This article was originally published in Physicians Practice
Understanding a practice’s payer mix is crucial when evaluating where your practice stands today — especially given the fact that reimbursement methodologies can significantly differ by payer. It is not uncommon for managed care organizations to blend several fee sources, effectively creating fee schedules that vary in rates for the same CPT code. Disparities in reimbursement for the same service, with the same level of complexity and performed by the same physician can be detrimental to the financial health of your practice.
For this reason, an initial practice financial evaluation is critical. Although most practices have little control over patient coverage types, they can better mitigate financial risk by understanding all the components that impact revenue.
Here are six ways to improve your practice’s RCM reimbursement tactics.
Conduct a contract inventory
Obtain copies of all your payer agreements and current fee schedules. Managed care contracts are also critical to the health and well-being of your practice. These contracts affect payment, the way you practice medicine, where your patients may receive care and patient financial responsibility, yet a majority of practices have little or no understanding of the terms to which they have agreed.
Build a payer matrix
Reduce each contract to the most basic components that affect day-to-day operations: effective and term dates, notice periods and default fee schedules. Update the matrix regularly to reflect any amendments, addendums or fee schedule changes to the original agreement.
Determine your 10 most frequently billed codes
In general, these should account for roughly 70 percent of your practice revenue. Once you’ve identified your top 10 billed CPT codes, add fee schedule rates by payer and code to the matrix for an ongoing rate analysis and comparison. This will help you understand which payers are most valuable for your bottom line.
Assess your payer mix from multiple perspectives
Look at the percentage of patients by plan type (e.g., traditional Medicare, Advantage Plans, Medicaid, commercial and workers’ compensation), then calculate your revenue dollars by plan. This will give you an all-encompassing view of where each payer sits as a percentage of both your business and reimbursement.
Monitor payment trends
It is the practice’s responsibility to monitor changes to payers’ guidelines and fees. Luckily, the internet is a great resource, and pertinent updates can easily be found online by visiting the appropriate billing-related websites. Proposed changes to Medicare’s fee schedule, for example, are available through its website and the online Federal Register. The public typically has an opportunity to comment on proposed changes, which can help influence the final rule.
Private payers often follow Medicare’s lead, but not always. It is important to monitor both government and commercial payer reimbursement trends. Pay close attention when any payer proposes altering the reimbursement rate or methodology for your top revenue producing codes and calculate the impact the proposed change might have.
Identify your leverage
Every practice has a differentiator that can be leveraged at the negotiating table. Develop a story illustrating what sets your practice apart, even if it only involves a handful of carve-out codes with high impact to your revenue. Perhaps you are licensed to perform certain procedures that are uncommon for other practices in the community or maybe your practice is in a designated rural or medically underserved area. Some payers have a budget for expected rate increase requests while others have multiple fee schedules based on practice demographics. Asking the right questions at the right time is a large part of the contract negotiation process.
Be proactive to ensure compliance
Physicians and other healthcare providers must take measures to ensure accurate and compliant diagnosis and treatment methods. RCM partners can support physicians and providers in achieving and maintaining regulatory compliance while optimizing their revenue through accurate, appropriate and timely payment for the services provided per commercial and federal and/or state rules.
Be proactive to safeguard revenue
Understanding the financial side of your practice not only helps you identify why your revenue looks the way it does, it also enables you to safeguard future revenue. Know which payers and codes generate most of your revenue. Go to conferences and network with colleagues to stay abreast of reimbursement trends. Audit your reimbursement with a critical eye and use those insights to drive negotiations.
Given the time and resource constraints faced by most practices, overseeing managed care seems like a daunting task. Those without the expertise or time should consider outsourcing their financial assessments, contracting and more to revenue cycle experts. For those who already have an RCM partner on board, find out if contract management is an available service that can be added to your existing agreement. Although it takes committed resources, a proactive approach to financial management is key for practices to achieve long-term revenue stability and growth.