Practice Management Alert

If your practice's billing department isn't as efficient in handling claims or as effective in producing revenue as you'd like it to be, it may be time to examine the entire billing and collection process. The key to improving your billing and collection operation is first recognizing when you have a problem, says Elizabeth W. Woodcock, MBA, FACMPE, an Atlanta-based consultant for the Medical Group Management Association (MGMA) Health Care Consulting Group in Englewood, Colo. Although it's true that every practice's billing department is different, the best-performing departments manage the entire process of billing and collection well, she says.
 
"There's no magical answer for how to do billing better. But, the best billing departments have good management of the process from beginning to end," she adds.
 
An MGMA annual study of medical group performance and successful management techniques released last year also found that medical groups with good financial results have addressed or avoided some common mistakes, Woodcock says. Among the top mistakes are the following:
 
1. Ignoring the process and focusing only on the office. Billing is more than generating claims and collecting revenue, Woodcock says. It's a process that begins when the patient arrives at the reception desk and ends when payment is received. "Many practices have the perception that the billing office is a handful of people who sit in some back corner typing away at claims. But, they can't do their job without the physician doing the coding, the administration negotiating the contract with insurers, the front desk updating patient information, and every other person in the practice gathering information correctly," she says.
 
Focusing on billing and collection as a process has been the key to managing accounts receivable at The Physicians Clinic of Spokane, a 20-doctor multispecialty practice in Spokane, Wash. The practice was cited for its successful accounts receivable (A/R) management in the MGMA's Performance and Practice of Successful Medical Groups 2000 report. "We applied continuous quality-improvement efforts to the billing process, looking at it from the point the patient makes an appointment, to checking in, to seeing the doctor, to checking out. We want to make sure the information captured on the charge tickets is accurate," says David Page, MHA, practice administrator. The practice has looked at every step in the process of generating and submitting a claim, and tried to find ways to make the process work better, he says.

Strive To Submit Clean Claims

 
The practice's goals are to avoid high A/R and get claims paid the first time they are submitted. To accomplish that, the practice strives to submit only clean claims. "Before we send out a claim, it's reviewed for correct coding, levels of service, documentation and supporting diagnosis codes," says Michelle Davis, business office manager of the practice.
 
2. Neglecting critical information. Practices that ignore returned mail, fail to review claims and edit reports, ignore remittance edit reports, and don't investigate claim-rejection correspondence from insurers are letting valuable information needed for proper billing and revenue collection slip through their fingers, Woodcock says. "I was at a practice recently where I measured literally six feet of returned mail. That meant this practice was continuing to send a statement and trying to collect from a patient who is no longer at that address, and they're ignoring some other address that should be contacted," she says.
 
Failing to review electronic claims and edit reports can result in claims, never being submitted, she says. "When you submit claims electronically, a report comes back to you that says these claims didn't go through the insurer's filter. That means those claims need to be worked because they need additional information or contain an error. It also means those claims never went out the door. If you don't look at those reports, find and correct the problems, and resubmit the claims, you'll never get paid for them," she observes.
 
Similarly, electronic remittance reports and claim rejections, such as an explanation of benefit (EOB) form that indicates no payment, are pieces of information that practices can't afford to ignore. "A remittance report is where something went wrong with payment. It's either not posted correctly, or it's going to result in a denial because there is no payment. For example, Medicare will send you a report that says we are going to remit to you zero dollars, and here's why. You don't want to tuck that in a corner. You want to go ahead and work that," Woodcock explains.
 
The same applies to an EOB with no payment and a reason code, often referred to as "correspondence." "You'll be spinning your wheels doing follow-up if nobody is working the correspondence," Woodcock says. "If you are calling about a claim because you haven't heard from the insured in four months, and you are not working correspondence daily, I'll bet there's a piece of paper about that claim sitting in a file drawer somewhere."

Review All EOBs

 
The Physicians Clinic billing department works daily on aged A/R and reviews all EOBs for problems, Davis says. "We try to work our accounts receivable from both ends. The newer claims and the aging ones are looked at. We try never to let a claim get older than 120 days before someone has looked at it," she says.
 
EOBs are also examined for no payment. "We go through every single voucher that comes in and look for a zero pay. And when we find a zero pay, we ask why," she adds. If the practice discovers an insurer is not processing the claim correctly, it discusses the problem with the company. The practice also keeps a log of problems, with whom each was discussed, and the resolution, if any. The log helps the practice identify recurring and consistent claim-processing issues that need to be addressed with the insurer. The practice also meets monthly with its biggest payer to discuss such claim-processing issues and ways to solve them.
 
3. Looking at the wrong performance indicators. Practices tend to measure the wrong things when they try to evaluate how their billing and collection departments run, Woodcock says. For example, a practice may conclude that its billing department is doing well because its collections are higher than they were in the previous year. But, she continues, the collections could appear higher because the billers are more productive, physicians improved the accuracy of their coding, or the practice added another physician who brings in more patients.

 
Woodcock recommends three indicators:
 
1. The percentage of total A/R over 120 days old. "The percent of A/R over 120 days can tell you everything. It's the proportion of your business outstanding after four months. It doesn't say you have $10,000 outstanding, which could be justified by saying your fees are high. If your percent in A/R over 120 days is 25 percent or higher, you've got to look into it. You may have an excuse, but it's a sign you're not getting paid," she says.
 
2. The adjusted collection rate is determined by taking the amount of collected revenue, excluding contractual and noncontractual adjustments, and dividing it by allowables. The adjusted collection rate tells you how much you actually collect out of the dollar amount an insurance company allows for a certain CPT code. "Insurance companies really don't care what you charge. They care about their allowable and what they pay on that allowable. What we want to figure out in the billing department is how much is the practice collecting of what they are able to collect," she says.
 
Many practices have trouble determining exactly what they collect versus what they potentially could collect because they make adjustments as they post charges, simply writing off what wasn't paid. For example, if there are two CPT codes on a Medicare claim, and Medicare failed to pay for the second code, the payment would be posted and the unpaid portion written off as a Medicare adjustment. "If, as we are posting the payment, we just write off that second CPT, we never will be able to differentiate between a contractual adjustment and a noncontractual adjustment. What we are trying to figure out are the noncontractual adjustments. What things are we writing off that we shouldn't?" Woodcock asks. If your adjusted collection rate is more than 5 percent, Woodcock  recommends analyzing adjusted claims to pinpoint the problem. Such an investigation may reveal that payments are being written off because the claim was submitted past the timely-filing deadline, or because a preauthorization was not received. "What you'd be looking for are write-offs that are the practice's fault and aren't required by any contract," she says.
 
3. The number of days gross charges in A/R, which is determined by taking 12 months of gross charges and dividing it by 365 to get charges per day. Then, divide total A/R by that charges-per-day figure to determine the number of days in A/R.
 
"Days in A/R takes into account productivity. It normalizes the fact that you may have, for example, a high-producing physician and a low-producing physician because the ratio is based on charges per day, not just total A/R," Woodcock explains.
  
The Physicians Clinic billing department monitors how many days claims are in A/R and works them to avoid letting them age more than 120 days, Davis says. To monitor its performance, the practice tracks denials through its billing computer system by using its own internal adjustment codes that are applied as payment is posted. "We have specific, two-digit adjustment codes for specific denials, and we have 50 such codes available."  Davis says. "For example, we have a code for specific commercial plan adjustments that are contractual. There are codes for denial reasons, such as no documentation to support the claim. We have a code for untimely billing. We track all these codes quarterly, and report our findings to our continuous quality-improvement team, our administrator and our doctors. We let them know what's going on, and where the problems are. And, to fix those problems, we look at the process," she explains.
 
Note: To obtain a copy of the Medical Group Management Association's report Performance and Practices of Successful Medical Groups 2000, visit www.mgma.org and click on its "Store" link.