Is Your Medical Practice Generating Maximum Cash Flow?
By: Austin LaRoche
The past three decades have seen a dramatic reduction in physician-owned medical practices, decreasing from 48.5% in 2012 to 31.4% in 2018.[i] Remaining independent has become an increasingly burdensome task – an Accenture survey in 2016 found that reimbursement pressures and increasing overhead costs are causing physicians to rethink entering private practice.[ii] High deductibles and low reimbursement rates, paired with regulatory pressures to modernize with the increasingly necessary implementation of software such as electronic medical records (EMR) systems, are dimming the appeal of practice ownership. Surveys by the Physicians Foundation, KFF, and FSMB found that while the total number of physicians exhibited consistent annual growth, the percent of physicians operating independently was rapidly decreasing,[iii] showing that only 1 in 3 doctors self-identified as independent in 2018 (Fig. 1).
To stay afloat, some independent practices implemented several different steps – including opting out of public programs and experimenting with low-cost staffing options – to adapt to changing market conditions (Fig. 2).
Fig. 2 – Infographic of survey respondents’ solution implementations
(Source: Accenture 2016)
Though implementing these solutions may be preferable to taking no action at all to ease current pressures on private medical practices, optimizations within a practice’s billing and collections process remains an often-overlooked area for improvement.
Even if private practices are already pursuing a combination of the solutions listed in Figure 2, a series of process modifications toward a more streamlined, efficient billing and collections process can maximize reimbursement rates. Driving meaningful outcomes for the practice depends on achieving a high level of performance in three key areas: Patient, Payor, and Practice (Fig. 3).
Fig. 3 – Framework for maximizing cash flow
Achieving excellence in each of these areas requires developing a focused set of capabilities.
Billing starts with the patient
Patient intake is a critical step in the entire billing process – by gathering all required information from the start, headaches can be avoided down the line. Additionally, maintaining a positive patient relationship will have compounding benefits to the practice whether through word of mouth referrals or appealing a rejected claim.
Negotiate – High quality care demands high reimbursement
Oftentimes, payors will send claims to third party negotiators. This can yield a quicker time to payment while accepting what could potentially be a lower reimbursement rate that would otherwise be offered by the payor themselves. Maximizing reimbursement through these services requires persistence – high quality of care should result in high reimbursement rates and it’s on the practice to demand it.
Additionally, getting patients involved in the negotiating process can be highly impactful in driving and improving reimbursement rates on most claims, which are frequently for either pre-authorized or emergency procedures. This might take the form of the patient calling the insurance company directly to inquire after an unpaid claim (assuming the claim is within the patient’s plan coverage). Another scenario could be a conference call between your practice, the patient, and the negotiator. In either case, presenting a unified front of patient and provider when negotiating with insurance payors increases the likelihood of a swift reimbursement.
Get the right authorization
Surgical cases often require pre-authorization to ensure reimbursement. While each case has its nuances, generally, the CPT codes across similar types of cases will exhibit a trend. Identify and store a set of CPT codes per surgical case type where pre-authorization is needed (along with the required non-surgical care for each code).
Claim denial is inevitable on some level. Appeals are central to ensuring appropriate reimbursement but can be tricky to manage. Thoroughly identifying and rectifying claim rejections can be the difference between $3,000 and $40,000. Generally, claim rejections can (and should) be appealed. One potential tool to increase a low reimbursement rate is to leverage a good patient relationship – appealing to insurance companies on behalf of your patients improves your practice’s reputation with a corresponding positive impact to your bottom line.
Claim submission starts with documentation
Documentation requirements for claim submission is critical to reducing rejections and appeals. Ideally, a template for each case type should be prepared. On average, healthcare.gov issuers deny 18% of in-network claims (Fig. 4). Insufficient documentation is a key cause of these claim rejections – delaying reimbursement by extension – yet is entirely avoidable. Work with your billing company (if applicable) to prepare a list of documents to go with each submission.
Documentation requirements for different types of insurance vary. For motor vehicle patients, ensure that claim numbers, policies, and adjuster contact information is gathered. For workers compensation patients, ensure that the claim number and employer information is gathered.
Fig. 4 – Share of 232.9 million in-network claims denied in 2017 (Source: KFF [iv])
The billing company question – To outsource or not to outsource?
The choice of whether to outsource billing and collections is one faced by many practices. A billing company typically handles the claims process from submission to appeals in return for a reimbursement percentage. This can ease the clerical burden on the practice but could ultimately cost more in the long run. Further, an inefficient billing company can cause delays in reimbursement, a circumstance beyond your control that still reflects poorly on your practice. Developing the skillset within your practice will give greater oversight but will require both a financial and time investment. Pros and cons of each should be weighed carefully before making a choice.
Choose (and use) your MIS wisely
Choosing an Electronic Medical Records or EMR system can often be daunting. Making the right choice is critical to maintaining a smooth billing process, regardless of whether a billing company is used. Inefficient use of an EMR system can cause bottlenecks and delay the reimbursement process by increasing the work needed to enter and later gather documentation.
Track your submissions
Once claims are submitted, it is critical to keep track of claims over time with or without a third-party billing company. Along with higher reimbursement rates, following up with each claim deepens internal expertise and profiling of highly responsive payors versus slow or otherwise difficult payors. The latter class may justify additional negotiations to increase rates.
When methodically following this approach, a private medical practice could expect a significant financial impact (Fig. 5).
Fig. 5 – Illustrative financials (Source: internal analysis)
While the increase in overhead to improve cash collections results in lower net margins, the overall revenues and profits generated by the business can increase substantially.
Implementing an efficient billing process will show a direct relationship to your practice’s ability to provide high quality care. Deploying efficient billing practices focused on maximizing reimbursement rates and minimizing denials can have demonstrable effect on the practice’s revenues.
Looking for the next step to re-engineering your private medical practice’s profitability?
What Might Stock Prices for Major Industries Do...
Why Artificial Intelligence is (Still) Human...
The Growing Influence of Alternative Lenders: More Options for Small Businesses, New Competition for Large Banks
The Growing Influence of Alternative Lenders:...