Synagis and your DSO

It’s “Synagis Season” again for many home infusion companies.  As a clinician it’s “no fun” to see such sick kids and as parents there are financial challenges as well when their insurance coverage is inadequate or unavailable.  The cost and low profit margin on the drug requires that a home infusion company pay attention to this area of their business, during this season.

Consider the impact of a seasonal, high priced service such as providing Synagis on your DSO.  If you are not careful you’ll be caught off guard at the end of the season and here is why.

Days sales outstanding (DSO) is a calculation used by a company to estimate their average collection period.  The formula to calculate it is your Accounts Receivable balance / average daily sales for a period, usually 90 days.  If your A/R is $1,000,000 and for the last 90 days you’ve generated $1,000,000 in revenue (or $11,111/day), your DSO is 90 days.  The lower your DSO, the faster you are collecting your money and the more bragging rights you have with other providers.

High revenue seasonal services like Synagis can lower your DSO.  What’s wrong with this?  We want a lower DSO, right?  Absolutely, but you must be careful that you don’t take your eye of the non-Synagis portion of your business.  Let me explain.

Any time you have a spike in revenue, especially when it is a service like Synagis that you can get paid for rather quickly if you are doing a good job in your billing area, you’ll see your DSO go down.  Why?  Because your sales are going up fast and the money from these sales is coming in quickly.  The reimbursement staff is excited because the company DSO has gone from 73 to 48.  This is great because it usually happens around the end of the year, about 3 months into Synagis season.  The bad news comes when Synagis season is over, the revenue stops and you are left with A/R that is old, A/R that you have not paid attention to as you should have and A/R that is harder to collect.  Spring is turning into summer and your DSO is 94.

The best solution to this is to manage your DSO by payer, therapy and biller/collector to make sure you see the entire picture and can addresses issues quickly.  Carve out special business situations like Synagis season so you don’t lose focus of the rest of your business.  Use the A/R Analyzer, Revenue Analyzer and Profitability Analyzer reports in Rock-Pond Reports to make sure you see the entire picture and keep your business on course through change.