1. vol. 102, no. 9September 2016
Dallas Medical Journal
DCMS Foundation hits the Big 7-0!
MACRA, Part 2: Step this way
Student intern program

2. 234 Dallas Medical Journal September 2016
assionate about the health and
physical well-being of their
patients, physicians dedicate
their time and energy to the
practice of medicine. But equally important
and often neglected is the “business of
healing”— the financial fitness of their
practice.
Medical Revenue Cycle Management
(RCM) describes the activities surrounding
the business of medicine and includes the
nonprovider activities that must occur for
the medical provider to generate revenue. At
a minimum, RCM includes:
• Billing and coding
• Claim submission rejections/denials
management (A/R), and payment
posting
• Credentialing
• Patient accounts management
• Marketing
As with other top achievers, physicians
need a well-balanced, qualified, dedicated,
and high-performance team looking after
and managing their business. Most successful
practices outsource their RCM function to
a service provider because of their lower cost
and higher value. RCM service providers
commonly use a fee agreement that charges
a percentage of the cash collected by the
service provider. Some RCM services use all
cash posted to the ledger, while others charge
only for amounts collected other than copays
and cash pays.
Physicians who are uncertain about what
drives the financial fitness of their practice
are used to asking RCM service providers
for the lowest possible fee rate (percentage
of cash collected). This rate is dependent
on the average allowed amount per patient
encounter (gross revenue) and the average
number of patients seen per week (claims
volume).
These major factors affect the gross
revenue of a practice:
• Diagnosis and procedure codes used
and their associated modifiers
• Proper and sufficient eligibility and
benefits verifications
• Consistent and sufficient
preauthorizations
• Payer mix and contracted ratesPatient
mix
• Billing team efficiency in claims
submission, denials management and
posting activities
• Consistent attention to credentialing
and privileging
• Ancillary services
The scenario below has played out
multiple times in my discussions about
service fees with physicians:
Physician: We’re seeing lower
reimbursements and the A/R (accounts
receivable) is getting larger. What do you charge
to change this situation?
Me: Based on your specialty and volume,
we can provide our service for 5.75% of cash
collected, excluding copays and cash pays.
Physician: Well, I was expecting 5%, which
is what the other company we talked to has
offered.
Me: Doctor, your current cash collected
amount per patient encounter is $130 on
average. If we contractually guarantee you
at least 5% higher reimbursement from this
current level, for the same volume, would you
prefer our higher fee rate or the lower 5%?
Physician: I’m not sure, but the lower rate
sounds better.
Now, let’s see the choices the physician
faces, in financial terms, when hiring an
RCM service.
Option A: An RCM service that collects
5% more per encounter, on average,
and charges only for amounts collected,
excluding copays
5% higher reimbursement = $136.50 per
encounter
5.75% fees = $6.67 per encounter
(excluding 15% of collections as copays)
Net revenue for the practice = $129.83 per
encounter
Option B: An RCM service that collects
$130 per encounter, on average
Reimbursement = $130 per encounter
5% fees = $6.50 per encounter
Net revenue for the practice = $123.50 per
encounter
Comparison: Option A fees are 0.75%
higher than the other service provider but
delivers 5.12% greater net revenue, or $6.33
more per encounter. On an average annual
encounter volume, this is a benefit to the
practice of about $26,500 per provider per
year. Which option should the physician
choose?
Physicians often focus on getting the
lowest possible fee rate, which essentially
is a race to the bottom. Outperforming
RCM service providers use a combination
of strong billing and coding skills, financial
management, process engineering, and
technology to deliver superior returns in
terms of higher reimbursements and faster
payments to their customers.
5 keys to financial fitness
Timely filing
Timely filing limits are defined by the
payers (Medicare, Medicaid and commercial
insurers) and embody the rules for filing and
adjudicating claims. The limits are defined
in number of days from Date of Service
(date of the patient encounter) to the date of
the claim receipt by the payer. These limits
vary among payers but generally are split
into Medicare and Others. Filing limits vary
greatly among insurance companies:
• Medicare: 365 days
• Medicaid: 95 days
• Blue Cross/Blue Shield: 365 days
• Cigna: 90 days
• United Healthcare: 90 days
• Health Net: 120 days
• Secure Horizons: 90 days
Managing timely filing involves tracking
and managing the three main causes of
tardiness:
Charge Entry: Measured from Date of
Service to when the encounter (superbill
from an EMR or face sheet) was closed and
made available to the billing (RCM) team.
Target: less than 1 day.
Initial Claim Submission: Measured
from receipt of encounter data to submission
“and receipt” of the claim by the payer.
How financially fit is your
Practice Management
By Zahid Khalid, Cofounder, Sypore
P
‘business of healing’?

3. September 2016 Dallas Medical Journal 235
Target: 2 days at most (including Charge
Entry).
Rejection/Denial Claim Resubmission:
Measured from receipt of rejection/denial to
resubmission “and receipt” of the claim by
the payer. Target: 2 days at most.
Use of modifiers
Code modifiers further describe a procedure
code without changing the definition of the
code. Misuse of modifiers is a leading cause
of claims denial and lower reimbursements.
Their intentional and repeated misuse can
lead to audits and penalties.
Provider credentialing
Provider credentialing is the verification of
a healthcare provider’s experience, expertise
and willingness to provide medical care.
Without proper credentialing, insurance
companies can delay or deny reimbursement
for medical services. The credentialing
process is cumbersome and tedious, and
requires ongoing attention for validations,
revalidations and other required updates.
To further complicate matters, payers have
different rules, requirements and forms.
A good RCM provider offers credentialing
services, and ensures that the end-to-end
process can detect and prevent revenue
loss due to credentialing issues. Because
credentialing can be a lengthy process,
transparency is important.
Preauthorizations and verification
of eligibility and benefits
Revenue commonly is lost because the
patient’s insurance eligibility and benefits are
not verified at each visit. This is an area in
which a well-engineered end-to-end process
with built-in monitoring capability comes
into play. If this vital part of the process is
neglected or poorly planned and executed,
revenue loss can be significant.
Accounts Receivable management
Physicians concerned about the financial
state of their practice pay great attention to
their A/R — it involves some of the biggest
and most confusing numbers.
As an example, a gastroenterology practice
expressed serious concerns to us about the
practice’s large and growing A/R, in the $1.5
million range. This clearly was a case of poor
A/R management by the in-house team (very
common). The physicians’ understanding of
the A/R numbers was critical so they could
realize the true value trapped in the A/R and
at risk of loss to timely filing. Table 1 shows
the math.
The mathematical equation for under-
standing the actual value of the A/R is:
Charge Amount = Adjustments +
Payments + A/R balance
The key is understanding that the A/R
amount is not all collectible; only the
“payment rate” part can be collected. So, in
this example, the true “maximum value” of
the A/R is:
Charge balance x Payment rate =
$1,400,000 x 33.33% = $466,666
Incidentally, the A/R Days metric for this
practice is extremely poor at 146 days. This
number should be below 35.
Another area of A/R management that
practices commonly handle incorrectly,
resulting in revenue loss, is “A/R Aging.” The
method of using “aging buckets” for claims
due over 30 days, over 60 days, over 90 days,
Metric Results Comments
Cash Collections Level Cash collection per
claim is around $202
with approximately 8%
additional room for
improvement.
Accounts Receivable
Days
Days in A/R is over 75.
This is “Poor Performer”
in this category.
and over 120 days is borrowed from standard
accounting used at most businesses. But this
method is inadequate for A/R management
for a medical practice because of the
differences in the payers’ payment cycles. For
example, Medicare typically pays within 10
days, so why wait 30 days before following
up on an unpaid claim? By the same token,
some payers pay within 45 days, so why call
on claims that are unpaid at 30 days?
For physicians to efficiently keep an eye
on the financial fitness of their practice,
they need a dashboard view of the practice
performance as shown on Table 2. DMJ
ZahidKhalidisCFOforSypore,whichoffers
medicalbillingandcredentialingservicesfor
NorthTexasmedicalpracticesandisamember
oftheDCMSCircleofFriendsprogram.Members
canchecktheFinancialFitnessScoreoftheir
practiceatwww.sypore.com/practice-analysis.
Item Value Comments
Charge amount $3,500,000 Total charges for the year
Adjustments $1,400,000 Total adjustments for the year
Payments $700,000 Total payments received
Charge balance (A/R) $1,400,000 A/R balance
Payment rate 33.33% Payments as a % of charge amt
Daily charges $ 9,589
AR Days 146 Number of days of charges inA/R
AR % of charges 40.0%
Max expected payments $1,166,667 Total potential payments
Table 1
Table 2
Medical Board
License Defense
Protect Your Livelihood!
Consultation
or
Representation
MARCUS L. STEVENSON, JD, LLM
Statewide Practice
The Stevenson Law Firm, PC
11200 Broadway Street, Ste 2743
Pearland, Texas 77584
(832) 413-5222
(832) 413-5224 (Fax)
helpme@mlslegal.com
www.texashealthlawattorney.com
Helping to Protect Healthcare
Providers’ Licenses, Relationships
and Money
StevensonLaw.indd 1 12/16/15 11:17 AM