Production and Income  

Definitions

Production – The amount of money you expect to collect. Production is often described in terms of production for all (or a group of) patients in a date range (or on a certain date). 'Gross production' is really just the sum of the fees charged the patient(s), while 'net production' is the 'gross production' minus adjustments (including insurance writeoffs)

WriteOffs – EZ 2000 Plus Dental Software uses this term to refer to reduction in charges to patients due to insurance contracts that allow the provider to charge only a specified amount. If the user has entered the PPO fee schedule into EZ 2000 Plus Dental and set the patient insurance type to 'PPO percentage', then there are reports that can analyze PPO writeoffs.

Adjustments – Adjustments are reductions in charges to patients. EZ 2000 splits adjustments into positive adjustments and negative adjustments for data entry purposes, but they are reported together or by type. An example of a positive adjustment type might be 'missed appointment' or 'late charge'. An example of a negative adjustment might be 'senior discount'.

Income – One could also call this 'collections'. It is the amount of money brought in or paid on accounts, usually described in terms of a date range. For reporting purposes, this may be grouped into 'insurance income' and 'patient income'.

Production or Income? Sometimes there is confusion about whether a particular entry is production or income, such as with a patient refund check. Both a negative adjustment (production) or a negative payment (income) would reduce the account balance. This entry must be put in as a negative payment, because money is entering or leaving the office: and thus it should and will show up as income on the reports.

Another example is a warranty credit. A patient comes into your office and a veneer that you applied last week has come off. You want to show the production of putting the veneer back on, so you should charge the procedure like normal. But you are not going to collect the fee (no money exchanges hands), and you do not want the production to show in your Net Production for the day. So you include a negative adjustment equal in amount to the fee for the procedure. Thus when you look at your gross production for the day, the number will include the work done for the day. Gross production is a good number to compare how busy you were in different periods. But your net production includes the adjustment, so the net production for that patient is zero.

Reports

There are several Production and Income reports.

Daily – Production and income with each transaction listed, most detailed, use any date range.

Monthly – Production and income grouped by date, also shows scheduled production, any date range.
Annual – Production and income summed by month, only use for a single calendar year.

If you would like more options, run the 'More Options' report rather than 'Today' or 'Last Month' etc. There is one option that confuses users with these reports, and that is 'Show insurance writeoffs by' option. This is discussed at http://www.ez2000help.com/manual/insplantypes.html . If you use PPO insurance plan type when you setup your PPO insurance, then you will have writeoffs showing on your reports. If you enter the PPO fee schedules, then you know what the writeoff is (to the best of your knowledge) at the time of service. Since you know the writeoff at the time of service, you should account for the writeoff at the time of service. Then your production numbers will reflect the writeoffs in the same period, so choose the 'Show insurance writeoffs by date of service'. If you choose 'show writeoffs by insurance payment date' then the writeoff date (and thus the negative production date) will depend upon what the date is that the insurance payment is made, and thus the period will not match.

Let us look at how just one procedure only would show each way, if it were the only procedure performed in a date range. For example if you do a $500 crown for a customer with a PPO insurance where the allowed fee is $300, then there is a $200 writeoff. If you you know this ahead of time, you will want to run your report showing writeoff at time of service, so that your net production for the day is $300. Let us say that the patient paid $60 at the time of service and that insurance is paid 22 days later in the amount of $240, with the $200 writeoff.

Insurance writeoff by Insurance payment date (this is the default as of version 6.9)

Insurance writeoff by service date (if you change the option button)

Note that the second report more clearly shows the writeoff on the date of service, which puts the excessive gross production and the writeoff always in the same time period. But it would make more sense to use the default 'Show writeoffs by insurance payment date' if you do not know the writeoff ahead of time because your historical reports would need to be rerun as the insurance payments came in.

Paying providers based upon production or income:

This starts out easy but becomes complicated. We will split this into two

Production by provider

First, suppose you want to compensate providers at your practices by paying them a percentage of production. This is easy if you do not have PPOs or if you know your PPO rates and have entered all of your fee schedules. If you do not have PPOs just run the Production and Income report (probably the monthly one) for whatever date range you desire with a single provider chosen, repeating for each provider. Use the Net Production column, which will account for adjustments. Lock the data using Setup > security > lockdate (http://www.ez2000help.com/manual/security.html) so that it will not be changed later, if you do not, there is no guarantee that the data won't change over time. This is true for all of you financial reports.

Do the same thing if you have PPO and have entered all of your fee schedules and are using PPO insurance type. Use the Net Production column, which will account for adjustments and writeoffs. You will realize that you will need to use insurance writeoff by service date, or your net production will change over time.

What if you do NOT know your PPO fees (and thus writeoffs) or you know that the values you enter at treatment time are questionable and thus need to be corrected upon insurance payment. In this case, you will be entering writeoffs at the time of insurance payment. So you will run your production and income reports in the default manner (writeoffs by insurance payment date). Because insurance payments will NOT always be in the same period as the production, you may have 'residual' negative production. A provider's net production in any given period will be lessened by the amount of writeoffs entered on insurance payments received in that period, even though the work may be from another period. This may or may not have a significant impact upon the production. Example:

The real result here is that your writeoffs are really associated with work in a different period so the numbers become less meaningful if you are trying to measure productivity. The reason you can't just use service date so that they are in the correct period is that the writeoffs will keep changing as payments come in and you may overpay your providers. You must account for the writeoffs on a different date than the service because the writeoffs were not known at the time of service.

Income by provider

Income by provider can also be viewed on the same reports that your production was viewed in: the Production and Income reports. Writeoffs are not an issue here because writeoffs do not affect income, they simply lower the amount you expect to collect which is called production. There are two type of income, insurance income and patient income: the two are summed to give you total income. Compensating employees by income is possible, but there must be awareness of potential issues, primarily 1) who is deciding to which provider patient payments are attributed 2) realizing that income may come later than the period in which it was earned.

Insurance Income

Insurance income is easier to assign to the correct provider than patient income. When insurance income arrives (electronic or by check) you enter the payment(s) and create the check(s). If you enter the payment by procedure (see http://www.ez2000help.com/manual/claimpayment.htm) , then the treating provider for each procedure is attributed the corresponding income. Very straightforward, and the reports will correctly attribute the income. If you enter the payment by total, you are also OK if all of the procedures on the claim are attributed to the same provider.

Patient Income

Patient income is entered by clicking the payment button in the Account module (http://www.ez2000help.com/manual/payments.html) and will be assigned to the patient's primary provider unless you split the payment to provider or split the payment by procedure. We will suppose that you have no trouble splitting the patient payment. Just remember that your staff must be aware that it is important to know what provider is being given credit for a payment, and that you have a way of deciding if multiple providers are owed. If a provider is being compensated this way, I would think it fair to print them a copy of the payments report for their payments each day or week so that they could verify the information.

So what are the issues with reporting Income by Provider?

In addition to the issues described on the web pages below and in the paragraphs above, there is one issue. Income does not come in at the time of service, so it is nearly impossible to say you are square with a provider unless you sign a settlement. That is, unless you make rules that say otherwise, the obligation to pay your providers a cut of the income lasts as long as your oldest balance for that provider. We can use one particular procedure as an example. Provider A performs a procedure for $1000. Insurance payment is expected to be $400, patient pays $300 immediately and will pay the remainder after insurance pays. Insurance is billed the next day. Three weeks later the claim comes back saying that the procedure needs more information, the original prosthesis date is incorrect. One month after the procedure date, the provider's husband gets a job in Zambia and leaves immediately. The insurance payment finally arrives three months after the original procedure, and it is indeed $400. Now because we are paying based on income, provide A is made a check to be sent to Zambia. The patient moves and fails to pay the remaining $300. A year later the patient pays. Now another check must be mailed to Zambia.

So the ex employee retains a claim on the Accounts Receivable for work that they did, and that can be a problem, but if it is not, this might be the way you want to compensate your providers.

For more on attributing insurance and patient income correctly, see http://www.ez2000help.com/manual/payments.html and http://www.ez2000help.com/manual/reportprodinc.html

Collection Ratio (how much income am I getting compared to my production?)

You would think you can just compare income and production for a period and that might tell you what percentage of your production you are collecting. Not so fast. This is problematic because it will compare different periods. The period you collect for is not the same period the work was done in so that ratio will have no meaning. Each incoming payment will be from an unknown period of production.

An example would be to simplify it to if one patient payment was made in the period for $500 and no work was done, the ratio of the amount you collect relative to production would be 1/0 (or infinity) for that period. Say the next period the sum of patient portions is $2500 and you get 10 checks in the mail totaling $3000 and $2000 is paid in the office, Your ratio is 5000:2500 or 2:1 or 200%. The next period the sum of patient portions is $3000 and you collect $2000, your ratio is 2:3 or 66%. These numbers will not help you run your business.

And it does not matter if you make the period larger, unless you make it ONE period for all time, which again is not informative.

What you may be looking for is called the 'collection ratio' and is reported in units of days. It is also called an average collection period. If

AR=Average Accounts Receivable for period ((Starting AR Ending AR)/2)

P=Period=Length of collection period in days

CE=Credit Extended = net production

Then the formula is AR*P/CE and is reported in days.

If your ARStart is $5000 and your AREnd is $15000 then your average AR over the period is $10000.

If we call your production the credit extended, and count payment at time of service as collection, for a month of 30 days with the AR shown above and production (sales) of 50,000, your ratio is

$10,000*30 Days/$50,000 =6 days

What does that mean to you? It means that you need to produce for 6 days to equal your average AR. So the lower the number, the better.