Coding may not be the reason
It's easy to blame a practice's skyrocketing accounts receivable (A/R) on coding and the insurance companies. But our experience with orthopaedic practices, and the results of AAOS/KarenZupko & Associates (KZA) pre-workshop surveys on coding and reimbursement, indicate that the problem is a lot more complex.
To ensure that "clean" claims go out and proper payments are received, physicians and staff must accurately code and document services. But coding is only one component of a practice's revenue cycle—a highly interrelated process that begins before the patient arrives for his or her appointment and includes various steps, staff, and processes (Fig. 1). We have found that A/R and collection problems often arise when a revenue cycle is in disarray.
Most practices today do not address the inefficiencies within their practices that can negatively impact payment. In the past, enough money flowed from insurance reimbursements to keep practices in the black. "We'll bill you after insurance pays" was good enough because the patient's portion of the bill was not that substantial. Remember the days of the $250 deductible?
Over the years, however, practices have been experiencing declining reimbursements and increases in patient financial responsibility—a trend that is expected to continue. For example, the number of employed patients with high deductible health plans (HDHPs) has increased by 600 percent since 2005. By 2018, it's predicted that 50 percent of employers will offer HDHPs. If practices' revenue cycles do not adapt to include proactive processes, cleaner workflows, and well-trained staff, they will be forced to continue to write off more accounts to collection agencies and to bad debt. To avoid that, we suggest practices implement the following six strategies:
1. Conduct a root cause analysis of payment problems.
Similar to delivering good patient care, getting paid is a team sport. Claim denials or uncollected patient payments are rarely the fault of one person. Rather, they result from poorly designed processes, lack of information or training, and/or team communication errors. Because staff and physicians in many practices work in silos, not everyone on the team understands what's needed to generate a bill or follow up on an unpaid account. Team involvement in root cause analysis is vital.
Digging into process flows and staff competencies can be messy and uncomfortable, and that's why few practices do it. But until practices have data, they are just shooting from the hip. For groups that have blissfully separated the clinical and business sides of the practice, it's time to study up and scrub in.
The same techniques used to conduct a root cause analysis in the event of a bad outcome can also be used to identify the root cause of claim denial trends or an increasing percentage of A/R greater than 90 days old. In short, practices must assess processes and communication, ask questions, and gather data and results. The information in Fig. 1 can be used to guide discussions and observe workflows. See the sidebar for additional help with conducting a root cause analysis.
2. Provide patients a cost estimate and collect presurgical deposits.
Collecting presurgical deposits provides practices one of the best returns on revenue and patient experience for the least amount of effort. Yet, results of the AAOS/KZA's preworkshop survey on coding and reimbursement indicate that 57 percent of practices surveyed collect presurgical deposits, which means a significant number of them don't.
Implementing collection of presurgical deposits is critical, particularly as HDHPs proliferate. The Advisory Board Company's analysis of 400,000 claims found that a patient's propensity to pay decreases as deductibles rise, irrespective of the patient's income level. In other words, as HDHPs increase, so too will bad debt write-offs. Practices that schedule high deductible ($1,500; $2,500; or $5,000) patients for surgery without collecting any money up front will find that many of the patients won't pay their bill. A patient's propensity to pay by deductible size is illustrated in Fig. 2.
Patients who pay deposits have skin in the game, which increases their value perception. The cost transparency also enables them to make decisions about their care, especially if the procedure is elective. The practice's surgery coordinator or financial counselor should contact the patient's insurance plan to determine unmet deductible, co-insurance, and services that are not covered. This information, provided to the patient on a cost estimate spreadsheet or form, must be discussed with him or her before surgery is scheduled. Ideally, the presurgical deposit should account for 50 percent of the patient's out-of-pocket costs.
3. Collect the patient's portion of office services and any outstanding A/R balances over 30 days old at the time of service.
Data already in the practice management system (PMS) can be leveraged to increase collections. Staff should be trained to generate and use reports from the PMS that indicate the amounts patients owe, unmet deductibles, and ineligible patients from whom they can collect at the time of service.
Practices that see a high number of patients often find that printing out a table of the most common Current Procedural Terminology codes and top insurance plans—often with a patient's financial responsibility already calculated—can streamline the process.
4. Offer automated recurring payments.
Appreciated by patients, yet underutilized by practices, automated recurring payments charge a patient's credit card each month for an agreed upon amount. That means no more mailing paper statements, no more payment books, and no more staff interventions are needed. The process is payment card industry compliant and more secure than maintaining a spreadsheet with patient credit card numbers. This payment option is low hanging fruit that practices can implement swiftly. However, only 31 percent of pre-workshop attendees say they offer this option.
5. Offer patient financing.
With the rise of HDHPs, practices must offer patient financing options or risk never collecting a chunk of the patient's balance. Yet, only 25 percent of workshop attendees say they offer patient financing.
Sending statements for months (and often years!) is expensive. Asking staff to follow up on old accounts and make collection calls keeps them from higher-return activities, such as denial management. Insurance industry data show that 20 percent of all filed claims are rejected and 65 percent of those claims are never resubmitted. Imagine the revenue impact if staff had more time to analyze and resubmit 100 percent of denials.
We often hear from physicians that they don't offer financing because the companies charge a service fee. But that reasoning is flawed. It's true that the finance companies do charge a service fee. However, the payment—in full—is often made within just a few days. The finance companies also assume all the default risk as well as the logistics of collecting from the patient. The practice has its money in the bank and the account is off the books; there is no receivable to collect and no staff interventions are required.
The days of physicians offering what amounts to unsecured, interest free loans (internal payment plans) are over. Practices are not banks—you can't repossess a knee replacement.
6. Train the staff.
Imagine not attending any continuing medical education for 5 or 10 years. Would you be an effective surgeon? Probably not. The same is true for the business office staff. The efforts of staff who don't receive proper collections training may be ineffective and the practice's bottom line will suffer as a result.
Inadequate training is rampant in the practices we visit. The little training staff do receive is usually facilitated by a peer who has no training guide or written job aids. In most cases there is no reinforcement training, competency assessment, or ongoing training. It's important, therefore, to develop collections training and onboarding that is consistent and includes written materials. Schedule vendors to train staff on new technologies and procedures. Send staff to off-site training, and assign them webinars to watch and business articles to read. Investments such as these will pay big dividends in patient collections and revenue.
Physicians must recognize that the payment processes and solutions that worked well even a few years ago don't work today. For those whose receivables are on the rise, it's probably time to look beyond the coding and to think differently about the people and processes that impact payment. These practices will need to identify root causes of problems, be proactive about collecting from patients up front, and train their teams for success.
Michael R. Marks, MD, MBA, is a senior KZA consultant, a member of the AAOS Patient Safety and Medical Liability Committees, and cochair of the AAOS Communications Skills Mentoring Program. Cheryl Toth, MBA, is KZA's director of marketing.
Questions to ask during a root cause analysis
- Does our practice preregister new patients? Is this done by phone, on paper, or online?
- Who is held accountable when claims are rejected for errors such as "wrong address" or "wrong date of birth?" Have we provided enough training to avoid these errors?
- If we want staff to collect at the point of service, have we provided them with the amounts they can collect, by service/CPT code and by insurance plan? Do we have the right staff in these positions? Do they know how to ask for money and handle objections?
- Which staff is empowered to offer payment plans? At what point in the process? Do they have the tools necessary to help them automate this for patients (ie, a recurring payment technology)? Is our policy to proactively offer a plan or have physicians instructed staff to wait until the patient asks?
- Pre-AAOS/KZA Workshop Surveys, KarenZupko & Associates, Inc., Chicago, IL. Data is from results of 2017 workshop surveys taken through April 24, 2017. There were 142 total survey responses, though not all attendees answered all questions. Those who took the survey included surgeons, NPPs, managers, and staff.
- The IRS defines a High Deductible Health Plan as one having a deductible that is $1,300 for individuals and $2,600 for families.
- Minimizing Bad Debt: Point-of-Service Collections, The Advisory Board Company Financial Leadership Council, October 21, 2015.
- Minimizing Bed Debt: Point-of-Service Collections.
- Fighting Increasing Patient AR Levels Caused by High Deductible Health Plans
- Time Value of Money is the idea thatmoney available at the presenttimeis worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, providedmoney can earn interest, any amount ofmoneyis worth more the sooner it is received. Source: Investopedia.