PRACTICE POINTERS

Increase collections—watch those EOBs!

Explanations of benefits offer a wealth of information on payments and denials. Learn how to profit from them.

By Michael J. Wiley

Many insurance companies make it difficult for physicians to get paid. They change their rules, fail to distribute important information, and lose or deny your claims.

But with every check they send you, they also give you a valuable tool called the explanation of benefits. By using the EOB properly, you can improve your billing process and raise your collection ratio by 5 percent or more.

That can add up to a lot of money. If your practice bills $4 million a year, and you lift your collection ratio by 5 percent, your annual revenue rises by $200,000.

All too often, though, physicians and office managers leave EOB reviews to the billing staff. This is a mistake. You and your administrator should review at least a few EOBs each month to see if billing and collection problems exist. You might notice areas where you could be getting paid more.

In one practice, for instance, a billing clerk told us that a major plan wouldn't pay for E&M services rendered to a patient on the same day a doctor did a related procedure on that patient. We asked to look at the plan's most recent EOB. Sure enough, the plan had denied a procedure-related E&M claim and had indicated why: Both the procedure and the E&M visit had been billed with the same diagnosis code.

It turned out that the practice was billing for E&M services in conjunction with procedures five times a day, on average. Some of the claims for those services were being rejected under insurance rules. But in about 30 percent of the cases, the doctors were performing an E&M service unrelated to the procedure. The doctors would have been reimbursed for these services if they had used a separate CPT code with a modifier –25.

Know why your claim was denied

EOBs can reveal other billing and front-office mistakes, too. They show when claims are denied because referrals weren't preauthorized, procedures weren't precertified, diagnosis and procedure codes didn't match, services were unbundled from a global fee, or claims were submitted too late.

Carriers generally give you a set amount of time—between 90 and 180 days from the date of service—to file your claim. If your office files a claim after the deadline, you won't get paid—ever. So look at your EOBs to be sure you're not paying clerks to resubmit claims that were filed late, and then get on them to file claims on time.

Unbundling charges from a global fee can also result in claims that will never be paid—and in time-wasting resubmissions. For instance, post-op care is usually included in surgical fees. If your staff is billing separately for post-op visits, it'll show up on the EOB.

If the EOB indicates you're seeing patients without referrals or doing procedures without approval, you'll need to talk with your front-office staff to determine what the problem is.

When an EOB says a claim was denied for "lack of medical necessity," it usually means that the ICD-9-CM code didn't match the CPT code. Insurance companies have software that matches these codes, so you can't appeal this kind of denial. But you can buy coding software that checks codes prior to claims submission. Coding programs—which range from $600 to $1,300 and work with most of the leading practice management systems—quickly pay for themselves by enabling you to collect on a higher percentage of claims.

Or you can buy a charge-capture program designed for handheld computers. Some charge-capture software matches the diagnosis and procedure codes you select; other programs are built into electronic medical records that generate codes from your documentation.*

Of course, any computer program is only as good as the data you put into it. Many physicians give their billing people encounter forms that contain incomplete, vague, or erroneous information. Then the clerks have to figure out what's wrong, check the chart, and guess which codes to enter into the computer—an almost surefire formula for inaccurate billing. Even an experienced billing person is unlikely to know what must be documented to justify a level 2, 3, or 4 E&M code. And you can't rely on staff to pick the right code among the 20 or so related to hypertension.

Deciding which battles to fight

When a claim is denied or downcoded, your billing clerk should bring you the EOB and the chart that goes with that claim, and let you decide whether to request a payment review.

If the documentation is insufficient, you've learned something. But where it makes sense to request a review, do so by all means. Your complaint keeps the plans on their toes and might result in increased payments.

If you file level 4 or 5 E&M claims for several visits by the same patient, some plans will downcode them for lack of medical necessity. The plans don't know that Mr. Smith has poorly controlled diabetes and hypertension and is at risk for complications. You can avoid this kind of downcoding by entering all of the diagnosis codes pertinent to Mr. Smith on every visit, not just the initial one. Then check the next EOB to see whether the plan has gotten the message.

Obviously, you don't have time to examine every EOB. The best way to ensure accountability is to have the same staff member bill and post payments from particular carriers and follow up with those companies. While some experts may object that this approach increases the risk of embezzlement, there are other ways to combat theft. And by making one person responsible for all payments from a certain insurer, you know whom to ask if those payments fall short of expectations.

Since some plans and types of insurance are harder to deal with than others, you can't just assign each billing person the same number of carriers. If a clerk is dealing with more difficult payers, she should handle fewer claims than other staffers do.

Use electronic remittance advice

Posting payments is labor-intensive and boring. In some practices, a clerk might spend a day and a half each month keying in amounts from Medicare EOBs alone. To reduce the drudgery and expense of this task, take advantage of the electronic remittance advice offered by Medicare and some commercial carriers. Payments are automatically posted to your A/R, and you still get reports telling you which claims were adjusted or denied. So you're saving keyboard time without losing control.

Most top practice management systems can be purchased with electronic remittance advice software, or you can add that later. Make sure, however, that your software vendor already has customers who are using software. It's one thing to say you have the capability, and another to actually communicate with Medicare's computer programs.

Meet regularly with your billing staff to take maximum advantage of EOBs. Several of the most efficient and successful practices I know do this once a month. The agenda always includes a series of questions: What problems are we having with which insurance companies? What are we doing that's generating the most denials? What are the billing people missing from the doctors? What changes do we need in the software?

By asking the right questions and keeping an eye on your EOBs, you'll have a better handle on your finances. Don't scorn EOBs just because they come from health plans. Use them well, and see the results in your bottom line.

*See "How the device in your hand can put more money into your pocket," Dec. 17, 2001.

The author is a practice management consultant with Berdon Healthcare Consulting in Jericho, NY.

 

Michael Wiley. Practice Pointers: Increase collections--watch those EOBs!. Medical Economics 2002;8:35.