Here, we’ll explore the typical timelines, industry benchmarks, and factors influencing payment speed. We’ll also discuss actionable steps clinics can take to accelerate their revenue cycle.
Typical Payment Timelines in Physical Therapy
In outpatient physical therapy, payment timelines can vary widely based on factors such as the insurance company, clearing house being used, whether claims are being submitted electronically, nature of the payer agreement, front desk performance, billing practices, and payer contracts. Generally, if claims are being submitted electronically (and paid electronically) via a top level clearinghouse, you can expect the following :
- Commercial Insurance: Payments from private or commercial insurers often arrive within 7- 10 days of claim submission. However, this period may extend if the claim lacks complete documentation or contains errors. It should also be noted that many payers (either by incompetence or intent), delay or deny the payment of claims for incorrect reasons. In these cases, your billing company should fight aggressively to have the claim paid immediately.
- Medicare/Medicaid: It is not uncommon for Medicare and Medicaid to process claims within 7 days. These government payers typically operate on a tighter payment schedule than private insurers, though they also have strict requirements that must be met.
- Workers’ Compensation: Claims for workers’ compensation can take 45 to 90 days to process, sometimes longer, due to the additional documentation and verification needed. There are still many small workers’ comp administrators that have inefficient processes and therefore can take even longer to ultimately send you a check.
- Patient Payments: This depends entirely on your policy, which should be determined carefully. Many clinics find that firmly requiring payment of copays / coinsurances at the time of service results in poorer compliance with attending for the full plan of care. When patients are given the option to pay upon receipt of a statement, this time flexibility often achieves higher POC compliance. This of course comes with a slower patient payment cycle.
- Auto and Attorney: These balances can possibly take years to be paid, depending on your arrangements with the payer. In some states, initial Auto medical expenses are paid within 60 days. If you have arrangements with attorneys that allow them to pay you once they have been paid, there is also the possibility that you will not be paid at all.
Industry Benchmarks for Physical Therapy Reimbursement
A commonly used industry standard for reimbursement speed is the Days Sales Outstanding (DSO) metric, which represents the average number of days it takes to collect payment after services are rendered. A DSO of 24 days is generally considered healthy for outpatient physical therapy clinics. However, achieving this requires streamlined billing practices and proactive follow-up with payers. A DSO of 15 days is possible if all departments are operating well and communicating efficiently.
Key Factors That Influence Payment Speed
Several elements can impact how quickly payments are received:
- Electronic claim submission with a top level clearinghouse: Better clearinghouses have electronic connections established with more payers. This often requires more demographic information to be included on the claim so that the payer is able to automate payment. By achieving better electronic connections, claims will be correctly processed faster and payments will be made more quickly.
- Billing Accuracy: Claims submitted with incomplete information or incorrect codes can cause significant delays. Clean claims, or those submitted accurately on the first try, have a much higher chance of being paid quickly.
- Denial Management: Rejected claims can significantly delay reimbursement. Having a denial management process in place can help identify the reason for denial and quickly resubmit the corrected claim.
- Payer Mix: The mix of insurance types can affect payment timelines. For instance, Medicare will reimburse more quickly than commercial insurers or workers’ compensation.
- Patient Responsibility Collection: If co-pays and deductibles are collected promptly at the time of service, obviously patient balances will not remain in Accounts Receivable.
Steps to Speed Up Payment in Outpatient Physical Therapy
- Verify Insurance Eligibility and Benefits: Ensuring that you have the correct information related to 3rd party eligibility and benefits will avoid costly delays.
- Submit Clean Claims: Train your billing staff or outsource to a medical billing service specializing in physical therapy to ensure accuracy in coding and documentation. Clean claims significantly improve the speed of payment.
- Automate Patient Reminders: Patient payments often account for a substantial portion of your revenue. Automated reminders for co-pays and balances help improve collections.
- Follow Up on Denied Claims Promptly: Reviewing denials quickly and resubmitting them with corrections can drastically shorten the DSO.
- Use a Revenue Cycle Management (RCM) Partner: Partnering with an RCM specialist who understands outpatient physical therapy billing can optimize the entire billing and payment process. A specialized RCM partner can ensure quick claim submission, manage denials efficiently, and optimize your revenue cycle.
- Complete notes in a timely manner: Obviously a claim can’t be submitted until the treatment note is complete. It is possible that notes that are completed late may not be received by the payer until after the timely filing limit. This will result in denial of the claim.
Conclusion
A payment cycle of 15-40 days is a realistic target for most outpatient physical therapy clinics. By investing in accurate billing, consistent follow-up, and professional revenue cycle management, clinics can reduce delays and maintain a steady cash flow.
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