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INCREASING PROFITS

5 proven levers for improving your medical practice

Virtually any medical practice can immediately improve its revenue, cash flow, profitability, and growth, along with streamlining its operations by embracing five levers for medical practice improvement.

John W. McDaniel, founder and chairman of Peak Performance Physicians LLC of New Orleans, LA, says these five levers apply to any type of healthcare business, whether it is a hospital, a medical practice, a nursing home, or a home healthcare agency.

The levers are reimbursement systems, billing and collections processes, accounts receivable management, operations improvement, and practice growth.

Lever 1: Reimbursement systems.

Reimbursement systems considerations include examining coding compliance, analyzing your professional fee schedule, analyzing fixed fee (Medicare/Medicaid) payor impact, and looking at managed care contracting.

Important reimbursement systems recommendations from McDaniel include:

  • Conducting an evaluation and management coding utilization analysis by physician in order to ensure compliance against CMS Audit Standards and determining areas of potential undercoding or overcoding. In most practices, coding is an area for immediate profitability improvement.
  • Conducting quarterly coding in-service training with all physicians and appropriate clinic staff.
  • Performing documentation chart audits for each physician in order to ensure proper documentation and medical necessity vis-à-vis procedural coding.
  • Conducting educational sessions with each physician in order to review the outcome of your assessment and establish a framework within which each physician may accomplish these tasks in order to satisfy compliance requirements.
  • Conducting an annual professional fee schedule review.
  • Conducting charge validation studies to determine your managed care reimbursement.
  • Establishing a chart audit committee to perform quarterly random sampling audits from a compliance standpoint, as well as to ensure the capturing of all appropriate charges.

Lever 2: Billing and collection processes

Billing and collection processes boil down to converting effort to cash, says McDaniel.

They include point of service collections; initial billing (you should get your bills out within one day of seeing a patient); re-billing frequency (how promptly clients are re-billed following claim denials and rejections of coverage); a claim denial and rejection follow-up process; an EOB (explanation of benefits) review; credit balances (if you have overpayments, you have 60 days to return those monies and if you don’t it’s deemed a false claim); and looking at the costs and benefits of in-house billing versus outsourced billing.

McDaniel’s recommendations regarding billing and collection procedures include:

  • Developing claim denial and rejection follow-up reporting on a monthly basis. This includes tracking the reasons for the denials and rejections by individual employee.
  • Developing monthly targets for point of service collections for the medical practice.
  • Developing a system for training compliance with patient payment plans.
  • Implementing formal training programs for front office personnel to decrease error rates for claim denials and rejections.
  • Ensuring consistent performance by front-end personnel with respect to insurance verification/eligibility and pre-authorization processes.
  • Monitoring credit balances on a monthly basis to ensure prompt refunding of patient overpayments.
  • Reviewing, revising and implementing written financial policies and procedures.

Lever 3: Accounts receivable management

The third lever for improving profitability is accounts receivable management, which McDaniel is “where the money is.”

“We utilize the 80/20 approach where typically 80 percent of your dollars will be in 20 percent of your payors,” he says.

Segregate aged trial balances by insurance company. “We like to re-sort them by age and by dollars. We want to drill down every single account as to why that account has not been paid. That’s where it’s beneficial to really have good relationships with your provider reps with the different insurance companies.”

Recommendations for accounts receivable management include these:

  • Consider using IRS Form 1099-C for uncollectible accounts exceeding $600. “Most people are not aware that if you forgive any debt over $600 you are supposed to report it to the IRS using a 1099 form as miscellaneous income. People don’t like getting reported to the IRS.”
  • Consider alternatives to collection agencies, such as using credit bureaus and small claims courts for dealing with excessive delinquent account balances.
  • Develop monthly audits of accounts receivable and claim denial follow-up, and review notes on each particular account in order to ensure that each account is properly worked on a monthly basis.
  • Develop segregated aged trial balances by major payors in order to facilitate follow-up with outstanding account balances in excess of 60 days by major insurers.
  • Increased surveillance as to charge/collection/adjustment ratios by payor should occur in order to detect areas of low reimbursement and/or delayed payments from major managed care companies.
  • Conduct quarterly monitoring of collection agency performance.
  • Look at the feasibility of outsourcing 90-day-plus insurance accounts.
  • Look at the feasibility of outsourcing all patient balance accounts.

Lever 4: Operations improvement

The fourth lever is operations improvement—involving everything within the four walls.

“How can you gain economies of scale? Are there any opportunities for outsourcing?” he asks.

Look at the possibility of saving on purchases by exploring group purchases opportunities.

Another area of cost saving involves changing the mix of personnel in your practice. But McDaniel warns against trying to save money by underpaying your front office staff.

If your practice has multiple sites, McDaniel suggests looking at implementing centralized scheduling.

Recommendations in this area include:

  • Developing an effective patient recall system.
  • Developing a monitoring system with respect to no-show patients and cancellations.
  • Developing performance monitoring benchmarks and metrics.
  • Implementing a medical practice compliance and integrity program.
  • Exploring opportunities for additional ancillary services.

Lever 5: Practice growth

Practice growth is the final lever.

“Are you monitoring who refers your patients? If you’re a specialized service, your customer is the referring physician, not the patient.”

You should also look at where your patients are coming from geographically. You might consider opening a satellite practice in a more affluent area.

Recommendations for growing your practice include:

  • Conducting patient satisfaction surveys.
  • Examining your patient scheduling efficiency.
  • Establishing physician productivity goals and monitoring reports.

Analyzing total work and relative value by CPT code, collections and patient expenses.


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