In the day-to-day chaos of running a healthcare practice or facility, it can be very easy to forget some of the basic building blocks of the business.
In the day-to-day chaos of running a healthcare practice or facility, it can be very easy to forget some of the basic building blocks of the business. Ironically, those seemingly small details can have the largest impact on a practice’s bottom line.
One example of this phenomenon is the third-party fee schedules that determine most of the revenue received. For most healthcare providers, revenue is comprised of payments generated from a number of government programs and managed care carriers. Each one of these entities has a different fee schedule and, potentially, a different methodology under which the reimbursements are made.
Not surprisingly, many practices and healthcare organizations have either lost track—or never understood—how their payments are coming in. With reimbursements on the decline, patient liability on the rise, and other imminent changes in the marketplace, this lack of attention to fee schedules can be a recipe for disaster.
We’ve had the unique opportunity to be on both sides of the table when it comes to these issues. As contract managers for 2 large insurance companies, we had access to unlimited data when negotiating contracts with hospitals, facilities, and medical practices. This data was compiled by a staff of financial analysts who were trained to mine from expansive claims databases and compare it across a large number of providers.
Contrast that setup to that of a medical facility or practice, where analytical resources can often be scarce or non-existent. When working with large medical facilities and practices, we discovered that this information was much more difficult to obtain, let alone having the time to analyze it on a meaningful level.
The bottom line is there is no better time to be intimately familiar with your organization’s fee schedules. Here are some simple, quantitative ways to do that:
• Know your services mix (code set)
While there are thousands of CPT codes, your practice only bills for a relatively small portion of them. Know what those codes are and how much each contributes to the total. This gives staff members a reference point for the most important codes so they can reconcile incoming payments with the fee schedule quickly and easily.
• Know your networks
The first step is to know what networks your organization is contracted with. This may seem elementary, but it is often difficult to ascertain. The reason this is so difficult is that insurance carriers and third-party administrators often use names that differ from the actual provider network. For example, an insurance card may have a name like “SISCO” on it, but claims are paid through the “Multi-plan” network.
It is imperative to be able to associate the large number of third-party administrator and insurance company names with the relatively smaller number of networks. Staff members are able to easily calculate estimated payments, which also allow them to provide estimates of patient balances for both pre- and post-service collections activities.
• Know your network mix
Once you associate your insurance carriers and third-party administrators with the network, you must determine what percentage of total payments each network contributes to the bottom line. Doing so pinpoints areas of improvement for fee schedules to be used in managed care contract negotiations. It also allows practices to delineate services they may or may not want to provide to various insured populations in an effort to avoid losses on specific services.
There are a number of ways this type of analysis can be achieved and implemented into your organization’s operations. If you don’t have the resources on staff, often a trusted advisor with knowledge of third-party fee schedules and reimbursement can be of great benefit in either establishing or re-establishing the knowledge that means so much to the bottom line.
Brian Bourke is healthcare consulting manager at HKP, the workforce management affiliate of Honkamp Krueger & Co., P.C., a CPA and business consulting firm headquartered in Dubuque, Iowa. He works with medical providers and medical facilities on developing and improving operational efficiencies at their organizations. You can contact him at firstname.lastname@example.org.
Honkamp Kruger & Co., P.C is a proud member of the National CPA Health Care Advisors Association (HCAA), a nationwide network of CPA firms devoted to serving the healthcare industry. Members provide proactive solutions to the accounting needs of physicians and physician groups. For more information contact the HCAA at email@example.com.