elizabeth w. woodcock, mba, facmpe, cpc€¦ · charges out and payments in. the fact is that...

Elizabeth W. Woodcock, MBA, FACMPE, CPC

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About the Author .................................................................................. 2

Complimentary Recorded Webinars ......................................................... 2

Best Practices in Medical Practice Billing and Collections ................... 3

Summary .............................................................................................13

Resources .............................................................................................14

Easy, Affordable, Web–Based Medical Billing! .......................................... 15

Best Practices in Medical Practice Billing and Collections

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Denial Management: Strategies to Improve Cash Flow in Medical Billing

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Everything You Need to Know About Maximizing Patient Collections

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About the author

ComplimentaryWebinars

Elizabeth Woodcock, MBA, FACMPE, CPC, is a speaker, trainer and author who is passionately dedicated to helping physician practices achieve and

at practice operations and revenue cycle management, she is nationally recognized for her outstanding presentations and writings aimed at improving the business of medicine. Her education and expertise, combined with her humor and an engaging delivery, make her popular with physicians and administrators alike.

With rich experience in consulting, training, and industry research, Elizabeth has led educational session for the nation’s most prominent health care professional associations, specialty societies, and medical societies. She consults for many clients including Kareo medical billing software.


www.kareo.com © 2014 Kareo, Inc. (888) 775-2736 3

‘‘Establishing the terms of your practice’s relationship with its insurance payers is

revenue cycle.

Now is the time to explore all aspects of your billing and collections cycle and look for performance improvement opportunities. With the impact of the recession well-entrenched, reimbursement and patient volume down, and costs and bad debt up, your medical practice needs nothing short of perfection in managing billing and collections.

ty to patients – and more collections tasks to your practice. These pressures demand a better-performing billing cycle.

organization reach that level.

1. Know the ground rules

Historically, medical practices focused on billing and collections – getting the charges out and payments in. The fact is that billing and collections processes commence long before you send a charge to a payer or patient.

Establishing the terms of your practice’s relationship with its insurance ately, it’s also a

misunderstood and overlooked step. Many times, medical practiceor simply misplace their copies of signed contracts with payers. But those contracts are your roadmaps to the fees, terms and other provisions that determine how – and if – you’ll get paid for services rendered.

Whether you have to ask payers for duplicate copies or conduct a top-to-ctice’s payer

contracts in front of you. Review them and look for:

Contract terms. Most contracts between payers and providers include an “evergreen clause,” which means that the contract goes on for perpetuity unless you stop it. This isn’t ideal, as most contracts don’t require the payer to communicate changes to the agreement, such as an alteration in reimbursement. Request that your contract contain a clause requiring the payer to notify you of any changes. Even if they are changes you can’t prevent, it’s only fair that you should know about them.

Understanding how to end a contract is important, too. Ideally, both parties should have a period of time, such as 60 days, in which to




‘‘National settlements also mandate this disclosure: The payer must provide you with its prices if you make a written request.

Fee schedules.they’re willing to pay you for your services (prices for services – usually by Current Procedural Terminology [CPT®] code – are often called “allowables”). The phrase “allowable” is apt because that amount is the extent of what you’re allowed to collect from the payer

called the fee schedule. Don’t fall for nebulous statements such as: “allowables are set at 110 percent of Medicare.” This could mean almost anything because the Medicare fee schedule changes every year, as does its conversion factor for professional services.

Questions to ask a payer in response to its promise to pay a percentage of the Medicare fee schedule should include:

• Which year’s fee schedule?• What is the conversion factor?• Are the geographic practice cost indices (GPCIs) recognized? If so, which one?• Is the Medicare budget-neutrality adjustment (used for several years, but now defunct) applied?

These are only a few of the many questions that could be relevant. The takeaway is that you need your prices, not a nebulous formula! Although it’s unlikely that you’ll get a copy of the payer’s allowables for all 7,000-plus procedure codes, you should at least know the ones that apply to your practice most often. Put your top 50 CPT® codes in writing. Include them in a letter requesting the allowable for each. Some states, like Georgia, have laws that support your request by requiring payers to respond to them. National settlements between the American Medical Association and several major payers also mandate this disclosure: The payer must provide you with its prices if you make a written request. If you encounter delays or roadblocks in getting this information, contact your state medical society for assistance.

Provider enrollment process: A signature on the contract is just one step toward a successful relationship with that insurance payer. Payers require each provider in the practice to enroll with them, and this is far from an overnight process. Gather intelligence about what the payer requires and follow the instructions precisely. If the proof of

rovider’s diploma is required, then get it – even you have to take down the

in gathering enrollment information will postpone payment to the practice. Once you are sure the provider enrollment application is complete, send it and all of the requested materials to the payer via



These basic ground rules – establishing terms of the contractual relationship, obtaining the fee schedule and following enrollment rules exactly – will set your practice on the path to a successful relationship with its payers.

2. Focus on patient collections

The success of patient collections is contingent on placing it front and center in the billing and collections process — a

nonelderly Americans is uninsured today.1 Many of these Americans are working, but their employers don’t offer insurance. Those who are insured are responsible for a

in the past, including Americans who subscribe to a high-deductible health plan (HDHP). Historically, the billing and collections process ran smoothly for practices that only focused on billing and collecting from third-party payers. Today, with projections that 30 percent of revenue will soon come exclusively from patients’ pockets, optimizing patient collections is paramount.2

Many providers still seem to hold collections at arm’s length as an unappetizing process best not discussed openly with the patient. But avoiding the issue during the patient encounter may only set him or her up for an unpleasant surprise when the bill arrives several months after the service. It does nothing to enhance the patient’s relationship with your practice and everything to promote the impression that the patient doesn’t need to pay

the money, you would have asked for it sooner.)

In contrast, high-performing practices recognize the role of transparency in a successful billing and collections process. Sharing information with patients

in, rather than mistrustful of, the billing and collections process.

eligibility for patients before their appointments. With good information systems in place, unexpected bills for services the patient thought were covered won’t occur. Transparency equates to providing patients with information about coverage, or the lack of it. It also means becoming the patient’s advocate by helping her or him contact the insurer or employer to answer questions.

1 Kaiser Family Foundation, October 2011. 2 Celent, 2012 projection. “The Retailish Future of Health Care.”

‘‘Sharing information with

responsibilities helps them become engaged in, rather than mistrustful of, the billing and collections process.



collect it requires planning on the part of the practice. Here’s how:

• Determine the fee schedule, by payer, for the procedure codes you most commonly perform.

• Create a spreadsheet showing the fee schedule, such as the example in Figure One.

• Put protocols in placeresponsibility when they call to schedule appointments. Scripts can help staff stay on message. For example:

• When patients schedule appointments: “Ms. Woodcock, we accept cash and checks, as well as credit and debit cards for payments due”;

• payment with you for tomorrow’s visit”; and

• When patients who have balances call: “Ms. Woodcock, how would you like to take care of your balance? We gladly accept credit cards over the phone.”

• Upgrade information systems. Successful execution of these proven collections tactics will require information systems that allow staff to look up balances quickly and process credit cards.

Your investment in patient collections will return dividends in revenue and goodwill.

3. Prevent and manage denials

Denials are services that an insurer refuses to pay. The reasons vary: The payer may not agree that the services were medically necessary based on the diagnosis, or there may be an administrative glitch, such as missing

which you submitted the claim. Regardless of the reason, the key to billing and collections success is to understand each denial and act to get it reversed.

Before dedicating all of your resources to managing denials, however, start by ins in the front

collecting accurate information about patients’ insurance – data should be ems should

be able to do so automatically. In the past, it wasn’t a problem to verify the patient’s insurance once a year. In today’s challenging times, Americans rapidly change employers – and insurance. It’s a necessity to verify active coverage each and every time a patient is seen.

‘‘Best-Practice Tip:

eligibility – and give it to them. This helps patients understand

the role of an advocate instead of a collector. Several payers have even started to offer “patient-friendly” versions of the insurance



Get information at registration.’t performed,

take the time to query the website of the patient’s insurer to verify coverage when the patient arrives. Although it may require an additional investment of time by staff, the reward is that both parties – your staff and the patient –

Armed with this information, you can move beyond collecting copayments and request coinsurance and unmet deductibles as well.

Pay attention to coding. Accurate registration isn’t the only step in preventing denials. Capturing and entering charges correctly and in a timely manner are equally important. Code services in accordance with national coding guidelines from the American Medical Association’s Current Procedural Terminology (CPT®) and the World Health Organization’s International

(ICD-9-CM). Keep up to date with the changes in the CPT® and ICD-9-CM codes you use, as well as coding-related rules such as Medicare’s Correct Coding Initiative (CCI).

Work pre-adjudication edits daily. that insurers reject some. These “edits” are typically returned by your claims clearinghouse. That’s okay – you’d rather catch any mistakes before the claims get into the payers’ hands. Correct these errors before they enter the payers’ claims adjudication process, and you’ll greatly increase the likelihood of getting paid faster. Resist the temptation to batch these edits and work them just once a week – or even worse, once a month. Submit claims and work edits every day.

Know how to appeal denied claims. Despite your best efforts, denials are inevitable. The steps described here will keep them to a minimum. All the same, you must know what to do once you receive a denial. The initial step

your remittances and on correspondence from the insurers. Look deeper than the entire encounter. Scrutinize denials on a line-item basis. Just because one line item was paid does not mean the outcome of the remaining services were, too. Record each denial – ideally, by reason code – in your practice management system. Doing so regularly will help you track the number of denied services as well as the causes.

Take a three-question approach to denials:

1. Should the service be written off?In most instances, the answer is “no,” but there are a few grounds for immediate adjustment. For example, if the CPT® code should have legitimately been part of the surgical package’s post-operative services

ould be written off. Claims for which you cannot locate documentation to support the service should be written off, as well.

‘‘performed, take the time to query the website of the patient’s insurer to verify coverage when the patient arrives.



2. Should the service be corrected?If the service is coded incorrectly, an authorization number missing or a patient’s insurance coverage declined, get to the root of the problem. Correct the code, query the management system for the authorization number and search for the correct coverage by reviewing the card

well. In sum, do whatever it takes, based on the reason for the denial, to

3. Should the denial of the service be appealed?s and refuses

to pay you (often with no reason given) – call the payer’s customer service center to learn the status of the denial. Determine next steps based on the cause. If the service was denied for medical necessity, communicate with the physician who rendered care. Ask if he or she would dictate a statement of support to include in an appeal letter. Develop an appeal that offers an alternative view of the medical necessity for the service and why it should be paid. In essence, you are in a debate with the payer, so make your case as compelling as possible.

Once you’ve made the call or sent the appeal letter to the payer, set a reminder to revisit the account in two weeks. A manual calendar can get the job done, but automating these time-based alerts through your

nt. After you’re “tickled” by your reminder system to return to the account, check to see if the claim has been paid. If it has not, go to the payer’s website to check the disposition of the payment. If you can’t determine the status from online information, pick up the telephone and start the process again.

Regardless of the action you take, don’t forget to track and monitor the types of denials you’re handling. This information helps communicate the reasons for denials with management and colleagues, which is a key step to preventing the same types of denials from occurring again.

4. Get everyone engaged

Long considered the responsibility and sole domain of the businbilling and collections require engagement from providers and clinical and administrative staff, as well as billers.

Consider the various key billing and collections responsibilities of personnel not employed as billers. These responsibilities by function are:

Providers: Responsible for documentation and, most often, coding. Timeliness and accuracy of documentation and charge submission are critical, as is up-to-date training about coding. Even if a coder is responsible for verifying the CPT® and ICD-9-CM codes, the providers must have a working knowledge of the codes they routinely use in order to maximize

‘‘Best-Practice Tip: Setting Priorities

There’s always more work than people to do it, so knowing how to approach your responsibilities is

Print work lists in hierarchical order,

and never let a charge be entered or an account initially worked past the

Automate your small-balance write-off process to get the

example, invoices with less than $10 outstanding) off your plate.

Streamline your patient collections process so that collections are done at the time of service.

Eliminate manual work where possible. For example, automating the revenue cycle includes processing and mailing statements without manual intervention.

Attend to credits. To stay in compliance, your practice must give creditors their money back without unnecessary delays. Take a day a month, at minimum, to process

that they are true credits. Another reason to handle credits regularly is that they overstate receivables, giving a distorted snapshot of your billing and collections performance.




When more than one service is being billed per encounter, list the charge with the highest relative

many payers apply multiple service discounts when more than one service is submitted, you want to make sure the discount is applied to the lower-dollar services (which you can ensure by listing RVUs in descending order — largest to smallest).

reimbursement. If, for example, counseling is the controlling factor in that it’s

necessary to document the time and nature of the counseling, not just that it was provided during the visit.

Nurses and clinical support staff: Accountable for steering patients in the correct direction for ancillary services, including services provided in-house. They must be aware of the patients’ type of insurance. They also must know

from patients when non-covered services are to be performed. Nurses are responsible for getting pre-authorizations for certain services from the patient’s insurer or alerting administrative staff to do so. It’s in the best interest of the practice – and the patient – for clinical support staff to be engaged in the billing process. Patients don’t want to end up with unexpected costs, and the practice doesn’t want to perform services for free.

Front In charge of gathering patients’ demographic and insurance information, capturing referrals and optimizing time-of-service collections.

ion to collecting and recording the information promptly and accurately, the front

coverage directly with the payer) and document it (e.g., photocopy or scan patients’

from patients at the time of service, based on the practice’s protocols — when patients arrive or check out.

Coders: Responsible for reviewing or choosing the CPT® and/or ICD-9-CM codes for services rendered, as well as providing support for coding-related

the providers’ choice of codes to abstracting codes based on documentation – the coder plays a vital role in ensuring that the billing process runs smoothly. Timeliness and accuracy are essential, as is knowledge of the reimbursement process. Coders must understand the nuances of the surgical package for procedures and surgeries, for example, as well as the bundling rules, such as Medicare’s CCI edits. Coders who take responsibility for resolving coding-related denials help get these services paid accurately.

Management: Accountable for contracts with payers, enrolling providers, ice

performance on track. Essentially an advisor to the business ofmanager is responsible for the ground rules – setting policies and procedures and determining the nature of the relationship with each payer. The manager monitors revenue cycle progress and intervenes when necessary. The manager, in conjunction with the owner of the business, also determines when additional resources may be required – from a new practice management system to more staff.

Engagement in the revenue cycle is not an option for the high-performing medical practice. The “it’s not my job” syndrome is a recipe for disaster in


success of any billing operation.

these employees by referring to receptionists as “Directors of Time-of-Service Collections” or “Directors of Denial Prevention.” Their roles in time-of-service collections, gathering accurate and complete insurance information and patient demographics are essential.




Track missing charges on a daily

by matching the appointment schedule to charges billed.

services such as immunizations and injections, were billed by matching the record of services performed (a logbook maintained in the lab, for example) to charges billed. Do the same for surgeries by matching the operating room (OR) log to charges. Verify admissions and discharges by matching the hospital census to charges.

In sum, double-check services by matching a source document

OR log) to your charges. Ideally you will have the management systems to do so automatically. Regardless, make these check-offs part of the daily.

billing and collections performance; engaging everyone in the billing process creates the framework for success.

5. Track performance closely

The complexity of billing lends itself to micromanagement. But it’s easy to get lost if you allow the details to blind you to the larger picture. Don’t make the mistake of getting so deep into the minutiae of billing that you forget to the steer the ship.

Keep a close watch on these four key performance indicators:

Days in receivables outstanding (DRO). Arguably the single best indicator for professional fee billing, DRO is calculated by dividing your total receivables (net of credits) by your average daily charge. (See Figure Two.) Look for a rate in the 35-45-day range. Within it, you are, on average, collecting for services four to six weeks after they are rendered (assuming your providers enter charges promptly). Unlike other businesses, however, your medical practice won’t collect the value of the receivables. Because medical practices carry receivables on a gross charge basis, you’ll normally collect anywhere from 30 to 60 percent, depending on where you’ve set your charges.

Aged trial balance. Zero in on one category of your aged trial balance – the percentage of receivables over 120 days, for example – to ensure that you’re on the path to success. This statistic should be as low as possible, but

time-of-service collections and effective denial-prevention strategies, as well as staying on top of payers and patients who do not make good on their

Adjusted collection rate. Measuring what you collect as a percent of your charges is old-school because it depends on where you’ve set your fees. It tells you nothing about your collections performance. Instead, look at how good you are at collecting what you should be paid. Measure the percent of adjusted charges (gross charges less contractual adjustments) that you collect. Your practice management system may be able to perform this calculation for you. If not, spot-check your performance by reviewing a set of invoices each month. Look at each line item, asking: What was the allowable for this service? Was it fully paid? If not, was it the payer’s or patient’s responsibility – or our practice’s mistake?

Cash. As in any business, particularly in the current economic climate, cash is king. Look to improve on previous performance. It’s also important to account

the door? Can you at least bring it in faster after services are provided?

‘‘Figure Two

total receivables, net of credits

average daily charge

Average daily charge = gross charges

from the past 90 days, divided by 90

DRO =



Marry these and other key performance indicators with a periodic audit of accounts. Pull accounts at random and look at them from soup to nuts. Determine the lag time between the date of service and the date of charge entry. Look to see when the claim or statement was submitted after the service was rendered. Then follow each activity: Was payment received? If so, was it the amount expected? If not, was the variance written off as a

oblem and work to get it resolved? In addition, perform regular audits to identify opportunities to improve collections. (See Figure Three above.)

The complexity of the health care market is increasing. There’s too much at stake for your practice’s future to leave matters to chance, and that’s just what you are doing if you fail to scrutinize your entire billing and collections process and regularly monitor its performance. It’s no longer good enough to just

and collections

optimize reimbursement, but to stay in business.

Figure Three: Effective Auditing

Perform an audit of outstanding invoices. Choose a date of service (or an entire week) from approximately nine months ago, and gather all data about invoices that remain unpaid. Ask these questions:

• Who was responsible for nonpayment?

• Were appropriate and timely actions taken?

• Were appropriate adjustments taken?

• Is the invoice in the hands

responsible party?

• Did the notes explain the employee’s actions?

It’s no longergood enough to just get

the basics right; you must

billing and collections process.


Remove credits from your calculations of performance. Credits (money owed to someone else) offset receivables (money owed to you), so it’s important to take them out of your management reports.

‘‘



Figure One. Sample Fee Schedule Tracking Spreadsheet

CPT® DescriptionPractice Charge

Medicare 2011

Reimbursement by Payer

Payer 1 Payer 2 Payer 3 Payer 4 Payer 5 Payer 6

99201 $60.00 $44.11 $37.32 $28.89 $31.24 $38.99 $29.25 $38.56

99202 $161.00 $71.01 $64.59 $58.13 $87.20 $77.51 $61.36 $103.35

99203 $240.00 $102.95 $95.96 $ 86.36 $129.54 $115.15 $91.16 $153.53

99204 $340.00 $158.33 $135.53 $121.98 $182.97 $162.64 $128.76 $ 216.86

99205 $430.00 $197.06 $172.13 $154.91 $232.37 $206.55 $163.52 $ 275.40

99211 $53.00 $19.71 $21.28 $19.15 $28.73 $25.54 $20.22 $34.05

99212 $94.00 $41.45 $37.71 $33.94 $50.91 $45.25 $35.83 $60.34

99213 $132.00 $68.97 $52.65 $47.38 $71.07 $63.17 $50.01 $84.23

99214 $205.00 $102.27 $82.14 $73.93 $110.89 $98.57 $78.04 $131.43

99215 $298.00 $137.60 $119.11 $107.20 $160.79 $142.93 $113.15 $190.57

11200 Removal of skin tag $175.00 $83.58 $70.19 $66.68 $94.76 $77.21 $73.70 $112.31

Sample only. “Medicare 2011” reported based on nonfacility reimbursement, with no geographical adjustment. Est. = established.



Best Practices in Medical Practice Billing and Collections1. Use payer contracts as a tool to ensure proper reimbursement and

fair treatment by:• Understanding contract terms;• Tracking fee schedules of payer allowables; and • Adhering to every detail of the provider enrollment process.

2. Focus on patient collections by:• Providing information and assistance to educate patients about • opportunities; and• Upgrading information systems to track balances.

3. Prevent and manage denials by:• sible;• Understanding coding rules and staying current with changes in coding policies;• Working denied claims quickly to provide requested information;• Knowing how to appeal denied claims; and• Tracking denials to prevent future denials.

4. Get and keep everyone engaged by establishing expectations for non-billing staff roles in the billing and collections process, including:• Providers: Supply documentation, and often coding;• Nurses and clinical support staff: Steer patients to ancillary services and obtain

waivers and pre-authorizations as required;• ure referrals and

optimize time-of-service collections based on practice protocols; • Coders: Review CPT® and/or ICD-9-CM codes for services rendered and provide

support for coding-related denials; and• s and keep overall

performance on track.

5. Monitor performance closely by keeping a close watch on:• Days in receivables outstanding (DRO);• Aged trial balance;• Adjusted collection rate; and• Cash.

Summary



1. More information on HIPAA 5010 at http://aspe.hhs.gov/admnsimp/index.htm

2. Centers for Medicare and Medicaid Services (CMS) http://www.CMS.gov.

• For information on 5010 from CMS home page, click “Regulations and Guidance,”

• For information on ICD-10 including deadlines, go to https://www.cms.gov/ICD10/

3. Find documentation guidelines for the Evaluation and Management codes: (https://www.cms.gov/MLNEdWebGuide/25_EMDOC.asp)

CPT® is a registered trademark of the American Medical Association.

Resources

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