say, listen, you know, our office, you know, had we had a snafu with the insurance or whatever you want to say, but we're writing this off for you. So this way, maybe a patient just decided to leave because of that. But it's a big thing, but main take-home point, I'll pass it back, is like we just need to look at as doctors

Stop The Bleeding At Checkout

Henry Ernst 6:17

as we screwed up. It's not, don't be kicking your team's ass and stuff like that. Like maybe they didn't have the systems in place, and now you have the systems, now you can audit them carefully.

Paul Etchison 6:27

So I feel like we should send a statement. I want to send the statement and have them call me all pissed off. I literally like, and then I'll write it off. But some of them will pay. Yeah. The thing is, is like if if I look at that, and if I look at that patient account and I'm like, they haven't been here in two years. I mean, they're not coming back. I'm just gonna send them a statement. That's just me.

Henry Ernst 6:46

It's like no.

Paul Etchison 6:48

I'm sending the statement and I'm gonna see if they call.

Henry Ernst 6:51

Okay, I'm in the middle. Let's see if I can be in the middle of Paul and Steve. We take the alphabet, we take like four or five letters at a time, and we send the statements to those people. And then we do that in increments. Why? If we send every freaking statement for like $700,000, you're gonna be so deluged with calls that your front desk is not gonna be able to function. So I'm okay with doing what you said, Paul, but maybe you're strategically just send them little bits at a time. Yes, and then decide to write them off. Because I think the main thing is when you're in a really, really, really oh shit moment, just you gotta just move forward somehow. And the thing I was telling these people is the good news is this should not affect your cash flow moving forward. It affected your cash flow over the last 12 to 18 months. Your cash flow should have been that much better, but now we're gonna clean up the systems, we're gonna fix everything, and now it'll be your better moving forward. Yeah, I like that. Steve, Steve's getting angrier by the moment. I see steam coming out of his ears over there.

SPEAKER_02 7:48

Yeah, I'm just living in a life of anger. I know. Yeah, thank you. So learning is expensive, and learning a lot can be really expensive. And I think what Henry was getting at was like, when you have this oh shit moment, congratulations. You're about to learn a ton about what you should have done. So we can go about this in many different ways, but for that specific example, when I look and our AR is way out of whack, the first thing I want to know is is it patient or is it insurance? I need to differentiate those two. Because if our patient balances are really high, that tells me something about how we're collecting a time of service or not. And if the insurance balances are really high, that tells me a lot about what's happening with our communication with the insurance companies and how quickly we're getting paid from the insurance companies. For that specific example that you talked about, Paul, if I patient, the last thing I want to do is send an anonymous letter for $700,000 to a patient or whatever it is, a $500 bill to a patient who hasn't been there. The only thing that we'll do is piss them off. And the only thing that we'll do will have them call and take up probably the person who answered the phone, the manager, maybe the doctor, maybe my time, and everyone else, that's where they go home thinking about is I can't believe you sent that person a bill.

Paul Etchison 9:04

What if you sent them a few bills already and they just ignored them and then you stopped sending bills?

SPEAKER_02 9:08

Sure. That's okay, that's that's different. But typically at this point, if someone's just realizing they have hundreds of thousands of dollars outstanding, they don't have a process. True. So I think part of the take-home is like you need to learn what your process is and stick to it. But by chance, if it doesn't go exactly how you thought it would, and then you end up with the same position because you weren't auditing your system. I'm just saying that facetiously, like I've never had that happen to me. But what I would do is develop a plan. I would call those patients and I would say, hey, I know it's been a long time. We were reviewing your chart and do want to let you know that you have this balance. We'd love to get you back in and want to make sure that bill is cleaned up. And then from there I can go send them a bill because they'll be expecting it. Every point in the patient touch point, I want to make sure that I'm setting expectations. And if it's been two years and I just get this random thing in the mail, one of two things are happening. I'm throwing it in the trash, or I'm getting incredibly frustrated and angry, and I'm gonna call people and share that. So I want to find ways to mitigate that. But I think the more important thing, like Henry said, moving forward is we need a clear system so that we don't get into this position again.

Paul Etchison 10:17

True. You gotta cut the bleeding, you gotta make sure it doesn't get worse, and that's collecting on the patient portion, following up on insurance claims. And I like you said, patient versus insurance. I think there should be another bucket that's plus ninety. And if it's plus ninety, the solution is nobody's looking. I mean, that is just the solution. Somebody has to look and be accountable for these balance because there's that's the only way you get plus ninety with a big large amount. You know, one thing that popped in my head is that we call these people that had these balances. You know, there's a number of positive balances on your AR as well that could use a phone call, say, hey, you got a positive balance. Would you like us to put this credit back on your credit card? Or we haven't seen you in a while. It's a nice reactivation opportunity. But the thing is, you know, I'm wondering, Henry, like you're overestimating. Steve, do you overestimate? We don't do that. Like we try to get our estimates spot on. I do not. I try to get them as accurate as I possibly can. Yeah.

SPEAKER_02 11:12

And I think it's possible.

Paul Etchison 11:13

I really do. I I mean,

Old Balances Without Patient Blowback

Paul Etchison 11:15

I think it's a little bit more challenging on a network. I've noticed that with us our Delta thing, it's sometimes that's just all over the board, but we just if we're still learning on it. Like I mean, they pay on two different fee schedules. They have the MAC and the UCR, and you don't know which one they're paying on. It's a pain in the ass.

Henry Ernst 11:30

To address your point, I want to be as much as possible of a zero statement office. I don't want to ever have statements come out of this office in the perfect world, right? Yeah. Those suck. You made a good point. When insurance payments come in, I love to be the office that most things are positive, right? There's like a $34 credit on the account. Amazing, right? We can give them a letter, a check that says, hey, thanks for doing the treatment. Here's some money back after your insurance got paid. It's just so much easier. I just learned that from a mentor of mine, and I've done it ever since. The other thing, as we're talking about older balances, yes, it's good to have your own plan. I like to just take them person by person sometimes. It sucks, but we know this person is a pain in the ass. Forget them. I don't even care if they don't come back. Write this thing off. I don't even call them. Right. And then there's other people, you know what? This is a nice lady. Let's reach out to her, right? And I'm okay with giving the office manager a little leaveway and saying, hey, I'm okay with setting them up on a payment plan. Right. If you call them and they're amendable, give them a payment plan. That's better than just writing it off. So, yes, Steve, we have to not get into this place. We have to clear up our systems, we have to make sure they're good. But there's no written definitive way to take care of these old ass accounts that are two years old. And what the heck do we do with them?

SPEAKER_02 12:43

Henry, for this client of yours, do they now have a written out process for how they're going to follow up with these overdue balances?

Henry Ernst 12:51

So we've got three steps. Like we said, we're we're mainly focused on shoring up the front door right now. So every patient that's getting treatment done today is not getting creating anymore. So we're really focused on that. But I kind of gave them guidelines and say, hey, there's lots of different ways we can go with these older accounts. We all agreed that's some of this is practice transition to like the older team members that have been there in transition are not really doing collecting the right way, and the systems weren't good. So, like I said, we're showing up those systems, but I kind of gave them some guidance, almost like the conversation we're having now. And I kind of let them feel like what's going to be best for them. And it's going to be an ongoing thing. We literally just started. So we shall see.

Paul Etchison 13:31

What's hard about it is that it's such an astronomical number just to forget about and write off. But you're right. Like even if you're going to go through it line by line and patient by patient, you're going to send all these statements, the chances you collecting any of that stuff that's super old is like zero. Yep. So it would almost be like less like emotional energy just to say, forget about it. And let's just move forward and say, like, like you mentioned, Steve, it's such an expensive lesson.

SPEAKER_02 13:56

Yeah, I think anything over two years, I actually think that's probably the right approach.

Paul Etchison 14:00

What about one year?

SPEAKER_02 14:00

What is the thing? What is the number? Yeah, for me, the timeline's two years.

Henry Ernst 14:04

But there could be opportunities where maybe there's some insurance logistical things that you drop the ball on that you could go back into, and there's not really that much emotional energy for that.

SPEAKER_02 14:14

Yep.

Henry Ernst 14:14

So certainly get the low-hanging fruit. But yeah, we have to draw a line, and I think that's exactly what I told them. Two years done. Just don't even fight it. It's done. Anything under that, a year, year and a half, maybe take it line by line, case by case, a few letters in the alphabet at a time per week, and do it case by case.

Paul Etchison 14:33

I'm going to tell my clients 24 months. I think it sounds smarter.

SPEAKER_02 14:37

Yeah, I think that's that's way different than two years. I agree with that. That's really smart, Paul. I think the hard part is it's so far away from what our everyday is. Like we walk in, we look at our schedule, most of our morning huddles are not consistent of our AR balances. Like it's so in the distant. But at the same time, it's so freaking important. Like if we don't have a very good collecting process, following up process, and then we can't keep the lights on. And I think that is probably what every listener should take out of this. Is like, if I don't know as the owner of my business, my AR process, I'm probably missing a huge opportunity for us to take better care of our patients, our practices, take home more money, take care of my team better. So I would have that written out. I would want to know, not that I need to know how to do every step, but I would want to know every step enough where if the numbers of the data is telling me that something's messed up, I know where to go.

Paul Etchison 15:35

Yeah. And I think it's one of those things, it's it's literally, it hurts the owner. It really doesn't hurt anybody else. It really affects nobody else. And it's like if the owner's not like looking at it, it's not affecting anybody. I mean, in a level of ignorance that they have.

SPEAKER_02 15:49

Like that, that's what I would tell this your client. You didn't get a hundred couple hundred thousand dollars of AR today. That was probably months, if not years, of ignorance. Yeah. So, like, we're not going to solve this issue today.

Paul Etchison 16:02

It is the price of ignorance.

SPEAKER_02 16:03

That does impact your ability to invest in technology, which hurts the patients. It does impact your ability to give raises, yeah, because you don't have as much income there. So it may not be direct impact

Draw The Line On Write-Offs

SPEAKER_02 16:16

on the employee because they don't see it hit the bank account. But ultimately, if you had an extra seven, eight hundred thousand dollars, it's a lot easier to invest in your team and invest in your practice.

Henry Ernst 16:28

Yeah, this is the definition of a quarterly rock. This is going to take about 90 days to try and attempt to get this all done. And I am the type of person that gives credit where credit is due. So I did uh reference one of your podcasts that you did, Paul. I don't know when it was, but I remember it was really good. And you made a good point. Maybe you can tell the listeners, like you had a good point of when this happens, what's the weekly meeting look like with your office manager or whoever's in charge of that? You mentioned something about looking at the AR reports and what metrics to look at. Maybe it'll be valuable if you go over that with the listeners there.

Paul Etchison 17:00

I tell my clients the same thing like that you're talking about is that this needs to be like you mentioned a quarterly rock. This needs to be something that is followed up on a weekly basis with the person that is in charge of it. Because as we've seen, this has not been a priority for somebody. And we're gonna expect to make it a priority by somebody, but we can't make it a priority for them if we only check in once every other month to see how it's going. And I actually worked with a client like this. And it's we had a point of frustration where it was like, you know, for the past six months, we have been talking about AR. And I am surprised we have not put a period on this yet, but it's it's frustrating. And it was that they were just not checking in enough. But I would say, like, I don't know if that answered is what you're talking about, Henry. It's I hope I delivered on that for you. Please, Henry. I aim to serve you. Of course. Servant leadership.

Henry Ernst 17:48

I think it you were talking about metrics and how like every week, well, like we're talking about meeting once per week. Well, what exactly are we looking at? What should that air report look like week to week? So we're seeing things move in the right direction.

Paul Etchison 18:01

I think you should tell the listeners because I think it'll mean more coming from you.

SPEAKER_02 18:05

Do you want me to do you want me to chime in here? And uh Steve, what do you think I said? Yeah, I think that this is probably right up my alley because you guys both think that I just love numbers and just stare at spreadsheets. So what where I got lost in our last conversation was I kept looking for this stupid spreadsheet and I finally found it. So a finance major or something like that? In college a zillion years ago, I might have been, but I still have really poor Excel skills and managed my bank account very poorly, if that's what you're trying to get at. Yeah. So weekly, I want to know our number of AR days, which is how long on average does it take us to get a dollar if we produce it today. That number should be less, ideally less than 30. I want to know our 90-day collection percentage. That benchmark should be 99%. So every dollar that we could collect, we collected 99% of that. And then I want to know our insurance aging, 0 to 30, 30 to 60, 60 to 90, and above 90. And the expectation should be that we are less, significantly

Weekly AR Meeting That Works

SPEAKER_02 19:10

less, than 5% of claims aging over 90 days. Once they get to 60-day claim mark, they should be on the doctor's desk already. There should be a narrative written, we should be following up with those. And we need a at least 85% clean claim rate. If there's if we're not getting that, that probably means there's some documentation errors. And then from there, I also want to know the patient side. So what's our zero to 30 days for uh patient AR? What's our 30 to 60? What's our 60 to 90? What's our 90, 90 plus? If I can look at those consistently, I'll be able to develop trends and I'll know exactly where in this process things are falling through the cracks. And if I'm unable to, if it's because my patient numbers are rising and it's because I'm not uh getting them accurate estimates, well, maybe I need to look into a better insurance verification process. Maybe I'm not collecting day of, maybe I'm not collecting at all. So I think once I have the data, if I'm using it and looking at it consistently, from there I can have real conversations of how we change behavior and ultimately change how our patient experiences. I love the clean claim rate. I've never heard anyone talk about that before. I will give Tina, she probably doesn't listen, but I'll give her all the credit for that. She was trying to find a way to uh incentivize her team, and she leads our RCM team. So she was like, if we can get 85% of our claims clean, paid, then that process will be really smooth.

Paul Etchison 20:37

And 50% How do you track that? I mean, is that something that's tracked to like the clearinghouse? Or like I was just wondering where would you get this number? That's a great question for Tina. Tina, eat your ham.

SPEAKER_02 20:46

But what are the expectations would be that they're not sitting there. We don't need more information from either the doctor or from the patient to be able to get to get that number. So each office for us will have their non-clean claims on a spreadsheet that there's communication with the office and the AR team on each of those claims. So we know we know where they are. I like that.

Henry Ernst 21:10

Henry, take us home, baby. Yeah, so great point, Steve. But it's a couple things that I bullet pointed, like when you're gonna meet with this AR person every week, like we want to try to get that 90 days at about 10 to 12% of our total collections, right? So it's it's shifting from all that here to less and less and less. So each week you should see that, especially in this oh shit phase where things are getting rapidly better as we're doing things. You guys mentioned it before. What is it AR balance? Is it insurance AR balance or is it a patient balance? That's really, really important. And also let's start tracking what's the percentage that we collect at the time of service. So preserving the front end to not let it get to this stuff anymore. And you made a great point, Paul, again, giving credit when credit is due. I think you mentioned a statement that said if we're chasing AR, then our systems have already failed. So that's how you can look at it. If we're chasing AR and our AR report is a shit show, then we have failed as the owner of the practice, and we just need to clean things up.

Paul Etchison 22:10

All right. So I think the biggest thing to remember here for this episode is this. AR problems, they're not random. I mean, let's face it, they don't just happen to you. They're the result of systems that were never clearly built, never consistently followed. And I mean, if we've got a big growing AR, they were never audited ever or even given to somebody as their responsibility. And if you had this problem at your office, I hope after listening to this episode, you feel empowered now because AR failures are always system related. If systems created the problem, well, the good news is systems can fix the problem too. So here's what I want you to remember if your AR is growing, your process is already breaking somewhere, you need clear accountability around the collections, you need clear accountability around insurance follow-up, all the patient balances. Somebody needs to be accountable for it. And if nobody is reviewing the numbers consistently, these small problems can turn into very expensive problems. The good news, systems can fix it. The stuff is fixable. You do not need to panic. You don't have to work harder, and you absolutely do not need to feel ashamed about this. I would tell you that most of the clients I work with have an AR issue. It is normal. So you just got to create those systems and make sure that they are working and that they're followed consistently. And honestly, if we think about it at a more macro level, that's kind of what running a successful practice really just comes down to. It's never about perfection, it's just awareness of what's going on and systems that work and that we hold people accountable to do them. We set the standard and we make sure that people are meeting that standard. So if you can do that not only in the AR, but in every little part of your practice, I mean, you're gonna have a rocking practice. But if you're sitting there listening to this and you're just like, you want some help creating stronger systems, you want a process that has been implemented in other practices that works, that's easy, that you can't fail on. Well, then reach out to us at Dental Practice

Systems, Accountability, And Next Steps

Paul Etchison 24:21

Heroes. Come set up a strategy call with me, dentalpracticeheroes.com slash strategy. I will have a conversation with you. I'll listen to what's going on in your practice, I'll give you some advice. And if we can help you, I will let you know what that looks like. But there will be no pressure, it's just a conversation. So set up a call with me. I'm excited to talk to you. I'm looking forward to it. And if you haven't left a review yet for this podcast, why? What are you waiting for? Just do it. Please do it. No, seriously, I really appreciate it if you would. It helps more people find the podcast, it makes us feel good for the time that we put into it. And it just, I think it's gonna bring you really good luck. I mean, I don't know why. I've just got this feeling. So if you leave that five star review, man, look out. Something great's gonna happen to you today. I promise it. Hey, thank you so much for listening. Have a great week at the office this week. We'll talk to you next time.