Old insurance claims, incorrect balances, and poor follow-up could be costing your practice tens of thousands of dollars. In this week’s episode, Jeff explains how to identify the problems hiding in your AR and start collecting what you're owed.
Smile Care Claims - https://www.smilecareclaims.com/
Dental Business RX Episode 200 - https://www.dentalbusinessrx.com/episodes/ep200
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Questions From This Episode
Why does Jeff say you're better off not producing treatment at all than producing it and never collecting for it?
If you never produced the treatment in the first place, you never spent staff time on it or incurred material costs, so producing something you ultimately never collect on is actually worse than not doing it at all. Healthcare's heavy focus on production statistics can obscure this, since a practice can look busy and productive while quietly losing real profit to uncollected balances.
What does a healthy accounts receivable actually look like, broken down by aging bracket?
For insurance balances, the zero to thirty bucket should hold roughly a month's worth of expected insurance production, the thirty-one to sixty bucket should sit under 10 percent of that expected amount, and anything sixty-one days or older should be under 5 percent, ideally near zero, and always shrinking rather than rolling over. Patient balances should be close to zero across the board, aside from occasional short-term payment plans or an unappealable insurance underpayment.
Why should credit balances be filtered out separately rather than lumped into a practice's total accounts receivable number?
A raw accounts receivable total nets patient credit balances against money owed to the practice, which can make the real number look smaller and less urgent than it actually is, if patients owe $150,000 and the practice owes $50,000 in prepaid, undelivered treatment, pulling an unfiltered report shows only $100,000. Credit balances need their own separate review too, since they exist either because a service hasn't been delivered yet or because of a genuine overpayment, and each requires a different kind of follow-up.
When auditing an old, aging account, what are the two most common culprits Jeff points to?
A payment was actually received, from either insurance or the patient, but never properly posted to the account, which a billing company guest on the show recently confirmed is one of the most common findings in real AR audits. The other common culprit is that insurance paid less than expected and the remaining balance was never reassigned to the patient, leaving it sitting incorrectly as an open insurance balance instead.
Why does Jeff push back on the idea that AI will eventually make insurance claims processing fast and automatic?
The technology to let an AI evaluate and instantly pay a claim already exists, but insurance companies have a real financial incentive not to build it, since the float, the money they hold before paying out claims, is actively being used to generate returns for them. Practices can absolutely use AI to help file cleaner claims, but Jeff doesn't expect that same speed and automation to ever show up on the insurance company's side of the process.
Episode Transcript
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You call an electrician, and they come out to your practice or your house, whatever you called them for, and they fix whatever it was they were there to fix, and you pay. If you don't pay, their business comes after you for the balance. And if you have other problems and still owe them money, they simply won't come back out. The same applies to a plumber, a painter, any of these small businesses. If you're working with a contractor or a roofer doing genuinely involved work on your home, they'll take out a lien on the property, so if you don't pay them, they can prevent you from selling, cloud the title, or potentially trigger a foreclosure. The bottom line is these businesses build in real protection to make sure they actually get paid. And even the owners of these businesses, whether or not they're especially great executives, are looking at one thing regularly: their receivables. Why? Because it's their lifeline, it's their income.
Now compare that to the healthcare model. We'll focus on dentistry here, but the comparison holds broadly. Do you, as a business owner, actually know where your accounts receivable stands right now? Do you know how much is sitting over 61 days old? Do you have one of those accounts receivable reports with a chunk of money sitting over 90 days that you glance at occasionally, think you should probably do something about, feel genuinely overwhelmed by, and then plunge back into work and forget about? If that sounds like you, you're not alone.
On top of that, a lot of you listening are probably still in network, whether through individual contracts, umbrella plans, or some combination, and that only compounds the problem. You're already delivering services at a discounted rate, and now you're not even collecting all of that discounted amount. And here's something worth sitting with: if you're already paying your bills at your current collection levels, whose money is sitting in that uncollected balance? That money is your profit.
So what should you actually be doing about this? How often should you be looking at your accounts receivable? How do you evaluate it? What should happen with these out-of-control balances? And of course, insurance plays a real role here too, a complication fairly unique to healthcare. But what should actually happen with old insurance balances, or old patient balances? That's what I want to talk about in this week's episode. Accounts receivable isn't the most exciting topic, but I'd push back on that, it's very likely where you're losing real profit, which makes it considerably more interesting than it sounds. My name is Jeff Blumberg, and I'm your host.
There's an interesting concept I picked up early on working in healthcare, an industry where the business owner sometimes just doesn't collect. You're actually better off not producing something at all than producing it and never getting paid for it. That runs against the grain in healthcare, since there's such a heavy focus on production, what did we produce, what did we produce. But if you didn't actually produce a given treatment, you never spent staff time on it, and you never incurred the material cost. So in a real sense, it's better not to have produced it at all than to produce it and collect nothing. It's a genuinely interesting way to think about it.
So let's get into this. How do you evaluate accounts receivable, and how often should you be looking at it? At minimum, monthly. The owner and the office manager should both be reviewing it monthly, and whoever's directly responsible for your AR may be looking at it more frequently than that. But as the owner, monthly is the floor. Pick a specific day, ideally when you're genuinely free of distractions, don't try to do this between patients, set aside real time to actually sit down and look at it.
If you're dealing with a genuinely problematic AR, and I'll explain what a healthy versus unhealthy AR actually looks like in a moment, it can help to export it from your software into a spreadsheet so you can make notes as you work through it.
So what does a healthy AR actually look like? First, your aging brackets: current, meaning balances under 30 days, then 31 to 60, then 61 to 90. Some software just tracks 90-plus as a single bucket, others break it further into 91 to 120 and 120-plus. But those are your basic aging brackets.
There are really two sides to this: patient balances, money patients owe you, and insurance balances. Let's start with insurance. What does a healthy insurance AR actually look like? The zero-to-30 bucket should hold roughly a month's worth of production in insurance portions, no more. Say you're doing a $1,500 crown and expecting insurance to pay $500, that $500 sitting in your zero-to-30 bucket is completely normal. The 31-to-60 bucket should sit under 10 percent of whatever you're expecting from insurance companies overall. Anything 61-plus should be under 5 percent, ideally close to zero, and that number should always be shrinking or holding steady, never rolling forward and growing.
A couple of things worth flagging here. If you're doing any orthodontic work, some insurance companies won't pay until the case is fully complete. So if you're running a longer ortho case, over a year, say, that insurance balance is going to sit there the entire time. If you just look at a raw aging report, it'll look like a genuinely nasty 120-plus day balance, when it's really just a case you're waiting to finish. Most software lets you flag these accordingly, an expected future payment, or a patient on a formal payment plan, so you can differentiate a real problem balance from a completely normal one on your aging report, instead of just seeing a scary total and panicking.
The other thing worth watching for, and I'll get into this more shortly, is that in certain cases, what's listed in your AR as owed by insurance is actually a patient balance in disguise, which is exactly where account-level auditing becomes necessary.
Now, patient balances. These should genuinely be as close to zero as possible. Why would a patient owe you money at all? If you're doing a larger case, ideally you're getting prepaid. If a patient's on some kind of internal payment plan, half down and half in two weeks, something like that, you might have the occasional balance for a short window. You'll also occasionally see an insurance underpayment that's simply not appealable, and the patient ends up owing that difference. But none of that should realistically extend past 30 days. Aside from the occasional unappealable underpayment, patient balances should sit as close to zero as possible, especially if you're already collecting in advance for most of what you do.
One more thing to watch for when pulling this report: if you're taking prepayments, say for all-on-X cases or full mouth reconstructions, those show up as credit balances on account, and here's the problem they can create. Say you pull your total accounts receivable and it shows $100,000. But say patients actually owe you $150,000, and you're separately carrying $50,000 in prepayments toward a larger implant case you still owe treatment on. Unless you filter that report properly, pulling a raw total nets those two figures against each other and simply shows $100,000, which doesn't actually tell you what you need to know, since you're going to handle those two situations completely differently.
So when you pull a receivables report specifically to see what patients owe you, filter out the credit balances entirely, otherwise it distorts your real number. You'd then pull those credit balances separately and review them on their own. Credit balances generally exist for one of two reasons: undelivered services, meaning you took payment for something you haven't finished yet, a patient paid in full for an implant case, but so far you've only placed the implant and still owe the restoration, or an overpayment, either from insurance or the patient, that's simply sitting on the account.
You need an actual policy in your practice for handling both. For patients carrying a credit balance tied to unfinished treatment, make sure every one of them is actually still on the schedule, even if the case is going to stretch out over several months. Say a patient paid for two implants and the restorations, you've placed the implants, and you're waiting for them to integrate before finishing the case. That patient needs a real date to come back for new x-rays or a scan so you know exactly where things stand. They can't simply disappear into the ether, not just because they need to actually finish their treatment, but because you're sitting on an unfinished obligation the whole time. Don't lose track of these patients.
For simple overpayments, you need a clear policy on when you'd actually issue a refund. You can call the patient directly, your insurance overpaid and you have $50 on account, and they might say just leave it for their next cleaning, or they might ask you to send the $50 back. Either way, have an actual point of policy for when smaller overpayment credits get refunded rather than sitting indefinitely.
Now, say you pull your AR and find a genuinely large balance sitting at 90-plus days that isn't an ortho case you're waiting to complete, real money allegedly owed to the practice, or a concerning amount at 60-plus. That doesn't fit the healthy model I just described, so at that point you need to figure out what's actually going on.
As I mentioned, you may find balances assigned to insurance that are really patient balances, or vice versa. So these older, aging accounts genuinely need to be audited, quickly. This can be time-consuming, but it's necessary, otherwise you risk losing that money permanently.
There are two reasonable ways to prioritize this audit. If insurance is involved, you might start with the oldest balances first, since there's a real risk the filing window runs out entirely, I'll get into that. Or you might start with the largest balances instead. This really depends on the specific situation, since you don't want to spend all your time chasing large balances only to discover a batch of smaller, $500 to $600 insurance claims that are now unpayable simply because you never got to them in time.
So you're auditing the account, looking at how the balance was actually created. What are the major culprits? Most commonly, either the payment was actually received and never posted, this happens, insurance or the patient paid, and someone on the team simply never logged it. We've genuinely seen this happen repeatedly. We actually had a guest post on the podcast this week from Cindy Sammarco of Smile Care Claims, a billing company, I'll put a link on the episode webpage, and this was exactly one of the most common issues they uncover doing AR audits: a batch of payments that had already come in, from insurance or the patient, and simply never got posted.
Or, payment was received but a remaining patient balance existed, insurance didn't pay the full expected amount, so the patient owed something, but that balance was never reassigned to the patient. Or, it's a genuinely real, open claim or real patient balance.
I'm not going to turn this into a full insurance primer, but a couple of things worth knowing. Say you audit an account and find $600 owed by an insurance company, and it's been outstanding for ten months. Where would you actually start? With the accounts closest to the filing deadline, the ones sitting at eleven to thirteen months. The first thing to check on the insurance side is whether you actually filed, and whether you have proof of it. If you filed with documentation and can prove it, there's a real chance you can fight for that payment, you did everything required, and even if the insurer claims they never received the x-ray or simply never paid, you have real standing to push back.
Now say you filed, but the insurance company requested additional information, a pre-op x-ray, for instance, and it was never sent back. Depending on the specific insurer, you're now on a separate clock to respond, and after a certain point they'll close the claim entirely, so you have to stay on top of that too, since it varies company by company. If the filing window was, say, a full year, and the claim was simply never filed at all, that money may genuinely be gone.
Or maybe insurance paid, but down-coded the claim, paid for a filling instead of a crown, and no appeal was filed. Ten months later, it's genuinely unclear how appealable that still is, and this is where you have to make a real judgment call. There are really two things worth pulling out of an audit like this. If you find that claims simply weren't filed, or were filed and never followed up on when more information was requested, that points to a genuine problem in the practice, one that's very likely still happening on every new claim going out the door. Same if you find your verification process is weak, you're performing procedures that genuinely aren't covered, filing anyway, and getting denied because it really isn't part of that plan.
If you find issues like this, fix the underlying process before you even finish cleaning up the old accounts, otherwise you're simply going to keep recreating the exact same problem on every claim you file going forward.
The second thing worth checking: if your claims are consistently getting denied or flagged for more information, a narrative, a pre-op x-ray, look honestly at whether you're actually supplying a solid narrative, or actually taking that pre-op x-ray. I'm not trying to weigh in on clinical judgment here, that's genuinely not my place, there's what you feel is clinically necessary, and there's separately what the insurance company wants documented. I've heard of situations where a doctor has a pre-op x-ray from four or five months earlier and feels that's perfectly adequate, while the insurance company specifically wants one from the day before.
Ideally, insurance companies would simply trust a doctor's clinical judgment, you're the one in the patient's mouth. But that's not how it actually works. So it's worth knowing, for larger or more involved procedures specifically, exactly what documentation is required, the narrative, the pre-op x-ray, perio charting if relevant, whatever applies, and making sure you're consistently supplying all of it. Otherwise you're creating unnecessary extra work for yourself, and if you ever do need to fight a denied claim, having supplied everything required from the start puts you in a considerably stronger position.
I'll also say this, since someone asked me recently whether AI is eventually going to take over insurance filing entirely. My honest answer: you could probably teach an AI to file a claim just fine. The real problem isn't on the practice side, it's that if insurance companies built an AI specifically to evaluate and pay claims quickly, a valid claim would come in, get automatically approved, and get paid within 24 to 48 hours. That would make everyone's life dramatically simpler, no more chasing, no more follow-up. But that's exactly the problem with the model. Insurance companies have a genuine financial incentive not to build that, since they profit from holding onto that float, the money sitting unpaid, as long as possible. So while practices can absolutely use AI to help file cleaner, more complete claims, I don't expect to see that same speed and automation show up on the insurance company's side of the process anytime soon. You can do everything right on your end and still run into what I'd honestly call fairly primitive follow-up procedures with insurance companies, they lost this, they never received that. Electronic filing was supposed to eliminate that entirely, the same way people used to say about paper filing, we never received the x-ray.
I remember hearing about a practice that filed a claim covering two cleanings and a Maryland bridge, all in the same envelope, one adult child's Maryland bridge, and cleanings for another child and the mom. The cleanings got paid without issue. The Maryland bridge claim simply never got processed. When the office called to ask what happened, they were told it was never received, despite being in the exact same envelope. This kind of thing has been happening for a long time, and electronic filing hasn't fully solved it.
So, bottom line: make sure that if there's a genuine systemic issue in how you're filing, whether that's a verification gap or a documentation gap, you actually fix it, so you're getting paid properly going forward. If you're required to take a pre-op x-ray you don't feel is clinically necessary, and the alternative is losing payment on the crown itself, I'd rather absorb the $30 or $40 cost of that x-ray than fight a claim I can no longer support, since you obviously can't go back in time and take a new pre-op image. Again, that's not clinical advice, that's simply a financial judgment call.
So for every account you're auditing that involves insurance, figure out where it actually stands: is it refilable, is it appealable? Then check whether there are genuine patient balances mixed in as well, since that happens too.
Say your audit turns up a batch of real, sizable patient balances. What do you actually do with them? I've talked to people who just write these off automatically. I wouldn't. I'd reach out to the patient directly: we recently audited your account, and here's exactly what we found, with a full breakdown, every date of service, what was done, what insurance paid, laid out clearly, especially if it's a family account with multiple people involved. Show them plainly, insurance paid this, you hit your annual maximum, which left a $300 balance, or however it breaks down, even if the balance is $1,000 and a year old.
The worst outcome is they say no. You can always offer some kind of resolution, we took a while getting to this, so we're willing to write off 15 or 20 percent if you can take care of the rest now. Especially on a balance that's only six months old, getting a meaningful portion of it is considerably better than simply writing the whole thing off. I've seen this work well for cleaning up old balances.
Which brings up a related point. One of the biggest sources of genuine frustration in any business, not just dentistry, is being billed incorrectly. It damages a patient's trust in the practice. If your accounts aren't accurate, you genuinely can't bill patients properly at all. Say a patient owes $1,000, and you believe $600 of that is coming from insurance, so you bill them for the remaining $400 and they pay it. Then you discover that $600 was never actually coming from insurance, it was the patient's responsibility all along. Now you have a real problem. Or the reverse, a balance gets assigned to the patient when $600 of it should have been billed to insurance instead, and you've billed them the full $1,000. That's going to genuinely upset a patient, understandably. This is exactly why keeping your accounts accurate matters so much.
I've mentioned on the show before that we regularly see newer clients come in with a genuinely messed up AR, and a lot of it traces back to exactly what I've described here, wrong balance assignments, one kind or another. What tends to happen in these cases is that the AR simply sits there indefinitely. In some cases, practices aren't even billing patients properly, only billing a portion of what's actually owed, leaving real money on the table. In other cases, they've simply assumed those patient balances are unrecoverable and written off tens, sometimes hundreds, of thousands of dollars.
So, in a nutshell: you own a business, and this is a genuinely critical financial part of running it. You can't simply ignore it as the owner, the same way your scheduler can't ignore confirming patients, it's just not acceptable. You should be reviewing your AR regularly, using the benchmarks I gave you here, those were specifically insurance benchmarks. Patient balances, again, should really be close to zero. If you're running your practice this way, and you still find you're not hitting your profitability targets, at least you'll know it isn't because money is simply sitting uncollected, you'll know the real issue is productivity or expenses instead. There's genuinely nothing worse than falling short of your profit goals while a meaningful chunk of that exact shortfall is sitting quietly in your own accounts receivable, as if it doesn't count.
So, not the most exciting topic, but genuinely one worth your full attention. I hope this helps. If you'd like assistance with this or anything else, you can reach us here at MGE at mgeonline.com, or call us at (800) 640-1140. Folks, have a great week, and we'll see you at the next episode.