MEDICAL BILLING BLOG

The U.S. Census Bureau recently released a report revealing that the number of people without health coverage in the U.S. grew to 46.3 million in 2008, compared with 45.7 million in 2007.

According to the report, the number of citizens covered by private health insurance fell from 202 million to 201 million, and those with employment-based health insurance fell from 177.4 million to 176.3 million. The uninsured rate for native- and foreign-born people stayed about the same, with native-born persons at 12.9 percent, and foreign-born people at 33.5 percent. The number of uninsured non-citizens remained at approximately the same level, 44.7 percent uninsured. Meanwhile, the number covered by government health insurance jumped from 83 million to 87.4 million.

These finding reinforce the importance of good patient collections and bad debt management for medical practices. The expected collection levels from patients drops dramatically over time. Given this and the high rates of patient responsibility mean that a medical practice can easily lose 10% of its expected revenue to a bad patient collection processes.

The following articles can help you learn more about how to improve your patient collection efforts:

Improving Patient Collections

Patient Collection Tools

2009 copyright by Carl Mays II

   Like many of you, I am continuing to discover that more and more business is being conducted over the Internet and, specifically, by way of e-mail.  When I first began speaking professionally, I never imagined I would ever book engagements without communicating with the meeting planner on the telephone and through traditional mail.  Along came the popularity of the fax, which changed procedures somewhat, but nothing like the changes instigated by the Internet explosion about 10 years ago that began noticeably affecting the manner in which my speaking engagements were booked and continues to become more common.   

   Recently, I spoke for the first time with a meeting planner when she met me as I arrived at a conference in Arizona for which she had booked me as the keynote speaker.  Up until then, all communication with her had been via e-mail, except for the signed letter of agreement and deposit check I received through the postal service.  Even the questionnaire I require to be completed as I customize presentation preparations was handled through e-mail and never discussed on the phone.  To top that, however, I had another engagement where even the letter of agreement was taken care of over the Internet and the speaking deposit was made via Internet transfer.

   All of this is being shared in this column because it is hot on my mind as a result of a recent conversation with some other speakers who have been in the business for a long time like I have.  And the thing about it is, no matter the profession in which you are involved, if you have been around for very long then you know what the changes have been like in your specialty - and how things continue to change.     

   As many businesses can attest, the Internet affects all services and products.  In my case, selling books and other materials through my Web site has replaced flyers, brochures and various traditional methods. And I'm sure that many readers of this column agree with me when I say that letters received through traditional mail are becoming few and far between (except for bills - and even the billing companies are emphasizing more and more that consumers receive and pay bills via Internet).  In response to my columns, e-mails arrive weekly.  On the other hand, I can't remember the last time I received a column-response letter through the post office, which used to come frequently.       

   And with the introduction of MyMerlin.net, our new mentoring Web site for students and others, I am receiving some e-mail responses and questions that at first glance appear to be written in hieroglyphics or some alien language.  It's a continually-changing writing style that is popular with contemporary texters, tweeters and other such communicators.  In discussing this with school teachers, I am told that some students are trying to merge this communication style into text written for school projects.  Based on their frames of reference, experience and ages, teachers are dealing with this in various ways.

   I received a recent e-mail regarding MyMerlin.net that began with: "?4U" (Question for you).  Following the question that dealt with the disposition quiz I developed for the site, the e-mail concluded with: "TIA" (Thanks in advance).  Now, I will tell you, I am not into texting, but I did rather easily recognize the "?4U" part and deciphered the "TIA" closing.  I struggled through the question enough to comprehend its essence.  Maybe next week I will share with you the question and my reply to it.  It is something of interest to just about anyone, and I think of special interest to readers of my weekly column.

   TAFN (That's all for now).

______________

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."

A series of successful class action lawsuits have led to positive changes for physicians - in theory. I say in theory because medical billing companies and medical billing departments must be vigilant to make sure that payers are living up to the promises they have made as part of their settlement agreements.

It is critical that quick action be taken each and every time that a settlement agreement is violated. If you believe that Unicare, Humana or BCBS are in violation of their agreement then you need to file a compliance dispute form. Each company requires a different form - of course - but there is no charge for filing a dispute. These forms can be found on the HMO Settlements Web site in the Compliance Center.

This dispute process has teeth and physicians have recovered millions of dollars in previously denied and underpaid claims. In addition, they have also saved millions more by avoiding repaying amounts that payers asserted were overpayments.

An example of the rules by which BCBS has agreed to conduct business will demonstrate how significant the changes have been.  As a result of its settlement BCBS:

• May not seek overpayment recovery beyond 18 months (six months for insured plans) unless fraud is implicated;
• Must use a clinically based definition of medical necessity;
• Must adhere to most CPT coding rules, including payment for evaluation and management codes appended with modifier 25 and payment for add-on codes without reduction for Multiple Procedure Logic;
• Must pay for codes submitted with 59 modifiers to the extent they follow CPT rules regarding designation of separate procedures,
• Must provide 90 days advance notice of material adverse changes;
• May not require physicians to participate in all products,
• Must disclose their methodology for determining "usual, customary, and reasonable" amounts.
• Must not utilize global periods for surgical procedures longer than CMS', and
• May not automatically reduce CPT codes to codes of lesser intensity

In order for your practice to fully take advantage of these changes it is critical that you put in place processes to spot violations so that you can pursue the remedies that are proven to work (as described earlier). This is a great opportunity to take advantage of a more level playing field between providers and payers- do not let this pass you by. Make sure that the medical billing service or employee responsible for your medical billing is taking full advantage of these opportunities.

To put this into action you need a systematic process (such as automated reporting) to identify violations by the payers. This process needs to be as automated as possible so that you can catch all violations and not just catch them when they have occurred in volumes o large to miss.

Next you need a process to easily file disputes if a violation has occurred. Again, this must be automated so that it does not always end up at the bottom of the "to do" list. Finally, you need to have a system to follow the disputes to their conclusion.

With these elements in place you can be confident that you are taking full advantage of the agreements that have been made by payers. In addition, you will have a new and powerful weapon in your arsenal to maximize the legitimate collections you are owed for the high value services you provide and the hard work that you perform.

2009 copyright by Carl Mays II and the ClaimCare Medical Billing Company

   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. 

_____________________________

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."

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

   During the American Revolutionary War, Thomas Paine presented his case for independence from England in a pamphlet titled Common Sense.  He also wrote a series of essays collectively titled The Crisis.  Many of us are familiar with the opening sentence of the initial essay of December 23, 1776: "These are the times that try men's souls."  With these words he began his ongoing support for an independent and self-governing America through the war's many crises.  General George Washington found the essay so inspiring he ordered it read to the troops at Valley Forge. 

   Paine emphasized: "The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman.  Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph.  What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value.  Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as FREEDOM should not be highly rated.  Britain, with an army to enforce her tyranny, has declared that she has a right (not only to TAX) but ‘to BIND us in ALL CASES WHATSOEVER' and if being bound in that manner, is not slavery, then is there not such a thing as slavery upon earth.  Even the expression is impious; for so unlimited a power can belong only to God."

   We observed and celebrated Independence Day this year in the midst of another series of crises.  These current economic, cultural, moral and political crises may be miniscule compared to those in 1776, but they can be truly deemed crises.  Experienced individually and collectively, they are present on various levels throughout the world.  Thus, it came as no surprise when my recent column titled "Don't give in, don't give out, don't give up" drew numerous e-mails and comments.

   One respondent told me, "This could not have come at a better and more opportune time.  I have been discouraged by a number of things: some health-related issues, some age-related issues, some family-related issues and some dream-related issues."  A company CEO wrote, "I have had employees making some positive comments about your column today."  An entertainer said, "We all currently need such inspiration and encouragement."  

   Readers especially commented on my wife Jean's words (and the column title): "Don't give in, don't give out, don't give up."  And comments came heavily regarding the column's final paragraph: "Players, coaches, teachers, students, employers, employees, spouses, parents, children... everyone needs to encourage and to be encouraged. Have you ever failed at anything? I have. Have you ever gotten down on yourself? I have. Have you ever needed encouragement? I have. Have you ever been encouraged by someone? I have. Have you ever been an encourager? I have. As (LSU baseball player) Jared Mitchell said, ‘It's everybody pulling together...' and never giving up." 

   No, the individual and group crises we are experiencing today can't compare to those of Thomas Paine's day, nor can my words of encouragement and challenge make any mark whatsoever on the Richter scale in comparison to Paine's words.  The truth of the matter, however, is that we must never lose sight of the vital necessity of individual and group persistence.  Sometimes it's a huge challenge to maintain the philosophy I emphasize in my Winning Thoughts book: "Often, the main difference between an obstacle and an opportunity is the attitude with which we face it.  Are you pinned-in on your own one-yard line - or - do you have a great opportunity to go 99 yards for a touchdown!"  It is a challenge.  But we can do it.  Together.

_____________________________

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."

 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

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

Today's Blog Entry is from a Guest Blogger - Carl Mays - the father of ClaimCare's President - Carl Mays II 

   Some great lessons emerged from the 2009 NCAA College World Series. Eight deserving baseball teams made the trip to Omaha to participate in what, to me, is one of the most entertaining and purest events in all of sports. And the lessons come like clockwork in this annual competition. In my mind, the lesson that perennially takes the spotlight can be summarized by one of my favorite quotes, Winston Churchill's: "Never, never, never, never, never give up!" Or, as my wife Jean likes to say, "Don't give in, don't give out, don't give up!" 

   This mantra was highlighted by Texas and LSU, two outstanding teams that survived to battle in the best two-out-of-three championship series. Especially did LSU freshman Mikie Mahtook step up and epitomize Churchill's long-ago encouragement and challenge. In game one, Texas hit five home runs and took a one-run lead into the ninth inning, but LSU came back to tie the game and send it into extra innings. Then in the eleventh inning, with two outs, Mahtook singled in the winning run - after he had struggled mightily his first four times at bat - and after he had been given intravenous fluids to treat cramps in the sixth inning.

   In previous at-bats, Mahtook struck out three times and hit into a double play. Interviewed after the game, Mahtook said, "My first three at-bats, it wasn't like I just struck out. It was three terrible at-bats. I was chasing balls in the dirt. Then I stayed back on a change-up and bounced into a double play." Next, very importantly (and another great lesson), he said, "When I got into the dugout, guys were telling me to make sure I keep my head straight. Jared Mitchell told me I was going to come back up again with a big at-bat and told me, ‘You're going to come through for us.' That helped me out a lot."

   After the heart-breaking loss in game one, Texas came back to win game two convincingly by a score of 5-1. That set the stage for a tremendous championship playoff game - and continued with the "never give up" mantra. LSU jumped off to a quick lead in the first inning as result of a three-run home run by Jared Mitchell (the encourager of Mikie Mahtook in game one.)  Then after LSU took a four-run lead, Texas battled back to tie the game in the fifth inning. That set the stage for more heroics from LSU freshman Mahtook in the sixth. With Mitchell on base, Mahtook hit a double that scored the leading run - and opened the door to a five-run inning that eventually developed into an 11-4 LSU victory and national championship.

   Mahtook's double that scored Mitchell, put LSU back in the lead and paved the way for more runs was voted the "Pontiac Game-Changing Performance." Mitchell was voted the "College World Series Most Outstanding Player." Interestingly, the one who was encouraged in game one (Mahtook) and the one who was the specific encourager (Mitchell) earned recognition they will treasure for a lifetime. When Mitchell was asked to comment on the championship win in a post-game interview he said, "It's everybody pulling together..."

   Players, coaches, teachers, students, employers, employees, spouses, parents, children... everyone needs to encourage and to be encouraged. Have you ever failed at anything? I have. Have you ever gotten down on yourself? I have. Have you ever needed encouragement? I have. Have you ever been encouraged by someone? I have. Have you ever been an encourager? I have. As Mitchell said, "It's everybody pulling together..." and never giving up.  

_____________________________

© Carl Mays 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 MyMerlin.Net for students and others is based on his book and program, "A Strategy For Winning."  

 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