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Can an ASP save you money?


Application service providers are helping some physicians reduce administrative costs. They can also supply connectivity with payers and others. But don't sign on the dotted line too quickly.

The Connected Physician
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Can an ASP save you money?

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Choose article section... ASPs offer a wide range of services to practices What to look for before you sign with an ASP Measure the performance of your ASP vendor Bet on ASPs to grow because of financial edge ASPs serve programs onlineThe Connected Physician

Application service providers are helping some physicians reduce administrative costs. They can also supply connectivity with payers and others. But don't sign on the dotted line too quickly.

By Mark Hagland

Ob/gyn James A. Greenberg of Boston was long frustrated by the problems his office encountered in submitting claims and handling other billing and payment chores.

Many physicians try to dispense with those headaches by using an outside billing service. But Greenberg's practice, the four-doctor Brigham/Faulkner Ob/Gyn Associates, went a step further: It hired an Internet-based application service provider. The ASP hosts the office's practice management software and connects it electronically to most of its payers.

"We used to do all our billing in-house," Greenberg recalls. "My office manager was always on the phone with insurance carriers, but now she doesn't have to do that anymore." Changing how he and his partners do billing and administrative paperwork has "largely automated a very important part of our office procedures," he reports.

For example, the group's ASP, Waltham, MA-based athena, can instantly confirm patients' eligibility with many plans. That saves time for staffers who'd otherwise have to call or check online with each HMO or PPO. As a result, says Greenberg, the doctors haven't had to hire an extra employee as their practice has grown. They're also getting paid faster, he adds, because problems with claims are usually caught before they're submitted.

But not all physicians who've tried ASPs have had good experiences. Some ASPs, for instance, transmit claims to electronic clearinghouses without first checking for completeness and accuracy. That can result in the same payment delays that practices encounter when they submit claims themselves.

ASPs offer a wide range of services to practices

In the broadest sense, ASPs are companies that operate software programs for clients over the Internet. In health care, those clients may be physician practices, IPAs, hospital systems, or health plans. For medical offices, ASPs provide services ranging from billing and posting to more complex data exchanges with insurers, clinical information management, and data analysis and reporting. helps Green- berg's practice in a number of ways. For starters, it replaced the group's practice management system with its own Web-hosted software, which runs everything from registration and scheduling to billing, collections, and reporting. The ASP integrates those functions with the claims-editing rules of a couple of major health plans and with eligibility data from the plans that provide most of the ob/gyn group's business.

According to Todd Park, athenahealth's president, this allows the ASP to supervise every stage of the process that leads to claims payment and thereby head off errors.

The system replaces whatever practice management system an office used. "We have to do that," Park says, "because the workflow is closely tied together and integrated with our rules engine. For example, a lot of the errors typically found on a claim happen in registration and scheduling. Sometimes the staff gets the registration ID number wrong, or doesn't ask for a consent form or referral when one is needed. So the athenahealth rules engine must guide data entry and data flow at those early stages."

The ASP eliminates the need for Greenberg's staff to verify insurance coverage. When claim information is entered into the system, it checks to make sure the correct ICD-9 code is attached to the appropriate CPT code, and alerts the staff if additional information is needed.

An outside billing service is the traditional alternative to doing practice management internally. But in Greenberg's opinion, an ASP offers superior service. "A regular billing company is only as good as the data it receives from your office," he says. "Ideally, you'd like the doctor to put in all the data, but that's very difficult. So the office staff does it."

In an ASP setup, he continues, "The automated system does the work for the billing company," and it works more efficiently than an in-house or outsourced clerical staff to spot incomplete or inaccurate data. Connectivity also makes important contributions, he adds. By catching eligibility problems before patients come in, for instance, athenahealth dramatically increases the likelihood that the physician will get paid.

Park says athenahealth charges practices, on average, about 5.5 percent of revenues. Savings on operations and the acceleration of payments more than justify this investment, he maintains. "We've been able to show that we can cut the time it takes to get paid by the insurance company by about 30 percent. And we're able to cut cash operating costs to do practice management and billing by between 15 and 60 percent at no upfront cost."

What to look for before you sign with an ASP

How can you tell whether an ASP is right for your practice? Here are essential questions to ask, according to industry experts and physicians who use ASPs:

• What financial and service goals can an ASP help you reach? The worst strategy, experts say, is to simply dump your information technology needs on an ASP without first forming a clear picture of what you want to accomplish through automation.

• What does the ASP offer that an outside billing service doesn't? There are a number of calculations to make in determining the economic and time savings of each option. Bear in mind, for example, that your staff will still have to perform some functions, such as initial data entry, even if you hire an ASP. But an ASP might reduce staffing requirements.

• What ASP functions do you need that go beyond simple connectivity? There are a number of ways to go online with payers, hospitals, and other parties you do business with. For instance, many physicians use EDI clearinghouses for electronic claims submission through their in-house practice management systems. And some doctors perform online transactions via Web-based services that aren't connected with practice management software. Bellevue, WA-based PointShare, for example, offers online eligibility checks, referrals, and lab results, but is not an ASP. So if all you want is connectivity, you don't need an ASP.

• Does the ASP have the technical capabilities you need? An ASP vendor should be able to offer 24/7 access to your data, state-of-the-art data security, and full backup capabilities to prevent loss of vital data. It should also guarantee network availability nearly 100 percent of the time. But to make sure that your connection with the ASP is fast and reliable, you'll have to invest in a high-speed, always-on connection, which can cost from $40 to $200 a month.

• What are the terms of the ASP contract? It's important that the contract spell out the service's responsibilities in detail, say ASP client physicians. Yet the agreement must allow some flexibility, especially on your side of the contract. That way, you can constantly reassess the terms of the contract and the degree of service fulfillment you're receiving from your vendor.

Measure the performance of your ASP vendor

Especially for large groups, it's critically important to monitor the ASP's performance regularly. "A practice that simply outsources and never looks again is a practice that's being held hostage by its vendor and is not getting value out of that relationship," says Doug McKell, CEO of Physician Practice Partners in Springfield, MA. (His company is an MSO that operates the 70-physician RiverBend Medical Group.)

Since 1999, when it contracted with the TriZetto Group, an ASP based in Newport Beach, CA, to operate its practice, financial, and pharmacy management software, McKell has met with TriZetto representatives every month to assess what the vendor is doing. "You should retain a high level of knowledge about the software being used in your organization," he says. " 'Set it and forget it' is not a good operating phrase."

TriZetto also helped the Talbert Medical Group of Costa Mesa, CA, pull itself out of the information technology morass into which the 115 physicians found themselves sinking after buying back their practice from the failing MedPartners organization. Faced with a capital crunch, the group had little cash to rebuild its information system, says internist Steven F. Izumi, the group's medical director. But the group needed a sophisticated system to manage the capitation contracts that bring in most of its revenue. So Izumi and his colleagues turned to TriZetto.

The ASP worked quickly to rebuild the information system that MedPartners had left in disarray. Partly as a result, says Izumi, Talbert was able to turn itself around financially and make a profit on its capitated contracts covering about 82,000 patients.

The ASP has also made the physicians' lives easier, he says, by providing connectivity to support such functions as scheduling, eligibility, and referrals. MedPartners, he recalls, didn't integrate the computer systems of the various groups it acquired. So referrals from Talbert doctors to specialists in neighboring groups like Mullikin and Friendly Hills depended on paper and faxes. "That made the flow of information very time-consuming and labor-intensive," Izumi recalls.

"Now the referral, authorization, and billing processes are nearly invisible to the doctor," he says. "If they're working well, the doctor no longer even notices they're happening, because they're much more automated."

Bet on ASPs to grow because of financial edge

ASPs are expected to spread rapidly. "ASP growth will more than quadruple over the next two to three years in the health care industry," predicts Dan Clerkin, consulting manager in the Tampa office of First Consulting Group, a leading Internet health care consulting firm.

One factor that's expected to accelerate the adoption of ASPs is their low initial cost. In comparison with conventional practice management systems, ASPs allow physicians to obtain access to the latest software without a significant upfront investment, notes Clive Riddle, president of Managed Care On-Line, a Modesto, CA, company that compiles information on managed care.

"ASPs require far less capital expenditure than traditional software acquisition, and they turn much of the cost of information systems into a variable monthly cost instead of an expensive lifetime cost," Riddle contends. "So they can enable small, undercapitalized physician groups to get technology they couldn't otherwise afford."

ASPs can also help physicians meet consumer demands for better service, notes Clerkin. Moreover, he says, they can help practices respond to requests for outcomes data from employers, health insurers, and consumers. And ASPs can enable doctors to satisfy the electronic security and privacy provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Final privacy regulations for HIPAA were published last December.

Financial stability is a key factor for physicians and medical groups to consider when shopping for an ASP, Riddle and Clerkin both emphasize. The current shakeout among ASPs means that some services won't be around two or three years from now, says Clerkin. But considering the inefficiency of many physician offices and the 30 percent or more of medical claims that are delayed or denied because of errors, ASPs that reduce the turnaround time for claims payment should do well, argues Jonathan S. Bush, CEO of

Ob/gyn James Greenberg agrees. "I can't imagine that practically everybody won't be doing this soon," he says. With health insurers fighting to hold the line on costs, and doctors' reimbursement cut to the bone in many areas, he says, the only hope for quality health care is to reduce administrative costs through collaborative IT investment—with ASPs a key factor.

"Once I looked into this and thought about it, I didn't see any downside" to going the ASP route, he says. And though he quickly adds that no ASP is perfect, he asks, "How does this compare to my other options?" As far as he's concerned, there's simply no comparison.

ASPs serve programs online

The author is a Chicago-based independent journalist and speaker in health care.

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