How's your bad debt?
It didn’t surprise HME consultant Karen Moore when Rotech Healthcare announced this week, as part of its latest financial earnings, that its bad debt was too high and that it would fight to get it under control.
Moore, vice president of AnCor Healthcare Consulting, says many HME providers are looking to reduce bad debt as a way to make up for lost revenue.
“With all the decreases in reimbursement, that’s where you can do some picking up,” she said. “The industry standard is 3% but a lot of companies are running as high as 6% to 8%. If you can reduce that and put it directly to your bottom line, that’s major.”
Rotech reported contractual and bad debt adjustment levels of $6 million higher than expected for the fourth quarter. That’s on top of a $17.8 million reduction in net revenue due to various reimbursement cuts last year.
Before providers get too excited about boosting their bottom lines, though, Moore says reducing bad debt isn’t always easy.
“Everyone wants a simple answer, but I’ve been in the HME industry for 20 years, and there’s no simple answer,” she said. “It’s almost 100 small things.”
Some of those “small things”: Making sure you hold employees accountable for their quality of work and productivity, and making sure you have systems in place to collect co-pays and other secondary payments upfront, Moore says.
About the latter, Moore says: “The clinics in hospitals are getting a lot smarter about this. I’ve read where some clinics, if you don’t give them insurance, they request a fairly larger retainer amount before they’ll even see you.”
Reducing bad debt also takes time—three months if a provider’s company is in fairly good shape, at least six months if it’s not, Moore says.
“If it’s an ideal situation and you have a team of well trained and well managed employees in place, and you just need tweaks and processes and controls, then you can see results in a few months,” she said.