Six Sigma Blogs

One of the key advantages of billing outsourcing, when it is done correctly, is the clear alignment of incentives between the practice and the billing company.

Almost all medical billing companies are paid a percentage of what they collect. This means they are only paid when you are paid. It also means the more they collect for your practice, the more they are paid. Internal medical billers, on the other hand, are almost always hourly employees. They are paid based on showing up in your office, not based upon how well they perform your medical billing or how much money they collect for your practice. This is not an alignment of incentives.

Most people would prefer all their service providers to have “skin in the game” and only be paid for success versus just for making an attempt. For instance, would you prefer to pay your mechanic only if he properly fixed your car (and only for a previously agreed to price) or would you prefer to pay him an hourly rate and hope he will be as effective and efficient as possible in performing the job?

In a conversation I had recently with a busy cardiologist I heard a story that is not unusual. One of the office’s medical billers called in sick. Some information was needed while she was out so the office manager went looking through her desk. She did not find the information she needed, but she did find over $40,000 worth of claims that had not been billed and had gone beyond the timely filing deadline. That is right, $40,000 worth of claims that could not be billed and for which no money would ever be realized. Upon the billers return she was “sternly reprimanded for this egregious error. Not fired, but reprimanded for costing the practices tens of thousands of dollars. There is no alignment of incentives present in a situation like this.

This reaction is surprisingly common. Typically practices have so much trouble recruiting, training and retaining billing staff they are reticent to let one go. In addition, the billing staff complains about how understaffed they are and how they cannot be held responsible for not being able to complete even basic medical billing tasks. In this office’s case they moved the biller to the front desk and had her in charge of collecting patient demographics. A place where she can do even more harm through poor performance.

This volume of missing charges should not have gone unnoticed. There should have been multiple reports that could have identified such a problem. The practice, unfortunately, did not know how to properly utilize the capabilities of the billing system and so, the required reports were never run. Proper use of a billing system requires much investment in time and training, an investment that hourly employees often do not make. This $40,000 in unbilled charges is likely a proverbial roach of this practice - in other words, for the one you see there are likely hundreds you do not.

Utilizing a medical billing company is not a panacea for such situations, but if you insure the following actions are built into your agreement with the billing service, you should be in good shape:

- A fully integrated tracking system (charges by locations/provider and payments by source - lock box, office, PO Box) should be in place and you should have full visibility into the system at all times.

- Your medical billing company should reimburse your practice for what you would have been paid by the payers based on your allowable for any claims that go past timely filing for reasons within the medical billing company’s control. What this means is that you never suffer financially if the billing company drops the ball. Try to have your billers reimburse you if they drop the ball.

- You should have access to the billing system so that you can see real time status of your account.

We often hear from the physicians how hard and long they work for ever decreasing reimbursements. All this is true. However, too often we also see practices (through various reasons) hurt themselves financially - over and over again.

No - your staff will not work harder for you just because you employ them; and No - the biller who lost you $40,000 will not do any better job collecting money and gathering information from patients. You will probably need to “sternly” reprimand them again.

Selecting a world-class medical billing service that provides total visibility into their process and has incentives that are fully aligned with those of the practice is the most reliable road to outstanding medical billing and financial excellence.

Copyright 2008 by Carl Mays II

Clean Claim Laws are currently in place in every state. The assistance provided by the laws ranges from states like South Dakota which has no economic penalty to Texas where the payer sometimes is required to pay billed charges

The fundamental concept behind Clean Claim Laws is that insurance companies must respond to a clean claim within a given period (typically 30 days for electronic claims). Systematic utilization of these laws will allow a medical billing service or medical practice to significantly accelerate and increase collections. In order to take advantage of the clean claim law one must have a monitoring system built into your medical billing process that identifies:

1. Which payers are subject to the clean a claim law (not all are),

2. The date your practice initially submits each medical claim;

3. When a request for information was received from the payer (if you receive one then it stops the 30 day clock until you respond),

4. Events that restart the clean claim clock (e.g., your office replies to a payer’s information request), and

5. The date from the payer’s communication about the final disposition of the claim.

The idea of systematically tracking all of this information may be daunting, but with a smart system design it is possible and most definitely a worthwhile undertaking. After submitting a few Clean Claim law violation reports you will see your claims pay faster. I have seen situations where payers have actually called just to assure the practice that claims will be quickly processed.

If you would like to better understand the benefits of implementing a Clean Claim Law tracking system before investing the time and energy into the design and implementation of the system, then run a pilot. Identify a payer that is consistently in violation of the Clean Claim Law. Select 30 to 50 claims from this payer and manually track all of the items outlined above. Once you have some violations, file a report following your state’s guidelines. This process will allow you to better understand what will be required to make such a system a permanent part of your medical billing and see the potential benefit to your practice.

Copyright 2006 by Carl Mays II

Almost half of hospitals senior executives responding to a recent Transunion survey reported a marked (between 6 and 10 percent) growth in bad debt over the past 18 months. Over 25% realized between 11 and 20 percent growth in this key metric.

Additional important information in the survey included:

- Nearly 79 percent of respondents said they are concerned that Consumer Directed Healthcare Plans will increase their bad debt within the next two years.

- When ranking business objectives in order of importance, 43 percent of respondents said increasing collections at the time of service and post discharges were their number one objective, followed by improving operational efficiencies at 21 percent and decreasing bad debt at 18 percent.

These data points show a compelling need to revisit medical practice patient collections and insure it is being done effectively and efficiently. Tools and approaches that can serve a practice well include:

- Better use of on-line electronic payment tools. The latest tools can make it easy for you to accept practically any form of payment on-line and for patients to pay in a self-serve manner.

- Do not allow you credit card readers to be a bottleneck. The latest ones are inexpensive (since they are software based and hook up to a front desk PC). You should have at least two both for backup purposes and to facilitate taking payments from multiple patients at once. In addition, try and use one that converts checks to electronic payments for almost instantaneous processing of checks.

- Develop and rigorously follow a policy concerning patients that cannot pay co-pays (and other prearranged payments) on the day of service. Will you tell them they need to reschedule? Will you call and collect payments before they arrive? If you see patients that cannot pay on the day of service then make it easy for them to pay you after the fact. Do not wait for the claim to adjudicate to ask for them to send the co-pay. Give them a patient statement showing the co-pay balance due before they leave the office. Include a pre-addressed payment envelope.

- Tailor your follow-up based on the credit status of each patient. Your three basic categories could be: (1) insured, employed patients with a record of timely payments; (2) insured, employed patients with a spotty history; and (3) uninsured or underinsured patients. You might want to dispense with follow-up calls altogether for the underinsured or uninsured, but as part of your collection policy, you might help them sign up for Medicaid or charity resources from the get-go.

- Track how well your front desk staff collects co pays and coinsurance. Reward and discipline accordingly.

These steps can help you avoid falling prey to rising bad debt.

Copyright 2008. Carl Mays II

It has been accurately stated that you cannot manage what you do not measure. This is particularly true in the arena of medical billing denials. Without a strong Revenue Cycle Denial Management system in place you cannot properly manage this critical element of medical billing. If you are not managing your denials then you are most likely leaving more than 20% of your revenues uncollected.

There is a lot of confusion about the definition of denial management. If you ask five medical billing experts what this means you will probably receive six answers.

A good start to finding out if your practice is suffering from improper denial management is to find out from your medical billing service (or in-house medical billing manager) how they manage denials and how they measure success in this area.

A good denial management system is not simply about working denials, it is about systematically gathering the data required to eliminate denials. Working denials is like pumping water from your basement when a pipe bursts. Denial management is about fixing the pipe so you no longer need to pump water from the basement.

The system accomplishes this needed service by tracking, quantifying, and reporting on every claim billed for which any payer denied the service. The reporting should be comprehensive, tracking all denials (not just selected denials). If used properly, the system can reduce first-time claim denials by over 50 percent. Many practices have no way of monitoring if payers are denying their claims at excessive or unwarranted rates, or even for what reason. These practices are probably losing 10 to 20 percent of their total revenue.

What is typically missing from troubled billing operations is the lack of the management-reporting expertise needed to extract the data in a concise and meaningful way coupled with a lack of methodical, measured billing process needed to correct mistakes. A comprehensive Revenue Cycle Denial Management system has two main purposes. The first purpose is to provide feedback on why claims are denying and how many claims are not being paid on the first submission to the respective payers. The second is to fix these issues. Effective Revenue Cycle Denial Management software databases must be designed to track, quantify, and report on all denials for all payers.

The standard denial management output should track by payer, the number of claims denied and the reason for the denials. This must be coupled with a dashboard reporting tool for quick visual management. With these reports the billing team can easily identify which payers are inappropriately denying claims; they can also compare these payers to their peers for proper trending and follow-up. This output allows the medical billing team to develop and refine payer specific rules to prevent future payer denials by insuring all claims are clean when they are submitted.

With the analytical capabilities available, the medical billing department or medical billing company can identify systemic medical billing problems, create and test solutions to the problems and implement process changes that will increase collections AND drive down medical billing costs. One example of this is pursuit of Clean Claim Law violators with the denial data produced from the denial management system.

As previously mentioned, an effective denial management system is critical for your practice if you want to improve your medical billing and hasten your collections. Implementation of the proper system can easily increase collections by more than 10% and could even exceed a 20% increase in collections.

Copyright 2008 by Carl Mays II

No matter what technology you deploy or the strength of your process, superior medical billing ultimately relies upon a strong billing staff. There are four key elements to creating a world-class billing team:

1) Deploy a systematic approach to and dedicated resources for obtaining and developing strong employees:

The leading billing organizations recruit the best staff. A dedicated, specialized HR team evaluates applicants-applicants must pass a proprietary billing testing process assessing both skill and will. This process shouldn’t be different from the recruiting process of a Fortune 500 organization.

The leading billing organizations train to develop desired quality. Junior staff members must pass demanding training programs-junior team members are developed into billers, capable of following the measured and monitored billing process. In addition, staff is trained throughout the year in latest payer rules, follow-up techniques and compliance guidelines. A dedicated Compliance Officer is responsible for all additional HIPAA and OIG training.

If you do not remove weak performers from your team they will demoralize the entire group and will bring most people down to their level of performance. It is. Unfortunately true, that on bad apple can spoil the bunch. Each year remove the weakest members of the team based upon clear performance metrics.

2) Focus your team members: The best medical billing processes are designed to allow individuals to specialize in specific areas such as charge posting, insurance follow-up or payment posting. Such specialization allows the individuals to become true experts capable of spotting issues quickly that billers spending their time performing multiple tasks might miss.

3) Invest heavily in analytical efforts: Continuous improvement of the billing process and the billing team requires significant and on-going analytical efforts. By measuring key factors about both payers and the billing process, a billing group can speed up collections, lower denials and lower the cost of the billing process.

4) Compensate your medical billing specialists based upon performance, not effort: Your billing department should succeed when the practice succeeds. Many good billing systems have been undermined by a compensation approach that does not give the medical billing team the proper motivation to doggedly and efficiently pursue the practice’s claims. Remember to insure the compensation system falls with the OIG’s guidelines.

Utilizing these concepts will allow you to assemble and grow a medical billing team that will be capable of utilizing a great medical billing process to deliver powerful results.

Copyright 2008 by Carl Mays II

Bad debt is on the rise according to a 2008 survey from Transunion. This survey reported that almost 80% of the hospitals responding indicated bad debt growth of between 6 and 20 percent since in the past 20 months.

Additional important information in the survey included:

- Consumer Directed Healthcare Plans are a source of concern for hospital administrators. Almost 80% believe they will be a significant source of additional bad debt by the end of 2010.

- When ranking business objectives in order of importance, 43 percent of respondents said increasing collections at the time of service and post discharges were their number one objective, followed by improving operational efficiencies at 21 percent and decreasing bad debt at 18 percent.

These data points show a compelling need to revisit medical practice patient collections and insure it is being done effectively and efficiently. Tools and approaches that can serve a practice well include:

- Expand your use of the latest generation of on-line bill presentment and payment acceptance services/applications. These latest tools prevent you from ever being unable to accept a form of payment and they can lower your cost of pursuing patient balances.

- Do not allow you credit card readers to be a bottleneck. The latest ones are inexpensive (since they are software based and hook up to a front desk PC). You should have at least two both for backup purposes and to facilitate taking payments from multiple patients at once. In addition, try and use one that converts checks to electronic payments for almost instantaneous processing of checks.

- Put in place a clear policy about paying co-pays (and any other amounts due) on the day of service. Once in place; stick to the policy. If the policy allows patients to be seen without paying amounts due on the service date then make sure they leave the office with the information they need to pay you quickly - a patient statement and an envelope with the payment address.

- Prioritize patient collection efforts by more than just the balance owed. Consider the patients likelihood to pay. A $1,000 balance from a patient that is only 20% likely to pay is worth much less than a $500 balance from a patient that is 80% likely to pay. Elements to consider when accessing likeliness to pay include prior payment history and employment status.

- Use a monthly bonus system for employees that collect patient payments in the office. Make the amount meaningful and the metrics clear and easy to track.

Follow these steps and you can side step the bad debt train wreck.

Copyright 2008. Carl Mays II

One of the most important things in billing is to create and follow a very structured plan that can be measured each step of the way. Remember, if it cannot be measured and monitored it cannot be improved! One key element of this plan must be how to consistently and reliable create clean claims.

A process that insures claims go out the door clean can lower a practice’s AR to well under 45 days.

The leading medical billing services utilize scrubbers that ensure your claims are clean before they are submitted to payers. These scrubs accelerate the speed of collections by avoiding denials and delays. They also increase collections by minimizing the volume of “re-work” and allowing billing staff to focus their efforts on pursuing true collections improvement opportunities and not simply resubmitting claims that should have been paid the first time. As a result of these scrubbers, over 90% of claims submitted are paid upon first submission. These “scrubbers” include:

- A baseline scrubber. This scrubber insures that the claim has at least the basic information such as a social security number, properly formatted insurance id number, etc.

- Scrubber that checks coding, bundling, and procedure information versus local Medicare and CCI rules. This scrub assures better coding, identifies overlooked procedures or codes.

These scrubbers will lead to a marked improvement versus a billing process with no scrubbing; they are, however, not a complete scrubbing solution. A full solution requires a scrubber that can have a customized rule set that takes the knowledge of the billing company or medical practices and codifies it so that it can be applied to every claim before submission. This scrubber is:

- Customizable Rule Scrubber that applies the learnings from each denied claim to all future claims. This allows the rules to stay in step with the payers ever changing adjudication rules. Such scrubbers are the hallmark of the best medical billing services.

Consistent use of the scrubbers outlined above can decrease a medical practice’s collections cycle by up to 50 days. This is why you need to insure this critical step is being completed no matter who is doing your Medical Billing.

Copyright 2008 Carl Mays II