The 3-Step AR Diagnosis That Fixes Cashflow

Staring at your AR and seeing chaos instead of clarity? We’ve been there, and we built a simple path out. We walk through a practical, three-part framework that turns one scary number into a clear diagnosis, so you know what to fix first and how to keep cash flowing without drama.

If your AR feels like a magic eye poster, this is your focusing lens. Walk away with a short checklist, clear ownership, and a plan to make cash flow predictable. If this approach helps, subscribe, share it with a colleague, and leave a five-star review to help more practice owners find it. And if you want hands-on help building these systems, grab a free strategy call at dentalpracticeheroes.com/strategy.

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Chapters

• 0:00 AR Confusion And Why It Matters
• 4:41 A Client’s AR Spike And Root Causes
• 7:03 Detective Mode: From 55% To 98% Collections
• 8:07 Three-Bucket AR Diagnosis
• 9:47 The 30-Day Audit And Pattern Finding
• 11:39 Category A: Patient AR Fixes
• 13:39 Category B: Insurance AR Fixes

Transcript

AR Confusion And Why It Matters

Paul Etchison 2:07

You ever look at your AR report and you feel like you're staring at like one of those magic eye posters from the 90s? You're squinting and you tilt your head and you get closer and you're moving it closer to your face and you start thinking, is that a dolphin or bankruptcy? Because nothing in that mess makes sense to you. And it's just numbers everywhere. And you're not sure what you're looking at, but you're pretty sure it doesn't look good. Every owner has that moment of the how the hell did my AR get this high? And the truth is, AR isn't just one problem, it's a bunch of different problems hiding inside one number. And if you don't know which problem is yours, you might fix the wrong thing, and nothing gets better. So today I'm going to show you exactly how to diagnose your AR issue step by step so you know why the number is high and hence what to fix first. Now you are listening to the Dental Practice Heroes podcast, where we teach practice owners how to build team-driven practices that run smoothly, profitably, and effortlessly, even when they're not there. I'm your host, Dr. Paul Etchison, dentist, coach, and author of two books on dental practice management and the owner of a large multi-doctor practice in the south suburbs of Chicago. If you want a practice that's lean, profitable, and no longer dependent on you for every decision, keep listening. All right, let's dive into it. Now, typically when I start working with a client, we go through all this diagnosis process. And what we're doing is we're looking at all the different metrics, trying to figure out where we have areas of opportunity and what we're really missing. Now, eventually we'll get all these metrics under control, but we still check them every month. I remember recently working with a client where we saw the patient accounts receivable jump just in one month from$28,000 to$200,000. Now, she had had some recent turnover at the front desk, some new employees, but we caught it right away because as you can imagine, leaving this go for too long would be a big deal, a big problem for this office. So we caught that. And what this was was that the front desk employee was not collecting, was not generating claims, just all sorts of stuff. So when we think about AR, it only comes from one of six places. Okay. One, bad or inconsistent verification. We're not verifying right. Two, bad estimates where the team doesn't understand the non-covered codes, the downgrades, the frequencies, things like that, exclusions. Three, when we don't collect at the time of service, you know, we've got that fear of conflict, and the front desk says, we will just bill you later. Number four, the incomplete claims where we don't have proper evidence. We send claims out with the PAs or the narrative or the x-ray, or we're not doing complete period charts, those sort of things. Five, not sending statements or the pay links, or maybe at least we're sending one and then never again. And then six, not following up on old claims. And if nobody's working that aging report, you can imagine it compounds very silently. So the AR can really be tricky. And I remember I had a client that reached out to me over the summer, and she was just super disheartened because she was worried that she might have to close the practice soon. And I mean, that's a crazy thing to actually say. Like, oh my gosh, like things are really bad. And she was making about two to three thousand dollars each month as the owner, and she couldn't figure out why. And then she mentioned, I don't know why I opened this practice, I was making way more money as an associate. And I asked her, like, how much are you making, like as a practice owner? And she said, I'm taking distributions for about two to three thousand dollars each month, and I don't know where all the money's going. So I asked her, like, what are your collections? And then she told me the number. And it wasn't horrible. I mean, it was like an average office. But then when I asked her what her adjusted production was, whoa, it was huge compared to her collections. They were collecting about 55%, which totally makes sense why she was almost at the point of closing the practice. It is pretty hard to pay your expenses and make any money if you're collecting 55%. So we had to go into detective mode, going through the reports, talking to the team, looking at the policies, coming up with a plan, taking action, and we were able to attack that AR in the right spot so that we could get her out of that mess. And I'm still working with her. And what's cool is not only is she now collecting 98% plus, but she's producing 35% more. So, as you can imagine, she has a lot of cash flow coming in compared to when we started when she was barely paying the bills. So, how do we go into detective mode and figure out what to do to fix the AR? And what I want you to do is this three-step AR diagnosis. Now, step number one, we're gonna split the accounts receivable into three different buckets. It's either one patient AR, two insurance AR, or three, it's 90-day plus AR. And each bucket tells a different story. If we've got high patient AR, that's a collection problem, or it's a bad estimate problem. If we have high insurance AR, that is a claim problem or a verification problem. And if we have high 90 plus AR, well, that just means nobody's following up on anything. And we just let it be and let it grow like magic, like a chia pet just growing on its own. Amazing. All right, step two, run the last 30 days audit. I want you to pick 10 random charts from the last 30 days. And in each chart, you're gonna ask these questions. Was the insurance verified correctly? Was there a proper estimate? Did we pre-collect or did we collect the patient portion? Were the claims sent the day of? Were the proper things sent with the claims, such as the x-rays, the photos? And did anyone follow up? And I promise you, you will find your pattern in less than 10 charts. It doesn't take long to figure out where it is happening. And often you can just figure out these things from asking people at your front desk, but you could also audit the charts. Now, step three, assign each of the problems that you're discovering into the right category. If you find category A problems, that was the patient AR, that is typically front desk skill issue. That's bad verification, it's bad estimates, it's a fear of collecting, or it's not sending statements. That's where you're gonna attack that problem. Category B, which is the insurance AR, that's typically a clinical documentation issue, meaning we're missing images, we don't have the right narratives, we're not writing good narratives, we don't have good diagnostic support. So we're not filling out complete period charts, we're not taking photos of the right things, not taking the proper x-rays, things like that. And then we've got category C, which is just anything 90 plus. It just means more or less nobody is owning the aging report, nobody is paying any attention. There's no meetings about the AR, there's no accountability. So, which brings us to our next phase now that we've diagnosed and we know where the problem is, how do we fix it? So if we've got that front desk issue, we've got to work on training our team on insurance verification or coming up with more streamlined systems for insurance verification, standardizing where things are, where we put them in the chart, such as like sometimes like our practice management system doesn't have a good spot for every little thing for every insurance plan. So we've got to standardize where do we keep these things? So the people at the front, if they're not the one verifying it, they know where to look. We need to work on collection scripting. We talked about this in a different episode, getting your team comfortable with collecting money from the patient so that we don't have to chase down these patient AR balances. We may need to create a documented collection policy. I mean, that makes it a lot easier. Like this is how we do it. No exceptions. This is the way it is. We may need to have some front desk meetings and follow-up, checking on these things, making sure that they're taken care of, looking at our AR dashboards. And sometimes we need to send our front desk to exception rehab because they're addicted to making exceptions with every single patient. We got to send them away for 30 days so they can get that fixed and they can get better. But the thing is, is when you get category A problems, which are patient balances, you typically, it's not really a money problem, it's a policy enforcement problem. That is what we're looking at when we're looking at patient AR. All right, let's talk about category B problems. These are the insurance AR things. Now we're looking at what is our protocol for taking photos? What are the required x-rays we need for each claim? What do these narratives need to say? And what do we need to put in them? What kind of supporting evidence do we need to send with them so that we can get things paid? Making sure that we are sending the claims out and we're attaching the right things and getting the clinical team and the front end aligned on what is the evidence that we need to provide so that these claims can get paid. All right. And lastly, let's talk about category C. This is anything 90 plus. To fix this, it's a simple thing. It's simple, it's not easy, but we need to schedule an AR meeting with either our office manager or whoever is going to be in charge of that once per month. It might need to be once every other week at the beginning as we clean these things up. We may decide that we want to outsource certain parts of this. Maybe like there's a lot of services that can handle revenue cycle management where you can outsource this so someone outside of your office is taking care of it. And I think what's important in this regard is with a lot of offices I work with, we have to start this AR cleanup project where we just start going through these balances line by line, sending statements, sending pay links, sending people to collections, cleaning up this stuff, calling people, either writing off balances or sending them to collections and writing them off our books. We need to get a clean AR. We should have very little 90 plus AR because, like I said, if you've got it, it's because there's no follow-up. There is no other reason for you to have 90 plus AR. There is no follow-up having it at your office. So you start being on top of it, but at the same time, you got to clean up all that old stuff so it's not bogging down your 90 plus. So here are your tactical takeaways for this episode. I want you to split your AR into patient AR, insurance AR, and 90 plus AR. And that alone is gonna give you 80% of your story. You're gonna audit 10 charts and see what the biggest problem is. It should be screaming at you if you look at 10 charts. And then you're gonna figure out what are the right skills that you need to work on based on whether it is the patient AR, insurance AR, or 90-day AR. And fix that problem with just one focused improvement, little by little. Don't fix everything at once. Just attack one thing, stay on top of it, keep talking about the problem and the solution, support your team. And then lastly, make one person the AR owner so that you don't have 90 plus. There's one person in charge of following up with insurance AR and following up with the patient AR, should you have that created, cleaning that thing up. So your AR, it did not get out of control overnight. And the fix, unfortunately, is not going to come overnight either. It comes from clarity. Once you know where the problem is, when you diagnose it, fixing it becomes simple. You know what to do. Just like we diagnose issues in people's mouths, we need proper diagnosis. And when the AR becomes under control in your practice, the cash flow stabilizes and your entire practice is going to feel lighter. And if you want help diagnosing and working systems like these into your daily workflow, set up a free strategy call with me at dentalpracticeheroes.com slash strategy. And I would be happy to not only give you some free advice, but also tell you if we can help you and how that works if our goals align with yours. So thank you so much for listening today. If you like what you hear, please support me by leaving a five star review so more people can hear the podcast. Thank you so much for listening. I appreciate it. And we will talk to you next time.