Keeping staff productive, managing the day and caring for patients clearly takes center stage for most medical practices. This can make it difficult for physicians and managers to dedicate enough time to studying the financial side of running a business – and a medical practice is a business. The Financial Mindset offers key essentials to stay on top of the practice’s financial performance and improving profitability.
Step I: Capturing Charges
Capturing the most revenue for what you do starts with having insurance contracts that pay a reasonable rate for the services you provide.
Evaluate payer performance based on the insurance plans that account for the highest volume of revenue to the practice. Examine and compare their reimbursement rates for the top CPT codes utilized in the practice. This will identify under-performing contracts that compromise practice profits.
Other factors in evaluating payer performance include:
- The level of cooperation and support the plan’s provider relations department gives;
- How promptly claims are adjudicated;
- The number of errors in paying claims; and
- The number of denials that require the practice to fight for its money.
Next, establish procedures and ensure all charges are captured through accurate and timely documentation and coding for services, both CPT and ICD-9. Monitor time lag for reporting charges for both office and hospital care. Inputting data within 24 hours of providing the service reduces the potential for failing to report a service and will help to get you paid without delay, often within 10-15 days of clean claims submission.
Step II: Revenue Recovery
Collecting patient payment at time of service expedites payment and reduces the cost to chase the money down the road. It is also the best time to collect on old balances. Don’t ask the patient if she wants to pay the balance, simply say “Mrs. Nice, you have a $360 balance on your account. Would you like to pay that by check or credit card today?” If there is resistance, suggest she give credit card approval and offer to delay submitting the charge for a week or ten days to help her out. If she seems uncooperative, your financial department can talk with her and work out an agreement before she leaves the office.
Since you will be sending some patient statements, it’s important to scrutinize your patient statement form. Does it make sense? Can the patient determine what portion is pending insurance payment and what you expect of him? Also, send statements throughout the month to keep the cash flowing rather than sending them all out at the end of the month. This also smoothes out the workflow for incoming telephone queries from patients about their statement.
Optimizing reimbursement from third party payers requires a dedicated and knowledgeable employee. Do you have a resident insurance expert who can identify when a claim has not been paid or payment is incorrect?
The biggest portion of the accounts receivable is owed by insurance plans, so closely monitor unpaid claims, pursue inappropriately denied claims and analyze claims payment by scrutinizing the explanation of benefits when payment is made. Insurance companies bank on medical practices not taking the time to analyze claims reimbursement and appeal incorrect payments or denials. According to Health Business Advisors, 30% of insurance claims are denied and of those 15% are never resubmitted! According to Medicare, 65% % of claims denied are paid on appeal. So be diligent in going after these payments.
Do you have consistent collection processes? If more than 15% is 120 days aged or more, you need to investigate the reasons why. If adjustments spike out of norm it is a red flag that needs explaining. You may have one payer that has become delinquent in paying claims or perhaps staff just isn’t making those patient collection calls. Once the cause is identified appropriate action can be taken. Remember, the longer a balance is on the books the less chance you have of getting paid.
Step III. Profitability
The final step in the Financial Mindset is managing costs and improving profitability. This requires operational efficiency: providing proper training and job tools to minimize redundancy and duplication. Technology is the practice’s best friend when it comes to improving efficiency. Adding more sophisticated practice management software and making the website more patient-interactive through use of a patient portal pays big dividends.
Benchmark practice expenses by comparing them against the national average for your specialty. If some expenses are high, start digging deeper. The most common culprits or rising expenses include:
- Overtime pay: Not only will you be paying time and half for the employee, but you are paying it at the end of the day when they are likely to be less productive.
- Medical supplies: Keep close tabs on both medical and office supplies and do some comparative shopping to make sure the practice is getting the best prices. There are also co-op buying services that can negotiate on behalf of more physicians and because they represent a higher volume they are likely to get better cost reductions.
- Health insurance: They keep going up and become a challenge for the average medical practice. You want to provide competitive benefits, but many practices are finding it necessary to obtain higher deductible policies and ask the employee to pay a reasonable share of the premium.
- Rent: Rent remains consistent when you have a lease or even a loan if you own the facility. Just the same, it is important to use the space wisely. For example, it is better to have one more exam room and use an outside storage service for medical records that to have inactive records occupying valuable space. Also, if space is tight consider expanding clinic hours to optimize use of clinic space and provide better patient service in the process.
When a financial mindset guides a practice it is likely to improve finances and help it remain stable during economic downturns that threaten the practice’s financial future.
Judy Capko is a healthcare management and marketing consultant, speaker and author or the best-selling book: Secrets of the Best-Run Practices. She is based in Thousand Oaks, CA, and can be contacted at www.capko.com.
