Chapter 1
Managing Revenue to Maximize Practice Profit
by Judy Capko with Laurie Morgan
KEY INSIGHT: Getting paid more for what you do depends on numerous decisions, requires diligence by everyone in the practice, and begins before the patient is seen.
Revenue management is a multifaceted process and, as with every area of practice performance, the greater the commitment, the
greater the result. But the payoff from attention to revenue can be enormous for your practice.
Improving your ability to earn and capture revenue pays off again and again. To do it well, though, takes an organized, detail-oriented approach that starts before the patient selects you as their physician, and ends with the final payment. Known as the revenue cycle, this process offers opportunities for savvy practices to protect their revenue at every stage. But if youâre not paying close attention, these same stages are opportunities for revenue to slip silently through the cracks.
Getting paid for what they do remains one of the biggest concerns for physicians and administrators across the country. It is a concern for academic practices, group practices (both small and large), solo physicians, even hospital-owned practices. Thereâs no one big secret, but there are many little secrets and actions that are worthy of administrator and physician attention to improve revenue performance.
Capturing Charges and Maximizing Their Value
When we ask physicians to describe the process of capturing charges, they often say itâs mainly a matter of documenting all the services they performâusually in the EHRâso that they can be transferred into the billing system. Not every practice is using an integrated system, and some practices are still using paper records. But regardless of their technology set-up, most physicians think of charge capture primarily as a part of their documentation process.
Of course, documentation is essential to capturing charges, but other factors play an important role in maximizing them. The process begins long before services are providedâwith contracting.
Contracting Issues
Capko & Morgan has worked with private practice physicians that do their own contracting, and some that delegate some or all of this responsibility to managed care organizations (MCOs) through a centralized management service organization (MSO) or independent provider association (IPA). Recently, some physicians have also felt pressure to join up with âsupergroupsâ to build a bigger footprint, hoping to gain more negotiating leverage in the process. These structures may have their own MSO, outsource to a service, or have physician managers at the top of the pyramid who take responsibility for negotiating for all members.
Physicians who decide to rely on others to handle their contracting sometimes do so because they believe theyâll be less adept at negotiating; others fear that if they donât team up with other physicians or with professional managers, they could be left out in the cold and be unable to contract with certain plans.
But despite everyoneâs intentions, the appointed negotiators may or may not be more effective at representing physicians and obtaining favorable fee schedules or payment terms. Furthermore, they sometimes work on their own with little input from their internal customers, often even failing to provide member practices and physicians with copies of the contracts and associated fee schedules.
Even when others do the negotiating, itâs the practiceâs responsibility to evaluate and monitor the performance of the third-party payers and hold them to the terms of the contractâand to monitor the practiceâs conformance to the terms, too. So if you are working with others to handle these negotiations for you, itâs still essential that you receive documentation and fee schedules for each contract.
Itâs unfortunately not uncommon to encounter a practice that either does not have copies of contracts and related fee schedules or has them but does not know where they are. Sometimes, contracts are stored somewhere for years, automatically rolling over, causing the practice to miss out on fee schedule improvements theyâd only have needed to ask for. In other cases, practices have become part of large groups or work with management organizations that seem intent on deliberately withholding the contracts from the physicians. How can these practices be sure they are getting paid correctly and that the terms of the contract are not being violated? Physicians and staff cannot enforce the contract and have no means to hold the payer accountable unless they have a copy of the contract and its supporting documents.
Moreover, itâs also important to take a critical look at the insurance companies you contract with or intend to contract with in the future. Your existing payers should be evaluated each time your contract renews. And just because a new payer arrives on the scene, that doesnât mean you need to jump on board and obtain a contract. Look at the potential impact before you sign on. Does this insurance company or MCO have a contract with an important employer in town? Will further physician referrals be jeopardized if you donât sign on? What are the implications to the practice and your existing patients if you do or donât sign on? Even when youâre part of an umbrella organization, be sure youâre aware of what is being contemplated and how it impacts your own practice.
In the current environment, it may seem like thereâs no possibility of negotiation with powerful payers. But itâs critical not to simply give up control. Scrutinize every contract you are considering. Donât let the emotions of the situation get the best of you, even if the insurance company appears to be a major player in town. The goal in working with insurance payers is to develop a good relationship and contracts that are acceptable with terms that do not compromise either the practice or its patients.
A posture of relationship-building is an investment in your future ability to negotiate. Sometimes, we work with new practices that want to negotiate specific terms right out of the gate. When practices are new to the market, their lack of a track record can be an impediment to negotiatingâat least in the first year or two. As your relationship with the payer builds, your team can learn more about what the payer values and use that knowledge to build a strategy for negotiating. Your reputationâyes, including ratings from patientsâcan be an important differentiator in your favor. Of course, if youâre in a specialty that is underrepresented in your market, that will give you some leverage, too.
Another point in your favor will be flexibility. Are you interested in trying out a new payment model? You could benefit if a payer you work with is also interested. Your chosen facilities are another potential negotiating advantage. Keep in mind that health plans are primarily concerned with controlling costsâand, for procedures, the biggest portion of expenses will be incurred at the hospital. Are you currently on staff at a hospital that offers a more attractive business proposition to one of your contracted health plans? Or are you willing to be? If it allows a health plan to save much more on hospital costs, an increase in your reimbursement for procedures performed there is an excellent investment for them. (And, donât forget, in our world of increasing deductibles, using a less-costly hospital could even mean savings for patients who are on that plan as well.)
If youâre in an area where many of your competitors have been acquired by hospitals or larger practice organizations, you may assume this puts you in a weaker negotiating position. But the opposite might be true, especially if the hospital has already pressed a payer to a much higher fee schedule. Your practice may be able to negotiate a large bump, yet still offer the payer a much better deal than the behemoth down the street. Donât give up on the idea of finding a negotiation strategy without first learning more about what payers are concerned about.
Itâs worth noting that building relationships and learning about the negotiating priorities of your key payers is yet another way that investing in, and properly motivating and working with, a knowledgeable and motivated practice manager/administrator can contribute to your financial success. Even small improvements to contracted rates pay off every time you bill those codes to that payer. A savvy management professional can build the right relationships to understand the nuances of your payer relationships and do the analysis needed to make your case. This is yet another example of how saving money by aiming low in choosing and compensating the management professional who oversees your practice business can be penny-wise and pound-foolish.
You or your administrator also need to scrutinize the details of contracts and do the math. Contracted rates are often expressed in relative values, such as â102% of Medicare rate.â But which Medicare rate: which fee schedule year, which geography, etc.? Terms like these are often âgotchasââespecially if a contract auto-renews. But you can often change costly, specific terms, even with tough payers, by insisting on clarifying language (e.g., âthe most current Medicare fee scheduleâ for your specific locality).
Make sur...