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Written by Reed Tinsley, CPA | March 11, 2016
In general business, there’s an old saw known as the 80/20 rule: i.e., 80% of your business comes from the top 20% of your clients.
For a medical practice, the revenue story is rarely so straightforward – how many practices get 80% of their revenue from 20% of their patients? But, if you look at the 80/20 idea at the payer level, it usually rings true. Practices often maintain dozens of payer relationships while getting most of their revenue from a select group. On the flipside, practices may also find that 80% of their billing hassles are caused by 20% of their payers! Worst of all, sometimes you’ll find a key player is also delivering more than its share of aggravation.
In today’s insurance-oriented medical environment, too many physicians feel powerless against troublesome payer relationships. However, analyzing your practice’s high-maintenance payers can be an important step to greater profitability – and to taking control of your practice’s efficiency and long-term health. For example, you may be able to determine that it’s more profitable to drop a particularly troublesome payer if it accounts for a small portion of revenue. On the other hand, a difficult payer relationship might have room for improvement –a path worth pursuing if the payer in question accounts for a large proportion of your revenue base.
Hassle factors
Some billing hassles are more costly than others – these four are among the most common and most costly to practices:
- Repeated requests for referral or authorization
- Consistently slower claims processing than other payers
- Dissatisfied patients (frequent complaints)
- Poor support when problems arise
To get a sense of which payers create the most costly trouble, compare your payers by “hassle quotient” in a spreadsheet alongside reimbursement rates for key codes. To determine the hassle quotient, give payers one point for each hassle factor they’re routinely causing.
If a payer offers high reimbursement for some of your most important codes, it might be worthwhile to endure some hassle – for example, it might be worth waiting an extra week or two for reimbursement if it is significantly higher.
Of course, reimbursement rate alone can’t tell you how important a payer is to your practice – since a high- or low-payer might be associated with just a few patients. For this reason, it’s useful to look at the hassle quotient in comparison with overall volume as well.
