In a recent discussion with the editor of an online journal, I brought up the fact that a variety of business intelligence tools now exist to help practices understand and improve their revenue cycles. Using these tools to drill down into specific details about each of your payers—instead of taking a more global perspective—can fundamentally change the way you assess your revenue streams.

I suggest, for instance, that practices focus more attention on “collection mix” than on “payer mix”. Your payer mix typically represents your distribution of charges across payers, while your collection mix shows you the money collected each month from individual payers. From a revenue perspective, that’s the real focal point. Evaluate your highest-collection payer and those payers that represent the top 80 percent of collections. Look at the CPT codes billed and important “lag times”, such as:

• date of service to date of submission to the payer;
• date of service to date of payment; and
• date of submission to the payer to ERA date or response time.

This will allow you to start understanding payer-specific trends, and to measure payers against each other in key areas. In addition, it will help identify areas where you can optimize your own revenue cycle operations.

For example, review the denial messages or reason/remark codes you receive for your top CPT codes per payer. Let’s say the denial messages from a top payer on a top code all center on eligibility issues. Then you know to take steps in your front office to address that problem with those patients—perhaps through an eligibility verification tool.

Another practice I recommend is to identify, analyze and categorize your denials. By identifying those procedures with top denial rates, you can turn your attention to any snags that are hindering payment. Also, comparing your ERA data and your payer contracts can pinpoint underpayments (which may happen more often than you think: on average, 4 percent to 12 percent), and exposure to overpayments you will need to repay.

Typically, only the very best practice management systems on the market now are capable of aggregating some of these finite-level details. That’s why many companies are starting to emerge as third-party business intelligence vendors. Take advantage of available data analysis tools, and you’ll discover a wealth of revenue cycle optimization opportunities.

The classic response to this question is a quick shoulder shrug, followed by the return query, “Why does it matter?” After all, the value of secondary claims is usually just a fraction of that associated with primary claims. Most practices believe it costs more in resources (especially staff time) to chase secondary payments than they’re worth.

In the past, that was probably true. But now, I’m urging all practices to take a second look at their secondaries. They may be worth more than you think.

As you consider your practice’s secondary claims, it’s important to keep in mind a very basic concept: Ultimately, the patient is the party responsible for paying you for your services. If you think back just a few decades, you’ll recall that patients used to file their own insurance claims. They were the ones who shouldered the burden of orchestrating all payment—including that of primary and secondary insurers.

While this arrangement made the patient’s reimbursement responsibility clear to all involved, it often created cash flow problems for practices. It’s hard to run a business when you’re waiting for someone else—someone with no real financial motivation—to get around to asking his or her insurance company to pay you!

So gradually, more and more practices began filing insurance claims on behalf of their patients. Today, most practices do. Patients certainly appreciate the service, but it’s also a vital way to ensure more consistent cash flow for the practice. This arrangement remains a win-win situation on the whole, but secondary claims historically have been lost in the shuffle.

As stated earlier, the cost to collect secondaries has never seemed to justify the effort. But two trends may now invalidate that idea:

1)   the current economic environment and impending health reform initiatives are dampening earning capacity, thus making it more important to collect every dollar owed; and
2)   the increasing ability of clearinghouses to file secondary claims electronically makes it much more economical to collect those dollars.

Clearinghouses with large lists of payers able to accept electronic secondaries can be tremendously helpful. Have you ever filed a primary claim to Medicare, then waited forever on a secondary filed to AARP, for instance? Many clearinghouses can send and track those claims for you, reducing the resources you need to expend to bring in that revenue stream.

Bottom line: less time, less effort, and more money. And the payoff can be substantial.

How much money from secondary claims is your practice writing off?

Lots of practices seem to have this in mind when they ask about billing for their nurse practitioners (NPs), physician assistants (PAs), and other non-physician providers (NPPs). Most want to know about the basic advantages and disadvantages of billing for NPPs under their own Medicare billing numbers. Here’s my response:

The biggest advantage of allowing an NPP to bill under his/her own billing number is that you don’t have to worry about incident-to guidelines, which limit how and where an NPP-patient encounter can take place. Under his or her own number, for example, an NPP can see a new patient, or a patient in the hospital. By contrast, billing under the physician’s number requires direct personal supervision (that is, the physician must be in the office suite). NPPs also aren’t allowed to see new patients if they bill incident-to under the physician’s number.

The use of NPPs will allow your physicians freedom within their schedules to generate additional revenue through new patient encounters, surgery, etc. The main disadvantage is that payment under the NPP’s number is limited to 85% of the physician fee schedule reimbursement. If the same procedure or service is billed incident-to using the physician’s billing number, it is paid at 100% of the fee schedule amount.

Another common question I receive involves the correct coding of diagnostic tests for patients with signs or symptoms. Figuring out whether to report the pre-test or post-test diagnosis to support the claim can get confusing, because it depends on the result of the test.

Medicare guidelines state, “If the physician has confirmed a diagnosis based on the results of the diagnostic test, the physician interpreting the test should code that diagnosis.” So, for example, if a patient is referred to a radiologist with a diagnosis of abdominal pain, and an abdominal CT scan reveals the presence of an abscess, the correct diagnosis would be “intra-abdominal abscess.”

Medicare also says, “If the diagnostic test did not provide a diagnosis or was normal, the interpreting physician should code the sign(s) or symptom(s) that prompted the treating physician to order the study.” Using the same example above, a CT scan that didn’t show anything would be coded to the abdominal pain. (All of this information comes from the Medicare Claims Processing Manual, Chapter 23, Section 10.1.)

Remember that when there are no signs or symptoms, then the test is not considered a diagnostic test at all, but rather a screening test. When a screening test is performed, the appropriate screening diagnosis code must be the primary diagnosis, regardless of whether the test returns positive or negative.

Another frequently-asked coding question that’s really interesting to me pertains to distinct procedure modifier 59—which is something many claims editing functions help to address. The problem crops up when a practice uses modifier 59 to override a Correct Coding Initiative (CCI) edit, but the claim is still denied. Many coders and billers wonder if they’ve used the wrong modifier.

While possible, it’s unlikely. Modifier 59 was specifically introduced to bypass CCI edits. It’s more likely that the edit you were trying to override had a modifier indicator of “0,” which means it can’t be bypassed under any circumstances—even if you use a modifier. Many edits have a modifier indicator of “1,” which means they can be bypassed with modifier 59 (or another modifier, depending on the circumstances) when, for example, the two procedures are performed on different body locations or at different times on the same day.

There is no doubting the complexity of coding and billing practices. It’s tough to stay current with rules that seem to change every day. So, as questions arise, please feel free to submit them in the comment box below. We’d love to keep providing you with answers.

It’s a difficult benchmark to discuss, because a practice’s size has a lot to do with it. A good ratio in a large practice is very different than one in a smaller practice — and understandably so. Larger practices not only achieve some economies of scale, but also tend to carve out employee responsibilities. While a large practice might have specified “coders,” “billers,” and maybe even a designated “Medicare specialist,” a smaller practice might rely on a single person to do it all in conjunction with other duties. Yet this ratio is still quite important.

In many practices, it’s viewed strictly as an “expense” indicator. However, I feel strongly that it’s also a significant overall gauge of your practice’s financial health. That’s because the lower your billing staff-to-provider ratio, the more consistent your revenue cycle tends to be.

A high billing staff-to-provider ratio potentially points to underlying revenue cycle problems, including too many rejections, denials, and appeals. These are all time- and labor-intensive activities that could increase the need for billing staff—and thus raise the ratio. Automated tools can be used to address some of these problems and reduce the ratio, even if it already happens to be fairly solid.

Real-time patient eligibility tools, for instance, are one way to help decrease denials. Online claims editing capability (including CCI and LCD compliance edits) can speed rejection turnaround. With fewer rejections and denials, of course, comes a lessened need for appeals. And maximizing electronic claims submission, ERA and EFTs allows you to post payments quickly, with minimal manual labor.

Before you calculate your practice’s staff-to-provider ratio, however, it’s essential to know how to do it correctly. It seems simple enough: Count up the doctors in your practice and divide by the number of billing staff, right? Well, not quite.

Rather than count each physician individually—a common mistake—practices must make sure to count physician full-time equivalents (FTEs). To properly calculate the number of physician FTEs within your practice, divide the total number of patient encounters performed during the past year for your entire practice by the average number of yearly physician encounters, (This number will be between 3,600 and 4,800 depending on your specialty. Primary care tends to be on the high end at 4,800 and single surgical specialists, like orthopedics tend to be on the low side at 3,600.). The reason that you want to perform your FTE calculation in this manner is to accurately account for physicians who work part-time, job share, or work any other less-than-full-time schedule.

To calculate the number of billing staff FTEs, you’ll want to define an FTE as an employee who has been compensated for 2,080 hours of work (40 hours/week X 52 weeks/year) during the last year. Like the physician FTE calculation, this will take into account any employees that work any schedules more or less than 40 hours per week. Hours to include in this calculation should be related to any personnel that participate in the physician revenue cycle including data entry, coding, payment posting, accounts receivable follow-up, patient statement processing, etc.

So, an example calculation might go like this:

For the twelve months ending June 30, 2010:

Billing Staff Employee 1 was compensated for 2,080 hours of work = 1.0 FTE billing staff (2,080/2,080)
Billing Staff Employee 2 was compensated for 1,720 hours of work = .83 FTE billing staff (1,720/2,080)
Billing Staff Employee 3 was compensated for 1,500 hours of work = .72 FTE billing staff (1,500/2,080)

Dr. Koch performed 1,800 encounters = .5 FTE physician (1,800/3,600)
Dr. Sjogren performed 3,600 encounters = 1.0 FTE physician (3,600/3,600)

Billing Staff FTE count = 2.55 FTE (1.0+.83+.72)
Physician FTE count = 1.5 FTE (1.0+.5)

Physician to billing staff ratio of 1.70 (2.55/1.5)

The Medical Group Management Association (MGMA), in its 2008 book, Benchmarking Success – The Essential Guide for Group Practices, provides a benchmark standard ratio of 2.7 billing staff per physician in an average billing office. The 2.7 figure was derived by averaging the reported staff ratios across the many different physician specialties broken down within the publication. That number does not take into account the particulars of practice size, or any other factors that might alter it, but it’s perhaps a good starting point for your own investigation. No matter what your ratio, though, I urge you to view it as a barometer of your revenue cycle. Consider whether you have an opportunity to arrive at a better ratio by automating some of your processes.

Are you tracking your billing staff to provider ratio?  Share your experiences in the comment section below.

A/R>90 is a measure of a practice’s ability to get claims paid in a timely manner. This measure represents the amount of A/R older than 90 days as a percentage of the total A/R. Here’s how to calculate it: Take the dollar amount of the A/R that is greater than 90 days from the date of service, and divide that number by the dollar amount of your total A/R.

For example, let’s say your A/R report looks like this:

(Click to make image larger.)

You would add the total A/R for all aging buckets greater than ninety days (in the illustration above, that equals $429,608.51) and divide by total A/R ($2,124,042.74 in the illustration above). So, for this example, A/R>90 would be calculated: $429,608.51 ÷ $2,127,042.74 = 20.19 percent.

While not necessarily cause for alarm, the practice in our illustration may want to take a closer look at its aging claims. If your A/R>90 is less than 12 percent, consider yourself a “best performer.” A/R>90 that runs about 15-21 percent is fairly average, but a number approaching 25 percent or above indicates underperformance.

For this benchmark, it is critical to utilize an aging approach based on dates of service. That is the only way to obtain a true starting point from which you can measure each individual claim. I sometimes see practices using a transaction/re-aging approach, which typically ages a claim based on either the first claim submission date or a subsequent submission date. I believe this is problematic, because it holds the potential to dramatically skew the true aging of a claim.

Here’s an example: Let’s take a claim with date of service 01/15/2010 that is submitted to the carrier on 01/22/2010. On 03/01/10, if we were to use the transaction/re-aging approach, we would age this claim at 37 days vs. 44 days using the date of service approach. If this claim were to be re-filed/resubmitted on 03/10/2010 and still not resolved on 4/10/2010, the recalculated aging of the claim at that point would be 31 days. Using the date of service approach, the aging of this claim would have been 84 days. You can see that these two approaches provide vastly different numbers. With the date of transaction/re-aging approach you may not realize that you have a problem with your aging that needs to be addressed.

That said, there is some benefit in utilizing the transaction/re-aging A/R approach. It provides a practice with an understanding of whether its A/R is being worked appropriately. Ideally, in this approach a practice would see its aging buckets greater than 90 days at levels of $0 (or some minute amount that might typically represent appeals, worker’s comp, and no-fault claims where no re-filing/resubmission is necessary).

How are you tracking A/R>90?  Share your experiences in the comment section below.

One of the biggest challenges I’ve found, however, is that practices may think they’re adequately tracking certain benchmarks when they’re not. In reality, it’s not at all unusual for practices to be a little uncertain about whether they’re correctly calculating and analyzing important numbers.

So, I’d like to address two standard benchmarks that, in my experience, are particularly thorny: days in accounts receivable (A/R) and net collections percentage. It’s essential to track both accurately, because they demonstrate a practice’s ability to quickly turn over A/R and collect all money due. Let’s walk through: the definition of each term; the proper way to calculate each; an example calculation; and some common potential analysis pitfalls.

Days in A/R first. This is a measure of the rate of A/R turnover. It represents the number of days of A/R outstanding, based on the practice’s average daily charge volume.

Here’s how to calculate it: Take your total A/R divided by the practice’s average daily charge amount. (For the average daily charge, divide total charges for the last three months by 90.3 days, representing three months).

For example: If total charges for three months equal $81,270, the average daily charge equals $900 ($81,270/90.3). If total outstanding A/R is $50,000, days in A/R equals $50,000/$900, which is 55.55 days.
Once you have your number, it is important to recognize that a good overall level of days in A/R can hide areas of underperformance, including:

• Specific insurance carriers whose days in A/R are higher than they should be. For example, if your entire practice days in A/R level is 45 (good), but your Medicare days in A/R level is 48 (not good), there is a problem with Medicare that needs to be addressed. If you don’t break out days in A/R by payer, you may be missing potential trouble-spots.

• Claims that have aged past 90 or 120 days. A good overall days in A/R level also can hide elevated amounts in the older aging buckets. That’s why it’s so important to utilize the “A/R>90 days” benchmark. (Note: Check back to the blog in the coming weeks, when I’ll develop a further discussion on this aging benchmark).

Now let’s take a look at net collections percentage, which is a measure of a practice’s effectiveness in collecting all legitimate reimbursement. This figure reveals how much revenue is lost due to factors such as: uncollectible bad debt; untimely filing; inappropriate adjustments; payment posting errors; or claim underpayments.

Here’s how to calculate it:  Divide payments (less refunds) by charges (less approved write-offs) for the selected time frame. This calculation should be based on dates of service—that way you avoid comparing charges generated in the current month with payments and adjustments taken on claims from many prior months, which can lead to great fluctuations for this calculation. Additionally, it’s recommended that you perform this calculation utilizing aged data, typically from 4-6 months back, so that you ensure a majority of the claims used for the calculation have had ample time to clear.

For example: For dates of service 10/1/2009 through 12/31/2009, payments equal $485,698.75, refunds equal $13,368.75, total charges equal $842,985.00, and total approved write-offs equal $344,500.73. Divide payments less refunds ($485,698.75 -$13,368.75) by charges less approved write-offs ($842,985.00 – $344,500.73), then multiply by 100. The total net collections percentage comes to 94.75%.

Potential pitfalls when it comes to this calculation include:

• Counting inappropriate write-offs as part of the calculation. This is one of the most common mistakes that practices make. Inappropriately adjusting off a balance while posting payments, adjusting off a patient balance due to a physician order, etc., provides an inaccurate view of a practice’s ability to collect on all monies “earned.”

• Not having access to your fee schedules or reimbursement schemas for each payer. This will disable the practice from truly knowing what should have been paid, adding to the aforementioned inappropriate write-offs.

I hope these suggestions for calculating days in A/R and net collections percentage prove beneficial. If you stay tuned, I’ll post a similar blog in the upcoming weeks to describe how to correctly perform calculations for “lag time” (e.g., between date of service and date of submission) and A/R>90 days.

How are you tracking days in accounts receivable (A/R) and net collections percentage? Share your experiences in the comment section below.

During the event, Bryan discusses:
• What business intelligence is, and why it is important to the health of your practice.
• How business intelligence can improve all aspects of the revenue cycle.
• What key performance indicators you should be tracking.
• How the data that you’re capturing today can be used to prepare your practice for future healthcare reforms, initiatives and regulations.
• How business intelligence can improve the performance of you and your staff.

To learn more about using business data to improve your revenue cycle, download the webinar here.

Even the savviest medical billing staff must fine-tune the appeals process to prevent it from becoming a lengthy battle. Knowing how to write an effective appeal letter can greatly enhance your practice’s chance of getting paid for initially-denied or underpaid claims.

Use the following list of recommendations to improve your appeal letters and increase revenue:

1. Understand the content of your EOB/ERA. Look carefully to discover why the claim is being denied or underpaid. Ask yourself:
• Is the denial/underpayment due to bundling edits such as Medicare’s Correct Coding Initiative (CCI), an LCD, or a procedure’s global period?
• Did the insurance plan only pay for one procedure when two were included on the claim form?

Why this is important: The language of the appeal letter argument should address the insurance plan’s reason for denial/underpayment in a targeted fashion.

2. Know where to locate the insurance plan’s medical health and coverage policies. You’ll want to find out whether the insurance plan’s policies conflict with the accepted policies of the American Medical Association or your practice’s specialty association (for example, the American Association of Orthopaedic Surgeons). Also check whether your contract with the insurance plan includes exceptions to the policy or regulation, and whether the patient’s benefit plan covers the procedure.

Why this is important: Referencing the appropriate policy and regulation language within your appeal letter will provide the greatest chance of success. Supply a copy of all supporting documentation with your letter so that the appeal reviewer conveniently has all relevant information at his or her fingertips.

3. Be familiar with the insurance plan’s appeal process. In addition to knowing the proper forms to use, it is essential that you know the time frames allowed for submission, follow-up and response. If your first appeal letter is denied, what additional levels of appeal are possible?

Why this is important: Many appealed claims fall to the wayside when the proper appeal process and follow-up procedures are not appropriately managed. It’s important for a practice to implement a structured appeals follow-up protocol to ensure that all appealed claims are addressed in a timely manner. Treat each appealed claim like a project. Set expected milestones, including the date of appeal and expected response time. As each claim goes through the appeal process, track the level of the process it’s in, as well as the time requirement for filing.

Note: If you have exhausted all avenues with the insurance plan or feel that the insurance plan has unjustifiably denied your claim, file an external review with your state or federal insurance commission or regulatory agency.

4. Make sure the physician’s documentation is clear and complete. You’ve likely heard the old saying, “if it is not documented, it was not done.” Simply circling a CPT or ICD-9 code on a superbill does not provide supporting evidence that the procedure was performed—or medically necessary. Make sure your physicians document as much information as possible in the medical record to support any necessary appeal efforts.

5. Include as much information within the appeal letter as possible. Remember that the initial reviewer during the appeal process will make a determination based upon the presenting information. Include toward the top of your appeal letter: 1) all patient demographic information; 2) all pertinent insurance information; 3) date of service; 4) place of service; and 5) EOB/ERA denial code and reason.

Next, include: 1) evidence for the medical necessity of the procedure; 2) supporting research from the insurance plan’s medical policies, your specialty society information, the patient’s benefit coverage, etc.; 3) copies of all radiological, lab and pathology reports; and 4) any other pertinent information. Remember, the body of the letter should combat—and remain highly focused on—the insurance plan’s stated reason for denial/underpayment. Keep the letter professional.

6. Lastly, send the letter via certified mail so that you have record of its receipt by the insurance plan. As many of you know, two of the most common phrases used by insurers are, “We do not have record of that claim on file” and “We never received it”!

In summary, effective appeal writing first requires an understanding of the nature of the denial/underpayment, as well as the rules and regulations of the insurance plan and medical societies. From there, you must follow the appeal process correctly. Dispute the reason for the denial/underpayment with targeted, pertinent supporting documentation, and use certified mail to ensure that the result of your effort is received.

Code additions

Blood and Blood-Forming Organs – 285.x

Complications of Pregnancy, Childbirth & Puerperium – 670.xx

Conditions in the Perinatal Period – 768.xx, 779.xx

Congenital Anomalies – 756.xx

Digestive System – 569.xx

Endocrine, Nutritional and Metabolic, Immunity – 274.xx, 277.xx, 279.xx

Genitourinary System – 621.xx

Injury and Poisoning – 813.xx, 832.x, 969.xx,

Neoplasm – 209.xx, 239.xx

Nervous System and Sense Organs – 348.xx, 359.xx, 372.xx

Respiratory System – 488.x

Symptoms, Signs, and Ill-Defined Conditions – 784.xx, 787.xx, 789.x, 793.xx, 799.xx

V codes – V10.xx, V15.xx, V20.xx, V26.xx, V53.xx, V60.xx, V61.xx, V72.xx, V80.xx, V87.xx

Invalid codes

Circulatory System – 453.x

Conditions in the Perinatal Period – 768.x, 779.x

Endocrine, Nutritional and Metabolic, Immunity – 274.x, 279.xx

Injury and Poisoning – 969.x

Neoplasm – 239.x

Nervous System and Sense Organs – 348.x

Symptoms, Signs, and Ill-Defined Conditions – 784.x, 799.x

V codes – V10.x, V53.x, V60.x, V72.x, V80.x

Of course, if you haven’t done so already, you should also become acquainted with the numerous index changes, instructional note changes, revised code titles and coding guideline revisions. The potential benefits to your workflow and denial rates make it well worth the time spent upfront. The following Centers for Medicare and Medicaid Services link will provide further details.

As you can see, the changes this year aren’t as extensive as in some years past. Still, it might speed your workflow – to say nothing of lowering denial rates – to proactively check for any modifications to your “old standby” codes.

How are these ICD-9 additions or invalid codes affecting your practice for 2010?

We would appreciate the chance to hear your opinions!