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Welcome to the ClaimCare Medical Billing Blog. We strive to provide content that improves the overall quality of medical billing efforts across the US. If you have any specific topics that you would like to see addressed in this medical billing blog please post the topic in the Medical Billing Questions & Answers Forum. If you have an article that you would like considered for publication in the medical billing blog then please email your article to resources@claimcare.net.

MEDICAL BILLING BLOG

Allowables and Medical Billing Yields: A few additional thoughts

Posted by Carl Mays on Mon, Jul 06, 2009 @ 11:48 AM

medical billing yields 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 medical billing 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

Tags: medical billing operations, medical billing education, medical allowables, improving medical billing, theoretical medical billing yield

Allowables: Understanding your AR with Medical Billing Yields

Posted by Carl Mays on Sat, Jul 04, 2009 @ 01:49 AM

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

Tags: medical billing school, medical billing operations, medical billing education, medical allowables, improving medical billing, theoretical medical billing yield

Allowables: How They Affect EOBS & Medical Billing Reports

Posted by Carl Mays on Sat, Jun 27, 2009 @ 01:34 AM

medical billing allowables 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

Tags: medical billing school, medical billing education, medical allowables, theoretical medical billing yield

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