Optimizing Your Practice Cashflow Has Never Been More Important – Here is How

Practice Cashflow

Insights & Tips You Need to Quickly Maximize Your Income

Part 1 of a 12 Part Series Practice Financial Management from MedCV

Back by popular demand, John Rezen (FACHE, MHA) in collaboration with MedCV present a series of 2-3 minute reads on how You can assess and improve your practice financial performance in 12 essential areas. Each installment will help you and your team quickly add cash to your bottom line by allowing your practice to work smarter and harder. Even if you are not directly responsible for the management of your practice, knowing this information will help you make sure you are making the the income you and your team have earned.

Financial Improvement

Hospitals and medical groups are finally shaking off the economic fallout of the Covid-19 Pandemic, but now historic inflation and looming economic uncertainties continue to place significant pressure on them to improve their financial performance. The following checklist of performance measures will help physician enterprises identify financial opportunities and accelerate their improvements.

Revenue

  1. Allowable fee per wRVU
  2. Net insurance collection rate
  3. Personal pay collection rate
  4. wRVU per encounter
  5. Encounters per provider FTE
  6. Value-based care revenue

Expenses

  1. Staffing minutes per encounter
  2. Average staff pay rate per hour
  3. Providers’ pay per wRVU
  4. Service costs-to-revenue
  5. Supply and drug costs-to-revenue
  6. Overhead costs-to-revenue

Tip 1 of 12 – Allowable fee per wRVU

Improve Contract Rates

a. Assessment: Recurring contract negotiations with payors is necessary to make sure you are receiving appropriate rates for your services. Multiple factors play into the success of these negotiations–including the payor’s and the provider’s market leverage. Provider operational excellence demonstrated in service and quality metrics typically lead to greater market leverage and improves your negotiating position. An assessment of this opportunity involves comparing commercial carrier allowable schedules to Medicare rates. Each group of services–E&M Visits, Medicine Services, and Surgical procedures–should expect to see different percentages of Medicare. These rates will also vary by geographic region.

Accordingly, an accurate evaluation of the magnitude of this opportunity will require a good understanding of your market and your service mix. Furthermore, some commercial payors do not provide allowable schedules so in the absence of these schedules, the assessment will involve subtracting contractual adjustments from charges to identify allowed amounts. Under this second type of analysis you must insure you have a disciplined revenue cycle accounting system where only allowable based reductions are coded as contractual adjustments.

The amount of this opportunity can be projected by identifying the percent of Medicare allowed for each service group and comparing it to industry benchmarks. The percent difference multiplied by the total allowed charges in each service group will identify the revenue opportunity for each commercial payor.

b. Improvement Action: Initiate contract negotiations with each commercial payor where there is a revenue opportunity.  The projected opportunity level for each payor should help in setting priorities for the contract negotiations.  Determining the magnitude of opportunity for each payor and the commercial payor mix are first steps in preparing for these negotiations.  You must also understand your market leverage relative to that of the payor.  Additional preparation steps include, agreeing on a range of acceptable results, establishing your negotiating tactics, and agreeing on how far you will take the negotiations to achieve your goals. You must make sure you have sufficient managed care resources within your own administration or from the hospitals with whom you are affiliated to successfully conduct these negotiations. If not, there are a few vendors that provide this service who likely have better insight into appropriate contract rates.

Stay tuned for Part 2 of 12, Insurance Revenue Cycle Management next week. If you can’t wait that long, no problem, just contact John for the full 12 part series. It’s in your best financial interest to make sure each of these 12 Key Performance Indicators are optimized, you understand them, and that you take action, even if that action is to share this series and your new-found business insight with your colleagues or hospital administration. This series is freely available for personal use. However, if you would like to utilize this proprietary content in an instructional setting, please contact John Rezen.

John Rezen

John Rezen, CAPT, USN (Ret), FACHE, MHA, LSSBB, CRCR
President & CEO
Value Health, LLC
jrezen@valuehealth1.com

MedCV Advisory Board Member
https://www.linkedin.com/in/johnrezen/

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