Look Before You Cross: A Practical Approach To Revenue Growth
By Frank Cohen, Director of Analytics and Business Intelligence
In a perfect world, you would show up to work, see a patient, submit a claim, and be paid. Patients would always arrive on time for their scheduled appointments having their correct insurance, health questionnaire and family history information in hand, ready to go when they arrive at the front desk. Your charges for the services rendered would reasonably reflect not only the cost, but the true value of what you did, and you would actually be paid the amount you billed. It goes without saying that, unfortunately, this is not even close to the world we live in.
In our world, a huge amount of competition exists for the limited dollars available to pay for healthcare services, and with recent quality and outcome measures added to the mix alongside dwindling reimbursement, it’s harder than ever for providers to simply stay in the black.
When presenting on this topic, we often begin by asking attendees: “What would you say is the most important responsibility of a medical practice?” The inevitable, nearly unanimous response (which may have even crossed your mind while reading this) is: “Provide quality care to our patients.”
This is a noble objective and is definitely high on the list, but in our opinion, it’s not achievable unless the actual most important obligation is met first: The obligation to maintain practice profitability. Unless you are a military or government-mandated practice, or some other form of deficit-funded facility, you’ll reliably go out of business if you aren’t profitable. If that happens, no one wins; your patients will no longer have access to the quality care you provide and you’ll no longer be practicing the way you really want to. In short, to take good care of your patients, you must first take good care of your practice.
Profitability is a simple equation
Profitability actually is a pretty simple algebraic equation: revenues divided by expenses. To increase profitability, you need to increase the numerator (revenues) or decrease the denominator (expenses), or do some combination of both. Let’s examine each of these options in a little more detail.
First, let’s look at expenses. You always have the option to reduce staff pay and benefits, but what happens when you lower these expenses to below market value? You end up with a high attrition rate (i.e., people quitting) or at the very least, a disgruntled staff. In either scenario, the quality, continuity of care, and office morale usually declines, resulting in a less-than-ideal situation for the practice.
This inadvisable option is further complicated by the recently finalized overtime law (see story, pg. 1), which effectively increases the number of employees who are eligible for overtime pay. Some practices turn to layoffs or reducing work hours in an attempt to control payroll expenses, but as many have discovered later, changing staffing levels without changing the way they do business ends up being more expensive in the long run because of mistakes, missed opportunities, and rework. Though it’s important to monitor and control your payroll expense, it may be even more important to examine other factors that are likely impacting your profitability.
How about reducing volume? Well, because we have not yet figured out an efficient way to get paid based on outcomes, volume continues to rule with regard to revenue, so when you reduce volume, you reduce revenue. The bottom line? Quality is expensive and volume is necessary.
If you can’t do much to make a significant dent in your expenses, then shouldn’t you just focus on increasing revenue via increased patient volume or charge amounts? Well, in theory, but as we mentioned earlier, that may be easier said than done. Unlike any other industry that comes to mind, healthcare is one of the few business models in the U.S. where, with the exception of concierge providers, the amount you charge bears little resemblance to the amount you’re eventually paid. Even if you filed 100% clean claims, you’ll inevitably be paid less than you should.
Here’s why: You’re scheduled to see a patient, but even before the office visit occurs, you have to verify the patient’s insurance coverage and that it will pay for the visit or procedure in question. After all, patients rarely pay for their own care. Finally, you see the patient and nearly 1,600 decision points later, one or more procedure codes are selected from a possible list of 150 or so evaluation and management codes and possibly 15,000 other HCPCS codes. Add to this the 300 or so possible code modifiers and you end up with around 976 billion possible combinations from which to choose.
Your job, should you accept it, is to pick the right one. And to get paid, you need to correctly match these procedure codes with one or more of the 69,823 diagnostic ICD-10 codes. Once you make it through these murky waters, the claim goes to a payer with a charge that often seems irrelevant because the payer has a predetermined payment amount. It derived this amount from one fee schedule out of a thousand that it has distributed between different markets and products. When the claim either goes unpaid or underpaid, there is a set of codes that comes from a list of five group codes, 250 reason codes, and 650 remark codes. This means there are 976 billion possible reasons for your claim to be unpaid or underpaid, and you are responsible for knowing which one is the right one. And if you didn’t do this in the beginning of the process, you likely will have some portion to collect from the patient, who must make a choice between paying you and taking the kids to Disney World. In the most recent National Health Insurer Report Card (created by the American Medical Association or AMA), it was reported that the payer ends up paying nothing for nearly one out of every five claims filed. Of the remaining four claims that are paid, approximately 80% are paid incorrectly.
— Frank Cohen (email@example.com) and Jason Stephens (firstname.lastname@example.org). Frank is Director of Analytics and Business Intelligence at DoctorsManagement. Jason is Director of Consulting Business Partners & Vendors at DoctorsManagement.
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