Revenue Cycle Leakage: 5 Areas Your Practice Needs to Plug

dollar signMost practices today are barely getting by financially. With declining reimbursement from government and private payors and increasing operating expenses associated with new mandates such as Meaningful Use and ICD-10, many practices are seeing profitability - and sometimes their own salaries - decline dramatically. Collecting every last dollar earned is critical to their future survival and success. The days of being able to leave money behind with ineffective billing practices are long gone. Simply put - every dollar counts. But according to statistics from MGMA, most practices leave up to 30% of their potential revenue on the table every year. ¹ That 30% can be the difference between staying open and independent. The areas of revenue cycle leakage are well known but due to resource constraints, ineffective business processes or a lack of sophisticated automation (usually a root cause of the first two problems), most practices can’t seem to get their arms around them.

1. Eligibility - More than 25% of payor denials occur because patients are not eligible for benefits. ² Insurance information is the same as a credit card - it is proof of an ability to pay for a service to be provided. Most businesses will not provide a service until they confirm a customer’s ability to pay (usually by confirming a credit card) so why should a physician practice be any different? Seeing a patient without confirming their insurance information is taking a huge chance on ever receiving payment. The problem is that checking eligibility manually - through the web or online - is terribly cumbersome and time consuming. It can also be expensive if a practice is paying for each transaction to automate the process through a traditional practice management system or clearinghouse. 2. Not collecting patient responsibility - As patient responsibility increases year on year - it is now at nearly 25% of the value of the total bill ³ - practices need to develop a core competency in collecting the patient portion. The insurance payment alone is unlikely to even cover the full cost of the service provided. The patient portion is often the source of profit in a visit but practices generally only collect on 50% of what they are owed from patients. 4   Understanding patient responsibility and having the skills to collect co-pays, co-insurance and deductibles during the visit are critical given the challenges of collecting after the fact. In order to do that, however, the practice needs to have the information on patient responsibility and past due balances close at hand. 3. Coding Errors and Omissions - Even before the transition to ICD-10, coding an encounter that includes all the correct codes, modifiers and documentation was increasingly difficult. The 5-fold increase in codes with ICD-10, will make it close to impossible. CMS is estimating that denials will rise 100-200% and that days in AR will increase 20-40%. 5 4. Lack of Follow up - What happens when a claim is denied either for bad demographics or due to coding errors? It is often far too costly and time consuming for a practice to do the necessary follow up and appeals to ultimately secure payment. In fact, 65% of denials are never even appealed. 6  Work has been done, a service provided but an administrative error dooms the provider to non-payment. 5. Underpayments - Even when a claim is paid, it is sometimes not paid correctly. And when there is a mistake in payment, it is often to the benefit of the insurance company. According to the AMA, up to 10% of claims are not paid correctly. 7  But most practices are simply so pleased to be paid at all that they don’t bother to appeal these underpayments. That is even if they have the ability to flag them. So 30% left behind every year through eligibility denials, coding errors, unpaid patient balances, lack of follow up and underpayments. That is what is creating the vicious cycle that exists in many practices today. Practices simply don’t have the money to invest in the sort of sophisticated systems that offer real-time automated eligibility, robust coding rules, patient collection tools so they lose more money every year putting them even further behind the technology curve. What practices need to break out of this cycle is a partner that offers aligned incentives, state-of-the-art RCM-automation tools, visibility and accountability and variable pricing based on performance. Not trying to do it all on their own while not losing control with a traditional outsourcing model. It is a new way, a third approach that leverages the connectivity and transparency of cloud-based technology combined with purpose-built tools designed to plug that leaky revenue cycle and get that 30% back. Click link to download PDF version of article:  PluggingaLeakyRevenueCycle   1. “5 tips to improve your medical practice’s billing and collections,” MGMA In Practice Blog, Ot 2010, http://www.mgma.com 2. AMA, “Follow That Claim,”http://www.ama-assn.org/resources 3. “New AMA Study: Patients Responsible for Nearly One-Quarter of the Medical Bill,” June 2013, http://www.ama-assn.org/ama/pub/news/2013/2013-06-17 4. “The next wave of change for US health care payments,”McKinsey Quarterly, May 2010 5. “Readying Your Denials Management Strategy,” HFMA Educational Report, February 2013 6. “Insurance denials: Is your practice to blame?” MGMA In Practice Blog, Dec 2011, http://www.mgma.com/blog/insurance-denials-is-your-practice-to-blame 7. AMA, National Health Insurer Report Card, 2011-2013, http://www.ama-assn.org/ama/pub/news/2013-06-17-national-health-insuranc...  

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