The Healthcare environment in the United States is evolving rapidly due to the pressures to reduce costs. The Affordable Card Act (ACA) has provisions that expand coverage via Health Exchanges as well as expansions of the Medicaid program. Due to budget pressures, states are migrating from State run Medicaid to Medicaid being managed by Managed Health Care Plans. Coventry has a significant presence in the Managed Medicaid market. Aetna significantly increases their presence in Managed Medicaid and lower priced insurance plan options with the recently announced acquisition of Coventry. Given the migration of new patients to lower priced insurance plans (via the future Health Exchanges) as well as expanded Medicaid coverage, this is a potential growth opportunity for Aetna. Appears that Aetna believes in this potential opportunity due to the premium they paid for Coventry (over $5.0B).
For your Pediatric practice, it is critical to monitor the reimbursement trends by plan as these changes in the Healthcare system continue to occur. Pediatric offices usually provide one of the lowest costs of Healthcare delivery from the perspective of plans and employers. Leveraging the facilities of a Pediatric Office is in alignment with the interest of the Healthcare system by promoting wellness versus ‘sick care’. Also, services in pediatric offices are more cost effective than in hospital settings. Small Pediatric Practices can effectively manage this complex environment by adding new patients, providing quality care, and by implementing strong management of the practice revenue cycle. If a practice is unable to grow patients as well as manage their Pediatric Practice Revenue cycle effectively, they will eventually dissolve or merge with a Hospital System or large Medical Group.
Health insurers identify how to save money by lowering reimbursements – unfortunately, many use the ‘squeaky wheel’ type of rewards/evaluation. For example, a Health Insurer will not increase rates on all providers on their ‘independent products’ while negotiating high single digit rates with the Hospital System that uses their size as leverage. If the small Pediatric office does not have solid IT systems that allows them to evaluate their reimbursements, they might be underpaid compared to the Hospital System located in the same area. If your Pediatric practice provides high-quality and consistent medical care, the practice show be rewarded on the care provided. The Health Insurance companies prefer that practices are managed like the average Pediatric practice country versus Pediatric practices that consistently achieve collection rates above 99% of the contract amount. This is a good time to benchmark the collection rate and check the controls and systems in place that optimize not only the collection rate but also the Accounts Receivable (AR) days. Through good benchmarking and management of the revenue cycle, your practice can be confident on how to manage the changes in the Healthcare market like the Aetna acquisition of Coventry.
Pediatric EMR
Is there a Potential Impact on Pediatric Practice Revenue due to Aetna Acquisition of Coventry?
Proper Management of the Front Desk Team & the link to High Collection Rates for Pediatric Practices
The Revenue cycle is comprised of a front, middle and back end. Practice Managers need to optimize all three components for a practice to achieve an optimal collection rate. The front end of the revenue cycle is the front desk team in the practice. The front desk team members of a practice need to verify insurance eligibility as well as collect co-pays and any outstanding balances. Insurance eligibility can be verified via an automated link from the practice management system/clearing house to the insurance companies, Navinet or by calling the insurance companies. The owner as well as the practice manager of a practice need to insure that this activity is occurring accurately and consistently by the front desk team. The practice should check that the co-pay report for the day matches the co-pays collected. Also, the practice owner/manager should check-in with the back end billing team (billing company) to obtain feedback on the rate of accuracy of entering insurance and demographics by the front desk team. “Sloppy” work and/or lack of attention to detail by the front desk team can cause loss of revenue and/or delays in revenue.
The middle of the revenue cycle is comprised of the providers and clinical team properly documenting the charts as well as recording the diagnosis and CPT codes. This should be completed during the day of service and accurately. The back end of the revenue cycle is the billing team ‘scrubbing’ and verifying complete claims prior to sending to the insurance company. Additionally, the back end team will re-submit claims (make appropriate corrections) as well as send out patient statements and communicate to the front desk team for patients that have balances. The front desk team needs to effectively work with the back-end billing team to close the communication gap. When the front, middle and back-end of the revenue cycle is optimized due to good practice management, practices achieve better collection rates and faster payments than the average. For instance, we have practices that are 50% paid by the insurance company five days after the month closes (e.g. July is 50% paid for all insurance charges by August 5th).
Each member of the team needs to understand their role in the revenue cycle. Practice Managers as well as physician partners should be monitoring performance of the front desk team, the providers as well as the work of the back end billing team. Collaboration and cooperation as well as a skilled and dedicated team are critical to achieving the best success.
Minimizing Accounts Receivable Days (AR Days) in a Pediatric Practice
All practices have accounts receivables. There is a wide distribution of how efficiently Pediatric practices manage the revenue cycle to minimize the amount of revenue in accounts receivable. A common measure in the industry for benchmarking how well a practice manages the revenue cycle is Accounts Receivable Days or more commonly known as AR Days. What are AR days? Let’s look at an example. If a practice has an average of $100,000 in gross charges a month and currently has $200,000 in accounts receivable (waiting to be paid by insurance companies and patients), the practice has approximately 60 AR Days. All practices should continue to optimize their processes and systems until the practice consistently operates at less than 30 AR days.
There are many inefficiencies that slow down the revenue cycle for practices. For instance, some practices leave a copy of all their charges each week for a biller to ‘pick up’ then send to the insurance company. The biller/billing company then needs to enter these charges in their system, review and send to the clearing house. In some cases, at least two weeks pass prior to the claim being uploaded to the insurance company. I am aware of some hospital systems that wait to the end of the month to send all claims – what a wasteful practice! A strong Pediatric Billing company measures, monitors and benchmarks these processes and looks for ways to improve the AR days for the practice. This usually requires best practice sharing and routine evaluation of pain points in the revenue cycle. This is difficult for an average biller of a practice to do successfully due to their time and focus need to focus on the daily management of claims. Pediatric practices are dependent on the practices systems, processes and back-end billing team to minimize the AR days for the practice.
How Aligned are your consultants to the Goals of Your Pediatric Practice?
A Pediatric practice needs to successfully work with both internal and external stakeholders to be successful. These stakeholders include employees and external vendors/companies and sometimes, consultants. There can be misalignment of the goals of each of these stakeholders with the goals of your Pediatric Practice. There are a number of questions to ask a consultant to insure they represent your best interests.
Some of these questions could include:
-Is the consultant recommending a product or service due to an alliance with their firm or due to quality of the product for your practice? For instance, a company that sells servers will have a bias to recommend server E.H.R. systems due to their revenue being made based on providing advice and maintaining servers. If a consultant speaks at an event sponsored by a Vendor, this might indicate that there is a bias for this vendor. A question to ask: Is the speaking engagement with a particular vendor due to the vendor providing them customers that they can charge their consultant service and do they speak equally at events for all vendors in the same state (not just the ones that send them practices)?
-Having a consultant choose an E.H.R. service, could cause a Pediatric office to obtain an ‘old’ technology product or a product that does not appropriately balance the revenue/cost needs of the practice with the desire for a consultant to provide a service. Some consultants might not have the technical expertise to make the ‘right’ decision for your Pediatric Practice. Recommend asking any “E.H.R. consultant” how long they have managed a practice as well as their experiences with optimizing revenue for a practice (there are many with great experiences and unfortunately some with none to minimal experience). Equal time should be spent discussing the revenue cycle/practice management as well as clinical aspects of the E.H.R.. Consulting advice should look to optimize revenue, minimize burden, cost and start-up time. The practice is ‘on the hook’ for long-term operation of a system/process and the receiving end of decisions made regarding a system.
-Does this consultant make more or less money if the practice identifies a solution that requires minimal work on their part? Why would a consultant that charges by the hour (whether paid for by the practice or the government) seek a system that reduces billable hours? The long-term operational burdens are the responsibilities of the practice not a consultant.
Exceptional consultants with a solid history should be able to balance the needs of their clients with the need to optimize their own billable hours. Great consultants know and understand the revenue cycle and provide hints on how to reduce administrative burdens of Pediatric Practices. With all the conflicting priorities and needs of a Pediatric Practice, it is important for a practice owner to select the ‘best’ consultants/advisors for their particular needs.
The Cost of Maintaining a Server in a Pediatric Practice
I enjoy speaking with customers, potential customers, vendors and suppliers to obtain feedback as well as perspective. Recently, I was made aware of the actual costs that a practice incurs for appropriately maintaining a server. The ‘old’ method of establishing Electronic Health Records in an office was to install and operate a server with an internal network. Although this is still an option today, there are many expenses such as initial and continued operating costs that cloud computing provides a better choice. The winners of practices that choose client-server E.H.R. Systems are server companies, software companies that supply software for client-server applications and technology/server consultants that maintain servers.
I continue to be made aware by physicians of the cost of operating a server. The range in cost really concerns me and surprises me. For example, I know of a one-physician practice that was spending over $700/month just on an IT consultant to maintain his servers/network. When the Internet was ‘dial-up’ there was not another option for a physician practice. Businesses of all sizes began moving from client-server applications to cloud-based applications for many reasons. Some of these reasons include: most up to date software, lower operating costs and easier establishment of additional computers/users.
Evaluate the total cost of the option when deciding to choose client-server vs. cloud computing. Here are some items to obtain cost ranges when comparing a cloud-based option to a client server option:
-Cost of the servers, network gear and estimates of how often this equipment needs to be replaced.
-Cost of installing the network
-Cost of maintaining optimal up time of the network as well as maintenance
-Cost of software for the server (initial and yearly cost).
Consider conducting some ‘basic’ research by calling a local IT consultant to obtain a price quote. Also remember that you or an office manager will need to be the project manager/coordinator of the people and vendors once the practice decides to choose either cloud-based application or a server-based application. With a cloud-based application, the practice will need to maintain an internet connection as well as a wireless network. If there is not a person in the office whom is comfortable setting up a wireless network, usually a lower cost group such as the Geek Squad can set this up for the office. With a client-server application, the office will need to purchase servers, network gear, software for servers (in addition to their E.H.R. software) as well as incur an expert to install the system and maintain the system. The practice will also need to install battery back-up and a maintenance plan with all the components. These are examples of some of the hardware maintenance costs of a server.
There are many articles on the economic benefits of cloud-computing. For instance, see the April 30, 2012 article in Forbes Magazine titled “Cloud Could Cut $12 Billion from US Government Annual Deficit”. The study quoted in this article states that the US Government could reduce the annual IT Spend from about $80 B to $68 B. The winner would be the cloud-computing companies while other groups would either lose their contract or have reduction in services. Do not under estimate the amount of lobbying, PR and Marketing that the groups impacted by this migration to cloud computing will exhibit. Remember, the practice is ‘on the hook’ for the short term and long-term cost of a decision of client-server vs. cloud computing (not an external consultant whom might have minimal to no experience optimizing revenue for a practice). Internet speeds continue to increase dramatically which further enhances the positive aspects of cloud-computing.
