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Roundup: What Problems do Doctors & Dentists Face When They Manage Accounting & Finance?
Undoubtedly, the healthcare industry is quite different from other businesses. It is not only unique in terms of services but also in the way it provides services and deals with clients and stakeholders. That’s the reason, the healthcare sector faces innumerable challenges; be it in terms of client service or finance and accounting for dentists and doctors.
However, as we are aware of the fact that finance and accounting plays a vital role in every industry, even doctors and dentists are concerned about their books.
Is Accounting for Dentists Hard? Know from the Experts
So, in this roundup article, we’ve gathered pain points of some popular healthcare experts in the industry along with the appropriate solutions:
1. Lack of expertise and knowledge
The challenge I most often face with doctors is that they simply have no education or experience regarding business operations, finance, and accounting. So, it’s often difficult to make them understand that the myriad issues they face as private-practice doctors are, in fact, solvable with the right tools.
They have been led to believe that issues like slow reimbursements, long, drawn-out audits, high insurance claim rejection rates, excessive bad patient debts, unpaid bills due to mistakes with insurance authorizations, high AR days, and many other financial and accounting issues are simply “the way the game works” in American healthcare in the 21st century.
They just try to price all these losses and that poor cash flow into their business model (if you can even call that a business model). Our mission is to make them understand that in fact none of these things are inevitable. With the right combination of technology and outsource accounting services, you can all eliminate such problems.
Unveiling the Reality of Insurance Claim Rejections
For example, the average medical practice sees one in every three insurance claims initially getting rejected by private insurance companies. That is a cash-flow killer. The root cause is ultimately this: despite what you may have been told, insurance companies are not in the business of paying health insurance claims; they are in fact in the business for rejecting health insurance claims. They make it their business to find any excuse possible not to pay that claim.
And when you have doctors practicing using manual claims management services (often dedicating several headcounts of staff just for the purpose); when they don’t automate eligibility verifications; when they aren’t using technology to ensure the correctness of their claims, they are giving the insurance companies all the excuses they need to reject those claims.
Now, do many of those claims ultimately get paid? Yes, quite a few do. But only the ones resubmitting them, often multiple times. And every time a doctor has to fight that battle, it costs money. In fact, the average cost to rework a claim is $25. So, imagine how much a doctor has to pay collectively if s/he has to resubmit a $150 claim three times.
2. Unclaimed property
An Attorney, Specializing in Unclaimed Property with Significant Experience in the Accounting and Consulting Fields.
Unclaimed property is a current issue faced by many industries, including the healthcare industry. Every state has laws requiring that companies report and remit uncashed checks, credit balances, unused gift cards, rebate checks, dormant bank accounts, unredeemed life insurance policies, and dormant shareholder accounts.
Healthcare companies have an added complexity in complying with unclaimed property laws. Multiple payers make determining who has owed the money difficult. It may be clear that the patient account as a whole has a credit balance that is owed to someone. But that does not necessarily mean that the patient who has owed – it could be the insurance company or employer or other third-party.
Compliance with these state laws is vitally important. Delaware, the home of many corporate entities, is on a mission to audit every single business entity that is incorporated there. They employ the use of third-party contingent fee auditors that team up with a multitude of other states for audits that cover 15 years of transactions, at a minimum.
Fifteen years is often beyond the typical record retention policy of companies who have set their policies based on tax statute of limitations. Mergers and acquisitions, as well as system technology upgrades, have left additional gaps in records during audits.
Without records in an audit, companies face extrapolations, where their unclaimed property liabilities are estimated for prior years based on years where there are records. Unfortunately, there is a very punitive nature to these estimations, and they often result in millions of dollars of liability, even before penalties and interest are assessed.
3. Inefficient medical billing process
RN, BSN-OCN Patient Advocate 770-329 | Medical Bill 911
The medical billing process in the United States is broken. Around the country, millions of Americans are struggling with medical billing problems ranging from inaccurate charges to surprise fees to wrongly denied claims. Many of them have given up on trying to fight their medical bill errors and surprise fees.
The process of accounting in healthcare sector is exhausting and confusing. Medical bills are filled with special terms and lack clarity about whether or not you or your insurance provider is responsible for the payment. Consumer Reports recently performed a study in which one-third of the respondents indicated that they had paid a medical bill of $1,000 or more that they were not sure if they owed.
People gave reasons for giving up as the bill was confusing, and they didn’t understand the medical billing system. The complex medical coding system itself has problems and can result in billing errors. Each diagnosis or procedure has its own alphanumeric code (ICD) to qualify for reimbursement by insurers. A wrong code results in a rejected claim.
Neither insurers nor providers have an incentive to change the system. The additional expenses are passed on to the consumer in the form of higher premiums and out-of-pocket payments.
4. Staying non-compliant
One of the auditing issues in the healthcare industry is compliance. Whenever a new law or program is introduced, it is very important to comply with it. This is one of the major auditing issues because it is considered as a red flag for non-compliance.
The organization is many times not aware of the new laws, and it is difficult to make them understand what the effects of non-compliance are and how they can affect the organization during and after the audit.
5. Opening the same bank account for personal and business use
COO at Payment Depot
One of the biggest problems is that many doctors and dentists sign up for a merchant account with their bank (those are the worst accounts) when they open their first business bank account for the practice.
Over the years, the last thing they check is their credit card processing fees, and most companies make it too confusing to understand them anyway. We have spoken to countless dentists who said that they could have paid off their school loans with the savings.
6. Improper accounts management
Director of New Business and Client Relations at ICMC (International Capital Management Corp)
- Tax optimization and management are done incorrectly. Paying way too much and not taking advantage of certain opportunities.
- Not saving enough. The savings rate is huge.
- Bad debt management, not paying down debt responsibly.
- Misinformed on insurance or wrong insurance for themselves or their practices
- Personal Life – Divorce/loans
7. Not delegating non-core activities
The biggest problem for providers is recognizing the difference between delegating the finance functions and completely abdicating them. I was talking recently with an optometrist whose finance person had been stealing from the company. It was devastating.
The processing should be delegated, but there still needs to be a high-level oversight of the process and enforced internal controls. Small things like quickly reviewing bank statements, financial statements, or bank reconciliations are the ounce of prevention that saves a pound of cure.
Another problem which the providers have is in finding good billing staff. Competition for talent is fierce. Providers who hire or outsource to a poor biller start witnessing a drop in their income and a big hit to the cash flow.
8. No accounting for finance
Glenn H Englander
Millennial physicians increasingly do not work for themselves. They no longer wish to hang up the proverbial shingle. They get salaries. Their financial woes depend on paying back students loans, which is like paying for the house without being able to live in it. So, their problems stem from how their parents brought them up about finances, or not. Should they save or just spend?
If the doctors are actually starting on their own in some remote section of the country where this is necessary or possible, then they will learn quickly about getting and paying back loans and meeting a payroll.
I suspect that in today’s complex society, you need to outsource more due to human resource issues as well as get insurance payments within all the laws.
9. Common bookkeeping issues
An Accountant and Financial Coach at Boost Accounting based in London
Here are four problems that I come across time and time again:
Lack of financial clarity:
Generally, dentists are clinical and not technical people, and they do not understand the numbers, and as a result, they do not know what’s going on in the business. For example, they struggle to understand why their profit does not match their bank statement and are different.
Working IN the business and not on the business:
It is true, more work you do as a dentist, more you save on hiring the dental associates, and can keep the margin. The problem is, it is not scalable as we all have certain hours in a week for work. Furthermore, your business depends on you, and when you want to exit, it is challenging to sale the business.
Managing cash flow:
There’s always a battle with managing cash flow. By nature of the business, there are no debtors. However, when the gross profit and net profit margins are so tight, and also if there is a bleep in sales for a few months, then cash flow can be really tight.
Lack of systems in place:
Most of the businesses are still using the old way of keeping hard copy invoices and accounting for it. Dental businesses are not aware of new accounting technologies available to streamline accounting data entry. Apps like receipt bank can capture the details of the invoice and push the invoice to online accounting software like Xero and QuickBooks Online.
I have noticed, this saves the client at least 12 hours a week and GBP 300 a week, even if the business is doing less than GBP 500k.
10. Inadequate technology for auditing
CEO at Crediful | Auditing for RAC Recoverables for Medicare
Although may have a design that combat the misuse of the Medicare system, RAC is still controversial. The current auditing system is extremely inefficient, and auditors have to go from hospital to hospital to request documents to assess improper billing.
This creates a large administrative burden on hospitals that need them to face these extra costs until they get compensation from the Federal Government.
A private consultant system for hospitals would almost certainly be more cost-effective.
11. Messy accounting books
1. Cash to accrual conversion
2. Reporting proper net accounts receivable on your financial statements
3. Private Equity and Strategic Partner Growth
4. Revenue recognition changes
5. Entity structure under the new tax law
It seems that doctors and dentists can overcome all these accounting issues if they make the right move and develop better strategies.
Are you unable to manage your healthcare firm and accounting tasks simultaneously? Let Cogneesol experts take care of your accounting back-office workload to let you gain valuable financial data insights for better decision-making and tax dealing. Get in touch with our team now at +1 833-313-3143 or email us at [email protected]!
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