Seven Signs It’s Time to Revisit Physical Therapy Billing

Wouldn’t it be nice if your practice’s physical therapy billing ran like a well-oiled machine? Just imagine if claims went out quickly, payments came in promptly, and your admin staff were. Able to handle the process with few hiccups. For many, this may seem impossible and a far cry from what you’re dealing with now, but it doesn’t have to be.

The truth is physical therapy billing has become more complex over the years. Between evolving Medicare regulations, such as the 8-minute rule calculations, and payer-specific policies, many rehab clinics are struggling under financial pressures they’ve come to accept as unavoidable. However, here’s the good news: something can be done.

In this article, we’ll explore seven signs that your current approach isn’t working. That way, you can identify problems early and take action before they significantly impact your bottom line. Plus, we’ll reveal the pros and cons of different billing strategies for your practice.

7 Signs Your Physical Therapy Billing Needs Revisiting

When you’re used to having chaotic billing processes, it’s easy to just chalk it up to, “This is just the way things are.” But without optimizing your process, there might be billing problems that are costing you thousands annually. Therefore, let’s uncover what physical therapy clinics should look for so you know when you need a more robust solution.

1. A High Claims Denial Rate

Want to know a metric you absolutely should track? Your claims denial rate. Many physical therapy practice owners don’t monitor it consistently, which isn’t a critical component of your patients’ care, but may be a critical component of your patients’ access to your care. This metric deserves attention too, as it could be the difference between helping more patients or finding yourself missing out on more business. And this isn’t just a concern for specific practices; it’s an industry-wide issue.

The Research on Denial Rates

Did you know that rehabilitation services were among the top 15 narrow service types contributing to denied spending under Medicare Advantage insurers’ rules? A 2022 article examined data from 2014 to 2019 and found that rehabilitation and physical therapy claims accounted for 2.3% of total denied spending (approximately $3.44 million) and 2.2% of total denied services under private insurers’ coverage rules.

When further assessed, researchers found that these specific denial reasons applied to services denied only under the private insurer’s coverage rules, and were commonly classified as experimental or investigational for 61% of denied services and without proven efficacy for another 20% of denied services.

While this is just data from one insurer, others are likely noticing similar patterns.

How To Calculate Your Own Denial Rate

With denial rates this high across the industry, tracking your own numbers isn’t optional; it’s often essential. To calculate it, all you have to do is divide the total dollar amount of denied claims by the total dollar amount of claims submitted. Industry benchmarks suggest keeping them below 5%. If yours is higher, you’re likely leaving a good chunk of money on the table.

How Your Denial Rate Impacts Business

Let’s say PT Practice A bills $500,000 annually and has a 10% denial rate. The result is a staggering $50,000 in denied claims.

Even if they’re able to appeal half of those denials successfully, Pt Practice A will still have lost $25,000 that could have been avoided from the start. That doesn’t even include the administrative staff time spent working on those denials and appeals.

2. High Billing Staff Turnover

Staff turnover is already expensive, but losing members of your billing team can be particularly damaging. When experienced billing staff leave, here’s what they take with them:

• Understanding of payer quirks
• Familiarity with common documentation issues
• Relationships built with insurance representatives
• Institutional knowledge about your clinic’s specific workflows

In a nationwide study of over 43,000 healthcare workers, including administrative personnel, over 40% reported experiencing burnout. Additionally, 32.6% expressed their intent to leave their jobs.

So, if your physical therapy practice is experiencing high staff turnover among billing staff, it’s time to hit the reset button. Leaders should ask:

• Is billing staff workload manageable?
• Are we paying competitive wages for top-tier billing talent?
• Does the billing team have the tools they need? If not, what technological solutions can we implement to ease their burden? (Think, an electronic health record (EHR) that automatically assigns codes based on the documentation)

3. Your Practice Is Growing, But Your Billing Isn’t Keeping Up

Growing a business is a fantastic accomplishment, but it can also be hard to scale a PT clinic’s current systems. The billing approach that worked wonderfully when seeing 50 patients weekly might buckle under the weight of 150 weekly visits.

Here’s how it often goes: Practices usually make strides to add providers, expand their hours, and potentially even open a second location. They might even improve their clinical workflows and patient experience. But their billing processes often remain the same, sit on the back burner, and, unfortunately, leaving money on the table.

Before long, claims begin taking longer to submit, your accounts receivable days creep upward, denial rates increase, and you start facing problem #2 (high billing staff turnover). So, while you’re theoretically bringing in more revenue, your clinic’s bank balance doesn’t reflect the growth you and your team have achieved through all your hard work.

This lack of administrative scaling can pose a profound professional challenge, particularly for your clinical team. If you have demanding productivity standards but don’t have a back office that can keep up with the pace, the financial burden falls directly on the frontline.

As one study found, the largest source of ethical conflict among rehabilitation clinicians often comes from healthcare reimbursement pressures. So if your clinic is experiencing financial insecurity, even if it’s due to poor billing practices, it could push your PTs toward difficult decisions that might cause ethical dilemmas.

4. Unclear Picture of Billing 

It’s one thing to feel like something is off with billing at your practice; it’s another thing entirely when you can’t actually see what’s happening. When you don’t have a clear picture of what’s going wrong, it’s hard to answer simple questions like what’s our collection rate this month orhow many claims from last week are still pending?

Ultimately, this lack of visibility creates serious problems, resulting in:

• The inability to pull reports that show key metrics
• Patient account balances that aren’t properly reconciled
• Uncertainty about which claims have been paid, denied, or are still pending
• Discovering problems weeks or months after they’ve occurred
• Different staff members who give you conflicting information
• Manual processes and spreadsheets just to get the ‘quick’ answers you need

Sometimes practices reach this point because they use outdated technology, making it crucial to adopt innovative tools that simplify visibility. Other times, it’s due to inadequate training or processes created without intentional design. Therefore, it’s often a good idea to set a goal to revisit your billing processes quarterly to ensure they continue to give you the information you need.

5. Lengthy Accounts Receivable Process

As a physical therapist, and even as a clinic owner, you’re probably used to tracking functional outcomes measures, such as range-of-motion improvements and mobility scores. However, while those clinical metrics are essential, don’t overlook your metrics in accounts receivable (A/R). This crucial financial measure reveals how long it takes, on average, to collect payment after providing services.

To calculate yours, divide your total accounts receivable by your average daily charges. Ideally, you’ll want this metric under 30 days. But if you realize it’s steadily climbing to 40 days, then 50 days, and then 60 days, you have a serious cash flow problem brewing.

Long A/R periods often indicate bottlenecks in your revenue cycle. For instance, maybe your claims aren’t being submitted promptly, or denied claims aren’t being worked on quickly.

But what’s the cost of just accepting this as ”normal”? High days in A/R cost you things like:

• Increased bad debt write-offs
• Cash flow issues affecting payroll and operations
• Decreased likelihood of collecting older balances
• Staff spending more time on old claims than new ones

6. Billing Time Is Exceeding Patient Care Time

While you didn’t go through years of education to spend hours each week dealing with billing issues, you might find yourself doing just that maybe even more than helping patients improve their mobility.

And here’s the problem with that: every hour you devote to billing headaches is an hour you could’ve spent with a patient, working through scheduling, or marketing your services. Essentially, even though billing is necessary to get paid, when it’s cumbersome, it takes you away from actually caring for patients and growing your business.

7. Your Collection Rate Falls Below 95%

Do you know how much of the money you earn actually end up in your bank account? If not, it’s time to look into your collection rate, which is a metric that shows the percentage of expected revenue you collect. You can calculate your own by dividing payments received by charges adjusted by contractual write-offs.

Research on revenue cycle management shows that a healthy collection rate for PT practices should be 95% or higher. So, if you’re collecting less than this, you’re losing money unnecessarily.

Additionally, research reveals that providers across the healthcare industry fail to collect 2 to 5% of net patient revenue due to inefficient billing processes. This might sound small, but if you earn $500,000 annually, that’s $10,000 to $25,000 left on the table every year.

Physical Therapy Billing Options: In-House vs Outsourcing

Now that we’ve talked through the warning signs, let’s explore your solutions. It primarily comes down to two approaches: managing everything in-house or outsourcing to a company that handles physical therapy billing services.

The Advantages of In-House Billing

When you handle billing internally, you benefit from:

• Instant access to all of your financial data. By staying in-house, you’ll have immediate visibility into all your billing information without waiting for third-party reports.
• Direct control over every claim. Your team can address issues immediately with claims as they arise.
• Better patient relationships. Since your staff knows your patients personally, they can have more clear and empathetic billing conversations.

The Disadvantages of In-House Billing

However, in-house billing without the right systems can present challenges, such as:

• Staffing requirements. You’d need to hire, train, and retain qualified personnel to handle billing functions.
• Learning curve. Your staff will need time to develop expertise across different payers and scenarios. There are robust practice management tools are available that can help accelerate this process.
• Technology investment. Businesses will need comprehensive practice management software with integrated billing, real-time reporting, and automated workflows.

The Advantages of Outsourcing

Professional billing services also offer several benefits.

• Specialized expertise: Third party billing companies often have teams of certified billers who are current on Medicare updates, the 8-minute rule, and complex payer policies.
• Automatic scalability: You can adjust the resources you use as your practice grows very quickly.
• Higher collection rates: By working with experts, practices should achieve collection rates of 96-98%.

The Disadvantages of Outsourcing

Although they have some attractive perks, outsourcing may also come with trade-offs.

• Less direct control: You must rely on reports rather than real-time oversight of your PT clinics’ billing process.
• Communication delays: Questions and answers are received and sent via email or call instead of in-person responses.
• Service fees: Some agencies want a percentage of collections or flat monthly fees, which can get expensive for higher-revenue practices.

Take Control of Your Physical Therapy Billing

Proper billing is a big deal, and not just for the reason you might think. Sure, efficient billing can help you get paid on time, but it goes beyond that. Having a financially stable practice lets you focus your time on patient care.

If you’ve recognized any of these warning signs in your practice, it’s the perfect  time to take action. Carefully assess your current billing performance, determine whether your current approach is truly working, and recognize that there are modern EHR systems and other resources designed to overcome these common billing challenges.