Warning: Hospital Systems Can Buy Out Your Practice

By Dorothy Steed, CPC-H, CHCC, CPC-I, CPUM, CPUR, CPHM, CCS-P, CEMC, CFPC, ACS-OP, RCC, RMC, PCS, FCS, CPAR, CPMA

Hospital systems buy physician practices, and offer physicians lucrative deals to include regularly-scheduled hours, salary plus incentives, and payment of malpractice premiums. For those physicians who have become weary of business administration responsibilities, or who desire more personal and family time, such offers may be very tempting.

If your physician office becomes part of a hospital system, what would it mean for you, the coder or biller in the physician office?

Get the Facts

As soon as you are aware that a purchase arrangement is under consideration, you need to obtain the facts and quickly clarify how you will be affected. Your role depends on the business and legal structure of the arrangement. If the practice will be renting space from the hospital at fair market value, and the practice continues to operate independently—including personal ownership of equipment, independent purchasing of drugs and supplies, and full responsibility for employees—your role within the practice may not change. If this is not the case, however, your situation is likely to change.

Where Do You Stand?

If the practice is under hospital ownership, the physician(s) are hospital employees and will be hiring staff for clinics that are operated by the hospital. Do not be surprised if hospital finance administrators take a critical look at the practice’s business operation—including current accounts receivable, aging of accounts, rejected claims, and dollars billed versus revenue. It is likely they will consider these areas when determining whether to bring the business staff (including coders and billers) on-board as hospital employees. If your revenue is strong, your claims rejections are well-controlled, and your billed charges-to-reimbursement ratio is adequate, you’ll make a positive impression.

Although certain problems may be attributed to a specific managed care contract, most shortcomings will be taken at face value. If revenue is below the norm and rejected claims are not being worked out, these indictors will raise red flags to hospital administration. Short-term problems that are actively being worked on for a solution will be weighted differently than long term, unresolved issues. Significant deficiencies in these functions will be viewed negatively in negotiations for hospital positions.

Match Your Skills to New Structure

If you are to be a hospital employee and no longer employed by the physician(s), understand that the structure of hospital business operations is considerably different than a physician business structure.

Regardless of the position that you hold in a physician practice, hospital hiring managers will attempt to match skills to available positions. Each position will have a specific job description with stated skill requirements. Take a look at posted positions and requirements, and determine which match your current skills. You may be required to apply for a hospital position, to undergo mandatory skills testing, and to meet the same requirements as any new applicant or in-house transfer. You may be subject to the standard 90-day probationary period. Human Resources (HR) management must be certain they assess fairly all employees for requirements as stated in the official job description.

Know also that there are differences in hospital coding protocol. The hospital coding manager will assess your skills carefully and determine if you will be able to handle inpatient coding, when necessary. Understand inpatient claims are “where the money is” for hospitals, and these records will take priority over outpatient records. It may not be possible for the coding manager to hire for just outpatient coding. If not, it is likely that the manager will need to be comfortable in your ability to code inpatient records, and to meet productivity and accuracy standards, if you are to be considered for a coding position.

Understand Hospital Charges

In a hospital-operated clinic, two claims usually are generated. The first is the UB-04 for the hospital charges, and the other is the CMS-1500 for the physician charges. If you are hired as a biller, you may be required to handle both claims. The duties are not necessarily divided. You’ll need to understand how charges are generated to the UB-04 and to determine strategic areas that are high-risk for error. This includes erroneous departmental charging, incorrect number of units, missing charges, and missing modifiers. Errors must be corrected prior to releasing the claim to the payer.

If you are hired to work in the clinic and are responsible for entering charges, you must be clear about the correct division of charges for each claim. Typically, drugs are requisitioned from the hospital pharmacy and supplies are requisitioned from central supply. These are hospital charges, not physician charges. Errors in this charging function create claims rejections and are time-consuming and costly to correct. Charges that utilize hospital equipment and staff are hospital charges. You must be diligent to charge the technical component to the UB-04 and the physician component only on the CMS-1500.

When physicians are staffing in-house clinics and other service areas, it is typical that those nurses and technicians who assist the physician are hospital employees. If they are salaried by the hospital and withholding is reported on these staff members by the hospital, services that they provide are hospital charges. Because the physician does not bear the cost of practice expense, the incident-to concept does not apply. The physician will provide required levels of oversight and supervision.

Business as Usual

Another direction a buy-out may take is the practice will continue to operate as usual, but your physicians also may be responsible for rotation staffing in certain hospital clinics. The hospital may assume financial responsibility for the entire operation and develop a type of network. It is typical for a hospital-management-level employee to be your contact for business decisions.

If the hospital assumes financial responsibility, it’s likely you’ll no longer arrange service and repairs, but will be required to issue a work order that’s handled by the hospital. They may require all staffing changes to be directed to their HR department, who handles applicant screening. You may be set up on their pay scale and annual performance evaluation requirements.

Be mindful that when your physicians are on rotation in a hospital clinic, technical and professional components apply. When POS 22 Outpatient hospital is placed on your claim, your payer will edit accordingly for that environment.

Prepare for Future Trends

Hospitals, particularly large ones, do quite a bit of strategic planning. They have a pulse in their medical community and seek avenues to increase their strength. They are aware that the upcoming financial implications of ICD-10, implementation of electronic records, and Recovery Audit Contractor (RAC) investigations are of concern to physician practices, and that some physicians—particularly those in a solo practice or nearing retirement—may be considering other options. If the system is interested in pursuing physicians, the time may be soon.

If your physician(s) negotiate a buy-out, look upon it as a new chapter in your health care career. Do not become too focused on position labels. Instead, assess your current skills and learn the standard requirements for hospital positions. There are multiple positions in hospitals that may be a good match for you. In addition to coding and billing, there also are positions in patient access (registration), benefits verification, payment posting, managed care contractual adjustments, denial management, customer service, surgery scheduling and claims follow-up, to name a few. Although all hospitals have these functions, each hospital has its own internal structure. Benefits packages for hospital employees often are stronger due to the hospital’s ability to negotiate large employer rates. You’ll have the opportunity to learn new skills, transfer between departments, and make new industry contacts.

Understand that health care changes often, and those who adapt to change quickly will continue to have a strong presence.

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Dorothy Steed, CPC-H, CHCC, CPC-I, CPUM, CPUR, CPHM, CCS-P, CEMC, CFPC, ACS-OP, RCC, RMC, PCS, FCS, CPA, CPMA, is an independent consultant and educator in Atlanta, Ga. Her 33 years of health care experience includes past work as a Medicare specialist for a large hospital system and present work as a technical college instructor in Atlanta. She also performs coding reviews for the Quality Improvement Organization in Georgia and conducts physician audits and education. Dorothy has been a technical contributor for several medical publications, presented at several health care conferences, and has developed training classes that focus on facility billing, coding, and reimbursement.

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