Practice Financial Management – Insights & Tips From MedCV That You Need to Quickly Maximize Your Income
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. That’s why John Rezen (FACHE, MHA) in collaboration with MedCV have brought back this 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. The following checklist of performance measures will help physician enterprises identify financial opportunities and accelerate their improvements. Below are the 12 topics, to read a previous segment, click on the name/link. The current segment is in Blue and upcoming segments are in Black.
- Allowable fee per wRVU
- Net insurance collection rate
- Personal pay collection rate
- wRVU per encounter
- Encounters per provider FTE
- Value-based care revenue
- Staffing minutes per encounter
- Average staff pay rate per hour
- Providers’ pay per wRVU
- Service costs-to-revenue
- Supply and drug costs-to-revenue
- Overhead costs-to-revenue
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. So let’s get started!
Tip 2 of 12 – Net Insurance Collection Rate
- Insurance Revenue Cycle Management:
a. Assessment: Flawless revenue cycle management is essential for financial sustainability. Revenue cycle management success is dependent upon the effective execution of a wide scope of functions before, during and after the episode of care. These functions include provider credentialing, registration and authorization, time of service payment resolution, coding and documentation, charge posting, and claims management.
The insurance net collection rate is the outcome metric utilized to assess this opportunity. This metric is equal to the amount collected divided by the amount you expected to collect based on contractual allowables. If you do not know your allowables you can approximate these values by subtracting contract adjustments from gross charges. In order for this approach to work you must insure only allowable based reductions are considered in contractual adjustments.
A conservative value for the revenue opportunity on this factor can be identified by subtracting the actual insurance net collection rates from 98.5% and multiplying the difference by the total insurance portion of allowable payments.
b. Improvement Action: A data driven approach is required for effective revenue cycle management. Goals should be established on basic revenue cycle metrics including net collection rates at 180 days, denial rates, charge lag days, percent of accounts receivable (AR) over 90 days, and days in AR. More detailed analysis is required on each of these metrics when goals are not being met to determine the cause of “below standard” performance. Only by understanding the cause will you be able to pursue an effective solution. For example, denials may be due to flaws in credentialing, missed authorizations, or coding errors. Each of these errors require a different solution.
A first key step toward developing a flawless revenue cycle management system is conducting a Supply-Input-Process-Output- Customer (SIPOC) analysis of the internal revenue cycle process. The SIPOC analysis will identify the inputs and outputs required by each participant at each step of the process in order to have a flawless service. Next, the SIPOC analysis will support the collaborative establishment of Service Level Agreements (SLAs) between revenue cycle participants, including the clinic departments, access services and the billing office. In these SLAs, each department should commit to the standards, roles, and responsibilities necessary to optimize every operational interface (handoff) between the departments. The participants must also agree on disciplined systems to continuously identify reasons for substandard performance each month and then hardwiring system fixes that prevent further errors. Adopting the principle of stopping to fix problems is an essential element in achieving flawless revenue cycle management.
As a physician, if this sounds like a lot of work and maybe even has your “business anxiety level” up a few notches, you are not alone. The great news is that your role in this should just be to make sure it gets done and that those who are going to be responsible and accountable for this can explain and report details about what the plan looks like and its status to you.
Share this article with your practice manager, group administration, or hospital administration to make sure they are working on this or see what resources they have to get at this work. If they need help in getting started, they should consider connecting with John Rezen at Value Health. The key is to be able to have your baseline, you would expect your team to report to you the improvement(s) made and the results.
Stay tuned for Part 3 of 12, Personal Pay Collection Rate next week. If you can’t wait that long, no problem, just contact John for the full 12 part series. Again, it’s in your best financial interest to make sure each of these 12 Key Performance Indicators are optimized, you understand them, and take action, even if the action you take is to share the series and your new found business insight with your group or hospital administration.
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