Pay Attention to Billing and Collections

Tracy Bird, C.P.C., director of management and consulting services for Kansas Medical Mutual Insurance Company -- Medical Service Corp. in Shawnee Mission, Kan., has seen "the good, the bad and the ugly" when it comes to results of medical practice management and mismanagement. A fellow in the American College of Medical Practice Executives with more than 30 years' experience in medical practice management, Bird has worked with hundreds of family physicians and other medical specialists.

The most profound result of mismanagement she's ever encountered, Bird said recently, was a paperwork glitch that cost a three-physician primary care practice as much as $36,000 a month and went undetected for as long as two years. "Someone on staff didn't take the time to mark the charge ticket for a commonly performed ancillary test, and there was no process in place to double-check that everything got billed," said Bird. Thus, in a typical single month, "the practice billed for just two of the tests, when it should have charged for nearly 100 of them."

The story highlights the importance of what Bird calls the revenue cycle, a ticking clock that begins when the patient makes an appointment. "What continues at check-in and at all the points along the way after that is equally as important as collecting the very last dime," she said. "The revenue cycle is the lifeblood of a medical practice because that's where the money comes from. It should be at the top of every physician's list, right behind good patient care."

"Physicians can't sit on charges," said Bird. "Capturing charges in a timely fashion and getting them to your business office is important." She suggests that physicians shoot for a 48-hour turnaround. "Many insurance companies have a 60-day or 90-day timely filing clause," she noted. "If you don't file within that time frame, the claim is null and void."

Electronic claims filing, now required by many payers, can speed billing up tremendously, but Bird tells physicians to move beyond just ensuring that the claim is filed and received by the payer. "Make sure someone is checking the rejections, correcting the errors on those rejections and resubmitting them. If you don't identify billing errors that are occurring at the charge-entry level -- and I've seen this in many offices -- the claims-denied pile continues to grow because no one realizes that the same mistake is being made over and over."

On the collections side, Bird said the biggest mistake physicians make is not following up on unpaid claims. "Once a clean claim (a claim with no errors) is 45 days old, it should be paid. By the time a claim is 60 or 70 days old someone should be on the phone calling to find out what happened to the money."

FP Kathleen Saradarian, M.D., of Branchville, N.J., knows firsthand the value of having a tenacious in-house employee to pursue those unpaid claims. "I used to spend every Thursday at my desk, and at the end of the day would have successfully resolved, at best, three outstanding claims," she said.

Now, an employee dedicated to the task spends about four hours a day on the phone tracking the money. "She's self-motivated and goes after every dollar like this is her business," said Saradarian, who is thrilled with the results. Saradarian's practice currently has less than $1,400 in outstanding payer claims 60 days old and just $900 in outstanding 90-days claims, she said. That's a far better financial picture than when she was working the phones herself once a week.

Collection agencies play a role, but don't take that route too soon, warned Bird. Once you do send claims to a collection agency, track the recovery rate. "The industry standard suggests that 17 percent to 20 percent of that money is recoverable. If the collection agency is collecting a higher percentage, you're turning those accounts over too soon," she said.

Each practice must decide whether to keep billing in-house or use an outside company, said Bird. She's learned that in-house billing operations demand good communication between physicians and staff members. "If billing staff are afraid to approach the physicians about missing or confusing charges, the practice could be losing money," said Bird.

Prefer an outside billing company? Choose a reputable company, and don't hesitate to switch if you're not satisfied with the results you're getting, advised Andrea Skaggs, M.D., a solo family physician in Lexington, Ky. Skaggs said she saw her average reimbursement per encounter jump 19 percent -- from $79 in 2005 to $94 in 2006 -- after she switched billing companies. "Not only does the new biller help me bill for more services per visit, she pursues aging accounts much more aggressively, rather than writing them off, " Skaggs said.

The best way to determine the financial health of your practice is by crunching the numbers, tracking the data and watching for trends, and that's best done through monthly and year-end spreadsheets, said Bird.

Those spreadsheets should include "dashboard indicators," such as total practice charges, total payments, contractual adjustments and all other adjustments. "Break miscellaneous adjustments down by timely filing, bad debt, hardship, deceased patients or whatever the reason may be for all those other write-offs," said Bird. "Numbers on a spreadsheet help you recognize trends, and examining trends helps you understand what's going on in your practice."

Saradarian said monthly and year-end reports created by the practice management software in her electronic health record system allow her to graph those trends. For instance, her year-end data for 2006 showed that patients with her worst paying plan accounted for 50 percent of her practice; on the other hand, Medicaid accounted for just 1 percent of her income and 5 percent of her practice. "I'm just beginning to analyze the report and what it means. I'll probably consider eliminating some plans," she said.

For her part, Skaggs receives similar reports but goes one step further -- she conducts a quick pencil-to-paper assessment at the end of every workday. "Every single day I look at the bank balance and explanation of benefits forms, or EOBs, those forms that insurance companies send to tell me why they're not going to pay me," she said.

"It's vital to stay involved in the financial workings of your practice," she added. "Nobody cares about your practice like you do."