Billing Gone Bad? Find an Outsourcer

As a physician, you never want to reach the point of thinking, “Well, the billing person has tried to reach that patient four times. It’s only $65…I can absorb that.” Carry that attitude for a few months and you’ll be running yourself out of business.

Barry Haitoff, President of Medical Management Corporation of America, a billing outsourcer, advises doctors to hold fast to one principle: you have done the work and you deserve your compensation…every penny. Haitoff: “While physicians are intelligent, they aren’t magicians. They can’t juggle every aspect of their practices…and they usually don’t. I advise surgeons to do what they do best and outsource the rest. You don’t do your own accounting or legal work, so why should your billing be in house? Billing, something that arguably impacts a doctor’s daily life more than anything else, should not be dealt with by anyone less than professional management.”

According to Haitoff, practices, being led by humans, are subject to very human tendencies. Haitoff says, “Most office based doctors turn to outsourcing when they are experiencing ‘pain.’ They are in a panic because the computer system crashed, the biller quit, or the money is fast drying up. Bringing in an outside biller during tumultuous times is not the best option, however, because then you don’t have the opportunity to research the best outsourcer for the job.”

So let’s say that those in charge of the practice have the prescience to entrust their billing to an outside entity…before the lights go out. Where to begin? Haitoff advises, “I would first recommend checking with the Healthcare Billing and Management Association (HBMA), the association for third party medical billing companies. Additionally, it is a good idea to speak to other practices to determine which company they use and if they are satisfied. The most important thing is that once you narrow it down to a select few billing companies you must do your research. Meet with them, get references, verify the longevity of the company, and inquire if there are any billing staff who are certified by HBMA or coders who are certified by the American Academy of Professional Coders.”

Questions about automobile injuries, accident details, and casting should also enter into the discussion when interviewing a potential billing company. “It is essential, ” says Haitoff, “that you select a biller who specializes in orthopedics and has a strong track record of success in the field. You should determine, for example, how knowledgeable a billing company is about automobile injuries and workers’ compensation issues. Ask specifically if they know what insurance companies want to know about accident details. Also ask what they can tell you about billing for injectable drugs and casting material. Do they know that there is more you can bill for than the application of the cast itself?”

Haitoff continues, “On the coding front, do they know that you can bill and get paid for certain procedures using the appropriate modifier (an additional code that distinguishes a service performed)? For example, with modifier 59 (distinct procedural service), procedures typically considered inclusive are often times paid. This is the case when a surgeon performs an arthroscopy of the knee with menisectomy along with patella chondroplasty. Overall, there is a lot of money left on the table for insurance companies because of improper coding or billing issues—often due to inadequate follow up.”

Also part of any due diligence process, says Haitoff, is a thorough reference check. “While seemingly time consuming, I cannot stress enough the importance of checking references. You want to talk to people who will be able to say things like, ‘Since we started billing with ABC company our outstanding receivables have gone down, our collections have gone up, overhead has been reduced, etc.’ You want specifics.”

Surgeons can hardly be blamed for not thinking like CEOs or accountants: a little thing called patient care often comes first. Barry Haitoff says, “One of the largest expenses of any practice is for nonclinical salaries. Many times physicians want to reduce overhead and choose to economize in the category of salary. But some of those people are the ones you need to contact the insurers. The doctors don’t usually think about adding an employee, paying ‘X’ and getting ‘2X’ back as a result of claims follow up. Many insurance plans have a stipulation that you have 60/90 days to send in the claim and to ensure that it is paid. Their attitude is, ‘Don’t send it to us on the 91st day. We won’t pay.’ Meaning, of course, that the practice needs to employ enough people to dial the phone or check on line where available—a lot.”

Haitoff adds, “This is all tied into the doctor’s revenue for that month. If he or she takes a vacation for two weeks and collections go down, he still has to pay salaries…and the doctor’s take home compensation is reduced. Not the case when you outsource. Since the billing company’s fee is tied to revenue, when collections drop because the surgeon went on vacation, the billing overhead drops as well.”

Billing, says Haitoff, is an area where humans and technology can partner to effectuate a streamlined process. “Be sure to inquire about the software a biller uses. They should be set up to send claims electronically, as well as having the ability to accept electronic remittance advices because many insurers are beginning to do direct payments via electronic funds transfer. The software should also have an automated system for accounts receivable follow up. Traditional billers run accounts receivable aging reports and then use that report to follow up. But a good software system has an automated mechanism for doing that. If you send in a claim electronically, you should have a payment or denial in as little as two weeks; if not, then the claim goes into a work file and the supervisor manages that to ensure that it is followed up on.”

If a surgeon has a front desk and back office full of go getters, excellent. If not, the bank balance will suffer, as will the surgeon’s income. Haitoff: “In the case of in house billing, when someone takes a vacation, their work often lays in a pile until the person returns. That means that services performed don’t get into the system in a timely manner and payments aren’t posted in a timely manner, thus having a huge negative impact on the money. Most in house billing departments are already behind on accounts receivable follow up—vacation time just makes it worse. Generally speaking, follow up of unpaid claims is one thing that’s not always staring you in the face. If payments come in and you have a stack of Explanation of Benefits (EOBs) someone sees if the work is not done. But accounts receivable aging is where there is no payment, no EOB, nothing visible. So unless you have an automated system in place things won’t get handled efficiently, if at all. The front desk and back office folks are not going to do what they don’t see. And they may not be motivated and/or may be looking at the clock. Whereas they have no particular incentive, billing companies are motivated because we are paid based on the monies collected.”

To stay on the ethical and legal straight and narrow, practices should ensure that their billing company is on board with the latest privacy and security regulations. Haitoff explains, “The biller should have a compliance program in place, following guidelines for both the Office of Inspector General (OIG) and the Health Insurance Portability and Accountability Act (HIPAA). The HIPAA compliance program should also include the ‘Red Flag Rules, ’ new regulations relating to patient and employee security targeted at preventing and mitigating identity theft.”

The other red flags relate to the gut checks you should do while interviewing. “Beware if someone has little or no knowledge of orthopedics, can’t clearly explain their process, or can’t adequately respond to questions about compliance.”

Before you’re ready to hitch your future to a billing company, you should take the time to negotiate a fair contract. Barry Haitoff: “Most contracts are two to three years because the billing company has startup costs to recuperate. Some contracts provide an out for cause, although the biller will likely have a contract that doesn’t let a practice out without significant cause because they will be going to great lengths to set things up. Ideally, they will be somewhat flexible, however. If they are confident in their service, they should be somewhat willing to negotiate on the terms. While our contracts are three years, if the doctor says, ‘What if I get into this and I’m not happy with the results?’ I will ask him or her, ‘What will make you comfortable?’ In the end, the physician should always have the contract reviewed by attorney.”

The best news, says Haitoff, is that outsourced billing works. “We have seen collections increase in excess of 30% when a biller comes in. If an orthopedic surgeon is billing out $1 million per year, an increase of only 5% of the collection ration is $50, 000, which easily covers the expense of bringing in a billing company…not to mention the potential reallocation or reduction of staff. It’s something to seriously consider.”

Bill Carns, CEO of PracticeMax, also has substantial experience with the ins and outs of outsourcing. He says, “Doctors and practices are often consumed with what they do well; but things that their staff don’t understand, however, go by the wayside. When that happens, cashflow, the lifeblood of the group, is negatively affected. Outsourced billing has gained in popularity in part because of the increasing trend for people to focus on what they do best.”

For most practices, knowing that it’s time for a billing outsourcer is a matter of intuition rather than that of a systematized way of doing business. Bill Carns explains, “When reimbursements really slip and a practice begins to have cashflow problems, the doctors have a visceral response along the lines of, ‘Hey, I’m not making as much as I used to.’ In a more sophisticated practice they have data and reports and can see that there’s a problem. Those practices, however, are the exception.”

Sometimes, adds Carns, it takes an outside party to open the doctor’s eyes. “If cashflow is in jeopardy, a group might approach a bank or other entity for assistance. At times, banks refer clients to us, telling their client, ‘There appears to be an issue here.’”

To identify a pacesetting, trustworthy billing company, says Carns, “Most people talk to colleagues or friends to assess their experiences. They may discuss their collection rates, or the percentage they pay for billing.”

Numbers tell part of the story, states Carns, but other things must be taken into consideration. Regarding collection rates, he notes, “Collections depend on several variables. When comparing two orthopedic practices, one practice may collect 60% of gross charges, while another collects 30% of gross charges. Even though it compares collection rates, it is like comparing apples and oranges. If a practice is getting 60% of charges, the automatic reaction is that the biller or billing company must be very good. In reality it could just mean that the biller is not helping the practice stay abreast of fees so charges may be low and they may be leaving money on the table from insurance payers.”

“Conversely, collecting 30% of charges could be excellent because the charges may be in the 95^th percentile for the local market; a good payer mix exists, and the billing company may be collecting a high percentage of ‘net’ charges. A good billing company will be able to help you make sense of the apples and oranges.”

Carns goes on to say, “Beyond that, you should look for billers with certifications from multiple associations, including HBMA. Once you’ve identified a handful of candidates, you should interview them, asking things like, ‘How long have you been in business? What differentiates you from other billing companies? Can you provide a state-of-the-art, certified electronic health record system to verify insurance, improve documentation, and capture all charges? Are your coders certified? What other kind of practice management processes or technology do you have in place that will help maximize my revenue? What kind of reports and dashboard information is available to me and my partners? Do you provide insurance contracting services?’”

What’s a two or five dollar unpaid bill to a million dollar practice? Depending on the “multiplier, ” it could mean paying the phone bill. Bill Carns: “Let’s say an insurance company was expected to have paid $56.00, but only paid $54.00. An outdated, in house way of handing this is to say, ‘It’s only two dollars difference, so let’s just accept the payment as is (if the variance was even noticed!). It’s not worth spending 20 minutes on the phone.’ To avoid getting into this situation over and over again, the biller must have an efficient payment tracking system. They should have the appropriate technology and processes to track each and every expected dollar. And they should work with the payer on a project basis so a lot of labor isn’t spent chasing small under payments.”

Walking the fine line between caring physician and businessperson can be challenging indeed. “Collecting from patients, especially in this recession, ” says Carns, “requires tact and efficiency. Although challenging, the best option is to collect payment at the time of the visit so that the office doesn’t have to attempt to get it from patients afterwards. The typical practice sends multiple statements and if they don’t receive the money will write it off or send it to a collection agency. The more innovative practices employ billing companies who use call-center technology to contact patients to work out payment arrangements.”

Creativity, says Carns, can help smooth the way forward when collecting from patients. “Billing companies can work with practices to help facilitate interest free loans, interest free credit, or a schedule whereby the patient makes payments on a predetermined basis. Another innovative tool is credit scoring, used to determine feasibility and the probability of someone paying his or her balances. This is increasingly being implemented in some hospital systems and by some billing companies. If the doctor is willing to extend credit, either on an interest or interest free basis, they will want to know if the person is a good credit risk.”

“Alternatively, a biller may be able to help facilitate a medical credit card for the patient. There are numerous tools that billers can employ to help people get back on track with their financial responsibilities. While some medical collection agencies have seen their collections drop up to 60% in this recession, our billing company collections from patients have improved.”

Bill Carns concludes, “A responsible biller will help recover every dollar that is legally and ethically due to the practice.” When doctors aren’t worried about their money, they are free to concentrate on what they do best—care for their patients.