5 new-practice pitfalls

May 21, 2001

Think running your own show would be easy? These doctors did, too, until they gave it a try. You can learn from their blunders.

 

5 new-practice pitfalls

Jump to:Choose article section... 1. The credentialing snafu 2. The billing-service blunder 3. The space miscalculation 4. The hiring mistake 5. The image problem

Think running your own show would be easy? These doctors did, too, until they gave it a try. You can learn from their blunders.

By Doreen Mangan
Senior Editor

When Teresa Clabots started her pediatric practice in 1998, she accepted an oral bid of $500 for installing phone and computer wiring. The actual bill came to $2,500.

"I should have gotten the bid in writing," says Clabots. "If I'd known the true cost, I wouldn't have ordered computer wiring in the three exam rooms, my office, and two nursing areas. I don't need computers in all those locations. What was I thinking?"

Accepting an oral bid was just her first mistake. Clabots, who's based in Tacoma, WA, had been employed for 11 years by a large group and knew little about how to set up or run a practice. She's been learning, though, from her own faux pas.

Clabots isn't alone. "Many doctors go into practice caring only about treating patients; they don't realize they're running a business," says Gary W. Thompson, a practice management consultant in Lakewood, CO.

Whether you're just starting out or moving from a large group to your own practice, note and avoid these costly mistakes.

1. The credentialing snafu

Clabots didn't realize that she had to go through insurance companies' credentialing under her new practice name and tax identification number. As a result, insurers simply used her old ID number to process her new claims—and sent about $35,000 worth of reimbursements to Clabots' former group in the first three months of her private practice.

She wasn't able to recoup the money quickly. Instead, the pediatrician got by on severance funds from her previous employer and by stretching her bank line of credit.

The lesson: Lock in your payers months before you open your doors, says Gary Thompson. Avoiding payment snafus isn't the only reason for doing so. You can't assume you'll be accepted into a network under your own name, even if your old group was a member. "You may find that the insurer isn't taking new physician enrollments," Thompson says.

Allow three to six months to become credentialed with payers. Your Medicare provider number could come through in three weeks, but often it takes much longer, Thompson says. The application form asks highly detailed questions and requires several attachments, including proof of malpractice insurance.

"It's not unusual for Medicare to return the form because it's not filled out correctly," he says. Private payers' applications are less complicated, but their processing times vary. The Medicaid process varies from state to state.

If you're unable to secure credentialing before opening your practice, establish a line of credit at your bank. "Medicare will pay you retroactively, provided you have applied for credentialing prior to treating the patient," says Gray Tuttle Jr., a practice management consultant in Lansing, MI. However, some managed care programs will reimburse you for services provided only after you become credentialed.

What can you do if, as in Clabots' case, payers send checks to your former group? "Ask that group to notify payers that you're no longer practicing there, and request that payers hold checks or return claims, pending credentialing," says Robert J. Saner II, a health care attorney in Washington, DC.

If some checks go to the former group anyway, ask the group to forward the checks to you. However, Saner points out, the insurer will issue a 1099 for those payments to the group, which won't be happy about paying tax on money it didn't keep. As an alternative, your former practice could deposit the checks, write new checks to you, and send you a 1099 for the amount.

2. The billing-service blunder

When FP Debra J. Heck of Muncie, IN, opened her practice in 1999, she hired a billing service whose owner was a partner in another business with someone Heck knew. "We investigated other vendors, but not the billing company," Heck says. "Big mistake! It was grossly understaffed, and the people lacked basic coding knowledge." They didn't, for example, know the appropriate modifiers to use for blood tests sent to a lab.

Last June, Heck decided to bring billing in-house and hired her son, a math whiz on leave from college, to handle it. In analyzing the billing service's work, he found that the service consistently failed to file secondary insurance claims, particularly in Medicare cases, and didn't refile rejected claims.

Heck estimates that she lost more than $20,000 over 48 weeks, not including losses from denied claims that weren't refiled. In addition, she didn't have good information on payers' reimbursement levels, so she couldn't make informed decisions as to which contracts to cancel.

The lesson: Don't skip due diligence on the billing service. Consultant Thompson says you should first find out whether complaints have been lodged against the company with the Better Business Bureau.

But don't stop there, even if you get the all-clear. Contact clients of the billing service. If the service balks at your request for references, cross it off your list.

Ask the clients what's good and bad about the service. How well does it follow up on rejected claims? Many billing services mishandle them, says Thompson. Would the clients hire the firm again? How old are their receivables? The maximum acceptable age for receivables is two months for pediatricians, 2.5 months for FPs, and 2.7 to 2.9 months for ob/gyns, Thompson says.

Whether you bill insurers yourself or hire a service, your staff should have coding expertise in your specialty. Not realizing that, pediatrician Teresa Clabots hired someone whose previous experience was mostly in surgical billing—and Clabots lost thousands through inept coding.

The doctor wasn't aware of the problem until her banker asked why she was still borrowing in her fourth and fifth month of practice, when money should have been coming in. Clabots enlisted the aid of another pediatrician's office manager, who looked over the billing records and discovered the coding problems.

Clabots' billing clerk went back to the surgical practice full time. A medical assistant in Clabots' practice took over the billing and made some other important discoveries. For instance, the vaccine Prevnar was costing the doctor $58 a shot. Some of Clabots' payers were reimbursing as little as $13, and one wasn't reimbursing anything. The patients should have been billed for the balance whenever doing so wasn't prohibited by the insurer, but the biller hadn't realized this.

After the medical assistant began filing claims correctly, "my accounts receivable and late payments went way down," Clabots says. And though she lost money in her first year of practice, last year she took home more than $100,000.

If your staffers have limited coding experience, Thompson suggests, bring in a certified professional coder to teach them. The cost: $500 to $700 for two days, he estimates. To locate such experts in your area, contact the American Academy of Professional Coders in Salt Lake City (800-626-2633, or www.aapc.com).

If you hire coding staffers, don't make the same mistake Clabots did; ask what kind of coding they're familiar with. Have they taken coding courses? How do they handle denied claims? Thompson suggests you create a scenario of procedures and diagnoses and ask how an applicant would code.

3. The space miscalculation

When FP Jeffry Hatcher opened his solo practice nine years ago in Paris, IL, he thought three exam rooms would be more than enough. Paris is in Edgar County, which has a population of less than 20,000.

But Edgar County is an underserved area, and there was only one other FP in town. Patients were traveling 60 miles to Champaign, 45 miles to Mattoon, and 25 miles to Terre Haute, IN, for health care. When Hatcher set up shop, many of those patients switched to him. "I had no idea how busy we were going to be," Hatcher says. Within three months, the doctor, his patients, and his three staffers were tripping over each other.

One exam room housed a table that Hatcher, a DO, used for osteopathic manipulation. Because the room was also used for exams and other procedures, therapy patients were often forced to wait.

Office quarters were cramped, and storage space was limited. Two staffers, including a billing person, sat in the front area. Because of the uncomfortable environment, Hatcher moved after two years.

The new location—in a hospital-owned clinic—is about four times larger. Hatcher shares seven exam rooms with a part-time nurse practitioner, including one room that's exclusively for manipulation.

The lesson: "Do your homework," advises Dorothy R. Sweeney, a practice management consultant with The Health Care Group in Plymouth Meeting, PA. Study demographics, which you can get from the local hospital or chamber of commerce. Look at the age breakdown. A large population of elderly people or children makes for a busy practice. Hospital staffers and other doctors can give you an idea of which towns you might draw patients from.

In Hatcher's case, given that patients were traveling to doctors elsewhere, he should have anticipated being very busy. "If you're good and also personable, you'll capture those patients," Sweeney says. Normally, three exam rooms should be enough for an FP, she adds. "But this doctor might have done better if he had a manipulation room as well as the three exam rooms," she says.

Hatcher should have anticipated other space needs, too. The nurse needs an area to draw blood and do immunizations and other procedures. And the billing clerk needs a private area to talk to patients about payments or to call insurance companies. This is especially important in a small town, where patients often know each other.

4. The hiring mistake

Soon after Debbie Heck opened her practice, she hired a patient she knew casually to fill in for her receptionist, who'd become ill. The new hire was personable and did well.

When the receptionist returned, the doctor asked the temporary hire to stay on part time, to enter billing data and handle deposits. "The woman seemed fairly computer literate and had worked for her husband in his insurance business, so I felt she could do the job," Heck says.

But the woman, who was easily distracted, had a hard time. Other staffers noticed discrepancies between daily sheet totals and bank deposits. "I later found out that the woman preferred to add in her head rather than use the calculator. So we didn't have corroborating calculation slips," Heck says. After the woman was let go, employees found a drawer full of checks and cash that hadn't been deposited.

The lesson: Don't assume that people who do certain jobs well will be equally adept at other tasks. "I found that personality doesn't necessarily translate into competence," Heck says.

Adds Dot Sweeney: "You don't need a sparkling personality to add checks and cash and make sure the totals match what's on the daysheet. That's a very meticulous job; you need someone who works well with numbers."

Before hiring someone, first think through what the job requires and detail the responsibilities in writing, Sweeney advises. Discuss those details with candidates and review their backgrounds to find out whether they have the skills and experience needed.

Make sure candidates know what would be expected of them. "You won't be 100 percent successful in hiring the right people, but this process will weed out people who aren't appropriate," says Sweeney.

In Heck's case, continues Sweeney, "if the woman didn't want to use a calculator or didn't know how to use one, she clearly wasn't qualified for the job. If she had seen a detailed job description, she might have thought twice about taking the position."

Don't overlook training. "This employee may have been able to learn how to handle a calculator and to do the job well, if someone had shown her how," says Gary Thompson.

Hiring and training the right people is especially important for new practices, Sweeney says. As the practice grows, those first employees become senior employees, able to hire, train, and supervise others.

5. The image problem

Dot Sweeney tells of an FP who set up her first practice in a middle-class suburb. She spent a lot of money on exquisite furniture and thick carpeting. "The office had a museum-like atmosphere where people felt they had to speak in hushed tones," says Sweeney.

The doctor dressed in designer dresses and suits, complete with high heels and expensive jewelry. Both her appearance and her office were too upscale for the community she was serving. "Patients were intimidated and didn't come back a second time," Sweeney says.

It didn't help that the doctor left expensive stationery in the waiting room with a sign reading, "While you're waiting for me, drop a note to someone you haven't talked to for a while." All that did was signal to patients to expect a wait.

The lesson: Outfit your practice to suit your patients and the neighborhood. "If this doctor had thought about her market, who her patients were, and the image she was projecting, she wouldn't have designed such a plush setting," Sweeney says. "It might have gone over on Park Avenue, but not in her town."

If you're new to the area, you can learn something about your clientele from other doctors and hospital officials.

One way to avoid overspending, Sweeney says, is to stock your first practice with used furniture. "With hospitals closing practices and groups consolidating, you can get good deals on used medical equipment, including furniture and exam tables," she says. "In some cases, you can get items for less than half the original price."

 

Doreen Mangan. 5 new-practice pitfalls. Medical Economics 2001;10:85.

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