How to lower the high cost of collecting reimbursement. (Practice Management Clinic).

Reimbursement is the most important practice management issue in otolaryngology practice today. According to a December 2000 survey conducted by the American Academy of Otolaryngology--Head and Neck Surgery, more than 70% of us consider reimbursement to be our most significant business problem. The AAO-HNS also reports that there has been a steady rise in overhead expenses; 40% respondents (n = 1,555) reported at least a 60% practice overhead. Moreover, 34% of respondents received less income in 2000 than they did in 1999. Approximately 73% of AAO-HNS members believe that most claims denials are the result of arbitrary payment policies. Finally, 41% say they feel "not very favorably" about the practice of medicine today.

Compounding the problem of under-reimbursement, according to the April 23 issue of Time, is the fact that 30% of physicians' claims leave the office with errors, and 15% are lost and never missed by the submitting physician's staff.

If only we had the time

We are challenged not only by the amount of time it takes to treat our patients, but also by the amount of time it takes to collect for our services. As physicians, we focus first on the treatment of our patients, then we deal with whatever obstacles keep us from collecting our fees.

Let's examine what it costs to get claims paid. Using industry standards, let's assume that an otolaryngologist has 225 patient encounters a week, including those for routine office visits, allergy shots, audiologic testing, and surgery. Based on the formulas expressed in the table, we see that our annual cost of collecting fees is $175,000--or 23.3% of a typical ENT practice's total income!

If you wish to increase revenue by increasing the number of encounters, you also increase the cost of collecting the additional revenue. On the other hand, if you wish to increase revenue while maintaining or even decreasing the number of encounters, you must perform more expensive procedures, improve your claims processing system, maximize the amount you receive from third-party payers, decrease your cost, and/or limit your practice to encounters that generate the greatest profitability within the context of your payer environment and practice expertise.

Using technology to maximize revenue

Throughout the years, ENTs have tried to keep pace with reimbursement requirements, but we are constantly outmaneuvered by the third-party payers' technology. This forces us to continually improve the sophistication of our office billing personnel and practices. We can increase the size of our staff, send ourselves and our staff to practice management courses, re-engineer our office processes, hire consultants, read extensively, listen to audiotapes, and share information with each other. All of this takes time and/or money.

Today's ENT practice requires state-of-the-art billing and collection software that applies technology to reduce the human element in claims processing. Such technology can detect claim-denial trends, inappropriate edits, and human errors. It should be versatile, scalable, and changeable enough to meet the payers' challenges. It must also be user-friendly and affordable.

The right technology will not only protect your practice from losing revenue as a result of lost claims or failed appeals, it will also provide you with detailed financial reports that permit you to analyze reimbursement trends. Such an analysis will flag inappropriate payer edits, losing contracts, defects in your processes (e.g., authorizations and eligibility verifications), and other outlying trends that reveal an early diagnosis before the damage is irreparable.

Be vigilant in your search for the technology that fits your needs--it does exist.

Dr. Isenberg is an otolaryngologist in private practice in Indianapolis.

Table. Calculated annual cost of collecting third-party reimbursement

TIME

All figures used in these calculations are based on industry-standard estimates. With that in mind, let's assume that an otolaryngologist has 225 patient encounters per week:

225 encounters/wk x 52 wk/yr = 11,700 encounters/yr

Approximately 25 data entries can be posted in 1 hour:

11,700 encounters / 25 entries/hr = 468 hr for data entry

Each encounter requires at least 3 payment postings at an estimated 30 entries per hour:

11,700 encounters x 3 postings = 35,100 postings

30 payment postings can be entered in 1 hour:

35,100 postings / 30 entries/hr = 1,170 hr for payment posting

15% of "clean claims" require further adjudication (front-end push):

11,700 encounters x 0.15 = 1,755 claims that require further adjudication

Further adjudication requires 10 minutes per claim-i.e., 6 claims per hour:

1,755 adjudicated claims / 6 claims/hr = ~292 hr for adjudicated claims

30% of the 11,700 encounters result in a billing call from a patient:

11,700 encounters x 0.3 = 3,510 billing calls from patients

On average, each billing call from a patient requires 6 minutes-i.e., 10 calls per hour:

3,510 calls / 10 calls/hr = 351 hr for billing calls from patients

Denials and EOB reviews take, conservatively, 10 hours per week:

10 hr / wk x 52 wk = 520 hr for denials and EOB reviews

Add the total number of hours:

468 + 1,170 + 292 + 351 + 520 = 2,801 hr for claims processing (unadjusted)

Because only 70% of a full-time equivalent (FTE) employee's time is truly productive, calculate the adjusted amount of time required for claims processing:

2,801 hr / 0.7 = 4,001 hr for collecting reimbursement

STAFF COSTS

It takes 4,001 hours of employment to produce 2,801 hours of work. One FTE = 2,080 hours per year:

4,001 hr / 2,080 hr/FTE = 1.92 FTEs

It costs $20 per hour plus 30% in benefits to employ 2 FTEs to cover 2,000.5 hours each:

4,001 hr x $20/hr = $80,020 in salary; $80,020 x 0.3 = $24,006 in benefits

$80,020 + $24,006 = $104,026 annual salary and benefits cost to collect reimbursement

ADDITIONAL COSTS

Other costs of maintaining a practice management system (amortized over 3 years and without the hardware and software maintenance fees)-including billing charges and postage, records storage, outbound telephone calls, and office space for the 2 FTEs-total approximately $71,000:

$104,026 + $71,000 = -$175,000 total cost for collecting reimbursement

THE BOTTOM LINE

An ENT practice that has 225 encounters per week and collects an estimated $750,000 in fees spends approximately one-quarter of its income just to collect what it is owed!

$175,000 / $750,000 = 23.3% of income is spent on collecting reimbursement