Over the last few years, healthcare organizations as a whole, and physician practices in particular, have had to cope with severe pressure from challenges that include:
• Complex regulatory requirements;
• Electronic health record (EHR) adoption and Meaningful Use requirements;
• Reimbursement compression;
• Rising administrative costs;
• Risk-based reimbursement models; and
• Real growth in the self-pay portion of the typical practice’s accounts receivable portfolio.
Addressing just one or two of these multi-faceted challenges is enough to disrupt, and in some cases debilitate, a practice. Addressing them all requires a real understanding of your practice that we’ll call “organizational awareness.” Improved organizational awareness creates an opportunity for more deliberate leadership, better strategic and tactical plans, and underscores opportunities for continuous process improvement.
So, what should you be asking to increase your own organizational awareness relative to today’s practice management issues?
Where does my revenue come from?
Whether due to reimbursement reductions or effects of the Affordable Care Act, there will most likely be new and complex revenue variables that impact your practice. More than ever before, you need to understand the sources of your revenue at a granular level.
First, scrutinize your payer mix well beyond the traditional insurance categories such as “Cares,” “Caids,” “Blues” and “Commercials.” Look at payer and plan combinations (including employer-based plans), high-deductible and high co-pay plans, and at patients who pay out of pocket. As you look at your data, identify those payers who contribute the highest proportion of revenue, and also capture characteristics such as turnaround, denial rates, payment profiles (collection percentages) and cost to collect.
Second, scrutinize your patient mix using every bit of data from both your practice management and EHR systems. Consider the traditional intersections between age, sex, procedures and diagnosis codes. Then go to the next level by including compliance/adherence, satisfaction and even credit worthiness.
Developing this true understanding of both payer and patient mix is key to identifying profitable relationships.
What percentage of my accounts receivable (AR) portfolio is self-pay?
Most practices are accustomed to the traditional battle waged against deductibles at the beginning of each calendar year. However, few have the wherewithal to sustain high-touch tactics year-round to deal with the effects of uber-high deductible and co-pay plans, insurance exchanges and the like.
For a number of years, self-pay has been the fastest-growing portion of the AR portfolio. It is common to see 25 to 40 percent of a practice’s AR being self-pay. Still, traditional practice management systems are fine-tuned to collect from insurance companies, yet lagging when it comes to modern self-pay collection capabilities. “Old school” patient collections that start the process on the back end are labor intensive, expensive and generally ineffective. In fact, studies suggest that post-visit collection efforts result in collection percentages as low as 40 percent. In contrast, best practices that drive efforts to the front end of the revenue cycle (pre-visit) indicate collection percentages of 90 percent.
Best practices anchor first around readiness and taking every opportunity to communicate clearly with patients about payment expectations. They then depend on making it easy to pay using portals, kiosks, pay-by-phone, time-of-service discounts, and automated and recurring payment plans that collect from debit/credit cards or directly from bank accounts.
Do we know how to manage claim denials effectively?
Over the last five years, improvements in revenue cycle solutions, increased automation and pervasive electronic standards have resulted in modest decreases in claim denials in most medical practices.
With ICD-10, the Affordable Care Act, and especially during the transition in payment methodology from fee-for-service to fee-for-value, practices will once again need to turn their attention to actively avoiding claim denials by introducing pervasive process controls in the front, middle and back end of the revenue cycle.
Traditional denials are caused by a number of reasons, including: Poor demographic capture;
- Ineligible patients;
- Missing modifiers;
- Procedure and diagnosis mismatches;
- Lack of prior authorization or medical necessity;
- Duplicate claims; and/or
- Coordination of benefits.
These and bundled services will remain the most common denial reasons, but their frequency will be amplified by a number of factors.
As prepared as the industry seems to be, ICD-10 will be disruptive and will increase denials. Physicians will be front and center in the coding world, and the gap between the billing office and the clinical staff will never feel bigger. Meaningful Use brought patient portals, which is good. But some portals are simply unintelligent front ends and are disconnected from the front end of the revenue cycle where so many claim denials get their start.
In the short term, effectively managing claim denials involves zealous efforts to prevent denials in the first place, and also efforts to follow up on denied claims promptly and systematically. Longer-term organizational health comes from “owning” your denial report, analyzing every detail, looking for recurrent mistakes and implementing process improvements.
What are my most important KPIs?
Key performance indicators (KPIs) are quantifiable business metrics used to gauge or compare performance toward a goal. Working from your own organizational goals, choose KPIs that measure your improvement over time and enable you to measure against industry benchmarks.
While your practice management system should produce meaningful data from standard reports and dashboards, don’t be afraid to use off-the-shelf tools or contract expertise to mine the data for “truths” not included on standard reports. You can also look for sources of analytics that enable you to compare your group with others in your specialty or region. The Medical Group Management Association (MGMA), Healthcare Financial Management Association (HFMA) and others suggest a long list of traditional KPIs you can reference.
For the most impact, make your KPI selections based on your organization’s tactical goals and on your longer-term strategic goals. Also, keep big trends (like the growth in high-deductible/high co-pay plans) in mind and include KPIs (pre-registration rates, eligibility and service authorization rates, point-of-service cash collections) that shine a light on these less traditional areas.
Do we really know the cost of care delivery?
Whether you believe that risk-based contracting is in your near-term future or not, being able to answer the question of cost pays dividends in both the fee-for-service and value-based care worlds.
In fee-for-service, nothing is more fundamental. Are your payer contracts profitable? Do you make or lose money for every patient you encounter? Most sophisticated practices rely on resource-based relative value scales (RBRVS) and relative value units (RVUs) as proxy for cost. This method is effective and inexpensive, gives the practice a number of ways to isolate the particular aspects of cost and is typically included as a core functionality in most modern practice management systems. If you do nothing else, at least do this.
Looking forward, and in consideration of risk-sharing contracts, RBRVS won’t get the job done. You will need a financial perspective on both “the whole patient” and the whole organization. You will also need a holistic toolset including capital management, operational budgeting, strategic planning, labor productivity and decision support.
The end game here is episodic visualization – a financial representation of what it costs to deliver an episode of care.
Asking questions is essential to learning. In the increasingly complex healthcare market, asking the right questions is essential to survival. Your organization’s size, focus, market, affiliations, aspirations and culture will each inform your priorities, both tactically and strategically. Subsequently, this will inform the questions you ask. While basic, the questions suggested in this article have universal value regardless of practice characteristics. Their answers will produce value in both fee-for-service and fee-for-value scenarios, and improve your tactics and inform your strategy.
