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Accounts Receivable recovery is also known as AR recovery. Some companies specialize in AR recovery. Frequently, the pricing is based on a contingency of something like 50%. So the organization that makes the AR recovery will keep a certain fixed percentage of whatever they collect.
Many of these organizations may have minimum dollar thresholds (5 million, 10 million, 50 million, or whatever the dollar amount is outstanding, the accounts receivable) for them to justify going after it. Those aren’t things that you can figure out at a later time.
Pursue the “uncollectible” accounts
Typically, you’re going after accounts receivable that are perceived not to be collectible. Some organizations that don’t specialize in doing this but have this as one of their offerings use this as a loss leader to get the billing business. It’s typical that since you’re going after only those claims that are perceived or already have been gone or not collectible, it concerns written off claims. They have a $0 balance. There are nuances in whether it’s a $0 insurance balance or the total balance is zero.
Yet, there are different ways this can be played. Still, the fundamental concept is perceived as not collectible. It’s been written off, so there’s nothing to lose. Suppose you’re paying on a contingency basis and charging on a contingency basis. In that case, it’s a great way to demonstrate the capability of performance. Also, show there are dollars left behind. If you’re a billing company and you want to break into a provider, this is a great way to do it.
One of the critical problems that the entire industry faces, if you’re a revenue cycle management company or a medical billing company, is when you’re trying to get business, it’s challenging to demonstrate credibility even if you’ve got references. Everybody’s got connections. The worst billing companies in the world have references. If you can’t come up with three people to say positive things about you, you have to be the worst company on the planet.
Many providers have had bad experiences with billing companies where they checked references, and that didn’t go. Or they believed the sales story, and again it didn’t turn out well. I’m not casting a shadow or throwing shade on an entire industry. I’m saying that it’s often difficult to distinguish between the good and bad organizations in the sales cycle.
Since everybody says they’re going to collect more money, how does the provider figure out who is telling the truth and is credible? It’s very, very high risk for a provider to switch and then find out, “Ah, the last billing company was better than the current billing company.” Or worse, if they outsource and they fire all the people, they really can’t rehire those people if they find out that the billing turns out to have been worse than in the prior organization.
Give it a test run
The concept of AR recovery is a win-win, where it can be an excellent opportunity to sort of try out the relationship. The provider believes that there’s effectively nothing to lose, that these things are already written off. This would demonstrate that money is left behind. Another example is someone paying lip service or talking about a good game. Suddenly, the billing company has credibility if they come through and demonstrate and collect money. Indeed, if they’re outstanding at not only collecting money.
Show them the money
Nonetheless, even slicing and dicing and showing why they collected money and revealing the underlying reasons. Why is this the case? Whether it’s coding issues, whether it’s billing issues, or something else that they’re doing to solve someone’s problems, bringing in revenue that they didn’t get in under the current status quo is going to demonstrate knowledge. It also offers the ability to sort of slice and dice data and analyze things and explain and show that to a provider.
Use AR recovery as an entry point
Offer AR recovery. If not your primary sales tool, it should be one of the critical things that you have in your sales arsenal It will help you to break in and demonstrate that you know what you’re doing. If you’re a provider, you should go out and find somebody.
Invariably, if somebody’s knocking on your door and offering this, you should consider taking them up on it. On the other hand, you should go out and find somebody to do this and see what, if anything, they can collect because you have effectively nothing to lose and everything to gain. You might collect some money that dropped directly to the bottom line.
More than anything else, you will learn something significant, hopefully, and perhaps be able to quantify some opportunity for improvement where you might be able to say, “Okay, we’re collecting a million a month. We should be collecting 1,000,001.”
Now, we have some baseline to say, “Okay, we can project going forward that we’re going to make 1,000,001. This might prove better million because these are the categories where there are coding issues or collections issues. We think we’ll bump these, and then that rolls up to X, and then that means we can project going forward.”
Everyone loves projections on what you’re going to do in the future. However, it should be improved based on some actual performance history.
Feel free to get in touch with us, if you’re a provider and looking for somebody. Let us know if you need a referral. We can help guide you on how to go about doing this. If you’re a billing company, we can help you from a data and analytics standpoint.
In another podcast, we’ll go through and talk a bit about how to do some of this.