Consider a situation where you go through the entire claim cycle only to have it denied or not paid. Consider, also, instances where patient payments are significantly delayed. The time and resources used would seem to have been wasted and it would cause a strain on your practice, wouldn’t it? Now, you would have to contend with delays in receiving payments or worse, unpaid claims. Afterall, isn’t revenue the goal of your practice? Without a healthy revenue cycle, it would be next to impossible to provide the best treatment and care for your patients. How do you circumvent such a situation? We recommend using DSO.
What is DSO or days sales outstanding?
Days sales outstanding (DSO) is an important metric which measures the average number of days it takes for a practice to collect the complete payment for services provided and is usually calculated on a monthly, yearly, or quarterly basis. The outcome of days sales outstanding is an important performance indicator to how well your practice manages its revenue cycle. Calculating DSO involves dividing the total accounts receivable for a certain period by the net credit sales. This number is then multiplied by the days in that period.
Day Sales Outstanding = (Accounts Receivable/Net Credit Sales) x Number of days
The ideal DSO for a well-managed revenue cycle is less than 45 days. A DSO of more than 90 or 120 days should be avoided as much as possible because it increases the risk of payments not being made. Maintaining a DSO that is neither too high nor too low can seem formidable but doing so can result in better cash flow.
What do the days sales outstanding do for your practice?
- It shows the performance of your practice’s revenue cycle during a particular period.
- It shows how quickly patients pay their payments.
- It helps identify patients or insurance providers who are always late in paying their payments.
- It helps you understand if you are moving in the right direction with payment collection.
- It shows if your practice is achieving customer satisfaction.
- It can act as an early warning sign for the management of your revenue cycle.
How can a standard DSO be maintained?
Have patient payment terms planned well
Make sure that your practice has well-planned payment terms which are neither too tight nor too loose. In general, a practice with more flexible payment terms has a larger DSO than one with extremely strict ones. Although strict payment terms can decrease DSO and increase cash flow, if the payment terms are too tight, chances are high that the customers will leave your practice and find one with loose payment terms. Having well planned patient payment terms helps in ensuring that no patients or insurance providers are at a risk of slow payment or non-payment.
Accurate claims documentation
It is of absolute importance to take the time and have your records accurate before submitting your claims. Practices in a hurry to submit claims are likely to make errors. Even minute mistakes can lead to huge losses for your practice. Any errors in it can cause claim denial or rejection, lengthening the payment process and increasing DSO. Always have accurate patient data and information. Establishing quality-check procedures prior to submitting your claims is a surefire way to reduce these errors.
Do not overlook receivables
Overlooking receivables is a common mistake that practices tend to make. Just because your practice is making enough revenue doesn’t mean you shouldn’t pay attention to your accounts receivable. You never know how it will impact your practice in the long run. Observe and ensure that your practice gets paid for every service that it provides. Proper management of accounts receivable can help decrease the DSO.
Proper follow-up on claims
Submitting claims is not the last step to the claim cycle. Adequate follow-up is important in making sure that the claims get paid without delays. The longer it takes for the claims to be accepted, the higher the risk of claims going unpaid. In case your claims get rejected, remember to start the resubmission process as soon as possible for a faster payment cycle. A proper follow-up on claims helps your practice reduce its DSO, which makes faster reimbursements inevitable.
Stay focused and determined
Bear in mind that reducing your practice’s DSO doesn’t happen overnight. Making considerable improvements in your DSO and maintaining them overtime requires effort and, at least initially, hard work from your staff. It is, therefore, important to stick to the process and not lose focus. Setting goals and analyzing your previous DSO statistics can help in establishing a robust process, which eventually becomes a frictionless part of it.
On-time claim submission
Late submission of claims is a common reason for denials. Submitting the claims on time should be second nature to your practice, especially if you want to reduce the DSO. It could be your first step in reducing your practice’s days sales outstanding.
Partner with an RCM service vendor
Granted, reducing DSO requires some effort and diligence, which can add to the workload at your practice and for your staff. Your staff would most likely already have a lot on their plate and an increased DSO could prove fatal. This is one of the best reasons for you to partner with an RCM service provider. They provide your practice with skilled professionals who are efficient at clearing unpaid claims, submitting them on a timely basis, and helping you reduce the practice’s days sales outstanding so that your staff are left with sufficient time to focus on the practice.