MEDICAL BILLING BLOG

The June 1 Medicare Fee Cut - The Medical Billing Dance Continues

Physicians continue to see their collections, cashflow and emotions whipped around like a rag doll in the mouth of a rottweiler. Congress failed to act before the June 1, 2010 deadline. Once again physicians are "officially" under a new Medicare fee schedule that has an average reduction of over 21%. In reaction, Medicare will once more hold claims for the first 10 business days of the month (for June dates of service).

Physicians are being told that this 10 business day hold will have a minimal impact on their collections. This is not accurate, however, since Medicare is not holding the payments for 10 business days; rather they are holding the processing of the claims for 10 business days. It makes sense to hold the processing since if Congress negates the 21% pay cut then Medicare would need to reprocess the claims. This approach means, however, that at the end of the ten business day hold, Medicare will drop the full amount of held claims into the processing hopper and then the normal time line will begin (in other words, do not expect a big Medicare check on June 15th - which is the 11th business day of June). The bottom line is that unless Congress acts swiftly and thus Medicare begins to swiftly process claims, most physicians will see a big dip in their Medicare collections in June (since the payments typically seen in the last two weeks of a month are from dates of service in the first part of the month).

Here is the full text of the Medicare announcement (from the Trailblazer Website):

"The Continuing Extension Act of 2010, enacted April 15, 2010, extended the zero percent update to the 2010 Medicare Physician Fee Schedule (MPFS) through May 31, 2010. CMS believes Congress is working to avert the negative update scheduled to take effect June 1, 2010. To avoid disruption in the delivery of health care services to beneficiaries and payment of claims for physicians, non-physician practitioners and other providers of services paid under the MPFS, CMS has instructed its contractors to hold claims containing services paid under the MPFS (including anesthesia services) for the first 10 business days of June. This hold will only affect MPFS claims with dates of service on or after June 1, 2010.   This hold should have minimum impact on provider cash flow because, under the current law, clean electronic claims are not paid any sooner than 14 calendar days (29 for paper claims) after the date of receipt.   Be on the alert for more information about the 2010 MPFS update."

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Copyright 2010 by Carl Mays II. Carl is President and CEO of ClaimCare Medical Billing Service, one of the largest medical billing companies in the United States.

Medical billing collections will suffer no matter what Congress does

Everyone in the medical billing field is hopeful that Congress will act to defer (and ultimately eliminate) the proposed 21% fee reduction for Medicare.  Keep in mind, however, that March 2010 collections will likely suffer a delay even if the fee cut is deferred.  The coming months will be a challenging time for medical practices and medical billing companies.

In January 2010 Medicare had a 2 to 3 week delay in processing claims because they needed to update their system after Congress deferred the 21% Medicare fee reduction.  As of today, Medicare is still catching up in their claims processing (a fact that have not officially acknowledged).  ClaimCare found that as of February 23, 2010, Medicare was still at least a week behind in their typical claim processing time frame.  And this level of a delay happened when Medicare had plenty of advance warning concerning the deferral, so you can imagine what delays could result when they have less advance notice.  In addition to this delay, Medicare had a system problem that resulted in multiple weeks worth of secondary claims not crossing over properly.  This Medicare system problem has compounded the delay in collections.

There is every reason to expect another delay in Medicare payments in March 2010 if Congress issues a last-minute deferral of the 21% fee reduction.  Based upon past evidence and experience, if Congress does issue a deferment, we anticipate a 2 to 3 week delay in the Medicare claims processing and payments.  Therefore, when thinking about your cash flow for March 2010, you should plan for at least an additional 2 to 3 week delay for Medicare payments.

If Congress decides to delay the fee reduction for only 30 to 45 days (as they are considering), then this problem will be repeated and exacerbated in April if they pass yet another last-minute deferral.  Practices and medical billing companies need to plan on Medicare collections being less predicable and fairly erratic over the next few months.  As I stated earlier, this is a challenging time to be a medical practice or a medical billing company.

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Copyright 2010 by Carl Mays II. Carl is President and CEO of ClaimCare Medical Billing Service, one of the largest medical billing companies in the United States.

Patient Collections Even More Critical As The Use Of HSA's Accelerates

Without any intention to sound like a broken record... there is yet more data indicating how critical it is for medical practices to have a solid patient collection process in place. A new survey indicates that health savings accounts are growing in popularity.  Both the number of accounts and the amount of money in those accounts are growing at a significant rate. A recent study from Celent, a consulting company that works with banks, showed that the number of HSAs increased 46.1 percent between January 2008 and January 2009, and the money in HAS accounts grew by 62.6 percent. HSA accounts have an average account balance of $1,561. This number is likely significantly understated because most banks do not consistently purge inactive, zero-balance accounts.

What does this mean for medical practices? It means that they need have a solid set of tools, processes and policies in place for collecting the portion of their income that is the patient's responsibility. Some of the key elements of a world-class patient collections process are:

1. A clearly communicated patient collection policy that is consistently communicated to patients before they see the doctor;
2. An automated insurance verification tool that allows the front-desk to easily verify coverage and confirms the key parameters of the coverage (deductible, co-insurance percentage, and the amount of the deductible met for the current year);
3. An easily used tool that allows the front-desk to inform the patient before he leaves the office how much he will likely owe after the claim is adjudicated. This allows patient to pay their portion of the healthcare bill before they ever leave the office;
4. Quick claim submission and follow-up so that patients that have not paid their bill before leaving the office can be sent a patient statement as quickly as possible after the date of service;
5. Well designed patient statements that eliminate many of the issues that cause patients to treat bills from physicians differently than they treat credit card or utility bills;
6. Payment processing tools that automate and monitor payment plans; and
7. A system for ranking patient balances for follow-up effort based upon expected collections - not simply on the magnitude of the patient balance.

If you medical practices has not invested in developing a world-class patient collection process then you are likely losing at least 10% of your practice's potential revenue.

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Copyright 2009 by Carl Mays II. Carl is President and CEO of ClaimCare Medical Billing Service, one of the largest medical billing companies in the United States.

Assume People Have Positive Intentions

   Since I refer to Dale Evans Rogers in today's column, I guess I had better mention for my younger readers that she was once widely-known as "Queen of the Cowgirls" and teamed up with "King of the Cowboys" Roy Rogers to entertain many kids, including me, with movies and television shows. After hanging up her spurs, she became a much-in-demand inspirational speaker and writer. She passed away at the age of 88 in 2001, preceded in death by her husband Roy in 1998. 

   In her 1986 book, The Home Stretch, Dale wrote, "I don't know Carl Mays, but..." And then she went on to tell about something in one of my books. When I had a speaking engagement in Palm Springs a couple of years later, I contacted Dale prior to the trip and we made arrangements for me to visit with Roy and her. They had a home in Apple Valley and a museum in nearby Victorville, about 70 miles from Palm Springs. 

   A year later, Dale and I shared the speaking platform at a corporate conference. She emphasized the importance of assuming people with whom we live and work have good intentions. She said even when they mess up, still assume they were trying to do the right thing but just didn't get it right - and then work together to remedy the reason for failure. She admitted she had been burned by using this approach, but the few "burnings" were outweighed by the great dividends she and others received. Dale said, "I realize some people think this approach is not realistic, that it is naïve, superficial, phony and dangerous. Nothing could be further from the truth. Through the years I have discovered only tough-minded people have what it takes to develop and maintain a healthy and inspiring positive attitude in dealing with people and situations." 

   Dale's words came to mind when my son Carl II, CEO of ClaimCare, sent me a quote from Indra Nooyi, CEO of PepsiCo. She learned from her father in India, "Whatever anybody says or does, assume positive intent. You will be amazed at how your whole approach to a person or problem becomes very different. When you assume negative intent, you're angry. If you remove that anger and assume positive intent, you will be amazed.  Your emotional quotient goes up because you are no longer almost random in your response. You don't get defensive.  You don't scream. You are trying to understand and listen because at your basic core you are thinking, ‘Maybe this person is saying something to me that I'm not hearing...' 

   "In business, sometimes in the heat of the moment, people say things. You can either misconstrue what they're saying and assume they are trying to put you down, or you can think, ‘Wait a minute. Let me really get behind what they're saying to understand whether they are reacting because they're hurt, upset, confused, or they don't understand what it is I've asked them to do.' If you react from a negative perspective - because you didn't like the way they reacted - then it just becomes two negatives fighting each other. But when you assume positive intent, I think often what happens is the other person thinks, ‘Hey, wait a minute, maybe I'm wrong in reacting the way I do because this person is really making an effort.' " 

   Dale Evans and Indra Nooyi came from very different backgrounds, but both women gained the same valuable perspective to help them achieve success in their endeavors. 

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About our guest Blogger:

© Carl Mays, father of ClaimCare CEO Carl Mays II, is an author and speaker at over 3,500 events.  Contact carlmays@carlmays.com or 865-436-7478.  His motivational speaking and book information can be found on http://www.carlmays.com/.  The Student Mentoring site MyMerlin.Net for students and others is based on his book and program, "A Strategy For Winning."

Allowables: Predicting Expected Medical Billing Collections

This is the fifth and final article in my series on allowables. Now that we have covered how to understand your allowables, set your fee schedules, calculate your yields and value your AR, we are ready to discuss how to predict your practice's cash flow month-to-month.

In its simplest form, predicting collections can be done by taking your practice's average charges per month over the past year and multiplying by your weighted average practice yield. This calculation provides your average expected monthly collections. For instance, if you practice's average charges per month are $500,000 and your weighted average practice yield is 30%, then your average expected month collections should be around $150,000 ($500,000 X 0.3 = $150,000).

This does a good job of telling you're your average monthly collections and helping your understand if the collections your have budgeted for the year are supported by your charge volume. It does not, however, help you predict the month-to-month variations that can make managing a practice's cash flow difficult. These variations are primarily driven by changes in charge volume from month-to-month.

In order to capture the month-to-month variations it is necessary to add another element to your calculations; the distribution of the average month's payments by date of service. In other words, which month's patient encounters generated this month's collections? Once you know this you can apply your practice's average weighted yield to the portion of each preceding month's charges that will impact the current month's collections. This is easiest to see with an example:

Let's assume your weighted average practice yield is 30% and your collection distribution is:

• 15% of this month's collections come from this month's dates of service (month N);
• 40% of this month's collections come from last month's date of service (month N-1);
• 25% of this month's collections come from dates of service from two months ago (month N-2);
• 10% of this month's collections come from dates of service from three months ago (month N-3);
• 10% of this month's collections come from dates of service of 4+ months ago (month N-4+).

With this information in hand (which a good billing system or billing provider should be able to provide) you are ready to build a predictive collections model. If you use excel then you can build the model so that on one row your enter the practice's charges by month and then directly below you calculate the collections for the month. If we take the data from above, the calculation for each month would be (where n equals the current month):

 ((month N charges x 0.3 x 0.15) + (month N-1 charges x 0.3 x 0.4) + (month N-2 charges x 0.3 x 0.25) + (month N-3 charges x 0.3 x 0.1))/0.9  = Month N expected collections.

A couple of items of note:

• The faster your collections the more the current month's collections are dependent on the current month's charges.
• In order to simplify the calculation it is helpful to limit the calculation to the current month and the three previous months. This is what I did above and it is the reason that I divided the answer by 0.9. The current month and the preceding 3 months account for 90% of the current month's collections. When I divide the answer by 0.9 (90%), I take this 90% answer and extrapolate it to 100%.

Once you have constructed an excel spreadsheet with the formula's outlines above you can quite accurately predict your month-to-month collections and account for the impact of seasonal and vacation driven changes in your charge volume. In addition, with the collection prediction in place your can quickly spot billing issues before they have a chance to propagate.

Copyright 2009, Carl Mays II and the ClaimCare Medical Billing Company

Allowables and Medical Billing Yields: A few additional thoughts

 In my last post I outlined why yields are important and how to calculate them. In this article I want to follow up with a few more tactical points concerning medical billing yields:

1. Calculating yields requires accurate data about your procedure mix, payer mix and your allowables. If you do not have all of this data then you have bigger issues than just no knowing your yield - you need a new billing system.
2. Calculating yields is more complicated for specialties that have issues such as multiple procedure discounts. In situations like this you must understand what percentage of each CPT's occurrence will be subject to these discounts to gain an accurate yield. This is also true if you have other discounts that frequently apply such as assistant surgeon discounts. A fast way to understand the impact that these issues have on your yield is to calculate the yield on fully resolved claims from your billing system and see how much your yield is lowered by the effect of these various discounts.
3. The yield you are calculating is your theoretical yield. Your actual yield will be lower because of procedures that do not pay (e.g., preauthorization issues), patients that do not pay, bundling, duplicate claims, etc.
4. You need to recalculate your yield at least annually when Medicare and other payers change their contracts. You also need to recalculate your yield if there is a large shift in payer mix or procedure mix.
5. Looking at your yields between payers is a great way to compare the attractiveness of your various payer contracts. The payer yields moves away from looking at the multiple of Medicare that a payer says their contract pays and focuses instead on how the contract works for you and your procedure mix.
6. Along a similar line of thought to the point above, you can calculate the yield of a proposed contract to understand it true value to your practice and use this knowledge to better negotiate with a payer. For instance, if your fee schedule is set at 200% of Medicare and a payer contract has a yield of 48%, then you know that for your procedure mix the contract is actually paying less than Medicare (if it was paying at Medicare then the yield would be 50%).
7. Finally, ask you medical billing manager or medical billing company their thoughts on yields. If they do not completely understand yields and have thoughts on how you can use your yield to understand your practice, predict cashflow, compare contracts and negotiate contracts, then this is a major red flag in terms of their true understanding of medical billing.

Yields are a critical component of medical billing and practice management. The points above should help you become a "power user" when it comes to medical billing yields.

Copyright 2009, Carl Mays II and the ClaimCare Medical Billing Company

Allowables: Understanding your AR with Medical Billing Yields

This is the fourth in my series of articles on allowables and how they impact your collections and medical billing. Previous articles explored the reasons for setting fee schedules higher than expected collections and how this fee strategy coupled with contractual allowables impacts reports and EOBs. This article will discuss how to use the knowledge gained thus far to better understand the true value of a practice's AR.

Understanding the concept of yield is the key behind understanding the value of a practice's AR.  From a medical billing standpoint, yield is the amount of a claim that should actually result in a payment versus a contractual adjustment. In other words, if your yield is 50%, then on a $100 claim you should received $50 in payments and will write-off the rest to contractual adjustments. In the first article in this series on allowables I discussed why you should set your fee schedule higher than your contractual allowables. Having fees higher than allowables is what results in yields that are less than 100%.

Calculating your practice's yield is straightforward. At its simplest level you take the allowable for a CPT and divide by the fee you charge for that CPT. Using the example above, if your fee for a given CPT is $100 and your allowable for that fee is $50, then your yield is $50 (what you should collect)/$100 (what you charge) = 50%.

This is a straightforward calculation. The complication arises because of the various payer contracts for a practice and the fact that the yield for a specific payer often varies by CPT (i.e., with BCBS you may have a yield of 50% for one CPT and 60% for another CPT).

This means that calculating your yield requires you to understand your procedure mix. To get a close estimate of your yield for a specific payer you can:

1. Take your top 20 CPT codes and calculate the yield for each of these codes; and then
2. Calculate a weighted average for the overall yield based upon the frequency of each of your CPTs;

To move from a close estimate to a more precise estimate your repeat the above procedure but instead of only using your top 20 CPT codes, you use as many as is required to cover at least 90% of your charge volume with each payer. Typically, however, the top 20 CPTs provde an accurate answer.

Once you have completed the above exercise for one payer, you need to repeat this for each of your top payers (you should do this for the payers that represent at least 80% of your payment volume). Once you have done this you can then get an overall yield for your practice by creating a weighted average yield for the practice based upon your charge volume (not payment volume) for the practice. The idea of a weighted average yield of the practice works well as long as your procedure mix and payer mix are stable.  If either changes significantly, then you need to recalculate your yields.

With a weighted average practice yield in hand you can easily understand the value of your AR. If your practice yield is 50% and you have $500,000 in insurance AR then this AR is worth approximately $250,000. On the other hand, if you have $500,000 in insurance AR and a 30% yield, then your AR is worth $150,000. As you can see, understanding your yield is critical to understanding the true value of your AR.

Although developing yields can be tedious work, it is critical to know your practice's yield so that you do not make incorrect assumptions about the value of your AR or the cashflow impact of good and bad charge months.

Now that you understand your allowables, fee schedules, yields and AR value you are ready to predict and manage your practice's cashflow. Building and maintaining these predictions will be the subject of my next article in this series.

Copyright 2009, Carl Mays II and the ClaimCare Medical Billing Company

Allowables: How They Affect EOBS & Medical Billing Reports

 In my last article I discussed some of the principles and best practices to consider when setting a practice's fee schedules. This Article focuses on how your allowables and fee schedules shape the EOBs and reports you will see every day.

Impact on the Explanation of Benefits (EOB):

The main impact that you will see on your EOB is from contractual adjustments. Here is how this works on an EOB:

Let's say you bill $150 for a certain CPT and that your UHC contract allowable for this CPT is $100 and your patient has an insurance plan with a 20% co-insurance. Your UHC EOB will look like this:

• Charges: $150
• Allowed: $100
• Contractual Adjustments: $50 (difference between your fee schedule and your UHC contracted rate)
• Patient portion: $20 ($100 contract allowable times 20% patient co-insurance)
• Payment from UHC: $80

So, the $150 charge leads to an $80 payment from UHC and a $20 balance transferred to the patient. The amount you charge for this CPT has absolutely no impact on the $80 payment. If you charged $300 instead of $150, all that would happen is that the EOB would show a Contractual Adjustment of $200 (Your $300 charge minus the $100 contractual allowable) instead of $50. This is a critical point. Many new physicians think that a higher fee schedule will generate more income - this is not the case from payers with whom you have a contract. In addition, many new physicians do not understand why they see these contractual adjustments each month. As you can see the combination of your fee schedule and payer contracts lead to these contractual adjustments.

A final point here, payers make mistakes. Just because they say the contract allows a certain fee for a CPT does not mean they are correct. This is why it is critical to compare your allowables to your contracted rates.

Impact on your billing reports

Your will see two main impacts on your reports due to the interaction of your fee schedule and your allowable:

1. Contractual Adjustment Entries: As outlined above, all of your EOBs will show contractual adjustments. This means that all of your collections reports will show some of your Accounts Receivable (AR) was moved off the report due to payments (cash in the bank) and some will move off your report due to contractual adjustments (no cash in the bank). This is normal. It is critical, however, that your billing system is set up to differentiate between write-offs due to denials, timely filing issues, etc and contractual allowables adjustments. Assuming you are comparing allowables to your contracts then the contractual allowable adjustments are not a source of concern. Other types of adjustments/write-offs are likely costing you money.
2. Value of your AR: Because of contractual allowables, $1 of AR does not represent $1 of potential payments. This means that when you see $300,000 in AR you need to keep in mind that this is not $300,000 in potential payments. In the EOB example above, the initial $150 in AR only represented $100 in expected collections. Understanding this is critical to financial planning for your practice.

In the next article in this series I will go into more detail on how to get a realistic understanding of your AR using what you know about your allowables and fee schedules.

Copyright 2009, Carl Mays II and the ClaimCare Medical Billing Company

You are Losing Thousands to Healthcare Billing Underpayments

I am taking a brief respite from the previously mentioned outline for the series of posts on allowables and fee schedules to mention a key point about allowables - they are often ignored by insurance companies. If you are not systematically comparing your payments to your contracted allowables you are losing thousands of dollars. Most likely, your revenue is 7% lower than it should be - that is right 7%!

A recent National Health Insurer Report Card compiled by the American Medical Association measured payment accuracy of seven major payers: Aetna, Anthem BCBS, Cigna, Coventry, Human, United Healthcare and Medicare.

All of these payers to some degree strayed from contracted payment rate.   The worst offender was United (did not pay contracted rate in 38.4% of cases), followed by Cigna (did not pay contracted rate in 33.8% of cases), Aetna (did not pay contracted rate in 29.2% of cases), Anthem BCBS (did not pay contracted rate in 27.9% of cases), Humana (did not pay contracted rate in 15.8% of cases) and Coventry (did not pay contracted rate in 13.3% of cases).  Even Medicare missed contracted payment rates in almost 2% of cases.

It is hard to methodically track these underpayments.  From our experience at ClaimCare Medical Billing Services, as we look across multiple clients we will see the exact same CPTs being underpaid by the same amount by the same payer in a given month across all of our clients. The following month we will see the same payer switch to underpaying a different set of CPTs. These under payments are not huge but they add up quickly to big dollars for a medical practice. The combination of switching the codes being underpaid from month-to-month and keeping the underpayment amount "under the radar" can make this difficult for an individual practice to spot. It is also difficult for a billing office to spot if they are not comparing your payments to your contracted rates (and dealing with multiple procedure complexities properly).

At ClaimCare Medical Billing Services we have found that comparison of payments to allowables can increase a medical practice's collections by 5 to 10 percent.    This of course requires a strong process, powerful reporting technology and the ability to track complex procedures methodically-in the end, it can however add thousands of dollars to your bottom line.

Copyright 2009 by ClaimCare Inc and the ClaimCare Medical Billing Company

Medical Billing Allowables: How to Set A Practice's Fee Schedules

In my last article I discussed why fee schedules are set at levels above what a practice would expect to collect. In this article I will discuss some of the principles and best practices to consider when setting a practice's fee schedules. Before I start let me point out that this article is not about negotiating your contracts with payers. Doing that requires many steps, including obtaining a strong understanding of your cost structure. I am focusing only on setting the overall fee schedule for the practice once you know your allowables.

The main goals or principles to consider when setting a fee schedule are:

1. Be consistent: One key element of a fee schedule is not allowing inconsistencies in how the fees were set to make it hard to understand the true value of your AR at any point in time. If some codes are set at 300 percent of Medicare and others are set at 150 percent of Medicare and still others are legacy fees that are a random multiple of Medicare then it becomes difficult to look at your AR and quickly understand how much it should yield in terms of your collections. On the other hand, if a fee schedule is set in a consistent manner then some simple calculations will provide you with a yield which can be easily applied to you AR to provide you with a quick estimate of what you should collect. In a future article I will outline how to calculate your practice's yield.
2. Don't leave money uncollected: One of the key ideas to keep in mind is that no matter what an insurance plan is willing to pay for a claim, they will never pay more than you bill them. So, if BCBS is willing to pay $150 for a level 3 office visit but you bill them $125, they will only pay you $125. In addition, some plans pay a percentage of billed charges. Not many do this and typically they represent a small percentage of the practice's charges, but there is no reason to leave any money uncollected. Finally, payer allowables can change throughout the year. If you are charging BCBS $150 (from our previous example) and at some point the allowable goes up to $165, you will only receive $150 unless you increase your fees. So, you need to set you fee schedule high enough that you never bill a contracted payer less than they are willing to pay and high enough that you can reasonable take full advantage of plans that pay a percentage of billed charges. Finally, you want to set fees high enough that you have "wiggle" room and are not caught off guard by unexpected shifts in your allowables (like the BCBS example I provided earlier).
3. Don't scare away patients: So, given the two principles above why not simply charge 10 times Medicare and be done with it? Well, there are two ideas to keep in mind here. First, many self-pay patients (or those with high deductible insurance plans) will call a doctor's office and ask what about the charge for an office visit or procedure. If the patient hears that your office visit cost $1,500 they will likely move on to the next practice.  The second idea that you need to keep in mind is that patients will see on their Explanation of Benefits (EOBs) that you charged $1,500 for your office visit. Even though the EOB shows you may only have been paid $150, the idea that you charged so much can easily lead patients to view the practice as greedy and unreasonable.

So, given the ideas above you want to set the fee schedule consistently high enough not to leave legitimate money uncollected but not so high that you risk alienating patients when they receive an EOB or are told the charges for the day.

An easy way to achieve this balance is to set the fees at a reasonable percentage of Medicare. Often family practices will use 150 to 200 percent of Medicare and specialist will use 300 percent of Medicare. The percentage you select should be informed by practices in your area and your own payer contracts, but you will typically be quite safe with 200 to 300 percent of Medicare. Before finalizing your fee schedule you should always make sure that none of your payer contracts have carve outs or allowables that exceed (or even come within 25 percent) of your fees. One safety net you should always have in place is a report that identifies any claims that paid at 100 percent of billed charges. If you see this, then your charges for the codes on that claim are too low and you need to revisit your fee schedule.

Now that we have discussed why fees are set above expected collections and how to think about setting fee levels, it is time to discuss how your allowables and fee schedules interact to impact the reports and explanation of benefits that are seen in a practice each day. This will be the subject of the next article.

Copyright 2009, Carl Mays II and the ClaimCare Medical Billing Company