Home Q&A Is your group in good financial health?

Is your group in good financial health?

November 2008

Published in the November 2008 issue of Today’s Hospitalist

When it comes to the impact of this fall’s economic meltdown on hospital medicine, it’s anyone’s guess how the dust will settle. Hospitals “which employ nearly one-half of the hospitalist workforce “are staring at growing debt and the specter of more patients being cut loose from employer-based coverage.

For private hospitalist groups, both those that are local and those run by regional or national hospitalist programs, the short-term stakes may be even higher. While many of these groups receive some financial support from hospitals, they probably rely on professional fees more than physicians who are hospital employees.

That makes it even more important for private groups to run their billing and collection operations “lean and mean, and to adopt more technology to speed the process,” according to Kathy Campbell, president and CEO of AMPM, a medical billing and practice management company based in Austin, Texas. The company provides outsourced billing services and practice management analysis to local and national hospitalist groups.

Ms. Campbell spoke to Today’s Hospitalist about areas where medical groups can tighten up their finances.

What are the most common mistakes you see physicians making that impact revenue?
Many physicians still have issues with overcoding and undercoding, so we recommend that hospitalists undergo a coding audit once a year. We do a random selection of charts to review physicians’ documentation and coding, and then compare physician’s coding patterns to Medicare statistics by specialty.

But in the hospital, the No. 1 problem for physicians is lost charges or the lack of timeliness when turning charges in. We often find physicians jotting down patient charges on pieces of paper or in notebooks, but not turning those in for a week or two “or sometimes months. This is one reason why we strongly encourage clients to use point-of-service charge capture systems.

The delay in getting paid is enormous, or physicians lose the charges and get no credit. Many physicians are missing filing deadlines, and most payers are shortening up those deadlines.

How long do physicians have to file claims?
The deadlines range anywhere from 90 days to a year. A lot of payers are starting to adopt a 90-day filing deadline; in today’s environment, they’re probably going to move toward that even more. Medicare has the longest, which is 18 months on average.

With groups, what is the biggest pitfall you see in financial management?
The lack of proper follow-up. I say it all the time: It’s easy to bill, it’s hard to collect. The biggest issue with clients seeking out our services is that their accounts receivable, which is their unpaid invoices and bills, has just gotten out of control. They don’t understand why it’s so bad, and they don’t understand why they can’t collect. They don’t have good processes in place to ensure that they collect accurately and then do proper follow-up.

What is a telltale sign that a group isn’t managing its accounts receivable correctly?
One national benchmark that you hear about is that the percentage of accounts receivable that’s more than 120 days should not be more than 15%. We don’t really like that, so we try to get it closer to 10%.

That’s the kind of metric that groups need to track and report on monthly. The net collection rate is also important, as is days in accounts receivable; collections per visit or average reimbursement per visit; payer mix; and reimbursement by payer.

What’s an example of an indicator that groups point to as a sign of economic health that doesn’t have that much meaning?
The biggest indicator is the gross collection rate, which is the percentage of money you collect on your charges. We see physicians who are collecting 40% of their billed charges and they think that’s great because their buddy is collecting only 30% of his billed charges. But if your fee schedule is set at 200% of Medicare and his are at 300% of Medicare, then he’s doing better than you are as far as collecting more revenue.

What should groups be collecting as far as gross collection rate?
That depends on how high the group sets its billing rates. You don’t want to set those too low because then you’re leaving money on the table. Many average rates are available regionally by specialty.

But the point is not to compare your gross collection rate to someone else’s if you’re not comparing apples to apples. Instead, compare gross collections to your own rate month by month. If your gross collection rate is 40%, it should be close to 40% every month. If it isn’t, there’s some kind of breakdown in timing.

How can groups be sure they’re collecting what they’re supposed to be paid?
They need software systems sophisticated enough to reflect the actual allowable charges by individual payers. That way, every time the group is paid and you post the payments, you’ll know if the group was paid according to its contract. Billing software should also be able to report this information.

What level of claim denial rate do you see in hospitalist groups?
I’d expect to see between 7% and 9%. Hospitalists tend to be on the low end for medical practices. Hospitalists are mostly billing E&M codes, not the procedures and surgeries that more frequently get denied. The majority of hospitalist charges are pretty seamless. They may be denied the first time for typical issues like the wrong patient ID number, but we don’t see too many that are permanently denied.

If hospitalists are looking to join a private group, what financial metrics should they look at?
The first thing to review is the income statement and balance sheet. Is the group making money, and does it have sufficient cash? But I also think that the age of the accounts receivable “how much is over 90 days “is very important because that’s going to drive the practice’s cash flow.

That could be extremely important if physicians are going to be paid a bonus that’s tied to their percentage of collections. We’re seeing a trend away from that type of bonus to productivity-based bonuses pegged to RVUs. But if doctors are going to be paid something based on group collections, they need to focus on those statistics.

Phyllis Maguire is Executive Editor of Today’s Hospitalist.

E-mail questions about your group’s financial health to Kathy Campbell, president and CEO of AMPM, at hospitalist@ampm-inc.com.