Medical Billing Advisory: 2011. . . The Year of Compliance – Medicare Payment Suspension Actions and the Impact of the Affordable Care Act on Future Suspension Actions

Robert W. Liles, Esq., Liles Parker February 28th, 2011

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I.         Overview:

The recent debate over healthcare in this country has drawn attention to healthcare costs as well as the relationship between healthcare providers and the Federal government. With healthcare costs steadily on the rise, the government has been searching for ways to contain costs in Federal and State healthcare programs. These cost control efforts have resulted in a substantial focus on reducing healthcare fraud, which the federal government estimates could account for up to 10% of the country’s annual healthcare expenditures (or approximately $226 billion per year).[1] While the government has always possessed the authority to sanction providers for healthcare fraud and related activities, the newly-enacted Health Care Reform legislation (collectively referred to as the “Affordable Care Act” (ACA)) dramatically expands these regulatory powers. One of the most potent anti-fraud tools available to the government- specifically the Center for Medicare and Medicaid Services (CMS)- is the suspension of payments to providers. This article will provide a brief overview of CMS’s suspension authority and the requisite procedures, discuss the new relevant provisions of the ACA, and then conclude with some advice for providers seeking to avoid suspension actions.

II.         CMS Suspension Authority and Procedures:

Historically, CMS has been empowered to suspend payments to Medicare providers in three circumstances:

  • Fraud or willful misrepresentation;
  • An overpayment of an undetermined amount has been identified; or
  • Payments that have been made (or are scheduled to be made) may be incorrect. (42 C.F.R. §405.371(a)(1).

Suspension actions can be initiated several ways.  These include: (1) Suspensions requested by a Medicare contractor (generally recommended by a Zone Program Integrity Contractor (ZPIC) or Program Safeguard Contractor (PSC)), (2) Suspensions initiated by CMS, or (3) Suspensions requested by law enforcement (such as the Office of Inspector General (OIG) or the Department of Justice (DOJ).  Typically, the ZPIC or PSC would then provide CMS with a draft suspension notice, along with a summary of the information upon which the suspension action has been based.  The suspension notice to the health care provider must include

  • The specific reason for the suspension;
  • The extent of the suspension (such as all claims, certain types of claims, 100% suspension, or partial suspension);
  • A statement that the suspension is not appealable;
  • A statement that CMS has approved of the suspension action; 
  • The date on which the suspension will begin;
  • The items and services subject to the suspension;
  • The expected duration of the suspension action;
  • A statement that the provider may submit a rebuttal within 15 days of the suspension letter.
  • Information on where the provider is to mail the rebuttal.  (CMS, MPIM § 3.9.2.2.2).

     A.       CMS’ Role in Approving a Suspension Action

Once the suspension letter has been drafted, CMS will review it and determine whether the provider should be notified before or after the effective date of the suspension. If a provider is targeted for suspension because of fraud, deliberate misrepresentation, or harm to Medicare trust funds, then the provider will be notified of the suspension on or after the effective date.  Health care providers who are suspended for all other reasons are notified at least 15 days prior to the suspension taking effect.  Notably, the OIG found that only three of the providers suspended during this period were given advance notice.  In other words, it appears that all but three providers were suspended with no advance notice, and were likely suspected of fraud or willful misrepresentation.

     B.       Opportunity to Appeal a Suspension Action

Notably, there is not an administrative appeals mechanism available for providers to challenge a suspension action. At most, a provider can submit a “rebuttal” letter to CMS detailing why the proposed suspension should not take effect or should be lifted. A rebuttal letter must be submitted within 15 days of the suspension notice. CMS contractors will then review the provider’s rebuttal, draft a response, and submit the proposed response (along with the provider’s rebuttal) to CMS for approval.  From a practical standpoint, it has been our experience that CMS rarely changes its position and cancels the planned suspension action.

     C.        Length of Payment Suspensions

The length of a payment suspension period is usually 180 days, but this can be extended under certain circumstances.[2]   Pursuant to 42 C.F.R. § 405.372(d), the following suspension extensions can be sought: 

Requirements and Limitations on Extending Payment Suspension Actions  

 Entity Seeking an Extension    Duration of an Extension   Circumstances Under Which CMS May Grant an Extension 
  Contractor (ZPIC / PSC), OIG or DOJ   180 days   The contractor / OIG or DOJ is unable to complete their review of the information or investigation.  This typically arises because the contractor fails to complete its review of the potential overpayment within the 180 suspension period first assessed. 
 DOJ    180 days   An extension of 180 days can be granted if there is an ongoing investigation and the anticipated filing of a civil or criminal action.  Notably, the extension is limited to the amount of time needed to implement the proceedings.   
  OIG    No limit   Time limits for suspensions are not applicable if the provider is being reviewed by OIG for possible administrative action (such as CMP or permissive exclusion action). 

 

    D.       Having a Payment Suspension Action Lifted

During the suspension period, CMS contractors will request that the provider submit medical records relevant to any suspect claims being examined by CMS. A Medicare contractor (typically a ZPIC or PSC) will then analyze these medical records in order to determine the amount of any improper payments made to the provider, including overpayments. Once the overpayment has been calculated, a provider’s Medicare Administrative Contractor will issue a demand letter to the provider requesting a refund of the overpayment amount. In some instances, once CMS has ascertained the nature and extent of any overpayment, the suspension action will be lifted.  

Health care providers may continue to submit claims during a suspension period, but payment action for these claims will not be taken until the ZPIC / PSC can determine the nature and amount of any overpayment that may be owed. Any claims found to qualify for coverage and payment are usually used to offset the amount of the overpayment determined by the ZPIC / PSC.  Excess funds are then distributed to the provider.  

III.        Recent Analysis of Prior Suspension Actions Taken: 

On November 1, 2010, the OIG released a report for CMS entitled The Use of Payment Suspensions to Prevent Inappropriate Medicare Payments.[3] The goal of this report was to evaluate CMS’ use of suspension actions taken in 2007 and 2008 and  assess CMS’ procedures for implementing payment suspension actions. OIG analyzed 253 payment suspensions made during these two years.

    A.        General Overview of Suspension Actions Taken in 2007 and 2008

The OIG found that 85% of the providers suspended in 2007 and 2008 were  Medicare Part B providers.  Additionally, 79% of these providers were located in four states: Florida, California, Michigan, and Puerto Rico.  They further found that CMS contractors generally complied with the suspension “notice” requirements set forth in CMS rules and regulations, providing all of the required elements in the suspension notice in 96% of the actions examined.  Notably, only 16% of the providers suspended submitted a “rebuttal” to the suspension notice.   Notably, the average length of time before CMS approved a proposed suspension was four calendar days, and more than half of these suspensions were extended. Notably, the report explained that many suspensions are extended because CMS contractors needed additional time to calculate overpayments for reasons ranging from delayed receipt of medical records[4] to the complexity of the analysis required.  As OIG found, the median overpayments assessed in connection with payment suspension actions taken were quite large.  The OIG found the following: 

Overpayments Assessed in Connection with Payment Suspension Actions Taken During 2007 and 2008  

  Type of Health Care Provider     Number of Providers Suspended   Median Alleged Overpayment Assessed
  Part A   21   $1,645,026
  Part B – DMEPOS   57   $1,237,153
  Part B –non-DMEPOS   65   $1,072,338

     B.        Reasons for Suspensions

OIG reported that the great majority of suspensions that took place between 2007 and 2008 “exhibited characteristics that suggest fraud.” In fact, payment suspensions taken during this period were almost all used “as a tool to fight fraud.” The OIG based this conclusion on the following:

  • 99% of suspension notices were sent to the provider on or after the effective suspension date, indicating that fraud was a consideration in the suspension action.
  • 74% of suspended providers supplied information suggesting questionable billing patterns, such as spikes in multiple claims submitted for the same beneficiary or extensive services provided within a very short time frame.
  • 63% of suspensions involved complaints or information from beneficiaries raising concerns about services they never received or that were medically unnecessary.

     C.        CMS Guidance on Payment Suspensions is Inconsistent

The OIG noted some documents supplied by the CMS to provide guidance on payment suspensions are inconsistent or incomplete. Some information that the OIG identified as needing revision includes:

  • The CMS Program Integrity Manual (PIM) mandates that contractors requesting suspension submit to CMS a draft of the suspension notice along with “other supportive information” when requesting suspension. However, the manual fails to define or provide examples for the phrase “other supportive information.”
  • The model suspension notice contained in the PIM has not been updated since 2000. Accordingly, the notice provides an incorrect summary of the suspension process.

The OIG report concluded that, based on the data reviewed, Medicare payment suspensions were used almost exclusively as a tool to fight fraud in 2007 and 2008. The report did not offer any recommendations, but it did note that the PPACA dramatically expanded CMS’s authority to suspend Medicare payments.

V.        Health Care Reform and Medicare Payment Suspensions:

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act or “ACA”), was signed into law on March 23, 2010.  Among its provision, the ACA further expanded CMS’ ability to take payment suspension actions. In addition to the three suspension criteria discussed above, ACA now permitted CMS to suspend payments based on credible allegations of fraud unless there is good cause not to suspend such payments. The seemingly vague language and potentially broad scope of this rule has many providers concerned about the threat of payment suspensions.

     A.        Proposed Regulations

The ACA requires the Secretary, HHS to prepare new regulations implementing the provisions of the ACA, including the new payment suspension rules.  On September 23, 2010, HHS issued a proposed regulation which defines a “credible allegation of fraud” as “allegations from any source, including:

  • Fraud hotline complaints
  • Claims data mining
  • Provider audits
  • Civil false claims cases
  • Law enforcement investigations

As set out in the Proposed Rule, an allegation is “credible” when it has an “indicia of reliability.” Unfortunately, HHS does not supply any additional guidance as to the meaning of potentially vague terms, such as “source” or “indicia of reliability.” Indeed, HHS even appears to concede the ambiguity of these terms; the proposed regulation states “Many issues related to this definition will need to be determined on a case-by-case basis by looking at all the factors, circumstances, and issues at hand.”

This new regulation contains one important limitation, namely the “good cause” exception. Even in cases involving credible allegations of fraud, CMS may continue payments if there exists some good cause for doing so. In the proposed regulation, HHS gives several examples of what could constitute “good cause’ under this standard:

  • The possibility that payment suspension will alert a violator to an investigation or inquiry;
  • The possibility that payment suspension will expose whistleblowers or confidential sources;
  • Where payment suspension may jeopardize beneficiary access to necessary items or services;
  • Where remedies other than payment suspension available to CMS are more expeditions or effective in protecting Medicare funds; or
  • Where payment suspension would “not be in the best interests of the Medicare program.”

Aside from its broad sweep and built-in exception, this new credible allegation of fraud rule is distinct from the other bases for payment suspensions in three critical respects. To begin with, CMS is required to consult with OIG in determining whether a credible allegation of fraud exists. This collaboration is not required before CMS suspends payment on any other basis, and OIG has no formal role in imposing such suspensions. Additionally, as discussed above, the other suspension criteria have 180-day time limits (which, under certain circumstances, can be extended), while the credible allegation of fraud rule does not have any such time restrictions. Suspensions could remain effective indefinitely as OIG conducts its investigation into the fraud allegations. Finally, a payment suspension for a credible allegation of fraud may be lifted upon the resolution of the fraud investigation, which occurs when “a legal action is terminated by settlement, judgment, dismissal, or [dropped for lack of evidence].” Conversely, payment suspensions for other reasons are terminated upon refund of any assessed overpayment to CMS.

 VI.     Recommendations for Providers:

Medicare payment suspensions can dramatically impact and disrupt a provider’s healthcare practice. Based on the report published by OIG and in consideration of the new regulations promulgated by HHS, below are some recommendations for avoiding suspension actions.

     A.        Engage Experienced Legal Counsel

In light of both the seriousness and complexity presented, it is strongly recommended that providers facing a payment suspension action immediately engage experienced counsel.  As you will recall, almost all of the suspension actions pursued by Medicare contractors, OIG and DOJ involve allegations of fraud or deliberate misrepresentation.   Therefore, care should be taken to ensure that the rights of the health care provider and its staff are properly protected.

     B.        Submit a Rebuttal

The OIG report noted that only 16% of providers suspended between 2007 and 2008 submitted a rebuttal to the suspension notification. While a rebuttal does not guarantee that CMS will not proceed with the suspension, it does give the provider an opportunity to explain any of the potential mistakes or errors that drew the attention of CMS. Additionally, it is critical to keep in mind that suspension actions are not appealable; once a suspension is imposed, there is no recourse for the provider. A rebuttal is a provider’s only opportunity to be heard prior to imposition of the suspension.

     C.        Timely Provide Medical Records When Requested by CMS

As discussed above, once a suspension has been imposed CMS will request medical records from the provider in order to evaluate the related claims for any potential overpayments. In the OIG report, the authors noted that suspensions were often extended beyond the initial 180-day time period for a variety of reasons, one of which was the provider’s failure to timely submit medical records. It is possible that providers who comply with CMS medical records requests as soon as possible will see their cases resolved more quickly and their suspensions lifted without any extension. Additionally, providers should thoroughly organize medical records for complex cases so that CMS contractors can review the records more efficiently and therefore resolve the suspension action.

     D.        Credible Allegations of Fraud Can Originate from Practically Anywhere

Because the proposed regulations regarding credible allegations of fraud are exceedingly broad and vague, it is difficult to supply guidance to providers concerned about compliance with this new rule. However, one important principle to keep in mind is that, under the definition proposed by HHS, a credible allegation can come from any source. This includes patients, employees, or other providers. Therefore, it is extremely important for providers to be conscientious so that their conduct does not give rise to any inferences of fraud.

Robert W. Liles, Esq. owns a private law firm, Liles Parker, which focuses on fraud defense, internal audits, compliance, and regulatory matters. Robert serves as General Compliance Counsel for the American Medical Billing Association.


[1] Federal Bureau of Investigation, Financial Crimes Report to the Public 2007, available at http://www.fbi.gov/stats-services/publications/fcs_report2007/.

[2] For example, if a government official is unable to complete an examination of information submitted by a suspended provider or the Department of Justice is investigating potential criminal charges or civil actions, then the suspension may be extended for 180 days. If OIG is considering administrative action against the provider- such as exclusion from participation in Medicare or the assessment of civil monetary penalties- then the suspension may be extended indefinitely.

[3] Center for Medicare and Medicaid Services, The Use of Payment Suspensions to Prevent Inappropriate Medicare Payments, Report No. OEI-01-09-00180 (Nov. 2010).

[4] The report states that 55% of suspended providers never provided CMS contractors with any medical records at all.

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Use Your Medical Billing Software for Analysis: Does Your Billing Really Measure Up? Part II

Thom Schildmeyer February 24th, 2011

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medical billing software

Assess your cash flow and profitability with a quick and easy analysis of your medical billing

Note: The first part of this useful article was published yesterday, and covered how to pull data from financial reports and input it in the “dashboard” tool (spreadsheet) provided. Part II below covers how to compare your results to industry benchmarks (“healthy” ranges) and identify practice trends and areas of opportunity.

Once you have pulled data from your financial reports or, ideally, from your medical billing software reporting function, input the data into the dashboard tool provided in yesterday’s article. Then you are ready to evaluate practice trends and compare your results to industry benchmarks.

Step 3: Compare your medical billing results to industry benchmarks (“healthy” ranges)

Once your data is entered and calculated in the spreadsheet, it’s time to review the trends and compare your information to “healthy” ranges. This is just the beginning of performance measurement. There may be times when your information exceeds the industry benchmarks (which is good), but they are trending downward (which may not be good). This scenario should draw your attention and make you want to understand why the numbers are not moving in the right direction.

If you just see you are within or above the “healthy” range, you may gain a false sense that performance is great. But what you might not see, for example, is that you were 10 percent above the benchmark at the beginning of the year and now (just a few months later) you are only 2 percent above that mark. Something is driving the change, and now that you have measured it, you can manage it. Certain points in time are important to measure, but comparing that information to a “healthy” range and identifying trends is equally critical.

Step 4: Identify practice trends and areas of opportunity

The next step is to look at trends to determine areas for opportunity. Below I’ve highlighted some key points for each category/calculation of data:

  • Charges: There are several factors that can impact charges. For example, if a provider takes time off or performs more general procedures (versus surgical procedures), charges may be less from one month to another. Not only does this impact the current month’s charges but, perhaps more critical, also the next three months of collections and adjustments.

A practice’s fee schedule also can impact charges and adjustments. Higher fee schedules may result in higher charges, but also higher adjustments, and not necessarily more in collections. If you have recently changed your fee schedule, the trend in charges and adjustments will correlate to that change.

  • Adjustments: It’s essential to understand what your contractual adjustments are, and that they are posted accurately. Many billers simply adjust off any unpaid balance—yes, it happens more often than anyone wants to admit—so the collection and A/R ratios look better. This issue is critical to cash flow. If a balance is adjusted off, no statements are sent and there is no follow up with the patient, carrier, or secondary insurance to get paid what the practice is entitled to collect. While adjusting off balances is easy for the biller, reducing their workload while making numbers look “good,” it decreases your cash flow 
  • Adjusted Charges: It’s critical to know how much you legally are entitled to collect from your insurance carriers. Adjusted charges are calculated for you in the “dashboard” (Charges – Adjustments = Adjusted Charges). If the adjustments are accurate, the practice knows exactly what they should collect. This is very important when looking at the net collection ratio.
  • Adjustment percentage: This is another calculation in the “dashboard” (Contractual adjustments / Charges). Remember, including fee for service charges will result in a lower percentage because you have higher charges with no adjustments. Knowing what percentage you typically adjust off helps you understand and manage adjustments. This also serves warning to your billing team that someone is looking, often the best way of encouraging people to do the right thing.
  • Collections: Knowing the historical trend and collections total is important but can be misleading if that’s all you’re looking at. I have worked with providers who were very proud to tell me their billing team is terrific, saying for example “our collections have increased 20 percent each quarter the last two years.” However, when asked about net collection ratio or other metrics, they have no idea. I then find out, for example, they have added providers and are working more hours/days, thus increasing charges—but not achieving collections commensurate with that additional activity. The point is, even though more money is coming, providers may be working harder, spending more money, and not doing as well—profit-wise—as they think. And this doesn’t even factor increased A/R balances, delayed claims, or timely filing issues due to staff’s inability to “keep up” with the increased patient visits.
  • Net Collection Ratio: This tells you what percentage of adjusted charges (what you’re legally entitled to collect) the practice actually collected. (Net collections / adjusted charges = net collection ratio). The typical (varies slightly depending on what source you reference) “healthy” range is 95- 97 percent. Keep in mind there is a “bad debt” or “write off” amount from patients that refuse to pay, which is typically 1-3 percent.
  • Accounts Receivable (A/R): I am often asked “How much A/R should we have?” As long as it is current (0-60 days), you don’t need to be too concerned with A/R.  The next ratio, A/R percentage of gross charges, is more important to consider.
  • A/R Percentage of Gross Charges: This takes your A/R total and divides it by that month’s charges. The “healthy” range for A/R is 1.5 times your monthly charges (or 150% of your charges). Fee for service charges included in this calculation will cause the percentage to be lower.
  •  A/R Days Sales Outstanding (DSO): A/R DSO measures how many days it takes to collect a dollar owed. The typical (varies) “healthy” range is 30-45 days. With electronic remittance advices (ERAs) becoming more prevalent, enabling practices to get paid faster, that range should be coming down. Higher A/R DSO may be a sign your staff is not getting out “clean” claims, they are not working denials, or your payers are taking longer to pay. Just another data point to give you an idea on how the billing process is going.
  •  A/R 0-90 Days, 91-120 Days: Aging “buckets” show where your money is in the collection process. Obviously, it’s more challenging to collect money beyond 90 days. If your older “buckets” are growing, it could mean your staff is not working the A/R or addressing specific payer issues. Regardless, older A/R requires your attention and a plan to change that trend.
  • Patients Entered, Collections Per Patient, Charges Per Patient – These are simply data points to help you look into and address what may be causing downward trends.

Conclusion

Once you’ve completed steps 1-4 and have a clearer picture of trends, challenges, and opportunities, it’s time to set goals and take action to improve your billing performance. It’s equally critical to continue measuring on a monthly basis. Taking a few minutes each month to gather this key data, populating a spreadsheet, and comparing the output to “healthy” ranges will present a true picture on how your billing team is performing—in terms of collecting what you’re legally entitled to. Not only does measuring and managing your mission-critical billing create greater accountability within your practice, it typically will increase your revenue and cash flow. And after all, that’s the bottom line.

For more information on conducting a medical billing analysis, or questions about this article, contact Thom Schildmeyer at tschildmeyer@aesyntix.com or (916) 791-9500. You may also visit www.aesyntix.com.

Thom Schildmeyer, MBA, is President of Aesyntix Health, Inc., a medical billing service based in Roseville, CA.

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Use Your Medical Billing Software for Analysis: Does Your Billing Really Measure Up? Part I

Thom Schildmeyer February 23rd, 2011

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Use your medical billing software to measure your medical billing performance

Assess your cash flow and profitability with a quick and easy analysis of your medical billing

Note: The first part of this useful article will cover how to pull data from financial reports and input it in the “dashboard” tool (spreadsheet) provided. Part II will cover how to compare your results to industry benchmarks (“healthy” ranges) and identify practice trends and areas of opportunity.

One of my favorite quotes is, “You can’t manage what you don’t measure.” It started for us as kids in school, when our work was managed by our teachers using the traditional grading system (“A” = good; “F”= not so good). In business, and specifically for medical practices, your “report card” consists of many areas that impact the cash flow and profitability of your business.

 This article discusses how to accurately measure your medical billing performance and provides steps to perform your own analysis—with an easy-to-use “dashboard” tool that incorporates industry benchmarks or “healthy” ranges.

The Importance of Medical Billing—and Revenue—Performance

 While it’s fairly easy to determine your profitability (revenue minus expenses equals profit), it’s critical—and more difficult—to measure your medical billing performance, which directly correlates to the revenue line. You and your administrator(s) may look at provider productivity (patient appointments and charges) as one metric; however, that does not tell the whole story.

 Collections are a key part of the equation. This is the metric that tells you whether or not you are being paid successfully for your services. Specifically, your collections provide an indication whether charges are being billed correctly, being processed by payers, and being paid in a timely manner. This directly impacts the revenue factor in the profitability formula above. Unfortunately, the collections that your billing team is responsible for often go unmeasured, leaving you without a clear picture of how well you’re really doing in terms of cash flow and profitability. 

 Whether you outsource your medical billing or manage it in-house, it’s imperative to measure the performance of the team responsible on a monthly basis. But how do you accomplish that if you don’t quite understand the billing process or don’t have the time to dig through data and reports trying to figure out what’s working or not? Waiting until your cash flow is down is not the time to begin measuring and managing the medical billing team. It should be a proactive, monthly exercise that takes minutes—not hours or days.

Many in-house managers do not have billing experience, and those who do are often too distracted by daily “fires” to closely monitor billing performance. Even some outsourced billing companies don’t know what or how to measure, or in some cases they simply don’t want you to know—the reverse effect of “You can’t manage what you don’t measure.”

When you inquire about the status of your billing, you may hear “Billing is going well,” or “Collections are up.” Or perhaps you’re told of a Medicare issue or system glitch that has impacted claims processing and collections. These are surface comments and issues that can redirect your attention and provide a false sense of security around your cash flow and health of your business. In truth, many managers often don’t know the right questions to ask or reports to review in order to fully understand and measure billing performance. Or they simply don’t make the time around other “priorities.”

How Do You Measure Medical Billing Performance?

Throughout my 12 years consulting with medical practices, I have specifically focused on billing analyses. My presentations at national and regional meetings in recent years have focused often on financial analysis, benchmarking and measuring performance. I’d like to share with you my proven methodology and steps for completing your own analysis—in just minutes—which will provide a general sense of how your medical billing performance measures up.

The specific steps include:

  1. Pull data from financial reports
  2. Input data into “dashboard” tool (spreadsheet)
  3. Compare your results to industry benchmarks (“healthy” ranges)
  4. Identify practice trends and areas of opportunity

Below I will outline the first two steps;  tomorrow I’ll walk you through the analysis process, and discuss the key data you should be looking at.

Step 1: Pull Data from Financial Reports

Many practices fail to get past steps 1 and 2 because they don’t know what data to pull. The basic information you need to analyze your billing performance includes:

  •  Charges
  • Adjustments (contractual)
  • Collections
  • Total accounts receivable (A/R)  balance
  • Accounts receivable (A/R) aging analysis (0-30 days, 31-60 days, 61-90 days, 91-120 days, and 120+ days)
  • Patient encounters

 When gathering this data from your reports, there are a few important factors to consider:

  1.  Time Period: Your data for each of the items above must be for the same time period, ideally for a 12-month period, which helps identify trends or patterns. Oftentimes, I have received reports reflecting different time periods and even incomplete months, which makes the analysis process much more difficult. Reviewing a single month (which can be good or bad based on practice variables) is not nearly as enlightening as reviewing a quarterly or annual time period.
  2. Accurate Data: Make sure data being pulled is accurate. I recently received a practice’s information that was not consistent from one report to another. For example, the A/R Report stated there was $230,000 in outstanding A/R, while the Production Report listed $1,300,000 in A/R. Obviously, this huge discrepancy indicates something wrong—either with the report pulled or the included data.  Pay close attention to accuracy of the data you pull. It should be straight forward and consistent.
  3. Clinical vs. Cosmetic Data: It’s highly recommended to separate your clinical (insurance reimbursed) data from your “fee for service” data. This enables you to review the data separately, as well as combined (total practice). It’s important to know that “fee for service”-related data will have an impact on certain ratios and calculations, since there are no adjustments associated with those charges and payment is typically collected at time of service (e.g., no A/R balances). Some industry benchmarks report data with fee for service and others so be aware these variances will impact the ratios because those numbers vary significantly.

Most practice management systems today have production or practice performance reports that will have most of the above information (charges, adjustments, collections, A/R, encounters). I typically review the last page of a report and pull the monthly totals for the 12-month period for each category. The drill-down detail is helpful once you have identified a trend or “red flag,” but not needed for the initial analysis. Also, most A/R aging analysis reports will have the A/R balance and the “buckets” or number of days the balance is spread across.

Step 2: Input data into “dashboard” tool (spreadsheet)

Once you have that “raw” data, you need some sort of analytical tool to make sense of the information—that is, bring the numbers to life and tell your practice’s story. I typically provide my presentation attendees with a tool I’ve created—called the “dashboard—which they can take back to their practices and utilize immediately. This “dashboard” is a spreadsheet that allows you to input your data and then calculates ratios into an easy-to-read format that can be shared with your owners, supervisors and billing staff. 

Medical Billing Performance Analysis with Medical Billing Software

Note: This fully functional tool is available at http://www.aesyntix.com/resources/ (click on “Billing Sample Dashboard – Spreadsheet”). Feel free to download the spreadsheet and customize as needed. This is just one tool for a quick analysis, and you may want to create your own or customize this template. There also is an accompanying presentation (titled “How To Read Financials & Benchmarks”) that you can preview.

In the spreadsheet, input your data into the green cells only. The blue, grey and purple cells have preloaded formulas that automatically calculate averages and ratios to help you measure your billing performance.

Part II will cover how to compare your results to industry benchmarks (“healthy” ranges) and identify practice trends and areas of opportunity.

Thom Schildmeyer, MBA, is President of Aesyntix Health, Inc., a medical billing service based in Roseville, CA.

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Even the Best Medical Billing Software Needs Support From Your Brand (And Yes, You Have A Brand)

Kathy McCoy, MBA February 17th, 2011

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Medical billing software needs brand supportThese days, improving your practice or business profitability is a business-wide priority. Costs are analyzed, medical billing is scrutinized, and processes are retooled, among other things, to increase the bottom line. But while these are important steps, many practices fail to give due consideration to perhaps the most central and far-reaching aspect of their business: Brand.

 You already have a brand. But is it helping your bottom line?

Brand isn’t a marketing issue. Well, it is, but for the purposes of this discussion it’s really an issue of your practice’s “soul.” Whether or not you know it, your practice already has a brand. And you had better know what it is.

 Simply put, your brand is who you are, what you do and how you do it. Your brand begins with the parking lot, the door, the practice’s environment, the attitude and presence of the staff, the paperwork, your policies, signage, the doctors and nurses…everything. And all of these things are your responsibility, within your control and essential to your bottom line.

 On the topics of practice profitability and billing processes, it’s sometimes easy to forget the forest for focusing so intently on the trees. In other words, using the best medical billing software available and improving your billing and collections processes doesn’t mean you can forget about your practice’s brand — the way patients experience and perceive the practice. Why? Because that experience must be healthy, positive and professional… or else it may be undermining your profitability goals.

 The patient experience affects patients’ billing compliance…& loyalty.

The impact of brand on billing and collections isn’t a small issue. Remember, the first part of billing and collections is providing the service itself. A patient who has a bad — or even just a mediocre — experience at your practice may never come back. You can’t bill for subsequent visits if they never take place. At the same time, it is going to be much easier to collect from a patient who truly values the practice’s style and quality of care, responsiveness, accessibility, commitment, friendliness, etc.

 If your doctors and staff engender a personal relationship with patients, you’ll have a roster full of patients who will not want to disappoint your team by failing to pay. While this won’t eliminate delinquency, it will do far more to reduce it than if your practice is operating without paying attention to how it is perceived/experienced by patients and referrers.

 Optimize your ability to collect and be profitable by choosing — & living — your brand.

Discussion of improved billing and collections inevitably comes to the issue of patient compliance. There are many processes that can be improved, including collecting copays up front, clearly declaring payment responsibilities and policies, verifying addresses and insurance, offering payment options and more. But there are many other aspects to any practice for which improvement can further promote compliance. In addition to remembering to ask for the copay up front, staffers must remember to treat people warmly and maintain a compassionate professionalism.

 Maintaining your practice’s brand also involves having a clear idea of what that brand is and ensuring that every team member is living it. Are you the low-cost provider or the quality provider? Are you the “cattle-call” clinic or the specialists dedicated to individualized care? Will every action from every staffer and provider engender compliance with policies and payments? Or will those actions create a distance that gives patients less of a sense of obligation to your practice?

 These are questions related to vision and mission, which are vital to every business. As you consider ways to improve your medical billing and bottom line, make sure that your process-improvement efforts are also addressing the many things that affect how patients think and feel about you, because that does play a role in your bottom line.

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Medical Billing Incentive Plans that Inspire: 10 Tips for Success

Elizabeth W. Woodcock, MBA, FACMPE, CPC February 15th, 2011

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Medical billingThe best performance incentive plans are the ones that work, of course, but what works for employees – cash or days off – might not be what your organization can afford. Incentive plans that are effective at motivating billers must be affordable and targeted to specific results. Most importantly, they must be finite – that is, not a permanent entitlement.

Put careful thought into the design, goals and timing of any incentive plan – big or small. Use these 10 tips to shape your organization’s incentives for billers:

1.  Recognize that the revenue cycle is a function of many factors

Billing is an operational process, not a desk or a department. Your incentive plan should recognize that everyone in the organization plays a role in the process. Collection rates improve when front office employees remember to ask for copayments from every patient who owes one. Days in accounts receivables can decline if schedulers remind patients who call to schedule an appointment about any copayments or past-due balances. An effective plan influences behavior by tying rewards to specific targets; for example, always producing accurate registrations or always collecting time-of-service payments. Because many staff work in teams, base at least half of the reward on team performance and the remainder on individual achievement. It will give everyone a reason to work together.

 2.  If YOU don’t have the money, don’t even go there!

Nothing deflates employee morale faster than cancelling a popular incentive program. Keep your incentive programs cost under control by capping individual distributions at $100 per month or less. An exception might be when the incentive program is meant to replace part of employees’ salaries. In most cases, you’ll find that relatively modest incentives– $25 or $50 a month–are appreciated by employees and will inspire them to better performance.

 3. You get what you pay for. If you incent for speed, you will get it – but also the inaccuracy that comes with higher speed.

Give careful thought to the range of unintended consequences your incentives might inspire. Want to reward a biller for posting claims faster? Don’t be surprised if error rates go up because some employees skip important steps in their quest to work faster. Want to reward billers for resolving 100 percent of denied claims within 30 days? Be careful that they don’t start reclassifying claims denied for missing documentation, unbundling, medical necessity and other ‘noncontractual adjustments’ as contractual adjustments (e.g., the contracted allowable discount). Of course, most employees are conscientious. All the same, don’t be shocked when people go in the direction in which your incentives push them.

4. Not every account is the same.

Many organizations assign accounts to billers based on payer. That’s helpful for building core knowledge about a payer. It’s not so great if the new incentive plan holds the person working Medicaid accounts to the same standard as the person working Medicare accounts. Specialty differences also can make a big difference in how long claims remain in accounts receivable – and the work involved in getting claims paid. Before implementing your incentive plan, work with employees to ‘weight’ the various payers, using Medicare as the standard; they’ll have a good sense of the differences. In many states, Medicaid consumes twice as many resources – and time – as Medicare; Workers’ Compensation may be three times as hard. The weightings won’t be precise, but your incentive has a far better chance of success if performance goals – say, 25 days in receivables outstanding for Medicare, but 50 for Medicaid — are relevant to the payer mix, as well as to your organization and your market. Expect to revise goals over time – a change in your computer systems or payer mix, or new software in the state’s Workers’ Compensation program – can change things dramatically.

5. Distribute in a timely manner.

Memories are short. Keep the incentives tightly linked to the performance by distributing rewards soon after the end of the monitoring period, no more than 30 days. Because monetary rewards are – sadly – taxable income, you might find it easiest to distribute them as part of the employees’ regular paychecks. Make sure to give each employee earning a cash incentive a written statement of the gross amount of the reward. Distribute the statement separately, either with or before payroll distribution, so employees can see what they earned before Uncle Sam and the state took their cuts.

6. Establish clear expectations regarding measurements, including formulae.

A clearly drawn incentive program is immediately understandable and can be easily tracked by participants. If the plan is too complex, billers won’t understand what you want them to accomplish. Worse, they question the plan’s – and your – fairness. If the indicators and formulae are clear, employees will know what to do reach your intended goals. Spur competition by making and displaying charts of progress on indicators or distribute printouts at each staff meeting. It will make a bigger impact than burying the progress reports in the computer network.

7. Keep in mind…less is more.

The mantra “less is more” isn’t just for environmentalists. Small rewards – $25 to $50 per month – can be quite effective. Ask billers to suggest reward amounts; you might be surprised at the relatively modest amounts they consider worthy. The same goes for incentive plan criteria: keep them short and sweet so everyone will understand what they need to do to succeed.

8. Put the plan in writing.

It sounds so obvious, but your plan must be written down and readily available to employees. Hand out copies when you announce the plan and put copies on your organization’s intranet or internal server.

9. Evaluate annually.

Review your incentive plan’s overall results annually against the performance it is supposed to inspire. In some cases, you may be able to put a cash value on the plan’s impact: for example, the number of reduced denials from practice-caused errors times the cost of reworking a denied claim. Once you reach a goal, such as collecting 100 percent of patient copayments at time of service, move on to other targets.

10. Consider non-monetary awards.

The problem with most financial incentive plans is that they become an expectation, which means they are no longer motivating better performance but merely maintaining the status quo. Staff may come to view the additional cash as part of their normal compensation. They may even start depending on it. After the plan expires, morale (and results) can suffer as staff perceive that you took something away from them.

You can alleviate many of these issues by sticking to short-term plans–three to six months. Better still, consider a non-monetary incentive plan. Non-monetary awards can work well, and maybe better than cash awards, because they are perceived as more spontaneous and sincere.

Try these ideas to reward billers for reaching goals:

  • Offer an award – a fancy trophy, or a simple certificate.
  • Give a bag of popcorn, two movie passes and a note that reads: “Thank you for all of your hard work; Hope you’ll relax this weekend!”
  • Place a rose in a vase on the employee’s desk with a note that reads: “For all you do, this bud’s for you!”
  • Send a bouquet of flowers to an employee’s home with the message: “Where would we be without you? Thank you!”
  • Provide complimentary dinner delivery – or make trays of lasagna for everyone; accompany with the note: “Thank you for your hard work – hope you’ll take the night off”
  • Don an apron, and walk around with ice cream sundaes and fixings.
  • Host a BBQ behind your building – for lunch, or take home.
  • Allow a casual dress Friday.

When choosing incentives – and there are as many as you can imagine – opt for the ones that best fit your management style and your organization’s culture.

The most effective reward – monetary or non- monetary – is simply to say “thank you.” To incent billers, say “thank you” more often, or take the time to write a “thank you” note to each employee as a way of demonstrating your appreciation for a job well done.

For more information on this subject, watch a recorded webinar featuring Elizabeth Woodcock speaking on this topic now.

Elizabeth Woodcock, MBA, FACMPE, CPC, is an expert, author, speaker and trainer in practice management operations and revenue cycle management whose clients include Kareo medical billing software. She is a co-author of “The Physician Billing Process: Avoiding Potholes in the Road to Getting Paid.”

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Medical Billing: How to Hire – and Keep – the Best Biller

Elizabeth W. Woodcock, MBA, FACMPE, CPC February 9th, 2011

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Medical Billing: Hire the Best BillerGetting good results in billing starts with having the right employees. Getting a top-performing crew – and keeping it together – can be a challenge. Smart organizations know that hiring the wrong employee is costly – so costly, in fact, that it is well worth the extra effort to hire the right employee the first time around – every time.

Productivity, morale and, even, the organization’s revenue are at stake in the hiring process. Here are important steps – both in hiring and keeping – the best medical biller:

Know where to look. Staff can help recruit, too, so ask them for suggestions. A current staff member may have a friend who would fit in well with your operation. More employers are offering small incentives – for example, a $200 gas card – to employees who suggest a job candidate who turns into a hire. Managers and employees alike can network with colleagues at local medical billers’ associations. Many of these groups can also circulate the job posting. Turn to local training programs and community colleges when posting a position, as well as using advertisements in the local newspaper. Local community colleges and technical schools that train billing and office staff may be able to place interns. Internships can give you a view of how a potential candidate would fit with your team well before you ever need a replacement.

Get online. Online job listings like monster.com and careerbuilder.com can be expensive, but they will get the word out to a lot of people. Post the opening on your organization’s website and don’t forget about social networking. If your organization uses Facebook or Twitter, use them to spread the word about an opening. Staff might mention the opening to their online “friends” and “followers”, too.

Put expectations in writing. A critical part of ensuring high performance is when everyone is on the same page. Set job expectations in writing. Go beyond the job’s title, because “medical biller” can mean many things. Determine the responsibilities and tasks that you expect from this position and outline them. New and current employees should be able to read your expectations and understand where their job fits within the department – and within the overall organization. Medical billing changes constantly, so if you haven’t updated job descriptions since 1993, it’s long past time for a rewrite. Ask staff to help, too. Of course, don’t leave out the important phrase “perform other duties as assigned.” These five little words signal that you put high value on teamwork – and that change is inevitable.

Be patient. Yes, medical billing requires daily attention, but that doesn’t mean that you should hire the first candidate who walks in the door. Take your time, and find the right person. Consider employment like a marriage – the cost of a failed one comes at a very high price. Plan how to handle work on a short-term basis because you may need to wait to get the right candidate. If you’re hiring from another medical practice or billing service, the candidate may need to give two weeks’ notice. Don’t be put off by a top candidate’s desire to leave their previous employer on good terms – it’s a sign of respect. You’ll appreciate the same consideration when your employees leave.

Display the full compensation. Most job seekers focus on the hourly rate, but it’s likely that you have much more to offer, such as vacation time, health insurance, and other benefits. You pay for those benefits, so why not focus the candidate’s attention on them? Present the total value of your proposed compensation and benefits package – in writing — when you talk to job candidates. Benefits can make up 25 percent or more of your compensation package’s total value.

Don’t overlook references. Research shows that Americans have a propensity to stretch the truth on their resumes. Check all references. Be on the lookout for anything appears sketchy (for example, all of the reference phone numbers are cell phones, or the voice of the “reference” sounds the same on every call). Look carefully at the company name of the reference, then call the main number directly and ask for that individual. If they’ve never heard of that person, you know the job candidate is trying to scam you. Speaking of scams, don’t skip the background check – essential in today’s recruiting world – particularly for someone hired to handle significant sums of money. Finally, verify credentials directly with the accrediting body – the American Academy of Professional Coders, for example, offers an on-line confirmation process to determine if a candidate actually is a certified professional coder (CPC).

Give a test. Developing a simple test of knowledge can be remarkably revealing. Questions to test what every medical biller should know could include: “What does COB stand for?” or “What’s the birthday rule?” Test also for basic (but essential) math skills, such as calculating 20% of $219.18. Black out the confidential information on an explanation of benefits from an insurance company that denied payment on the claim. Present it to candidates, asking them to walk you through how they’d handle it. If the candidate says he would write it off and call it a day, you know it’s time to conclude the interview. Consider administering a short, basic test to weed out the unsuitable candidates before you spend time checking references and doing interviews.

Start retaining from the get-go. Employee retention is important, and it doesn’t start at the employee’s fifth-year anniversary. It starts from the moment you present the job offer. When hiring, a professional approach is the best – present the candidate with a letter outlining the offer and the start date. Upon acceptance, don’t resort to email. Take the time to call the candidate and speak with him/her personally, showing your appreciation of their decision. Saying, “we’re so pleased that you joined our team” demonstrates that you value teamwork and are excited about the decision. Looking for a special touch? Send the candidate who accepts your offer flowers and a note of welcome. In sum, make a great impression upfront – it will pay off in helping to retain your best employees.

Staff turnover costs money and not just in recruiting costs. Depending on your personnel policy, you may have the expense of paying out a departing worker’s unused sick or vacation leave in a lump sum. Then there’s the disruption to everyone’s work as they cover for the vacant position while a new person is located. Then, after the hire, staff may have to scramble until the new person gets up to speed. And don’t forget about all the time and effort everyone has put into creating teamwork in the billing office; you and the staff will have reinvest some of that time in the weeks and months following a new hire. Smart organizations look for the right medical biller when they hire — and make the effort to keep them around for the long haul.

Elizabeth Woodcock, MBA, FACMPE, CPC, is an expert, author, speaker and trainer in practice management operations and revenue cycle management whose clients include Kareo medical billing software. She is a co-author of “The Physician Billing Process: Avoiding Potholes in the Road to Getting Paid.”

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Medical Billing Tips: Adding – and Billing for – a Non-Physician Practitioner in Your Multi-Specialty Practice

Betsy Nicoletti, M.S., CPC February 9th, 2011

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The physicians of Fairview Medical Group met to consider hiring a Non-Physician Practitioner (NPP). The internists reported that their same day appointments filled up fifteen minutes after the phone lines opened each day, leaving scarce available appointments for acute visits. Physical exams were scheduled months ahead. The General Surgeons wanted help with post-operative visits. The surgeons pointed out they could perform more surgery if they had an NPP to do post-op care.  The practice manager was in agreement.  The idea seemed promising when someone asked, “What are the rules for billing an NPP?”

A long silence was the only response. The doctors charged the practice manager with researching the question and reporting back at the next board meeting.

Fairview’s insurance mix was 40% Medicare, 10% Medicaid, 20% Man’s Greatest Insurance, 18% Green Arrow, and 12% commercial insurance with which the practice had no contract.  At the next meeting, the manager reported that Man’s Greatest Insurance enrolled and credentialed NPPs.  For patients with this insurance the group would bill under the NPP’s number. This company offered to pay 85% of the fee schedule amount, but the manager believed that other groups in the state had successfully negotiated a full fee rate for NPP services. Green Arrow did not credential or enroll NPPs. Their on-line provider manual stated only that the NPP should operate within their state scope of practice and have a collaborative arrangement with a physician. For Green Arrow, the practice would bill under the MD’s provider number, and receive full reimbursement. If there was no contract with an insurance company, the group would bill under the physician’s provider number.

Medicaid rules vary state by state. The manager found that in their state Medicaid credentialed NPPs and paid at 85% of the already low fee schedule.

But what about the group’s largest single payer: Medicare?  Could the group bill under an MD’s provider number and collect at 100% of the fee schedule amount, or must the group bill under the NPPs provider number and collect at 85% of the fee schedule amount?  Unfortunately, the manager reported, it depends.

She summarized the Medicare rules this way:

Post-Op Care

Surgical services paid as global payments include payment for certain pre-operative services, intra-operative procedural work, and post-operative care. Post-op visits in the hospital or office are not separately paid.  The NPP in the group could provide these services, freeing up the physician to see new patients or perform surgery.

Assistant at Surgery (85% of the fee schedule)

Medicare pays a physician 16% of the fee schedule amount for surgical assisting and pays an NPP 85% of 16%, or 13.6% for surgical assisting.

Hospital Visits Under the Shared Services Rule (100%)

In the hospital, physicians and NPPs can share E/M services, each providing and documenting their portion of the care.  This allows the practice to combine the two notes and bill at the level reached by both notes.  Both the MD and the NPP must have a face-to-face, clinically meaningful visit with the patient.  The physician typically writes a briefer note and ties that note to the NPP note.

Critical Care

Critical care presents its own problems. A 2008 Medicare transmittal clarified that a group may not add together the time spent by the physician and an NPP when reporting critical care time.  After reviewing this policy, Fairview Medical decided not to deploy NPPs to provide critical care.

Bill Medicare Under the MD’s Provider Number When the Service Meets the Criteria of “Incident to” (100% of the fee schedule)

“Incident to” a physician’s service requires that the physician see the patient for the initial service for that problem and establish the plan of care.  The service provided must be a type that is typically provided in a physician office, be performed by an NPP who is an employee or contractor with the practice, and must occur in the office while the physician is present.

New Medicare Patients, or New Problems on Established Medicare Patients (85% of the fee schedule)

If the patient has a new problem for which the physician has not previously seen the patient and established the plan of care, a group may not bill under the physician’s provider number but must bill under the NPP’s number.  New patients seen by the NPP must always be billed under the NPP’s number, even if the physician meets the patient before the end of the visit and participates in the plan of care. These services do not meet the requirements of “incident to” care.  If an established patient is seen by the NPP, the NPP would need to indicate if the care provided was part of the physician’s plan of care (and could be billed incident to, under the MD’s provider number) or was for a new problem (and must be billed directly under the NPP’s provider number.)

Some groups elect to bill all NPP services to Medicare under the NPP’s provider number.  Although this limits the reimbursement to 85% for Medicare, it eliminates the need to distinguish between services that meet the requirements for “incident to” and those services, which do not.  Other groups task the NPP with indicating whether the service should be billed “incident to” or under the NPP provider number.  Fairview Medical Associates selected the second option, to maximize reimbursement.

Betsy Nicoletti is the founder of Codapedia.com, a source of free coding advice for physician practices and is a nationally known consultant and speaker. She can be reached at betsy.nicoletti@gmail.com

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Medical Billing Tip of the Month – February

admin February 9th, 2011

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Use “Tasks” to Flag Items for Follow-Up

We have really started using the “Tasks” in Kareo when we need to renew PA, RX’s, etc.–anything that we have to flag. The task can be assigned to whichever employee is working on that patient/doctor, and when the date it’s due comes up, that employee is alerted when they sign into Kareo that day. It has saved us a lot of time – we no longer have to keep folders on our desks or paperwork in a separate “working file.” It’s all in one place now. This has really been a timesaver for our company.

Barbara Schug
Best Billing Service
Las Vegas, NV

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Best Practices: Maximizing the Value of Your Billing Office and Medical Billing Software

Judy Capko February 9th, 2011

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Are you really maximizing the value of your practice management system to get the best billing performance? Even some top-notch billing staff can get mired in doing things a certain way because they know what they are doing and it has always worked for them. But in today’s environment, everyone needs to take a closer look at the processes involved in what they do.  The objective is to get the job done better with less effort and your billing system just might be your best friend in making this a reality. If the system falls short, it might be time to start looking ahead.

Don’t get stuck in the way these are currently done in the office.  Too often I visit a practice that hasn’t even invested in the upgrades of their existing system, let alone explored what different technology capabilities are available for the medical practice to do a better job of managing the revenue cycle.  One thing is for sure, if you haven’t upgraded your system when you could have,  you are losing out on opportunities that are costing the practice plenty.

Start digging.

The first thing to help you down the road to maximizing the billing tools you have is to dig deeper into your practice management system’s features.   Think about the things that require manual steps to track and accomplish with the current practice management system. Make a checklist. It could be anything from eligibility and verifying benefits to patient reminders and dunning messages placed on patient statements, or it might be automated collection letters and re-set reminders on outstanding claims. Perhaps it is electronic remittances or the ability to sort data and provide meaningful management reports that are laborious to obtain manually. 

These are features you should expect from a good practice management system today, along with ease of use, accuracy and reliability across the board.  If the vendor tells you theses feature are in research and development, it may be a long wait and time is not on your side.   Regardless, you need to know if there is an opportunity to get more out of the current system and your vendor is the one to tell you.  With the cost of running a medical practice, efficiency and reliability of the practice management’s system is vital to your future.

If you discover there are available system features the practice hasn’t tapped into, work with the vendor on how to get the staff trained and up to speed. 

What if you are maximizing the billing system and it simply falls short?    Then it is time to start exploring alternatives that apply more sophisticated technology.  The most costly overhead expense in running a medical practice is staffing, upward to 30% in some specialties, so doing things manually costs you far more in the long run than upgrading to a fully automated system for managing the patient and claims revenue cycle. 

This will take the practice on a journey that is likely to reveal billing systems and billing service companies with incredible features you never dreamed were available. For example, checking on eligibility and verifying a patient’s insurance benefits with the click of a mouse and in less than a minute; or scheduling specific reports to run automatically at a pre-determined date and time.  

An important goal in your search for a better system is to leverage today’s sophisticated technology by simplifying administrative duties, increasing staff productivity, and improving the quality of outcomes that are compromised with manual processes and an inadequate system.

Think about the advantages of dramatically reducing administrative hassles and costs while potentially increasing the practice’s revenue. 

The American Medical Association provides a detailed checklist for researching and selecting a billing system, available at www.ama-assn.org. It is a roadmap to help medical practices research and select the most appropriate system for their current and predicted future needs.

Embracing sophisticated technology in the medical office is no longer a lofty idea, it is a necessity; and whether you prefer an in-house system or a billing service, there are amazing solutions available that can take you into the future.  If you can get the job done better for less, then what are you waiting for?

Judy Capko Talks About Maximizing the Value of Your Billing SoftwareJudy Capko, who contributes this monthly column to “Getting Paid,” is the founder of Capko & Company and author of the popular book “Secrets of the Best-Run Practices,” Greenbranch Publishing, September 2005. Judy has specialized in medical practice operations and marketing for more than 20 years, and is a certified risk management specialist. www.Capko.com

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Understanding the RVU in Practice Management: Getting the Most Out of Using It in Your Practice

Bhagwan Satiani, MD, MBA, FACS, FACHE February 9th, 2011

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Under the Social Security Act, Medicare establishes a national fee schedule for physicians based upon Relative Value Units (RVUs). RVUs were part of the Resource-Based Relative Value Scale (RBRVS) adopted by Medicare in 1992. Medicare mandates updating of RVUs every 5 years and CMS has delegated the task to the Relative Value Update Committee (RUC), a committee of the AMA. Also charged to review RVUs is the Medicare Payment Advisory Commission (MedPAC), an independent federal body that Congress established in 1997 to analyze access, quality of care, and other issues affecting Medicare.

 The RBRVS reimbursement schedule assigns certain values to procedures/costs based upon Total RVUs. The total RVU consists of three separate components:  work (RVUw), practice expense (RVUPE) and malpractice (RVUMP). Further, Medicare adjusts payment by designating a geographic price cost index or GPCI and pays differently for the same procedure depending on the practice location. Another important component is the Conversion Factor (CF), which converts the RVU into a charge and reimbursement. The CMS Medicare CF for 2011is $33.9764.The payment formula is: 

[(RVUw x work GPCI) + (RVUPE x PE GPCI) + (RVUMP x malpractice GPCI)] x CF for the year in question.

Components of Total RVU

The major component of total RVU is the RVUw and accounts for about 50-53% of the total RVU. The RVUw is composed of two separate elements:  time (about 70%) and effort (about 30%). Time is generally figured by the time spent prior to a service, performing the service and the time spent following the service or procedure such as charting. Similarly, the effort or intensity also consists of the physical effort, skill and stress involved. Increasing complexity of a medical problem equals a higher RVUw.

The RVUPE is the next most weighted part (about 45%) of the total RVU formula. This includes: all non-physician and administrative payroll and benefits, all office expenses, cost of medical supplies and equipment and miscellaneous expenses such as accounting and legal. Medicare has gathered information by previous surveys and after figuring out per hour cost, then modifies this portion of the RVU for each specialty as well as for the type of facility.

What is the RBRVS and RVU system used for?

RVUs have continued to be used because they have become the standard measurement for cost benchmarking, been validated and used by almost all third party payers besides Medicare.

Depending upon the sophistication of the practice and electronic data gathering, valuable information can be obtained and utilized. In truth, RVUs are mistakenly thought to measure productivity. Every physician within a practice consumes resources and RVUs therefore measure resource consumption. For instance, RVUw’s are a measurement of time and effort put in by the physician. Therefore, if she records 4000 RVUw and is compensated $120,000, she has used $30 worth of resources for every RVUw. So, although we talk of physician productivity and relationship to RVUs, remember the real value of RVUs is costing or accurately measuring consumption of resources.

1. Practice efficiency, cost accounting purposes/fee schedule. A practice can determine expenses per RVU but this requires the business manager to track expense categories as well as total RVUs for each of the three expense categories (work, practice expense and malpractice).

3 Expense Categories 

Today, all practices should use RVU ‘costing’ to track revenues and derive the resources (translated to cost) consumed by the practice for a particular procedure or service. It is useful for instance to derive the cost per RVU for the practice. This can be done by first dividing the total cost by total RVUs (Total expenses/ sum of total RVUs = cost/RVU)

Each practice should have Total RVUs as well as each of the three components (RVUw, RVUPE and RVUMP) for each CPT code on a spreadsheet. This allows the practice to calculate dollar value for each component of the RVU by dividing total expenses for each of the three RVU categories.

2. Physician productivity & compensation. As mentioned, experts contend that RVUs are mistakenly thought to measure productivity rather than consumption of resources.  In any case, in 1999 only 11% of practices used RVUs as a tool for measuring productivity. The penetration is much higher today in practices utilizing some form of productivity compensation. Each physician’s productivity is measured by the Total RVUs recorded for each CPT code multiplied by the CF, which gives the practice reimbursement for each CPT code. In a lot of practices it is not uncommon to have part-time physicians. So, minutes per RVUw can also be calculated to arrive at evaluation of the part-time physician work. As an example, Family Practice, General Surgery, Internal Medicine and Obstetrics/Gynecology are generally around 20.97, 20.36, 21.20 and 22.04 minutes per RVUw. One has to be careful when compensation is based on RVUw because compensation rises with production and since the growth is not linear, the actual compensation per RVUw drops.

Where “team oriented” compensation plans are used, RVUws can be utilized to balance individual production and team production to mitigate a payer mix issue.

3. Contract negotiations. RVUs and Cost per RVU are two of the most common measurements used during contract negotiations between physicians and hospitals/insurance companies, for instance. It is therefore crucial to know the cost per RVU in order to see if a particular procedure is a money loser or profitable. Example: Let us use CPT code 99213 for a Level 3 office visit (non-facility) as an example and expense per RVU as in the previous table. To arrive at a potential profit for a contract for 1,000 office visits for the same CPT code, the analysis is illustrated below. The practice then has to decide whether the contract offer is worth accepting.

CPT Code Analysis 

However, during contract negotiations with an insurance company, the practice should not necessarily reject every contract based upon a CF that represents a losing proposition but evaluate the volume of procedures and the overall percentage of the practice revenue derived from the particular contract.

In summary, practice management systems should enter RVU of each code during the charge entry process. RVU data is valuable for cost accounting, productivity and compensation agreements within the practice as well as for external negotiations. Benchmarking is also easier with various groups such as the Medical Group Management Association (MGMA) or University Health Consortium, who track RVUs for specialty, type of practice and location. There are limitations to usage of RVUs for production/compensation, including the fact that physician experience, supervision of others, downtime (on call), coordination of care and complexity of service are not appropriately factored in.

Bhagwan Satiani, MD, MBA,  FACS, FACHE, is President of Savvy-Medicine (www.savvy-medicine.com), a business education consulting organization and Professor of Clinical Surgery, Division of Vascular Diseases & Surgery, Department of Surgery, The Ohio State University College of Medicine, Columbus. He is the author of the 3-volume set “The Smarter Physician” published by MGMA and co-author of “The Coming Shortage of Surgeons: Why They Are Disappearing and What We Can Do About It.”

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