A shift in the practice’s payor mix In some areas, the demographics of patients can switch away from commercial insurance to managed care. Sometimes, this switch can be sudden. Some service areas have been known to go from 20% managed care penetration to 70% within 12-months. Because managed care plans pay less than the office’s normal indemnity fee schedule, the practice’s gross collection percentage should decline accordingly.
If a shift has occurred, the office manager or administrator should first try to pinpoint a breakdown of the practice’s current payor mix. Next, attempt to decide what percentage of the revenue is derived from managed care, commercial insurance, self-paying patients, Medicare, Medicaid, and other insurance programs? Depending on the internal systems of the practice, obtaining this type of information can be an easy task or next to impossible. This is especially true for any medical practice still on a pegboard (i.e. manual) type of system. If a practice has a good computer system it can probably provide a payor mix analysis. If it does not, the manager should at least have the physician or the billing staff give you their best guess estimates of what the payor mix might be.
After pinpointing the payor mix, determine how the practice can shift its payor mix to the type of patients for whom reimbursement is the highest. This generally is accomplished by designing marketing strategies that target a specific payor class. The success of this will depend largely on the demographics of the practice’s area and the willingness of the physician to participate in marketing activities. For example, if the practice has moved toward managed care, there may not be much of an opportunity to move the payor mix around. The physician is stuck with managed-care reimbursement simply because no other alternatives are available.
Office fails to follow up on unpaid insurance claim forms If insurance claim forms are filed and not followed up on a timely basis, insurance companies may delay payment. In turn, the office will not get reimbursed quickly. This is a common systems breakdown in many medical offices and it effects cash flow. Generally it should only take 2-3 days to file claims for office visits and 5-7 days for hospital, surgery, and other charges.
Office fails to collect moneys from patients at the time of their office visit For certain medical practices, such as family practice, pediatrics, and allergy, office collection should be a mandatory policy. If payments are not made by patients at the time of their office visit, insurance must be filed for these services and, consequently, the office must wait for its payment. Good examples are copayments and deductibles. As a result, the gross collection rate will not be as good as it could have been if these payments were secured at the time of the visit. Thus, if the collection rate declines, the problem could be at the front desk.
Office fails to send out patients’ statements on a timely basis Patients who do not receive statements every month cannot pay on their accounts. If the statements are not mailed at the same time each month, cash flow could become erratic.
Change in insurance company reimbursement rates Many insurance plans are changing the way they pay physicians. For example, many commercial insurance carriers and managed-care plans are adopting a resource-based relative value scale (RBRVS) system similar to the current Medicare payment system. There will be continuing pressure to reform the Medicare payment system and this could impact physician reimbursement Other insurance plans annually decrease reimbursement rates, often without notifying physicians.
Office manages patient receivables poorly Poor collection activities include those in which patients are not called about their overdue accounts, collection letters are not used, or a collection agency is not used properly. The office may not follow up on unpaid insurance claims or does so too late. Patients may arrive at the physician’s office with an unpaid balance on their account. Many offices fail to collect this overdue amount when the patient is in the office. All of these factors could contribute to a poor gross collection percentage.
Office employs inexperienced personnel Unfortunately, some employees working in a medical office are not skilled at medical billing and collection. Billing a physician’s services is not an easy task. This also could be said of front desk personnel, many of whom are inexperienced in front-desk collections, scheduling, and so on. Always remember that if the office has implemented the proper business systems to ensure a successful and efficient operation, then collection problems could be directly tied to the people who are employed to carry the billing and collection duties.
Possible embezzlement If the practice has a good payor mix and all the right operational systems are in place and followed by the practice’s personnel, a poor gross collection rate could be the result of employee embezzlement. Instead of collected revenue ending up in the practice’s bank account, it is diverted to an employee’s own personal account