FINANCIAL CHALLENGES OF THE 21st CENTURY MEDICAL PRACTICE
As
we enter the second decade of the 21st century, medical practices
face a host of financial challenges. The unknowns of health care reform, changing
reimbursement and rising bad debt from the uninsured have introduced a
multitude of pressures
and uncertainties. Whether your practice aims to maintain physician compensation
at desired levels, keep up with overhead expenses or invest in new
technologies, the critical
factor for success is efficient management of the revenue cycle.
Background
The
revenue cycle comprises the numerous tasks of the billing and collection
process — namely, gathering and entering data about professional services
rendered, and ensuring that bills are paid in full. Think
of the medical practice’s revenue cycle as a wheel. The spokes are the
critical functions of the billing and collection process. Each function has
several key touch points, often in the form of tasks, that
practice staff or providers must perform. Unless each function is performed
effectively, the wheel will fail to turn. If it stops for too long, the
business will collapse.
These critical billing and collection functions and their related
touch points with providers and staff include:
· Contracting with insurers: Managing
and monitoring reimbursement agreements with government and private payers.
· Eliciting and processing patient
information: Scheduling and confirming appointments
as well as referrals, registering patients in the practice management system,
verifying insurance, obtaining pre-authorizations for treatment, and other
tasks.
· Capturing charges: Logging
all services provided to patients, correctly coding services, providing
required documentation and other tasks.
· Billing: Producing
and submitting claims to payers and sending statements to patients.
· Processing payments: Posting
payments, handling denials by insurers, and adjudicating accounts.
· Handling accounts receivable: Monitoring
performance and resolving or appealing payer denials.
· Managing collections: Determining
and collecting what patients owe, administering financial policies and
receiving payments.
For
each function and related touch point, a medical practice establishes
and assigns the administrative functions that must be performed.
Unfortunately, many medical practices do not take firm control over each of
these many wheel spokes. Opportunities to interact with patients and payers are
missed and, as a result, the revenue cycle does not operate at peak efficiency.
The
following are the 10 key opportunities where many medical practices can streamline
their revenue cycle. In doing so, they will be better able to bring in cash
faster and with less effort. You will clearly see the financial outcomes in the
bottom line: reduced days outstanding in accounts receivable, lower overhead —
and the greatest reward, higher collections.
Each
major function in the revenue cycle has responsible parties: physicians,
non-physician providers, nurses and other clinicians; and administrative and
billing office staff. Everyone in the practice has a role — often several roles
— to play in managing the revenue cycle. When
the wheel of the revenue cycle slows or snags, it may be because responsible
parties fail to understand their roles. Other times, a poorly designed function
is to blame. Perhaps the practice doesn’t provide staff with the tools to carry
out the function, or misplaces the task in its work flow. While dozens of
steps can speed up the revenue cycle and avoid missed collections
opportunities, here are the 10 most common prospects for improvements. These
will, in the long run, produce accurate and compliant billing and ensure that
your practice collects what its physicians have earned.
1. Recognize Where the Cycle Starts
The
revenue cycle starts as soon as the practice defines the terms of its relationship
with an insurer — or the practice’s policy regarding patients who have no
health care coverage. When the patient makes contact with your practice, the
revenue cycle wheel begins to turn. The cycle’s beginning includes stating the
practice’s financial expectations, collecting
from patients without insurance and verifying insurance coverage and benefits
from those who do.
Medical
practices historically viewed their billing offices as wholly separate units
from the day-to-day activities of scheduling, registering, arriving and
treating patients. This perspective comes from a time when practices routinely
waited months for payment after providers rendered medical services. This state
of affairs is no longer tenable in today’s fast-paced financial world, an
environment where medical practices’ profit margins have grown ever narrower
due to falling reimbursement and rising practice costs. Operating an efficient
revenue cycle requires practice wide buy-in to the following principles:
• Defining —
and knowing — the terms of insurance contracts and establishing an appropriate
but strict policy for patients without insurance.
• Involving everyone
in the practice in the revenue cycle — clinicians, as well as administrative
staff — not just the billing office staff.
• Ensuring the
accuracy of each data element about the patient — demographic, insurance and
other information.
• Recognizing that
the process of getting paid starts before the patient walks in the door.
Promote
a broader appreciation of this final point — the process of getting paid starts
before the patient walks in the door — by requesting schedulers to describe the
practice’s payment expectations to patients at the time they make
appointments. Require them also to reiterate these expectations in appointment-reminder
phone calls. Finally, mandate that time-of-service collection is a core
function of front-office staff. Developing a shared vision of where the revenue
cycle begins and recognizing that everyone contributes to its success is the
first important step toward a successful outcome.
2.
Focus on Accuracy
An
efficient revenue cycle results in faster throughput, but that does
not mean haste. To ensure speed and accuracy, focus attention
equally on improving the precision of the data submitted by clinical,
administrative and billing office staff. For physicians, non-physician providers,
nurses and other clinicians: establish
a written policy for timely completion of patient records, full and accurate
documentation of all services and recording diagnoses for each visit linked
clearly to the services rendered. The policy should also clarify the roles
of clinicians regarding waivers and pre-authorization for services.
For administrative
staff: pay careful attention to the
order in which assigned tasks are to be performed. What appears to be a logical
sequence on paper may not play out in the reality of a busy reception desk.
Provide staff the tools and technology to get assigned tasks done. For example,
if the practice expects due balances to be collected at the front office,
staff need training in how to identify the correct amount, how to ask for it
and establish a payment plan if the patient can’t pay in full — as well as
immediate access to a credit and debit card machine, and the change drawer.
For
billing office staff: clean claims and statements translate directly into
faster cash flow. Optimal staffing means having enough employees to allow
billers the time to ensure charges are accurate before posting them. Assigning
work by insurer allows billing staff to grow familiar with those payers’ rules.
A practice can prevent many of the denials that hold up cash flow by submitting
clean claims that get paid on first submission.
3. Submit Claims Daily
Send claims to payers as soon as they are ready. Use software or
clearinghouse services to help identify problems in any denied claims so that
corrected claims can be resubmitted as soon as possible. Send billing
statements promptly to patients who don’t have insurance or who are covered by
an insurer with which the practice does not participate. Don’t mail statements
only once a week, a protocol that just adds more days to your receivables. By
sending statements throughout the week, you spread out telephone calls from
patients who have questions about their bills. This bit of forethought allows
managers to structure staff in accordance with anticipated work flow.
4. Employ Technology
As
insurance deductibles, copayments and out-of-pocket costs continue to rise, a
front office employee who knows how to obtain accurate information about
patient financial responsibility is a tremendous asset. However, employees’
efforts to request time-of-service payments require the support of both
information technology and operational design. For example, appointment
schedulers should be able to quickly research patient balances and take credit
card payments by phone. Deploy technology appropriately, and don’t overlook
staff training. A stellar practice management system can’t form the basis of an
efficient billing office if employees don’t know how to use it.
Using technology wisely also includes:
•
Verifying patients’ insurance
coverage, benefits eligibility and financial responsibility automatically
before services are rendered.
• Pre-loading protocols based on
coding and payer reimbursement guidelines to electronically scrub claims before
submission.
• Transmitting claims
electronically.
• Automating secondary claims
submission.
• Posting payments electronically
through electronic remittance and funds transfer, rather than hand-keying.
• Using remote deposit services so
payments go into the practice’s accounts as soon as possible, not just once a day
or, worse, at the end of the week. Other technology that can improve the
billing process includes online bill payment, computerized payment monitoring
and automated, credit card-based payment plans.
5. Stay Current
When it comes to billing and collections in health care, rules
seem to have been created just to change. Many claims denials and lost billing
opportunities occur because medical practices do not set aside a little time
each year to track the annual changes made to the CPT®, HCPCS and ICD-9 and future ICD-10 coding
systems. Each annual Medicare fee schedule also brings a host of new rules for
covered services and reimbursement. Medical practices can turn to a myriad of resources
to stay up to date. National specialty societies scrupulously track coding and
regulatory changes that affect their members, and most publish newsletters and
e-mail alerts about rule changes. To track updates at a local level, tap into
state medical societies and professional associations for billers, coders and
practice managers. Payers’ websites also can provide useful information about
changes in payment policies, patient eligibility and other information critical
to efficient revenue cycle management. Practices using paper charge tickets must be sure
to revise them
each year based on the annual updates by the American Medical
Association to CPT codes. An electronic system will accomplish this
annual task much more quickly. Because payers make frequent adjustments to fee
schedules, and because a practice may deal with dozens of payers, it’s worth
asking payers for contract clauses requiring the payer to provide at least 60
days’ advance notice of any fee schedule change.
6. Leverage Payer Contracts
to Improve Billing Performance
To
resolve the frustration of an insurer engaging in unfair payment tactics or
creating inordinate delays, look to the contract. Shrewd negotiation during
contract talks can make the document your ally. Ideally, the contract contains
clauses that disallow bad insurer behavior — just as it will prohibit you or
your practice from taking certain actions. Contracts with payers deal with many
common issues, such as provider enrollment, take-backs and fee schedules. Keep
tab on each payer’s potential ‘hassle factor’ by creating a folder for each
insurer. Staff can put copies of correspondence, notes and explanations of
benefits revealing an underpayment or inappropriate
denials into this folder. Retrieve the contents of these “hassle”
folders to use at contract renewal to make sure frustrations with the payer are
addressed.
7. Involve Patients
Because
your medical practice bills the payer on behalf of its patients, it’s only
natural to ask for the patient’s help when something goes wrong in that
process. If, for example, a payer denies a claim based on insufficient
information from a patient, contact the patient immediately to prompt him or
her to respond. (One way to prevent these potential payments problems is to
address the issue of information-based denials in the payer contract. For
example, seek a contract clause allowing your practice to transfer financial
responsibility for the service to the beneficiary — the patient — if the patient
does not respond within 30 days to the payer’s information
request). Copy
patients on any appeal letters sent to payers for services that were rendered
to them. Seeing this information will likely stir patients to pick up the
phone and call their insurers. Of course, always send statements to patients
when bills are their financial responsibility, and hold them accountable for
payment.
8. Prioritize
Billing office employees are
generally detail-oriented. Therefore, they may lose sight of the big picture and
need help prioritizing their work. Abandon alpha-based sorting as the primary
work organizer. Instead, encourage staff to work insurance invoices and patient
balances in hierarchical order. Set a floor amount for second-level appeals. A
$10 floor, for example, may reflect the cost point at which your practice ends
up spending more on the secondary appeal process than the claim would be worth
if paid. Use tools to facilitate prioritization, such as creating an electronic
calendar with ticklers enabled or, better still, integrate alerts for due dates
of tasks or expected responses directly into the practice management system.
9. Follow Through
Whether it’s an appeal letter or simply a patient’s promise to pay
off a balance, make sure to monitor the progress of pending issues. Set up
electronic reminders — ticklers — for information requests and appeals. It’s
the only way you’ll guarantee results. Furthermore, follow through when
threatening to report a payer to the state insurance commissioner or turn a patient’s
delinquent account over to the collection agency. Don’t bluff.
10. Monitor Payments Closely
Monitor key performance indicators by payer. At a minimum, for
each payer, review the days in receivables outstanding, credits, aged trial
balance and adjustments by category. Perform quality audits at least once a
quarter by reviewing a number of accounts — say, 10 per physician — chosen at
random. Demand that payers provide the allowable amounts for codes your
practice’s physicians use most frequently. This information allows you to
determine whether the insurers are living up to the terms of their contracts.
To catch lower-than-contracted reimbursement, set up an automatic query in the
practice management system to track each payer’s allowables for filed claims.
Lower-than-contracted reimbursements are almost always due to the payer
bundling charges, down-coding services or making other changes not called for
in the contract. Flag every invoice for which the insurer reimburses 100
percent of the charge — that’s a sure sign that the practice is charging less
than the allowable it is due. When a claim is paid, the payer reimburses the
practice in the form of an allowable amount, often referred to as the
“allowance.” For each procedure code, the difference between the charge and the
allowance is considered a contractual adjustment. The billing office makes this
adjustment at the time of payment posting. The adjustment process breaks down
when billers treat other types of adjustments as contractual adjustments. These
non-contractual adjustments may include claims not paid because the charges
were not submitted promptly by your practice, or a payer refusing to remit
payment because you were late in submitting the enrollment paperwork for one of
your new providers. Be sure billers handle contractual adjustments separately
from non-contractual adjustments. Otherwise, what appears to be a glowing 100%
collection rate is, in reality, much lower. Keep these tips in mind as when
look for ways to boost your practice’s ability to collect the revenue it is
due. Collecting revenue is the “revenue” in the revenue cycle. And remember:
Improving management of the revenue cycle starts with staff. To make any of
these 10 basic approaches work — or any other approaches, for that matter — you
must hire motivated people and give them tools they need to do their jobs to
continue that motivation.
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