For many medical practices, providing quality services to patients is easy—processing claims and getting reimbursement is the hard part. As claims processing continues to become more and more complicated, this problem is only going to get worse.
Industry statistics show that denial rates and zero-pays can range from five percent to as much as 15 percent or more. Underpaid claims and partial payments can cut a practice’s income another five to seven percent. This was certainly a sizable problem for Orthopaedic Specialty Group (OSG) of Fairfield, Connecticut, according to practice CEO Steve Fiore. OSG is a full service orthopaedic practice with an advanced ambulatory surgery facility, three locations, three state of the art physical therapy facilities and 17 physicians and nine physician’s assistants on staff.
Like many orthopaedic practices, OSG used to bill primarily for medical services, not for any durable medical equipment (DME) like back braces, prosthetics and orthotics provided to patients as part of prescribed treatment. Under the traditional “stock and bill” model, equipment suppliers would stock inventory for OSG’s practice, doctors would do the fittings and adjustments, and the equipment supplier would pick up the patient’s data, do the billing and collect the revenue.
An Ancillary Revenue Stream – with a Catch
About two years ago, looking for ways to enhance practice revenues with ancillary revenue streams, Fiore decided to bring DME billing inhouse. Busy practices like OSG can realize as much as six figures in net income that otherwise would have gone to the DME vendors. Fiore felt that OSG had the resources and skill sets to manage the billing process internally and capture the additional revenue. But it was an ancillary revenue stream with a catch: what he didn’t anticipate was the complex labyrinth of insurance claims processing and payment collection.
OSG deals with 26 different payers, from large national health benefits groups like Medicare, Blue Cross/Blue Shield and Cigna to small regional health plans. Each one of them has different rules and requirements for claims submissions, and those rules and requirements are constantly changing, usually with no advance notice, and often with no notification at all.
“Lost and denied claims were soon averaging about seven percent of the practice’s business, representing a lot of lost reimbursement revenue,” said Fiore. “The reasons for denials could be anything – not using a new submission form we didn’t know about, a transposed number in a claim code, entering an outdated modifier, using a married instead of maiden name, even something as trivial as not capitalizing a word or missing the period after a middle initial. Trying to keep up with all of the different rules, find and fix the problems and resubmit claims was overwhelming.”
Fiore still felt that handling DME billing inhouse was the right choice for the practice, but they needed to find a way to improve claim reimbursement rates. He researched a number of options, and concluded that the most cost-efficient approach for OSG would be to outsource the practice’s insurance claims processing and collections functions to a claims clearinghouse specializing in healthcare.
Solution: Outsourcing Revenue Cycle Management
Fiore found a full service claims clearinghouse with a suite of sophisticated software technologies that enabled complete outsource revenue cycle management. The clearinghouse also partnered with a group of DME market subject matter experts with staff dedicated to tracking the payer’s constantly changing rules, requirements and reimbursement criteria. Since minimizing claim denials and increasing reimbursements was the number one priority for OSG, this made the combined solution even stronger and very appealing to Fiore.
Subject matter experts continually monitor and advise the clearinghouse’s technical team on new rules to keep their claims processing software applications up to date. This is critical because it helps the clearinghouse ensure that when OSG’s claims are submitted to payers, they’re accurate and correctly formatted to minimize denials and eliminate preventable claim rejections.
When OSG started doing their own DME billing, Fiore elected to keep patient transaction accounting in their inhouse practice management system so they could apply revenues to the doctors who delivered the service. This meant that each set of billing information had to be entered twice, once for the practice management system and once for bill/claim processing, doubling the chances for human error.
Thus another key criteria in selecting third party service providers to work with was their ability to integrate with OSG’s inhouse practice management system. Now the OSG accounting staff enters the billing/claim information into the third party billing application, which interfaces with OSG’s practice management system. Claims are then automatically created and submitted electronically to the clearinghouse for adjudication.
The staff only has to enter the data one time, cutting data entry time in half, significantly reducing errors and speeding billing. Since the electronic submission process also means immediate claim delivery, accounts receivable days outstanding dropped, as well.
Claims That Get Paid On First Pass Through
The clearinghouse systems automatically verify and validate every claim, making sure that the data meets each respective payer’s current rules, requirements and reimbursement criteria prior to submission. If a problem is detected with a claim pre-submission, the system instantly bounces it back for correction.
This ensures that OSG’s claims are as clean and perfect as possible so they’ll get paid on the first pass through. If something does slip through and a payer rejects a claim, the system has tools that let OSG accounting staff sort out the problem quickly and re-submit right away.
“Another big benefit of working through the clearinghouse’s automated claims submission is that there’s a time and date-stamped record of when our claims are received by payers, so we’ve virtually eliminated the problem of lost claims because we have proof of exactly when a claim was received,” Fiore commented. “They also validate that claims are in full compliance with Medicare requirements, keeping a complete record of all transactional data for audit purposes.”
As a result of outsourcing claims processing and collections, the reduction in claim denials and lost claims and the increase in reimbursements together now account for a 15 percent increase in OSG’s business, according to Fiore.
More Timely Patient Collections
Another factor affecting OSG’s practice revenues today is the significant increase in direct payments from patients to doctors due to higher deductibles and fewer people carrying full health insurance. OSG must bill directly to patients more often, making patient payments and collections a much bigger percentage of overall practice revenues.
This is another area where the outsource revenue cycle management model helps OSG, says Fiore. The system enables the collection of co-payments, co-insurance, deductibles and payments from uninsured patients at the time of service. It gives patients the flexibility to pay by credit card while they’re still in the office, or schedule automatic payments from their credit card or checking account.
This means more timely and complete collections, lower receivables and fewer headaches and hassles trying to chase individual patients for payment. Plus all payments are logged in real time into the system’s transaction report for easier posting, reconciling and end of day balancing.
Better Business Management
In addition to minimizing denials and lost claims, Fiore also appreciates the clearinghouse’s revenue cycle management system’s advanced analytical reporting tools. These help him better understand his practice’s business and organize it to more effectively deal with payer-related and patient-related revenue issues. He uses their reporting engines to track volumes, patient transaction activity, reimbursement cycles, trends and practice profitability.
The reports provide intelligence to make informed decisions and run the practice as a profitable business. They allow the doctors to see the financials whenever they want to, without having to worry about the day to day operation and business processes.
“Running a medical practice is a very complex business, and it was easy to lose sight of just how complicated and convoluted it can be, especially when payers are always changing things, making it more difficult to get paid,” concluded Fiore. “We made the right decision to bring DME billing inhouse, and we chose the right third party service providers to work with to minimize claim denials and increase timely reimbursements and collections. The business intelligence reporting is an added bonus. We are now in a position to manage our practice more profitably and continue to enhance our revenue stream year after year.”