Lowering DSO: Tips for Collecting Cash Quicker
DSO, or days sales outstanding, describes the average number of days from delivery of goods and/or services until invoices are paid in full. In home infusion, DSO can fluctuate a great deal depending on location, payer contracts, and services offered, but a target DSO for this line of business should be about 65 days. A DSO above 75 days is serious cause for concern, especially if there is no justification for why it is so high.
If your DSO climbs too high, this will negatively impact your company’s profitability and financial well-being. Plain and simple, the biggest danger of letting claims age is that the likelihood of collecting diminishes each month. Most plans have a maximum file limit AND a maximum appeal limit. If you are not on top of each outstanding claim, the time limit could easily expire, and you will have no recourse with the payer. The end result is bad debt.
Many factors can throw your DSO number out of balance, including Medicare ALJ hearings for example. There also could be problems with payers or large self-pay issues. If your DSO is longer than the targeted 65 days, the first step is to identify the source of the problem. One common issue is errors during intake, so be sure your company has a tight intake process that ensures that all the necessary information is collected and recorded and that the required documentation is captured prior to service.
In addition, there are three specific steps you can take to improve DSO.
1) Ensure that you are validating insurance benefits up front and establishing documentation and authorization requirements.
2) If you can determine the patient liability, collect all (or as much as you can) up front. It is MUCH easier to collect up front when the patient wants to go home from the hospital or start a therapy then after the services are completed.
3) Have a strong quality assurance process in place for ensuring the claims produced are accurate and complete. Clean claims will result in correctly paid claims the first time!
These changes should help you drive down your DSO, and watch for part two of this discussion, when I’ll address how you can collect more quickly and keep your cash flow strong.
In the meantime, if you are interested in having your processes evaluated in depth with detailed feedback on ways to improve, please click here to learn more from Mediware Reimbursement Services.