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Medical Practice Operations - Business Fundamental ...
255193 - Video 4
255193 - Video 4
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Hello, everybody, and welcome to the Module 3 of the Medical Practice Operations Business Fundamentals 101. This is part of an eight-part series, but there are some subsections. So, essentially, there will be 10 WebExes covering the fundamentals of medical practice management. As I've noted in prior presentations, this is not all-encompassing, and it's built for, really, a macro perspective on different component pieces of medical practice management. So, over the course of the next 30 to 45 minutes, we will dive into Module 3. Module 3 is a two-part presentation because it's so impactful to healthcare practices and makes a difference in, really, the lifeblood of the clinic in terms of operations. And we'll be contemplating the revenue cycle during Module 3. So, as I've done in prior presentations, I'll just reiterate, nothing to disclose, and this is not advice or counsel on any aspect of healthcare operations. So, make sure we level set with that right out of the gate. I work for WIFLI. WIFLI is a 105-year-old accounting firm. In the business verticals, you can see the different service lines that we attend to. I work in the healthcare space. I run the physician operations piece of WIFLI's National Healthcare Group, and in that space, we deal with academic medical centers, private practices, federally qualified health clinics, rural health clinics, critical access hospitals, private practices, tribes. So, we do a lot of work in a lot of different clinical platforms, and we are specialty agnostic. We travel across the country, and we'll work with any specialty. This is my background, 30 years in the healthcare space, and without further ado, we are going to jump into Module 3, the revenue cycle. What I wanted to get accomplished today during our time is really level set of what the revenue cycle is, understand the life cycle and what impacts the revenue cycle, and then contemplate some of the granular details of the rev cycle, and then we'll get a little bit into the measures and metrics of the rev cycle. So, this is my standard clinic flow sheet, if you will. This is the clinic workflow in the outpatient setting, essentially, and this applies to really any specialty with the variations being really, if you're doing cardiology, you might have nuclear medicine in office, or echoes, or something akin to that. If you're in another sub-specialty, you might have certain office procedures that are outside the internal medicine family practice loop, if you will. But in the rev cycle, as I've said before, all of these pieces contemplated on this diagram are revenue cycle pieces. Likewise, this really shows the interrelation of the clinic visit with the revenue cycle process. So, the clinic visit starts on the front end with check-in, obviously, and you have work up in the actual patient visit, coding and documentation, submission of the claims, et cetera, and then follow-up care, whatever that looks like. Likewise, in the rev cycle, it follows along with the patient visit. So, the rev cycle is interwoven pretty intimately with actual care delivery. And so, when people talk about rev cycle, one of the things I elucidate is it's not just billing and coding. It's all of these pieces that impact really the incoming cash flow versus outgoing. And so, eligibility check is really in my way of thinking where it starts. So, before a patient gets in the door, whether they're a walk-in or a referral, need to understand at the clinic level what their insurance is and then pre-check their eligibility to make sure that they're in network or out of network so you know how much to collect on the front end, et cetera. You know, make sure point of service collections are tight. So, it's understanding who's scheduled to come in that day so you could see if they have an outstanding balance. Again, what their co-pays are, deductibles, et cetera. Then you have your patient visit, work up, and then coding and documentation is, you know, what level of service are you billing? What is the documentation that substantiates that level of service? And then it's claims, submission, et cetera. And then on the back end, when you get the remittance, when you get the advice from the insurance companies, you know, are they EFTs? Do you still get some paper checks? What are the processes and procedures involved in getting those EFTs posted, making sure you're getting the right amount in, denials, how we work those, how we minimize those, appealing claims if they're deemed not medically necessary, early out collection processes if you've had problematic patients that you can't collect money from. And then front desk also is advanced beneficiary notices or that could be if you're in a surgical practice, making sure you get an ABN filled out so that you can ensure the insurance company, A, knows about the procedure and B, is going to pay it or if they deem it medically unnecessary but you deem it necessary, you have to let the patient know so that they understand they have the financial obligation. So, as I've said, the, and I got a little over my skis and a little ahead of myself, but the clinic ecosystem works hand in glove with the rev cycle ecosystem. They coexist. So, in broad terms, if you look at however money is collected, I would call that definitionally part of the revenue cycle. That really catches basically everything. We talked a little bit on the last slide about the multiple variables and inputs. These pieces, regardless of where they live, can impact the revenue cycle for the good or the bad. I mean, if you're not getting ABNs or you're not getting procedures that are deemed medically unnecessary, if you're not getting clearance for those ahead of time, there may be provisions in your contracts with your payers that stipulate you cannot bill a patient for them because the patient didn't know and the insurance company in their wisdom deemed it not medically necessary. So, the rev cycle life, the rev cycle life cycle begins as I intimated before actual visit. It honestly, I would make an argument it begins before the eligibility check. So, if a new provider is added to a medical practice, it will take them many months to get credentialed. And that's not medical staff privileges. A lot of people misconstrue credentialing with medical staff privileges at a hospital. When I say credentialing, they use that synonymously. When I say credentialing in the outpatient setting, I'm looking at that as, you know, Dr. Smith joined us. He went to Harvard Med School, wherever. He's doing X, Y, and Z. He's licensed to practice in the state of Georgia, etc., etc. Getting those, getting him or her hired in the practice, but ensuring a long enough runway so that by the time they start seeing patients, they are on all of your panels with your payers. So, credentialing, once you hire a doc, you need to get moving forward on the paperwork to get them on the panels with Blue Cross Blue Shield, United, Cigna, Aetna, Medicare, etc., because they won't recognize them, they won't recognize the physician unless they've been credentialed. So, that's really where the process starts. You will get claims denials, or you'll get physicians who you bill, who are at the practice, and the insurance company will say they're out of network. And then you've got a lot of cleanup to do to get revenue for those services. So, I'd argue rev cycle kind of starts then. And then it's the eligibility check. And there is software out there that will assist in checking eligibility if you don't have a direct line to your commercial payers. And then we talked about past due balances. There's a lot of folks, and in the front end piece of the revenue cycle is really prickly, right? You've got some at the front desk, or even, you know, maybe side office up in the front desk area to have these discussions about finances. And it's really prickly because people come in, and the front desk doesn't really want to say, hey, you owe us 800 bucks for your last visit. And so, oftentimes, this gets sloughed off to the side because it's just really distasteful to chat about, especially in the healthcare setting. You're not talking about, you know, the auto parts factory. So, it's very prickly. And there really needs to be policies and procedures in place to dictate how this is managed on an ongoing basis. And also, ensuring that your staff has backup, that they have leadership backup. Because you could get to a situation where if you've got, you know, someone who's notorious for not paying, that then becomes a physician-to-patient discussion about, hey, Mrs. Smith, we can't provide care for you unless you start paying your bills. And you may come to a position where you have to divorce the patient from the practice. As distasteful as that is, you know, I have seen that happen in my years in running private practices. And, you know, you can't have a profitable business if people are not paying their bills. It's really that simple. And if they're not paying their bills, physicians aren't going to get paid. Time of service collections. As you know, if you've listened to some of the other modules already, I love to use little graphics, simple numbers, just to paint a picture. And this is a little bit of an absurd example. But you'll look at the numbers and how they kind of grow, geometrically expand. And it'll give you a sense of the revenue that flows, even at the front desk. So TOS, time of service collections. When patients come to the door, they should never be asked, do you still have the same insurance? We talked about this in the last module. This is a recipe for a denied claim and then, you know, having to chase the claim around on the back end, which is a waste of time and money. You should always verify with ID and with their insurance card. Make sure the dates are for the period in question. 1-1-2023 to 12-31-2023 or what have you. You want to get all the front end collections that are due to the practice. And what I've painted, the picture I painted here is, let's say you've got a clinic with five locations and they see 40 patients a day, which would be insanely low, nonetheless. So you have 200 patient visits a day. And let's just say the average copay is $20, which again, if you've got people on high deductible plans, you're going to be collecting a lot more than that. So revenue per day for the practice is $4,000 in copays. Well, if you look at 253 working days, that's a million dollars in copays, not even back to payments or deductible collection. So if you've got 10% of that coming in cash, that's $100,000. And 90% in credit cards, that's $900,000. So again, this is absurd. If you're big enough to have five locations, you're probably running a hundred patients through a day. And just do the math on this, a hundred patients a day per location, 500 times, let's say $50, $75, that really starts to add up. So this makes an argument for A, collecting at the time of service and B, having policies and procedures in place to make sure you're not missing out on that front end $1 million. And again, if that doesn't get collected, but it's due to practice, let's say it's a hundred or it's a million dollars on the front end. And you're paying someone $35,000 on the front end to staff the front desk and to manage the patients on the front end and collect all the assorted detail. Well, they don't have policies and procedures for that. This million dollars less $35,000 and other assorted overhead then gets really depleted on the back end because you're spending considerably more time chasing that money on the back end because it's due to the practice. And let's say that million dollars now ends up being somewhere around 850,000 because of the number of folks you have to chase around. Again, a little bit of an absurd example, but I'm using that example to really clarify how important it is to A, get the money that's due to practice and B, have policies and procedures in place. So in the patient visit on the ecosystem, so the patient is through the door, we've collected co-pays, deductibles, et cetera. You want to ensure accurate workup, of course, clinically, but also documentation purposes for billing a claim. Accurate documentation and coding, accurate visit. In coding of the claim, obviously your level of service, which I'm going to call essentially these CPT codes you see on the right in this example. So these are recheck visits 99211 through 215, and then the diagnosis code to substantiate the level of billing, right? So obviously a 99215 requires more work, more effort, also requires more in-depth clinical review before you go and bill it. If you go and bill a 99215 and you've actually done a 212, first of all, that's bad in terms of patient care. Secondly, if you get called aside by Medicare, Medicaid, or someone else, there can be jail time if that's done intentionally just to either increase your work hour views or the revenue. So what you see in this allowable analysis is there are two things here. It's to show you the difference in fee schedules, basically. These are made up numbers, but they follow logically with how payers and Medicare are different in terms of what they pay for a medical procedure. So payer one, we'll just call that UnitedHealthcare, could be any commercial insurance company. And then you see the Medicare allowables for these recheck visits. And one of the useful things to do in a medical practice is understand when you get into negotiations with the commercial insurance companies, and we've talked before about leverage in your numbers when you're in a medical practice. Certainly if you're in a larger metro area and you are the dominant group, whether it's subspecialty or internal med or multi-specialty or what have you, you need to understand very clearly what you are paid by each insurance company to understand even if it's worth your while. And we'll get into the dynamic of that later because that's a whole different discussion. But basically, you might hear people say, well, we get 140% of Medicare. And what they're essentially saying is if you look at the 99211, they get $25 from Medicare, they get 35 from the commercial insurance companies. So that's 140% of Medicare. But people use that metric when they analyze contracts. It's just been broadly accepted for hundreds of years, X, Y, and Z. And so not hundreds, but you know what I'm saying. So in any event, you say, well, what's the right amount to get per Medicare claim or per contract vis-a-vis Medicare? And it really depends, again, on where you are. I know that in some states where, say, Blue Cross Blue Shield is the market dominant payer of the whole state, there are some clients I've dealt with in the South where that's the case. And Medicare actually pays better than Blue Cross Blue Shield. So you get these weird anomalies, and it is demographically driven. But the bottom line here is, before I go down much deeper into the rabbit hole, in this instance, you can see that this medical practice is getting 140% of Medicare for level one recheck. Well, level one recheck doesn't happen with frequency. And so if you were all happy about your 140%, you got to think about the volume then of what you're getting. If I'm doing $1,992.11 a year, and I'm making $35 off it, I don't care, honestly. If I'm doing 1,000 level fours, threes and fours, that's where things start to make the difference. And you can see in this example that this insurance company is only paying 125% of Medicare for a level three, 116% for a level four. And the reason for that is the insurance company knows that you're going to use a lot of these, and they're going to try to tamp down the reimbursement rate. So net net, when I look at these, this medical practice is actually making 120% of Medicare on the aggregate. And that's not awesome. But again, it really depends on where you are. So this just goes to show it's really worth understanding your data. The fee schedules are part of the revenue cycle. Your allowables are part of the revenue cycle, and that is, I hope, pretty clear based on this slide. And we will dig down a little deeper into this as we go. So even if you're performing telehealth, telemedicine, you need to ensure that the revenue cycle policies and procedures are in place. I would argue this is operational in the clinic. So all your team members understand what the measures and metrics are for the jobs they do. And it's very clear. Not only is that the right thing to do, because it level sets expectations for people, but it's also the right thing to do because it makes managing people easier. If folks understand what's expected of them, and then when they step on a landmine, you know pretty clearly that stepping on a landmine was the bad thing to do, right? So if we clearly point out to folks that this is what needs to happen, and here's what the expectation is, not only in your job, but for our revenue cycle, collecting co-pays up front, managing denials, checking for errors. If we have a denial rate of, let's say, 10%, I've got a huge problem. Because those claims might be able to be rebuilt. However, a 10% denial rate means rework, right? And so I'm going back through. It takes manpower. It's so inefficient. You should have a denial rate of 3% to 5% maximum. That's another piece of the rev cycle. So that's back end. Claim submission, checking for errors. All the EMRs, practice management systems, you may have a bolt on. But they essentially, for lack of a better phrase, they scrub the claims to make sure that they can get out the door. They kind of essentially check for front end denials. And then you have denials management on the back end, you know, patient out of network, whatever the case may be with regard to that. And then managing these patterns, and I think we get into this either later in this module or in the second module, but having policies and procedures in place to make sure that if I build $100 to Blue Cross Blue Shield, and their allowable is 80 for me, then I need to make sure I got the 80 bucks back from Blue Cross Blue Shield for that patient visit. There have been instances all across the country I've seen where, you know, people collect the 80 bucks, or they collect, they should collect 100, they collect 80, because that's what Blue Cross Blue Shield paid, and they just write the difference off. Well, there may be a reason for that, and you may be leaving money on the table. So paying attention when, I will tell you, when I go in and look at clinics, and the revenue cycle is too good, that's as, for me, that's as bad as it being really bad. Like, you know, some things are too good to be true, and maybe it is, but I'd really like to know why. And so I would dig into some of those things to understand, how are you doing this? And oftentimes, when the numbers are too good, either the math is wrong on how they calculate some of these metrics that we'll get into, or, you know, the accounts receivable aging is really, really good, because people do write stuff off, so you have nothing sitting there that needs to be worked. Policy procedures have to be delineated, and they need to be updated as needed. So in my trite little diagram that I've kicked off all my modules with, that life cycle of the visit and the rev cycle is an ecosystem, right? So it needs TLC, it needs tending to, so there need to be things put in place that we see how they go, like with any system, and then we tweak them out, we modify them, and then we continue to provide a feedback loop to all of the pieces on that life cycle to, as best we can, optimize utilization and ensure that we're running a tight ship. And I will tell you this too, vis-a-vis the employee evals, a lot of things in the medical practice, even in the clinical side with MAs or RNs, you can boil down a fair chunk of those into a measurable objective criteria that you can tie into the subjective piece of an evaluation. And again, if people understand their goals and what those look like, I mean, I had deployed with my nurse manager a series of objective measures for our MAs that really were fundamentally sound methodologies for working up a patient with regard to the HNP and all that. And so we would do chart audits, random chart audits, just to make sure everyone was doing what they needed to. And then we had a feedback loop, we had a threshold requirement, and a recheck on those folks that if they failed on a certain metric, we went back through and revisited that. But the shorter version of that is that gives you quantifiable data at the end of the year with which to help do the performance evaluations, and it takes a lot of the pain and agony off of management, and they're not scrambling at year's end to do the eval. So the fee schedules, this is how you generate revenue in a clinic. Again, this is absurd, and very facile, very macro, but it gives you the idea of where the dollars are coming from. Negotiations, important, and need to be tended to, I can't tell you the number of practices I go to where the billing staff has no idea where their contracts are with the insurance companies. And most of the insurance company contracts that I used to read are evergreen. So they will change, and they can have language in there that changes as Medicare changes. So let's say in the data example on the right-hand side of the slide, if I'm getting 120% of Medicare for these five recheck codes, if Medicare decides to change those, and my allowable with this insurance company alters based on some Medicare criteria, then my allowables for that payer are going to go down. And so then, if I've got a preponderance or a large group of patients who are on that insurance company, I can do the same exact work this year as I did last year and get a pay cut. And by the way, the cost to run your practice aren't going down. So think of it in those terms, when we looked at our very simplistic P&Ls from earlier modules, if you're working as hard or harder, and your revenue is going down, but your expense is going up because people have built in, you're giving a 3% raise to the staff or whatever, that's problematic. And so it just speaks to, as with any business, managing those data pieces. And it just mind boggles to think about the groups that have no idea what they're supposed to get paid from their insurance companies, because that is how you keep the doors open. So in earlier modules, we contemplated larger practices, whether subspecialty or multispecialty group, understanding your leverage in the market. Are you the biggest group? Are you the smallest group? Are you in New York City? Were there a gajillion cardiologists? I mean, how does that look? And nowadays too, you can make a quality argument to payers. Some of them profess to want to pay for quality. So if you have a great management team that works well with your, as I said in earlier modules, if you've got senior clinical leadership that gets it, and they can work with your and provide clinical counsel to your outstanding management team, you can start to measure. I was data mining in the early 2000s with cardiology data, and being able to make an argument that my guys were great, and they were meeting Maricopa College of Cardiology guidelines for certain care delivery elements, and that we deserved more money for that. And at the time, the first insurance company I went to said that they couldn't do carve outs because they didn't have the technical skills to do it. So in any event, they are now saying they want to pay that way. Medicare and Medicaid, they pay what they pay. They don't negotiate. If you don't take Medicare, even so, if you have a Medicare patient, you are limited. They have what they call Medicare limiting charge. It's a little bit higher than if you're in network, but you can't just charge your commercial fee and have patients pay that fee if they're Medicare patients. So a little example at the bottom here, and this goes to understanding your patient mix. If you're a high specialty, specifically if you're a high subspecialty clinic like a cardiology clinic and you're in Florida, for instance, with that demographic, or you're an ophthalmology clinic, the patient mix, what we call the patient mix, which is your number of commercial and private pay or self-pay versus your Medicare, Medicaid, that really matters in terms of projecting what kind of revenue expectations you might have. So Medicare patients, if I saw 10 patients a day at $100 per office visit, that's $1,000. Look at the difference if I saw the same 10 patients, $140. I mean, it's very simple math, should be intuitive, but it does matter. I mean, if your whole clinic is Medicare, extrapolate these numbers on 10,000 clinic visits a year, and that becomes real revenue or the loss thereof. So analyzing your allowables, we discussed this a little bit. These are new patient visit codes in your upper right-hand side of the slide. So 201 to 205, they obviously pay more, and you can see Medicare rates are posted, so you can go look at Medicare rates online. Ostensibly, they pay more because they require more work. Medicare doesn't recognize the 201 anymore. But theoretically, a level five person, if they're a new patient in your office, that's a very serious heavy-duty lift. That's a lot of work to work up a 99205 and bill for it, a lot of comorbidities possibly. But in any event, what I'm trying to paint here, the picture I'm trying to paint is, you've got five commercial insurance companies, whoever they may be. We'll call them Aetna, Cigna, United, Blue Cross Blue Shield, and I don't know, Joe Schmo. Your clinic needs to negotiate the allowables from these insurance companies for every procedure code that you do. And so you could see in this instance, let's go for a 99201. Insurance company one is only paying 20 bucks. Two is paying 40. Three is paying 20. Four is paying 35. Five is paying 45. You get into that level of noise when you're negotiating. And you really need to understand from a business perspective, either the clinician needs to or their management team needs to understand there's room to negotiate, but it's also give get, right? If I look at my data for the year, for last year, year before, and what I expect this year in terms of patient volumes, if I'm doing, I don't know, let's call it 25 99202s a year, maybe I'm willing to take $40 for a 202. Maybe I'm willing to take 20. But if I'm doing, you know, 6,000 99203s, well, maybe $50 doesn't look so good. Maybe I want 90 bucks. So that's where understanding your data, understanding your patient mix and payer mix and your demographics and leverage to negotiate comes into play with regard to your fiscal financial health. And that's just getting the revenue. I mentioned in a prior module, your charges don't equal revenue. So if you look in the column that says insurance number one on the top right-hand side, if you build $1,000 for that 99201, you're going to get $20 from insurance one, 40 from insurance two, 20 from insurance three. The rest is written off and cannot be balanced bill back to the patient. So charges, if you keep them static, they can, in theory, show some level of productivity. But in reality, the real productivity is, you know, basically an RVU, work RVU measure, which we alluded to and we'll get into in greater detail later. And, you know, your patient volumes and your revenue in the door. And we talked in the last slide about Medicare percentages. You may hear that bandied about with medical practices. And remember, practices cannot compare their fee schedules in their market. That's a violation of the, I believe it's the FTC rules and regulations. The way the government looks at that. That's like Coke and Pepsi getting together and saying, hey, let's charge everyone $25 for a 12 ounce Coke. It's rate setting and it's anti-competitive. The lower, I was gonna skip this one, but I'll talk about it. The patient exam lower left. So this is just to paint a picture of your allowables. Here's your $150 charge, right? And maybe you charge 150 bucks for every, whatever this is, we'll call it a level three. Insurance company one's gonna pay 100 for it. You're gonna have a co-pay of 20 from the patient, 80 from insurance company one. Here's the situation I alluded to earlier. Let's say you get 80 back from the insurance company and then your staff writes off the 20. They never collected co-pay. You're losing $20. Multiply that by, if you're in a big clinic, you know, 5,000 patients a week, a month, whatever, that becomes real money. That is due to the practice. The patient, when they get their insurance contract with Blue Cross Blue Shield or whomever, their obligation is to pay their portion. And technically, if you only collect from the insurance company, you're violating your contract with the insurance company. If they know about that, they can cancel your contract because the patient is obligated to have financial responsibility in this transaction. And so, here's why charges don't matter. Again, an absurd example from one of my books that I pulled out for this presentation. Let's say you have Dr. Fred Mendit and he does, I don't even know what I put in there, Igna-Magna-Nectomies. He does two a day, 10 a week, charges 10,000 per. So his annual charge is about 480 grand. But let's say he collects 288 for those, okay. So you've got Ignatius Schmo, he bills 10 level three new patients, five days a week, $200, weekly charge $200. So he's charging the same amount, you can see, $10,000. His annual charges are the same, 480. Now he's arguably working harder, but if he's not doing surgery, maybe he's less stressed about this. Nonetheless, you can see he's making, he's collecting about 80% of what he charges. Again, this is an absurd example, but it does show you charges really don't matter vis-a-vis revenue. Now they do have some tie-in, like I said, I'm not ignorant enough to presume that there is absolutely no tie-in, but it really is not a metric where I'm working so hard, I charged a billion dollars. Well, okay. So anyway, I think we've beaten that one into the ground. Accounts receivable. I won't get into great detail on this, but you will have access to these slides. This is where the rubber meets the road. And your office team, if you're in a large practice, you may have a manager and their sole job is to manage the billing and collecting. This is sort of a layman's revenue cycle analysis. This is where the rubber meets the road. And so here's what the data tell us. On 131, so at the end of January of whatever year, the practice had $400,000 outstanding. In that month, they charged 600,000. $550,000 were paid that month. They have contractual write-offs of 45,000. And so their ending AR went up $5,000, 405. Their collection percent was 99%. And so you can do a little analysis. If you're collecting historically 99% of what you charge, you can do some math and figure out what your expected revenue stream should look like based on outstanding monies. Now that ebbs and flows because if you're not collecting the money or you lose all your rev cycle staff, that goes out the door. So I wouldn't use that as my day-to-day management piece, but it's one of those data points that helps you to understand very clearly what's going on in your clinic. And big hiccups and big bumps can be seasonal, but they can also mean trouble. And we'll talk more about that later. The net collection rate, and I think we speak to that later mathematically, a net collection rate of 95 to 100% is the industry standard. So if you harken back to our module one on employment opportunities, and you go in in the interview process and say, hey, what's your net collection rate? What's your gross collection rate? I think you'd get some jaws hitting the floor because even with those data points, there are many groups that don't pay attention to those. And again, they don't tell the full story, but they are measures and metrics that paint a broader picture. And the more data points you get, the more clear and accurate the picture is. And you can see in this data below, gross collection rate is 91%. That tells me a lot of different things that their fee schedule could be low. Their net collection 99.16. Again, is that too good to be true? Are they just really that good? And then what you do is you look at the buckets. We break down in the industry, really zero to 30, 31 to 60, 61 to 90. And that really should be 91 to 120 and then greater than 120. And you look to see, in this case, these guys are doing a really good job. If you've got 50% of your accounts receivable, that's only aged between zero and 30 days, and another 35%, if you got 85% of your outstanding stuff, that's less than 60 days old, that's really pretty good. And then what you can get into some of the other analytics, the days in AR, you can do the calculation back of the napkin to figure out what are days in AR. This calculation on the right, lower right, indicates 21.96 days in AR. That's really, really good. And again, I would look at that and say, that's really, really good. And I would look at it and say, why is it that good? Because you can write things off to impact that calculation and make it better than it actually is. But if a medical clinic is collecting somewhere between 25 and 35 days in AR, that is really strong and they're doing a good job. That means technically, it's taking them on average, this group, in this instance, it's taking them about 22 days to collect the money that's due to practice, which is really, really good. That's quick turnaround. The adjustments and write-offs piece, some clinics just lump those together. To get a really accurate picture of what your net collection rate is, those really technically, the adjustments are a function of your contractual adjustments. As we said in the prior slide, right here on the lower left, the charge is 150, the allowable is 100. So I'm writing off $50. That's a contractual adjustment of 50. And you might say, why would I charge 150 if I'm gonna have to write it off? Well, having that 150 out there, you might get an insurance company that would pay 160. So if you bill 150 and they pay you 150, yeehaw for that. And also, it's really an exercise in, let's say two fee schedules, one for Medicare and one for commercials. This is just a static number, and it gives you flexibility in understanding the charge, but working within the parameters of the different insurance companies and their different allowables. So I see two might pay you 130, and you just charge everybody 150 for a 99203, for instance. So, okay. This is another example of our days in AR. These are three physicians broken down. So this last slide, that's the clinic broken down. And now we're on to breaking that down even further, because you could have good numbers up here, and then you could have Dr. X, Y, or Z who is having suboptimal performance. So then looking at the data, peeling back the layer of that onion to understand why would Dr., let's say X, for instance, why would he or she have bad AR? Well, maybe he or she is doing very advanced surgeries that sit in appeals or have to be medically reviewed by the insurance company for every one they do. I mean, there are ways to work around that, but nonetheless, there could be reasons, but understand those reasons. Maybe each one of these clinicians has their own person who manages their AR. Well, maybe Dr. X's person is not good. And so now we have to have a discussion. Is she not hitting her metrics? Are the positive procedures not clear? Do we need to offer her more education? So here's the example again. You can see charges for each of these docs, receipts, adjustments, write-offs, and here's what their outstanding AR is. And that can vary, again, by clinician. So the outstanding AR for this group is $350,000. So if their net collection percent is 89%, in theory, at this point in time, they could expect to collect 309,000 of that 350. All right, so we just actually discussed this in the last slide, breaking down the AR by physician and the value of that. And that requires time and effort. That requires someone paying attention. If you're in a three-doctor practice and you only have a practice administrator, he or she needs to, in their bag of tricks, needs to be able to attend to this. It's essential. If you're in a 100-doc multi-specialty group, you are going to have someone who manages that space. And they also might manage the billing and coding. So the actual review of charges and the documentation that substantiates the levels of service. So benchmarking, it's the standard of excellence, achievement, against which similar things are measured. There are data points out there that it leads, even if they're not dead-on, they give you a sense of what's going on in the industry, if you will, and you can get them by region in some instances, and that will help you to understand what, even if they're not dead-on for where you are, at least they give you a sense of what's going on. And candidly, you could build your own out as long as they're reasonable, because you need to have a measure by which to value the efficiency of the practice and how well you're doing with billing, coding, collecting. Again, this is the business side of healthcare. Whether it's distasteful or not is a discussion for another time, and it shouldn't be a business, et cetera, that is what it is, but you need the revenue to come in, the dollars that are due you. If you go to the grocery store and take a loaf of bread, that's shoplifting. I mean, they expect you to buy the loaf of bread and pay them for it. Likewise, you are providing a service of value, arguably a lot of value if you're tending to people's healthcare, and you should be paid for your service. Benchmarking happens in businesses all over the place, whether it's healthcare. I mean, Ford knows probably down to whatever widget goes into an EV, what the cost from the vendor is, what the markup needs to be either on that piece or the overall product to ensure profitability. Likewise, you should have that level of detail on your operations, so your profit and loss, like we talked about module one, and your revenue cycle. Key benchmarks that you could look at, WorkRVUs, which is a tried and true and accepted measure of productivity, the days in AR, collection percent, staffing per WorkRVU. Do we have the right number of people based on the work we're doing? And your overhead, revenue per WorkRVU, all of those component pieces. The cautions, I would say on benchmarking, don't overmeasure. Healthcare has a load of data. We've historically been really bad about managing that data and using it to better the business, whether it's clinical data and outcomes data, or whether it's managing the business and expense side. The key is understand the metrics that matter and measure those, right? I mean, there's so many data points, you can go down a rabbit hole really, really quick. Choose your data elements, choose the ones that matter to the clinic. And then the downside is, if you don't have enough data to benchmark, lower bad sample size, inaccurate data will throw things, but at least inaccurate data is gonna make you look because you'll see that something's broken or wrong, and then you can dig in and find out why you have that anomaly. Some of the national data is not out there in a broad database. Dermatology, for instance, has their own, I think they have a dermatology service line that offers data just for dermatology practices. They've carved that out as like a specialization. So benchmarking, why, how, what, from whom, whom, when, really answer these questions so that you know who's managing what pieces. Like, why are we doing this? Don't just do it because some consultant said do it. What are we doing in this space? Why are we doing this? Should we throw that aside because it doesn't matter to us? How are we doing it? What are the data pieces that go into it? And what is the measurement? What are the metrics? Where, when are we gonna, when are we gonna aggregate this data? So I would make the argument, and this comes up in our module 3a, we get a little more detail about this, but what do those reports look like? And how much detail should we get into? And we'll discuss that later. So that is my presentation, module 3 for revenue cycle. We will be doing another, golly, I gotta do quick math. As I said earlier, there are 10 modules, but they have a little weird nomenclature. So we do a 2a and a 3a, so they're really 10 modules. But we will be doing module 8, the final module, live on May 10th at 7 p.m. Eastern time. And what we ask is that, that's really gonna be dynamic, but I'd love to be able to build out a deck like this with some preloaded questions so we can have some discussion time. So if you happen to go through all of these modules before May 10th, send any questions you have to physicianservicesatosteopathic.org. We will get those built out into a slide deck, and we will have that presentation put together for May 10th. And if you're on the West Coast, and you can't carve out time at 4 p.m. Pacific, the presentation will be recorded and available as similar to these modules. So with that, I thank you for your time. This module ran very long, but as you can see and understand, this is A, very important, and B, there's a load of detail that goes behind revenue cycle, both the understanding, the analytics, and the why, when, how. So thank you for your time, and I hope you join me for the other modules within this series.
Video Summary
The video is part of an educational series on medical practice management, specifically focusing on the revenue cycle in Module 3. The speaker, associated with the accounting firm WIFLI, emphasizes the importance of understanding the revenue cycle to ensure efficient healthcare operations. They explain that the revenue cycle is integral to cash flow within clinics and is not just about billing but includes eligibility checks, coding, documentation, claims submission, and follow-up care. The module discusses the critical steps in managing revenue cycles, such as ensuring eligibility checks, handling co-pays, and managing claims and denials. The speaker outlines the negotiation of fee schedules, the necessity of understanding the patient mix to anticipate revenue, and highlights the use of benchmarks like WorkRVUs and days in accounts receivable for evaluating financial health. The module stresses the importance of having updated policies and procedures to manage revenue cycles effectively, considering the financial responsibility that comes with patient care. In conclusion, the session underlines the integration of clinic operations and revenue cycle processes in maintaining financial sustainability.
Keywords
medical practice management
revenue cycle
healthcare operations
claims submission
WorkRVUs
patient care
financial sustainability
WIFLI
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