Educational

What to look at when monitoring your reimbursement:

by Don Unfried

It is a fact that the financial "pulse" of a physician practice is its billing operations. The practice's survival depends not only on the volume of patients being treated, but also how well those charges are being filed to the insurance payers, how well reimbursement is being posted from the insurance payers and patients, and how well accounts are being monitored. Some physician practices handle all billing processes "in-house" while others choose to outsource their billing to a third party billing service. The risks associated with using a billing service can be huge, but so can inadequate training, cost, and staffing issues some physician practices deal with when trying to handle the billing "in-house". In any event, a physician / manager needs to understand a few basics in determining the health of their practice.

Monitor your "adjusted collection rate" and make sure your staff or billing service has the training, experience, and "ownership" attitude to aggressively work your accounts on a pro-active basis… which is what is required to get a solid adjusted collection rate.

The adjusted (net) collection rate is the ratio of:

(Total collections + insurance contractual write offs)
total charges

Total collections is not only what is paid by insurance, but what the patient owes as well. A good adjusted collection rate will be above 90%. Several months of charges vs collections (or a "year to date") percentage is what you need to track productivity. A "monthly" collection rate is of little value since charges and applied reimbursement rarely coincide during the same month. It is also very difficult to get the adjusted percentage above 95% in most specialties, which puts the preferred range between 90% and 95%.

Whether a practice is doing their billing "in house" or utilizing a billing service, the adjusted collection rate should not fall below the mid 80% range. Anything below that and the practice is losing considerable revenue. Also, consider it a "red flag" if a billing service is reluctant to provide you with the data (Explanation of Benefits and detailed reports) needed to verify how the accounts receivable is being managed.

A "gross" collection rate is also of little value. A gross collection rate could conceivably be 100%, but that simply means ALL your write offs are included in the calculation rate. By adjusting off and throwing in insurance denials (which some may be appealed) and bad debt (old accounts), a gross collection rate can look good when actually the adjusted collection rate is poor. Poor "in house" management or a bad billing service may keep the accounts receivable low, which means less work for them to deal with later. A billing service may want to quote you a high collection percentage, when it may actually just be a "gross" collection rate.

Is your staff or billing service sending out patient statements monthly? Surprisingly, some patients may not get a statement for months after a service and then it becomes almost impossible to collect the portion they owe. The statement can go out even though the insurance company hasn't paid their part yet. Some patients know what their deductibles are and should pay that portion. Also, the statement can inform the patient that insurance is being billed / processed and they need to be aware of this process. It is less of a surprise for patients to get statements soon after a visit / surgery than months later even though they may not be expected to pay until after their insurance pays. How are collection proceedings handled by the billing service? The physician owner should be involved in the aggressiveness of their collections.

Some physicians do not routinely look at their AR (accounts receivable aging report). The aging report will show the outstanding charges by month. Charges that have not been paid within 90 days run the risk of becoming "bad debt" and should be monitored carefully. Good billing reporting systems will be able to provide an AR by patient name as well as by payer type (i.e. Private pay, Medicare, Medicaid, BCBS, Aetna, Cigna, UHC, First Care, ect). Both are good for tracking collections and can also determine if a particular payer is slow or poor with proper reimbursement.

Remember, if you are using a billing service, you are paying a monthly fee or a percentage of your collections to that billing service so you certainly want the adjusted collection rate to be as high as possible. You would hope either your billing employees, or the billing service staff are motivated to maximize your collections, but it is always easier to process and post the easy "stuff", which involves entering your charges, processing your claims, sending out your statements, and posting the payments that come in. That is called "reactive" processing. Being "proactive" is more difficult because that involves monitoring the AR, calling the insurance companies and going after them for invalid denials, non-payment, as well as slow payment. It also involves talking to patients about their balances and the portion of charges they may owe. You may want to ask the billing service how they work the AR (accts receivable). Do they have someone assigned to specific accounts by doctor? How are appeals being handled? A good billing service will work with your office staff to get additional information. A good billing service will also let you know how patient conversations on accounts are going, since your reputation is reflected in the type of customer service they provide.

There are other issues to consider, but this is a quick summary of what to expect from your billing employees, or someone outside your practice acting as an extension of your practice. HCSTx will look at your practice to make an assessment and provide direction for improving reimbursement "in house" or assist with the outsourcing of your billing. Call us at 281-732-9770 to see how HCSTx can help your practice.