Getting the Most from Your Practice by Looking Within: Part 2 of a Four-Part Series

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Part Two: Examining the Financial Impacts of Your Business Decisions

Every decision you make, from hiring and training office personnel, to maintaining patient documentation, to billing processes, managing contracts, and monitoring accounts receivable (AR) are components in the overall success of your business. There are many situations within these areas that can lead to a slow outflux of dollars if left unchecked. In the second part of this series, we examine how AR and other business decisions impact the financial health of your O&P practice.

Proper Documentation and Collecting Patient Liability

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As discussed in the last installment (“Accounts Receivable Workflow: Is It Working for You?The O&P EDGE, March 2014), poor documentation can cost a practice its reimbursements. Proper chart documentation is extremely important for O&P providers. With increasing reimbursement issues, decreasing fee schedules, and tougher third-party payer reporting requirements, it is critical that practice managers ensure that practitioners document patient visits properly. It is up to the practitioner to fully describe the patient’s condition and capabilities, such as ambulatory skills, range of motion, and any other data supporting the decisions behind the products and services provided. To ensure that documentation is thorough and consistent throughout the patient care facility, conduct routine chart reviews. Determine whether the documentation in the chart supports the claim being billed, and ensure that improperly documented codes do not cause underbilling.

One step toward more timely reimbursement involves collecting the estimated patient balance no later than at the fitting or dispensing of the device. If the carrier then pays something other than what was expected, you can provide the patient with a refund or bill for the remainder, but payment for the majority of the claim will have been collected.

Analyze Reimbursements for Accuracy

It is important to ensure you receive proper, contracted reimbursements. Compare your reimbursement from each payer against the fee schedule or payment arrangement for which you contracted to ensure you are being paid correctly. If you find a discrepancy, it may be occurring every time you bill that particular code. Bring the discrepancy to the attention of the contractor or payer’s billing staff, and request that all of your prior claims for that code, going back to the beginning of the agreement, be reviewed and, if found to be in error, adjusted to pay you at the correct amount. Most payers will go back two to three years if they were at fault.

Analyze your Contracts

Contract terms have significant impact on your revenue. It is good practice to review the contracts every two years or so to determine if they are still profitable to maintain. For each contract, ask: How many patients do you see for that carrier? What is the amount of reimbursement you receive? Does the reimbursement allow a profit margin? Keep in mind that you may be taking a loss on some code reimbursements while making a decent profit on other codes.

We will review the intricacies of contracts in a subsequent article in this series, but it’s important to note that your contracts play a significant role in the financial health of your organization.

Analyze your AR

Outstanding AR offers one view of the practice’s financial fitness. What does your outstanding revenue say about the health of your financials? The following percentages represent an ideal breakdown of outstanding claims in each category for a healthy organization.

  • Individual and self-pay balances should represent less than 5 percent of the practice's total outstanding AR. Implement consistent verification of benefits and collection processes to keep these balances low.
  • Claims that are less than 30 days outstanding should not exceed more than 26 percent of the practice's total outstanding AR. This figure represents all new billing. It is ideal to bill claims within two days, but no more than three days, from the actual date of service. Be aware of how your practice management software calculates and interprets billing dates. For example, does it start the clock over for secondary billings or claims that have been rebilled? Understanding how your system interprets billing dates is essential. Secondary billings can be included in this category because they represent the first time the claim is submitted to that particular carrier. However, rebilled claims should not be classified in this category because they are resubmissions of unpaid claims.
  • Claims that are 31–60 days outstanding should not exceed more than 50 percent of the practice's total outstanding AR. These claims are still considered early in the billing cycle and are likely to be paid soon. Most carriers have language in their payer/provider contracts that bind them to a timeframe for processing clean claims with complete and accurate data—know what these terms are for the third-party payers with whom you contract. Most claims should be paid within 45 days. Medicare, however, pays clean claims within 15 days; therefore, claims for Medicare beneficiaries that are more than 30 days outstanding require follow-up. For all other payers, claims that are more than 45 days outstanding require followup if you billed electronically; since all information has been submitted during the electronic transmission of the claim, there should be less processing time at the payer. Paper claims will be processed, on average, within 30–45 days. Payment delays of 31–60 days may be due to payer-specific rules or incomplete documentation.
    Claims that are outstanding for 61 days or more should be investigated. Place a phone call to the carrier. The claim may require additional information or a letter of medical necessity to be submitted; you should determine what is holding up the processing of the claim during the phone call.
  • Claims that are 61–90 days outstanding should represent less than 10 percent of the practice's total outstanding AR. Claims in this category likely represent a problem: An appeal may be required, it was denied, or it was lost and must be resubmitted. Call the payer to find out the claim status prior to resubmitting it. The time clock starts over for a payer to process resubmitted claims; another 45–60 days may pass before a payment determination is made.
  • Claims that are 91–120 days outstanding should represent less than 8 percent of the practice's total outstanding AR. These claims could reflect major issues. For example, the payer is unable to obtain records from the ordering or referring physician, or the beneficiary's health insurance premiums have not been paid. Most claims in this category require a phone call to the third-party payer to determine how to proceed.
  • Claims that are more than 120 days outstanding should represent less than 6 percent of the practice's total outstanding AR. Claims in this category are generally in second- or third-level appeals, represent devices or services that required prior authorizations that were not completed and are now being appealed for consideration of backdating, or have been misplaced or lost. In many contractual cases, claims that are submitted more than 120 days may have already exceeded the timely filing for the payer and will not be paid by the payer and cannot be billed to the patient.

Expenses and Efficiency

Operating an efficient business is essential to minimizing expenses. Planning, preparation, and upfront investment in proper practice procedures can reduce outstanding AR, duplication of staff workload, and inventory overhead.

  • Analyze your office practices to ensure all processes are done in the most cost-effective manner. Create a smooth and streamlined practice from the patient referral, to the patient check-in, to the visit, to the lab or manufacturer, to the completed device and the fitting and dispensing of that device. Look for "black holes," places where orders end up and are not moved into the completion cycle, and institute practices to avoid paperwork delays, such as missing documentation or comments to ensure responsive prior authorization or verification of benefits.
  • Examine the responsibilities of the staff members. Are they using their skills appropriately for their assigned duties? Are they busy all day? What are they doing during down time? Review your employees' responsibilities and capabilities to determine whether staff members have the appropriate skills and experience to complete their assigned tasks. If there are inefficiencies, a lack of dependability, or productivity issues, it may be time to restructure the office, specific responsibilities, or the number of employees to operate your business successfully.
  • As mentioned in the previous article in this series, managing inventory and supply orders is another way to reduce company overhead. Analyze which products or inventory are used most often, and keep them in stock to avoid lost productivity.

Analyzing the financial health of your practice includes analyzing all aspects of your business, claims process, and business operations flow, as well as the ability to detect business trends and outcomes that may hinder efficiency and your business' financial health.

Christine M. Duprey is the owner of Caris Consulting, Abrams, Wisconsin. She can be reached at 920.826.5300 or at

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