Physicians Address Revenue Processes

November 15, 2001
Practice Management
John W. McDaniel

All physicians want to improve their practice efficiency and reduce their costs while also improving the quality of care they deliver. In reaching for this goal, many have become what some observers call high-performance physicians. These professionals continually review, develop, and implement improvement opportunities in five key areas of financial and operational performance: reimbursement systems, billing and collections processes, accounts receivable management, operations improvement, and practice growth.

A previous article in this series on high-performance physicians discussed how these high-performers are constantly exploring ways to enhance practice reimbursement, particularly through coding compliance and managed care contracting. But in addition to coding compliance and managed care contracting, high-performance physicians focus on revenue management techniques that involve billing and collection processes. For underperforming group medical practices, patient billing, collections, and accounts receivable management are among the most common areas of poor performance.

Office Operations
Managing information during the patient visit is important for every practice. In the front office, physicians and office staff need to collect accurate and timely information so that they can submit the data promptly for patient billing. The patient billing cycle involves patient scheduling and registration; insurance verification and eligibility; over-the-counter collection of copayments, deductibles, and outstanding balances; coding validation; charge entry; and referral management.

In the business office, physicians and office staff are involved in initial billing and rebilling. Initial billing includes prebilling edits, electronic claims submission and validation, and claims review procedures (both electronic and hardcopy). Rebilling includes account follow-up, secondary insurance verification, rejections, and denials. The staff also does payment posting, which includes tracking payments from insurers and monitoring and managing claims denials and rejections.

Physicians and staff in the business office also monitor payer contract compliance and manage patient self-pay accounts and patient payment plans. In addition, they manage accounts receivable. Managing accounts receivable involves monitoring the performance of collection agencies, as well as reviewing and approving write-offs for charity, physician and administrative requests, and aged accounts receivable reconciliations. They also must ensure that filings with insurers are done timely and accurately.

When seeking to improve their billing and collection processes, high-performance physicians use the 80-20 principle. In most medical practices, approximately 80% of patient revenue comes from 20% of the major payers of the practice. Following this principle means that physicians and office staff may want to put most of their efforts into the 20% of payers that represent 80% of practice revenue. At the same time, physicians cannot neglect the other 80% of payers. For all payers, physicians and office staff must constantly review various key financial and operating indicators, such as gross and adjusted charge or collection ratios, to determine the efficiency of the office staff and the payment turnaround time for insurers and patients.

Ensuring Payment
Validating reimbursements received from managed care organizations is important, since personnel at these companies can make mistakes. In fact, practices that validate reimbursements often find they are not always reimbursed at the amounts for which they have contracted. To ensure that they are being paid accurately, physicians may want to consider getting an editing module that can be used with practice management software. The editing module can perform periodic audits to double-check reimbursement rates from all major managed care companies.

Another important aspect of billing and collections involves credit balances. The Office of Inspector General of the federal Department of Health and Human Services strongly encourages that physicians refund patient balances within 60 to 90 days. Failure to do so may subject the practice to problems in the event of a government audit.

Business Operations
In the business office of a high-performance practice, physicians and staff frequently review and revise written financial policies. They encourage the practice to use information systems for appointment scheduling. They implement formal training programs for front-end clinic personnel. They develop performance monitoring benchmarks and procedures for following up on claims denials each month. And they conduct charge validation studies to ensure accurate contract reimbursement.

What’s more, it is not unusual for high-performance practices to conduct quarterly in-training sessions on office practices for all physicians and appropriate clinic staff, as well as review their professional fee schedule once each year.

In the area of patient registration, these physicians monitor the reasons for rejections and denials, develop monthly targets for over-the-counter collections, initiate an effective patient recall system, and establish monitoring systems that track cancellations and patients who do not show up for their office visits.

Since all practices will be affected by the Health Insurance Portability and Accountability Act, all physicians should consider revising their patient registration forms so they comply with HIPAA.

In the area of billings and collections, high-performance practices develop systems that allow them to monitor the performance of collection agencies at least once each quarter, as well as to track compliance with patient payment plans, monitor credit balances to ensure prompt refunding of patient overpayments, and implement formal training programs for front office staff to decrease error rates for claim rejections and denials. They also work to ensure consistent performance by office staff on insurance verification and pre-authorization processes.

Physicians who want to adopt the procedures of their high-performing colleagues in the area of accounts receivable management should develop segregated aged trial balances by major payers. Doing so will help to facilitate follow-up with any insurer that has an outstanding account balance in excess of 30 days. Physicians also should develop monthly procedures for auditing accounts receivable and for following up on claims denials. Office staff should keep notes on each account in order to ensure that each one is reviewed properly each month. When delinquent account balances become excessive, they should consider using small claims court to ensure payment.

When payments are slow, physicians should use their state’s prompt payment laws. To use these laws effectively, a physician needs to have good records on charges and collections from each payer. These records should show areas of low reimbursement or delayed payments from major managed care companies.

High-performance physicians take advantage of prompt payment laws by following up on claims after 30 days. If these claims remain unpaid, these physicians or their office staff make telephone inquiries to the appropriate insurers. They also may use the processes outlined by the state insurance commissioner to report delinquent insurers.

Physicians seeking to improve performance must develop internal control procedures. One procedure involves forming a chart audit committee that can perform quarterly random sample audits to ensure that the practice is in compliance with federal and state regulations on reimbursement and coding procedures and to ensure that the practice is capturing all appropriate charges.
In addition, all physicians should consider developing a compliance program that focuses particularly on proper coding, documentation, and medical necessity.

Benchmark Data
The better performing practices collect copayments and deductibles at the time of service from 93.55% of all patients, according to the Medical Management Group Association, in Englewood, Colo. Other practices do so at a rate of 71%, MGMA says. For the average primary care practice, as much as 20% of revenue results from such collections.

A review of the procedures high-performance physicians use for upfront collections, initial billing and rebilling, and claims denial and rejection follow-up makes clear why these physicians enjoy increased collection activity. While the common thread of poor performance in medical practices is usually a weak billing and collection process, this process is one of the strong practice areas for high-performance physicians.