Do payers take advantage of practice management incompetence?

To understand how the payers may take advantage of small practice without adequate technology infrastructure, think about billing complexity, which is the result of variety of CPT codes, large number of payers, and large number of patients.

Consider a medium-size cardiology practice seeing 1,000 patients per month with an average claim paid at $268.

If the practice administers 50 different procedures and works with 50 payers, then 1,000 monthly charges require selection from 2,500 unique fees defined by contractual agreements or “reasonable and customary pricing” (“Allowed”) for every CPT-Payer pair. Without provider-side automation of the billing process, the provider charges the same fee for each CPT code across all payers, reducing provider’s pricing complexity down to only 50 CPT-specific charges (“Billed”). Using uniform Billed for every CPT code to reduce fee complexity necessitates routine over-charging, increases the risk of under-charging (when Billed is below Allowed), and costs an average practice ~2% of its collections (~$64,320 annually).

On the other hand, the 1,000 payments (Payment = Billed – Adjustment) arriving monthly from 50 different payers must be compared too to 2,500 unique thresholds for every Allowed amount. But without payer-side automation, a review of 1,000 monthly Explanations Of Benefits is impossible, creating an opportunity for “occasional computer error” to the payer’s advantage. In our example, if half of the payers arbitrarily shrink the “Allowed” by just 20% for only 10% of random claims, annual practice losses add up to $32,160, or $96,480, including under-charging errors.

“We do fine as is. Our inhouse biller is just great.”

The smart approach is to maximize revenues and control and minimize costs and work. An in-house billing operation has little control and high costs. It is unable to identify and solve billing problems proactively. Think process, technology, and personnel.

1. Process
1. Reporting: Do you control billing yourself or do you rely on the opinion of your biller? Are your reports online or on paper? How easy is it for you to get the reports? Do you have to ask for them and then wait for delivery? How long do you need to wait to see denials report or distribution of your payments for a particular CPT code by different payers? How often do you review billing reports? Can you tell the percentage of underpayment for every CPT code and for every payer? Can you predict mid-month about potential payment problem down the road? Can you figure out precisely the individual contribution of each referring physician and how it would be affected if you decided to cancel your contract with any one of your current payers?
2. Measurement: Do reports have the detail required to assess quality of billing? How do you measure billing quality? What is your AR beyond 120 days? How does it compare with national average? Do you know how much you do not collect? Is data available to you continuously and in arbitrary aggregations so you can exercise control?
3. Accountability: How do you know that every problem was resolved? Do you have a daily or weekly report of all the appointments that did not have claims, or all claims that required your attention and still wait for your response, or all claims that were submitted but not received by the payer, or claims that were received by the payer but not paid in the past 25 days? How do you communicate with your biller? Using yellow "postit" notes and faxes? How do you know none of them were lost?
   
   
2. Personnel: How often does your biller participate in coding/billing conferences? What happens if your biller becomes unavailable? What are the real costs of managing your own personnel, including hiring, training, benefits, vacations, sick days, your own time spent on resolving personality conflicts and following up on problems left behind because of their incompetence?
   
   
3. Technology: Does it do everything you need and is it managed according to industry standards?
1. Functionality: Does it have built-in reconciliation and workflow management to keep everybody accountable and to be proactive? Do you keep individual history of every action performed on every claim by everyone that has ever touched it? Does it integrate entire office workflow? Does it have built-in scheduler, notes, superbill, and personal workbench? Do you upgrade its LMRP and CCI knowledge base on time? Does it manage your fee schedule and does it alert you about its violations?
2. Maintenance: How often do you perform backups of your system? When was the last time you tried to recover your data from your backups? What about software upgrades? Do you really want to be in the business of maintaining your own software and hardware?

“I just invested $15,000 in a new system. Why should I change again?”

Generally, investing makes sense in goods that appreciate with time. Technology does not appreciate and in fact, its value shrinks over time, often reaching zero value very quickly, sometimes as quickly as two or three years (cf. Moore's law). Therefore, renting might be a better option because renting frees up cash and it may also be tax deductible expense.

When running your practice, you must think about maximizing revenues and control and minimizing costs and work. Focus on process, technology, and personnel.

1. Process: Does it have built-in reconciliation and workflow management to keep everybody accountable and proactive?
   
   
2. Technology: Do you really want to deal with vendor, perform backups, worry about disk crashes, and manage your own personnel?
   
   
3. Personnel: What does it take to train your personnel and keep them current? Consider other personnel management costs: benefits, your time, lack of independent problem solving…

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