Understanding RVUs: Ensure Accurate Reimbursement for the E/M Services You Provide

Lisa Eramo April 30th, 2012

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If physicians aren’t familiar with RVUs and the glimpse they provide into patient severity, complexity of services rendered, and reimbursement, they should be.

When was the last time you took a closer look at the Relative Value Units (RVUs) associated with the evaluation and management (E/M) services you provide? How does your data stack up against national benchmarks, and are there areas for improvement in terms of profitability?

If physicians aren’t familiar with RVUs and the glimpse they provide into patient severity, complexity of services rendered, and reimbursement, they should be. Max Reiboldt, CPA, and Justin Chamblee, MAcc, CPA, of the Coker Group, and co-authors of RVUs at Work: Relative Value Units in the Medical Practice, discuss some of the ways in which physicians can use RVUs to ensure accurate reimbursement.

RVU components

RVUs are comprised of three components:

  • Work component
  • Practice expense component
  • Malpractice component

Each component has its own RVU value that is added together and multiplied by the Medicare conversion factor, which converts the RVU to a dollar amount for reimbursement. One caveat is that Medicare applies a geographic practice cost index (GPCI) to each of the individual components to adjust for geographic-specific differences. This means the actual calculation is a two-step process as follows:

  1. [Work RVU x GPCI] + [practice expense RVU x GPCI] + [malpractice RVU x GPCI] = GPCI-adjusted total RVU
  2. GPCI-adjusted total RVU x Medicare conversion factor  = Geographic-specific $$ payment

Dig into your data

Although physicians don’t have any control over individual RVU components, the GPCI, or the Medicare conversion factor, Reiboldt and Chamblee say they can control two factors that directly impact reimbursement:  

  • Patient volume
  • Level of E/M codes reported

Patient volume is relatively straightforward, meaning physicians who increase volume generate more RVUs, which, in turn, yields greater reimbursement. However, when it comes to E/M coding, physicians often tend to be more conservative, coding at a lower level (e.g., 99212 or 99213) when higher-level codes may be more appropriate based on the services they actually perform.

Reiboldt and Chamblee agree that many physicians often perform the work associated with a higher-level E/M code (e.g., 99214) but either don’t document their work sufficiently, or they document it but down-code out of fear that they will be targeted for an audit. In some cases, physicians simply don’t understand the documentation requirements for a higher-level E/M code. In these cases, physicians perform the service but are unaware that what they are doing and perhaps documenting would qualify for a higher code.  

Certified coders can provide specific advice to physicians regarding E/M coding and documentation requirements. Other sources can also lend insights into coding patterns.  For example, national benchmarks outlined in the E/M Bell Curve Data Book 2012: Your Comparative Guide to E/M Billing Patterns of Physician Practices allow physicians to compare their E/M RVUs with national data, says Chamblee. If a physician is substantially under-coding and reporting a lower-than-average volume of 99213 codes as compared with his or her peers, the physician is potentially leaving 50% of the work RVUs on the table. This is assuming he or she has performed the work for a higher level but not documented or coded it correctly, he adds. 

In addition to missed financial opportunities associated with down-coding, there are compliance ramifications, too. Down-coding is equally as inappropriate as over-coding, says Reiboldt. The idea is that insufficient documentation and down-coding denote a deprivation of service to the patient that can affect current care as well as future treatment, he adds.

Physicians have become increasingly more interested in RVUs over the last several years. Reiboldt and Chamblee say approximately 9 out of 10 employment arrangements with hospitals tend to incorporate a physician’s work RVU into his or her overall compensation. Physician practices continue to use RVUs as a management tool to measure productivity, and as practices upgrade to more comprehensive EHRs, it will become even easier to capture and report data relative to RVUs, they say.

Editor’s note: To view specific RVUs for E/M codes, visit the CMS website listing PFS Relative Value Files and unzip the file ‘RVU12AR.’).

Lisa A. Eramo is a freelance writer and editor specializing in medical coding, health information management, and other healthcare regulatory topics. Visit her website at http://lisaeramo.wordpress.com/. Lisa wrote most recently for Getting Paid on CDI in two posts entitled Clinical Documentation Improvement (CDI): How and Why Your Practice Could Benefit and Clinical Documentation Improvement (CDI) in Physician Practices: What’s It All About? Lisa has also recently written on 2012 CPT Code Changes: Reporting Procedures Related to Pacemakers and Cardioverter-Defibrillators, and other articles on 2012 CPT code changes.

You can learn more about RVUs and how to use them to increase your practice profitability in our upcoming webinar, “Using RVUs to Improve Your Bottom Line.” Register now to learn about this important topic with expert speaker Sara Larch, MSHA, FACMPE.

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Optimizing Office Visits for Preventive Services #2: The Welcome to Medicare Visit

Kathy McCoy, MBA April 26th, 2012

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Learn how to maximize revenue from the Welcome to Medicare Visit in this webinar with Betsy Nicoletti

When is a wellness visit more than a wellness visit? When it is one of the three types of preventive services visits now being covered by Medicare. During a recent webinar sponsored by Kareo entitled Optimizing Office Visits for Preventive Services, respected coding guru and author Betsy Nicoletti, M.S., CPC, drew some sharp distinctions between the timing and staging of the wellness visits that Medicare will fund for its enrollees. To understand each type of wellness visit, keep reading. Check back soon for details on how you can get paid for preventive services provided in tandem with wellness visits.

Medicare is now paying for three types of visits: the Welcome to Medicare visit (HCPCS code G0402) pays for newly enrolled Medicare patients to have an Initial Preventive Physical Exam (IPPE) within the first 12 months of enrollment. It is a once in a lifetime benefit and providers may also conduct and bill for a screening EKG (code G0403) during this visit. Enrollees lose this benefit if they do not schedule their Welcome to Medicare visit within one year of enrollment. What are the components of this type of visit? It includes:

  • Medical, family and social history, including medications, use of vitamins and supplements
  • Screening for depression using accepted tool
  • Screening for activities of daily living, safety, asking about hearing
  • Physical exam comprised of height, weight, BMI, BP, visual acuity
  • Screening EKG if needed
  • With patient consent, end of life planning
  • Counseling, education and referral based on above
  • Written plan given to patient for Medicare covered preventive services

Learn the requirements for the Welcome to Medicare visit from Betsy Nicoletti in this free recorded webinar

Our next blog on this webinar will cover the Annual Wellness Visit, its components and components of subsequent Annual Wellness Visits. Bookmark our blog to make it easy to check back on that discussion.  If you would like to explore any other practice management or medical billing topics of interest, feel free to check our webinar archive. You can also join our notification list for upcoming informative webinars such as this one.

You can also register now for next complimentary webinar, Using RVUs to Improve Your Bottom Line. Don’t miss it!

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Let’s Collect Deductibles in 2012: Tips for Improving Self Pay Collections #3 – Best Practices

Kathy McCoy, MBA April 24th, 2012

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Sara Larch discusses specific strategies for improving self pay collections in this complimentary webinar

We all know the reimbursement outlook for medical practices continues to be bleak in 2012, but did you know it is possible to give yourself an immediate raise, even in this environment? How, you ask? By collecting the self-pay monies that patients owe you.

That was the subject of an information-jammed webinar recently presented by well-respected practice management expert and author Sara M. Larch, MSHA, FACMPE on behalf of Kareo. Called Let’s Collect Deductibles in 2012: Tips for Improving Self Pay Collections, the webinar offered an extensive arsenal of tips, strategies and tools you can use for improving your collections starting tomorrow. Why the sense of urgency? Because in 2012, the portion of your total revenue owed to you by patients will be the highest it’s ever been: a whopping 30 percent of  the average practice’s total annual revenue. Compare that to 20 percent in 2011 and just 12 percent in 2007, and you can see the huge financial hit your practice will take if you don’t shore up your self-pay collections.

To help you get started, Kareo has been covering Sara’s extensive webinar in “quick-read” blogs that help you tackle this large topic. You can check out blogs #1 and #2 if you want to catch up. To learn what Sara considers some “Best Practices” in self-pay collections, keep reading.

It’s important to get some baseline information on how well you were doing on patient collections in 2011 before you can set goals for 2012. Hopefully, your practice management system will allow you to run a year-long snapshot that shows your total self pay collections in 2011. Going forward, Sara recommends that you start generating a Daily Cash Collection Report that includes a graph completed by collectors showing the amount of cash taken in at time of service by collector and by practice location. 

Sara emphasized throughout her presentation that it is much more effective to collect payment at the time of service (PATOS) than at any other point of a patient’s interaction with the practice. When you start running a monthly PATOS report, you will see why: it shows the amount of dollars brought in as cash, what is outstanding as bad debt, what is still aging in AR and uncollected, and what has gone to collections. Obviously, you want to minimize the dollars in the latter categories and focus on improving cash PATOS. To set your 2012 goal for PATOS, Sara recommends you look at what you could potentially collect based on your various contracts and specific payer mix.

Sara also offered some Best Practice Strategies that could easily be implemented in your practice. Our prior blog mentioned the importance of having a solid financial policy in place that you communicate to patients at least annually. Prior to each appointment, it is important to verify the correct insurance information with the payor for each patient. If applicable, screen patients for Medicaid or Medicare eligibility.  And have your staff calculate what the patient’s estimated payment portion should be, based on the required co-pays, deductibles and anticipated uncovered services.

 Collect pre-payments for procedures or surgeries not fully covered by insurance

When patients arrive for their appointments, be sure to scan their insurance cards to capture current copay and deductible amounts. Collect pre-payments for procedures or surgeries not fully covered by insurance.  If a patient is not contracted with an insurance company, have financial counselors negotiate a 75% to 100% payment upfront. Patients with high deductible health plans should also be expected to pay 75% of their estimated visit costs.

Billing fees can also be an effective way to motivate patients to pay at the time of service. Some practices levy a $10 statement fee if a copay is not paid, and a$15 late fee if copays are not paid in 30 days. Finally, Sara gave a great example of a letter (see below)—distributed with a self-addressed stamped envelope–that could be given to patients if they had not paid at the time of check-out. A cardiology practice that started using this simple technique increased its copay collections by 22% in 2 weeks!

If Patients Don't Pay, What Is the Next Best Strategy?

We’ll be posting more from Sara’s webinar—be sure to check back for her thoughts on avoiding collections and supporting your staff in developing their PATOS collection skills. In the meantime, be sure to check out our Resource Center for all the videos and webinars Kareo has sponsored related to improving  your cash flow and profitability.

You can also hear Sara speak in our next webinar, Using RVUs to Improve Your Bottom Line. Register now!

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Complimentary Webinar: Using RVUs to Improve Your Bottom Line

Kathy McCoy, MBA April 23rd, 2012

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May 24, 2012
10:00 AM – 11:00 AM PDT
Speaker: Sara Larch, MSHA, FACMPE

Learn how to use RVUs to improve your bottom line in this complimentary webinar

Medical practices have been using Relative Value Units (RVUs) since they were adopted by Medicare in 1992.  In the early years, medical practices only utilized RVUs to understand the Medicare fee schedule.  Now the role of RVUs has expanded.  RVUs have become the standard measurement in analysis of reimbursement and payer contracts, physician compensation and productivity, and practice staffing and operating costs.  The advantage of using RVUs in analysis is that they are not affected by factors that impact gross charges or collections.

In this webinar, we will discuss RVUs and how to use them to improve the medical practice’s profitability.  Attendees will learn:

  • How RVUs are calculated
  • Why using RVUs improves the quality of your analysis
  • How to use RVUs in reimbursement analysis
  • “Best Practices” in RVU benchmarking

Sara Larch, MSHA, FACMPE, principal, Business of Medicine and co-author of “The Physician Billing Process: 12 Potholes to Avoid in the Road to Getting Paid,” will describe key methods for managing RVUs to improve your bottom line.

Register now to learn how to use RVUs to improve the bottom line for your medical practice

CEU Credit

"Using RVUs to Improve Your Bottom Line" meets the criteria of the Professional Association of Health Care Office Management and is approved for 1.0 CEU(s).“Using RVUs to Improve Your Bottom Line” meets the criteria of the Professional Association of Health Care Office Management and is approved for 1.0 CEU(s).
The American Medical Billing Association (AMBA) will award 1 CMRS CEU for participation in this webinar on using RVUs to improve your bottom line.The American Medical Billing Association (AMBA) will award 1 CMRS CEU for participation in this webinar.

You can download the Kareo Using RVUs Webinar May 24 2012 Handout for the webinar now.

Question-and-Answer Session — Ask your tough questions and get answers about RVUs and ways to use them in your medical practice.

Who Should Attend
Private practice owners, office managers, billing managers, billing service owners and others concerned about improving practice cash flow.

About Your Speaker
Sara Larch, MSHA, FACMPE
Sara  Larch will discuss how to use RVUs to improve your bottom line in this complimentary webinar

Sara Larch, MSHA, FACMPE, is a speaker, author and consultant in the healthcare industry.  She has more than 30 years of experience in medical group operations in private physician and large medical group practices, non-profit health systems, academic medical centers, and physician faculty practice plans.

Sara currently assists medical group practices with practice analysis & operational improvement, physician practice integration and alignment, facilitating and leading change, and physician and hospital relationships.

Sara is Past Board Chair of the Medical Group Management Association and Past President of the Academic Practice Assembly and the Association of Managers of Obstetrics and Gynecology.  She is a co-author of “The Physician Billing Process: 12 Potholes to Avoid in the Road to Getting Paid and is a popular speaker at national and local conferences.

Register now to learn how to use RVUs to improve the bottom line for your medical practice

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Optimizing Office Visits for Preventive Services #1

Kathy McCoy, MBA April 19th, 2012

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During a highly informative webinar entitled Optimizing Office Visits for Preventive Services, coding expert and author Betsy Nicoletti, M.S., CPC offered concise tips and guidelines for coding and billing the various types of office visits

Medical billing professionals draw a sharp line between the coding for preventive services and coding for problem-oriented office visits. Clinicians, on the other hand, will tell you that the distinction is not so clear once you are in the exam room. How do you ensure you maximize reimbursement for each type of service, if they occur on the same day? Or DO you even provide them if you want to optimize your cash flow?

During a highly informative webinar entitled Optimizing Office Visits for Preventive Services, coding expert and author Betsy Nicoletti, M.S., CPC offered concise tips and guidelines for coding and billing the various types of office visits correctly, to maximize reimbursement. Her insights are extremely useful for any practices that routinely provide preventive services along with condition-focused health care.

Betsy began the webinar with an explanation of preventive services. The CPT book describes preventive services as a history and exam that is age and gender appropriate, but does not actually describe what services are “appropriate” by age or gender. Clinicians are instead referred to their respective medical society for those guidelines. Preventive services also include counseling on risk factor reduction and anticipatory guidance such as wearing sunscreen or child-proofing a household. And they include referrals for screening tests and immunizations – if you provide these services, you can bill for them as well.

Under health care reform, many patients will have first-dollar coverage for annual exams, without a co-payment or deductible. That’s welcome news for providers, since this wasn’t always the case before. Other preventive services you may be able to bill for include:

  • lab tests done in the office;
  • the administration of vaccines and the serum if you purchased it;
  • venipuncture;
  • and hearing and eye tests.

Note that coverage will vary by insurance plan – just because it is listed in the CPT book as a legitimate service does not always mean it is covered by a health plan.

Preventive services you may be able to bill for include lab tests done in the office; the administration of vaccines and the serum if you purchased it; venipuncture; and hearing and eye tests.

In terms of coding visits correctly, Betsy emphasizes that it is critical to ensure that the right visit type is noted at the time a patient makes an appointment. Whether using a paper chart or an electronic health record, getting the visit type correct up front allows the medical assistant to open the right template for documenting the services provided. It also allows the scheduler to allocate enough time for each type of visit.

In some cases, you may be able to bill for a problem-oriented visit as well as the wellness visit if you performed the key components associated with a problem-oriented visit that same day. Documentation is key here. The provider must note the symptoms and status in the history, and the assessment and plan actually must address the patient’s problem. In these cases, medical billers would use a 25 modifier on the problem-oriented visit.

In the webinar, Betsy also spends some time discussing the various types of wellness visits covered by Medicare. Check back for our blog on that discussion.  If you would like to find information on any other topics of interest, feel free to check our webinar archive. You can also join our notification list for upcoming informative webinars such as this one.

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Your Practice Administrative Costs: What’s Your Cost of Getting Paid? Part II

Bhagwan Satiani, MD, MBA, FACS, FACHE April 17th, 2012

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Major practice administrative costs for all practices (especially in dealing with tightly managed care plans) include additional staff salaries and benefits, prior authorizations, multiple plans, billing forms, policies, claims procedures and adjudication rules offered by each insurer.

As mentioned in yesterday’s post, Your Practice Administrative Costs: What’s Your Cost of Getting Paid? Part I, major expenses for all practices (especially in dealing with tightly managed care plans) are additional staff salaries and benefits for dealing with the prior authorizations, multiple plans, billing forms, policies, claims procedures and adjudication rules offered by each insurer.

In general, reports indicate that on average 0.67 non-clinical full time employees (FTEs) are dedicated to billing and insurance related matters (Woolhandler). Recent reports suggest that medical staff including medical assistants spend 20.6 hours per physician a week interacting with payers in the U.S. Prior authorizations alone consumed about 13 of these hours. This is in comparison to a total of 2.5 hours in Canada, mainly because they have a single payer system. In addition, clerical staff in a physician office spent over 53 hours a week per physician compared to 15.9 hours in Canada. When converted to U.S dollars this was calculated at $82,975 per year per physician in the U.S compared to $20,410 in Canada.

The time spent on administrative issues is not restricted to outpatients. In inpatients, a 1993 study of nurses at a hospital in Illinois found the staff spent about 40 percent of their time on patient care; the rest was consumed by administrative issues and communication and coordination.

Administrative costs are also a problem for insurance companies. Supporters of “Medicare for all” like to point to the absence of marketing, sales or commission costs and economies of scale and hence the often quoted figure of 2-3% administrative costs associated with Medicare. The problem with that number is that it does not include the cost of collecting premiums (done through the Internal Revenue Service), Medicare billing (outsourced to private insurance carriers) or even legal costs of defending legal actions by providers and others (done through the Attorney General’s Office). The rough guess is that true expenses, if spending by other government agencies is included, are between 6-8%.

What about the administrative costs of private insurance carriers? The Congressional Budget Office estimated that about 12% of the average insurer’s dollar is spent on administrative costs, although they ranged from 7-23%. Others have quoted a 14-22% figure. The stated reason for higher costs for private insurers is marketing costs, profits, executive salaries etc. These figures seem stacked against private insurers. However, if costs per beneficiary are calculated, Medicare costs were $509 and private insurer costs were $453/beneficiary in 2005. In fact, the McKinsey Global Institute reporting CMS data contends that Medicare per enrollee annual cost have risen 30% from 2003 to 2006 ($211 to $468). Therefore, some experts put Medicare administrative costs at 12.3% and therefore higher compared to private carriers.

Some argue that there are certain benefits to having multiple payers. Insurers get to compete in offering better products and at a lower price. Not that we have actually seen this yet! Then, another advantage is said to be curtailment of inappropriate care. We all know that inappropriate care still exists.

Some common sense steps

There are organizations such as the Healthcare Administrative Simplification Coalition trying to simplify the tortuous process. However, some common sense steps come to mind. These include:

  • Standardization of insurance, claim and other forms, billing and prior authorization procedures should be required.
  • Credentialing should be done through a single agency for all insurers.
  • Have a uniform formulary framework.
  • All communications must be electronic.
  • Verification of patient eligibility must be instantaneous, electronically available and uniform for all insurers.

It is not just the economic consequences that have physicians struggling to stay afloat. The emotional costs of dealing with the increasing complexities of administration and the world of insurance and billing are impossible to ascertain. Undoubtedly, this effect shows up in the dissatisfaction score on most physician surveys. Although electronic medical records should alleviate some of the difficulties outlined, the data confirming the beneficial effects is mixed. All physicians, their staff and their professional organizations should impress on their local politicians the tremendous burden administrative costs place on their practices.

You can learn more about reducing your cost of getting paid in our webinar on Getting Paid Accurately – What the National Health Insurer Report Card Means to Your Practice and How You Get Paid on April 19. Register now.

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Deadline Extended for Appealing Medicare EHR Bonus

Kathy McCoy, MBA April 16th, 2012

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Physicians who believe they were incorrectly denied a Medicare bonus for using an electronic health record (EHR) system last year have a few more weeks to appeal their case, according to a recent article on Medscape News Today.

The Centers for Medicare and Medicaid Services (CMS) announced earlier this month that it is extending the deadline for such eligibility appeals from March 31 to April 30.

The new deadline of April 30 for eligibility appeals applies only to the Medicare EHR bonus. In an eligibility appeal, clinicians must demonstrate that they met all the requirements of the Medicare EHR incentive program, but failed to receive a payment due to circumstances beyond their control. A CMS official told Medscape Medical News that such circumstances might include foul-ups in the agency’s various information systems as it attempted to cut a bonus check for a clinician. A natural disaster that prevented someone from reporting his or her EHR performance to CMS also qualifies for an eligibility appeal.

What cannot be appealed is a decision by the agency that a clinician simply failed to meet the requirements of the EHR incentive program under Medicare.

Physicians who think they should have received a Medicaid EHR bonus must file an appeal with their state Medicaid program. Each state has its own appeals process.

Information on how to file an eligibility appeal under Medicare is available on the CMS Web site.

You can learn more about this and other government incentive programs for medical practices in our recorded webinar, Government Incentives for Medical Practices: Tips and Tools to Qualify, Participate and Get Paid.

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Your Practice Administrative Costs: What’s Your Cost of Getting Paid? Part I

Bhagwan Satiani, MD, MBA, FACS, FACHE April 16th, 2012

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One of the reasons for the higher cost of healthcare in the U.S is the rise in practice administrative costs

Physician practices define administrative costs differently. A good definition is that they are those “costs which comprise transaction-related costs, benefits management, selling and marketing costs (to allow consumers specific choices regarding the level of risk they bear), and regulatory/compliance costs.”

One of the reasons for the higher cost of healthcare in the U.S is the practice administrative costs. Experts estimate that the approximate administrative cost is $293 billion each year in the U.S., or $1,059 per capita. In another study by The McKinsey Global Institute on excess spending on healthcare, administration and insurance together were estimated by to be 21% of the total excess spending. This would translate to about $160-180 billion in 2012.

The “macro” picture is not easily grasped until we start looking at each practice and determine what it costs to run a practice. Whereas economies of scale work for large health systems or insurance companies, small and medium sized practices are at a disadvantage.

How big is the problem? The median overhead for primary care practices is 59.5%, according to the 2010 MGMA report based upon 2009 data. Other than staff salaries and benefits, which take the largest bite, it is estimated that medical practices spend up to 27% of their revenue on administrative costs. Although medical practices decreased operating expenses 2.2% in 2010, general operating costs since 2001 have increased almost 53% to $252,629, far above any gains in revenue over the ten year period.

Third parties in healthcare exist to handle the payment transaction between the patient and the entity providing healthcare. Unfortunately, the costs associated with these transactions have increasingly hurt the physician practice. On 2006-7, the 6.6% rate of growth in resources dedicated to administrative activities was much higher than professional services and matched the 7.5% growth rate in hospital spending and the 6.7% for prescription drugs. 

The largest share of the administrative burden was attributed to the costs of dealing with insurers

So, what exactly makes up the “administrative” part of the cost for practices? A major cause of higher practice costs is the expense of dealing with insurers. It is estimated that the approximate cost of the time spent by physicians and their staff in interacting with insurers is about $31 billion each year. This represents about 6.9% of all U.S. expenditures for physician and clinical services. In another study, the largest share of the administrative burden (74%) was attributed to the time costs incurred by practicing physicians and their staffs in dealing with insurers about everything from preparing paperwork and contacting payers about prescriptions to providing diagnoses and treatment plans or referrals. It is not hard to find data to support these findings, considering that on average 12-15% of charges submitted to non-Medicare payers are denied on the first pass even though over 80% of these initial denials are eventually paid.

The average time physicians spend dealing with insurance companies is reported at 43 minutes per weekday, or three hours a week, or 3 weeks per year. This report by Casalino translated physician time into dollars and on average this cost a practice $68,274 per physician annually interacting with insurers. Primary care physicians spent even more time (3.5 hours per week). Physicians in smaller practices spent more time than physician in large practices. The waste may be even worse than the data indicate, since this time does not include time spent on recording billing or diagnosis or procedure codes. And how much time was spent on something that really matters, which is providing quality data to insurance companies? Two hours per physician per year by the office staff.

Tomorrow we’ll examine five ways to reduce your cost of getting paid in Part II of this blog post.

You can learn more about reducing your cost of getting paid in our webinar on Getting Paid Accurately – What the National Health Insurer Report Card Means to Your Practice and How You Get Paid on April 19. Register now.

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Keeping Tabs on Payer Contracts – Good for Your Practice and Your Patients, Too

Laurie Morgan April 11th, 2012

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Take more control by reviewing and managing your payer contracts.

A recent investigation by the NY Attorney General involving eight big insurers spotlighted a problem that is often underappreciated by practices: inaccurate health insurance provider directories.  Practices are often surprised when we tell them they should regularly verify their listings in payer directories.  Shouldn’t the payers have this down to a science?  But, insurance company databases are so large and change so frequently, mistakes often slip through. The case in NY revealed that the problem is not only widespread – it’s more costly than you might think. 

The NY investigation was triggered by numerous complaints from patients who had relied on outdated insurance company provider listings and ended up inconvenienced by delayed care – or worse, ended up paying large, unexpected out-of-network bills after receiving care. 

The case was settled with responsibility placed squarely on the insurers – whom the AG argued had an obligation to provide clear information to patients about the benefits of their plans. The carriers agreed to pay a $60,000 fine and promised to keep their directories more current in the future (including committing to removing physicians who leave their plans from their directories within 30 days of their exit).  But while the insurers have nominally accepted responsibility for these updates, the case underscores how important it is for practices to stay on top of this information, too.

Consider what happens when a patient arrives in your office for an appointment – only to learn you don’t take their insurance after all.  They’re disappointed, inconvenienced, and possibly facing a delay for treatment that they really need.  How does this reflect on your practice?  When your patient leaves your office, knowing she must start her search for care from the beginning, will this patient be motivated to refer your practice to others?   And what about the worst-case scenario: you proceed without realizing that the patient is out-of-network, and the patient gets hit with a large, unexpected expense.  That dissatisfied patient is not only unlikely to refer your practice – he may even complain to others about his experience.

The bottom line is, while carriers can and should do their part to make their plans work better for patients, your practice will be more successful if it also does its part to smooth the process and help patients avoid hassles and unexpected costs.  Take more control by:

  • Setting up a tickler to remind you to review each of your payer contracts on their anniversary date.  This simple act has many benefits. Not only will this allow you to act on contracts that could automatically expire (to avoid unknowingly being dropped from a plan), you’ll also be reminded of any “evergreen” provisions that automatically extend your rates (rather than increasing them).  Plus, it’s always a good idea to refresh your memory on contract terms, to be sure your practice doesn’t unintentionally violate any of them.
  • Reviewing your insurance verification processes. Are patients on plans you no longer accept slipping through your insurance verification process?  Make sure that you’re adequately and accurately verifying insurance before patients come in for their appointments – and make sure that staff who perform verifications are notified immediately when a plan is dropped.
  • Periodically review and update information in all key directories. Set aside time to review all key directories periodically. Claim your listings on major physician ratings sites so that you can monitor and update them.  Set a reminder in your calendar to double-check your listing in every online payer directory 30 days after you sign or renew your contract.

Quick checks of your directory information (both your payers and public directories like Avvo.com and Vitals.com) have a big payoff if they prevent even one patient from experiencing a hassle or unnecessary expense.  They also help ensure that when new patients are searching for a physician, your information shows up correctly.

Laurie Morgan is a management consultant with Capko & Company. She specializes in marketing, management and technology for medical practices and blogs about practice management issues at www.capko.com/blog. Laurie has a BA in Economics from Brown University and an MBA from Stanford. Laurie recently wrote for Getting Paid on Internal Controls: Keys to Avoiding Medical Practice Embezzlement.

You can learn more about evaluating and managing your payer contracts in our webinar on Getting Paid Accurately – What the National Health Insurer Report Card Means to Your Practice and How You Get Paid on April 19. Register now.

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Managing Underpayments in Medical Billing: Getting Every Penny You Deserve

Elizabeth W. Woodcock, MBA, FACMPE, CPC April 9th, 2012

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Manage underpayments in medical billing to protect your practice from lost revenue

With today’s complex coding and reimbursement systems, it came as no surprise to discover that payment accuracy rates among insurance companies dip as low as 62.08 percent. That finding comes from the American Medical Association’s National Health Insurer Report Card, a survey published annually by the AMA. Among other variables, the Report Card examines how often payers’ allowed amounts for medical claims equals the contracted fee schedule amount. The results are, arguably, alarming. It’s simply not healthy for your practice’s bottom line if nearly one in four insurance payments – or even one in ten – is wrong.

Historically, insurance companies paid a percentage of your charge, but that reimbursement formula has gone by the wayside. In today’s system, payers set prices for each service. The challenge is to ensure that you actually get that price. Underpayments in medical billing often go unnoticed but they hurt your bottom line all the same. Spending a little time now to improve tracking and management of payments pays off down the line.

Here’s how:

Know what you should get paid. It’s impossible to identify underpayments if you don’t know what you deserve to be paid. Ask all insurance companies with which you participate to provide a current fee schedule. They may balk or delay in providing you with their rates for all 7,000-plus CPT codes, but that’s ok. All you really need is a list of your top 50 CPT codes (including modifiers). Compile the list and request that the payer lists its fees for each one.

Seek other sources. Some companies may ignore your request or drag their feet when asked about prices. The good news is that Medicare and Medicaid reimbursements are publically available; the Centers for Medicare and Medicaid Services (CMS) offer a fast and easy online look-up tool for Medicare. Most states also post their Workers’ Compensation rates online. Commercial reimbursement, however, remains a challenge.

Deploy alternate strategies. If you are signing up with a payer for the first time, require that a list of the rates for your specialty’s top services by volume accompany your contract before you will sign up. If you already have a contractual agreement, don’t despair. Call the company’s customer service center – many offer a provider line for speedier service. If the representative who answers can’t help you, ask for a supervisor. If the payer has assigned a provider representative to you, contact that person. If those channels don’t work, ask to speak to the medical director. Document each attempt at communication and every point of contact. If efforts to telephone the insurance company don’t pay off, start typing: write a letter to the medical director to request the fee schedule. If you don’t hear back, write another letter, but raise the stakes by carbon copying your state’s insurance commissioner. Many states have laws requiring insurance companies to respond to physicians’ request for rates. If you are not sure about your state’s law, ask your medical society. Your state or county medical society also can fill you in about the American Medical Association’s settlements with several large, high-profile health insurance companies. Those settlements stem from the companies’ use of flawed data and other practices that unfairly reduced payments to physicians.

Establish a process to ensure payments are correct. Getting your rates in hand is just the first step. Now, you need to set up a review process to ensure that you get them 100 percent of the time. True, your staff could manually compare each incoming Explanation of Benefits (EOB) against the payer’s rate schedule, but that could consume many hours a week. Instead, use the power of automation: choose a practice management system that stores payers’ rate schedules and performs automatic cross checks on each line item. Comparing the EOB with the expected rate allows you to be automatically alerted to variances between what’s been paid and what should have been paid.

Examine remittances. Using a practice management system, the same type of automatic crosschecking of EOBs can be performed on electronic remittances as they are posted. Your management system can then spit out an “exception” report showing underpayments as well as any overpayments. Don’t just lay this “exception” report aside or toss it in the trash. Use it! Follow up on underpayments with the same vigor and tenacity as you would a denied claim. Remember, too, that like denials, underpayments should be identified on a line item basis. Don’t accept reimbursement for one line item as “payment in full.” Scrutinize by line item, not by encounter.

Evaluate staff motivation. Determine if you’ve inadvertently incented your employees not to ensure payments are always correct. Measuring performance through key indicators, such as days in receivables outstanding, is critical. Be aware, however, of a tricky dynamic that can come into play – and reduce your ability to identify underpayments. Here’s how it can happen: Payments from contracted insurance companies are below your full charge. The difference is considered a contractual adjustment. By contract, you may or may not be able to seek that difference from the patient; the variance is typically written off. Posting the payment, and making the corresponding contractual adjustment, removes that invoice off your receivables. All fine and good if it’s the correct payment, but it’s not uncommon to see some employees take the adjustment, write off the remaining receivable and call it a day – even when the payment is lower than what should have received. They may find that doing so wraps up their work neatly without a lot of troublesome follow-up. You may be aiding and abetting this behavior by stressing 100 percent completion rates in the billing office, or rewarding employees solely for high-volume production. Don’t just push to get the receivables down and throughput up. Take a balanced approach by also communicating to employees the importance of accuracy and cash flow (which, coincidentally, pays their salaries).

Recognize that underpayments may not come from the insurance company. The fee schedule from an insurance company represents allowables. These allowables reflect the total of what you are allowed to collect – from the insurer and from the beneficiary (the patient). Historically, the insurance company owed you the majority of the allowable. With the uptick in high deductible health plans in recent years and the growing number of employers selecting insurance plans with higher copayments and coinsurance, patients are owing  – and paying – a greater portion of their health care costs. If you find that you routinely get less than what you expected for contracted services, don’t overlook the impact of uncollected coinsurance, unmet deductibles and skipped copayments from patients. You may have to start paying closer attention to collecting cash more effectively from your patients, as well from their insurance companies.

Underpayments are not a minor inconvenience or a rare occurrence. It pays to pursue underpayments, but in the long run, you’ll be best served by taking steps to prevent them or, at least, detect them as soon as they occur. The AMA Healthcare Report Card found that payer accuracy rates range from 77 percent on the low side to a little over 98 percent (Medicare) on the high side. If your practice was entirely Medicare, you’d still face underpayments of almost 2 percent of your allowables. Figure that for a physician who brings in $250,000 annually, each percentage point equals $2,500. Now, apply the AMA’s findings and it should be crystal clear that the return on investment to improve detection of underpayments can really pay off – year after year. Now is an opportune time to get your game on to ensure that you’re being paid what you deserve.

For more information on How to Incentivize Your Staff for Optimal Performancewatch 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.”

To help practices deal with the  business epidemic of insurance underpayment, Kareo will be sponsoring a free webinar entitled “Getting Paid Accurately: What the National Health Insurer Report Card Means to Your Practice and How You Get Paid” featuring Frank Cohen on April 19. Register now to learn more about the impact of insurance underpayment and what you can do to protect your practice.

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Welcome to Getting Paid, a weblog by Kareo offering ideas, news and opinions about medical billing and practice management with the goal of making medical billing easier and yes, getting you paid. Visit the Product Blog for more information on our products.

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