TOP 10 METRICS TO MAXIMIZE YOUR PRACTICE S REVENUE

TOP 10 METRICS TO MAXIMIZE YOUR PRACTICE S REVENUE Billing and Reimbursement for Physician Offices, Ambulatory Surgery Billings & Reimbursements

Here are the Top Ten Metrics. The detailed explanations start on the following page. 1. Verification of Benefits/Collecting co-payments should be 100%. Top 10 Metrics to Maximize Your Practice s Revenue 2. Pre-Authorizations should be 100%. 3. Coding review and claim scrubbing should be 100%. 4. Clean claim submission rate should be greater than 95+% (best = 98-99%). 5. Denial rate should be less than 5%. 6. Accounts Receivables - 95% of your A/R should be paid within 60 days. 7. Your Adjusted Collection Rate should be 98 to 99%. 8. Accounts Receivable over 120 days should be less than 3%. 9. Reimbursement Ratio - Closed Claims vs. Overall Claims should be equal. 10. Negotiating Your Fee Schedule - 100% Optimization. A detailed explanation of these measures start on the next page. 2

The Top 10 Metrics to Maximize Your Practice s Revenue At MediGain our primary purpose is to help practices optimize their reimbursements and maximize their revenue. As a full service, professional revenue cycle management company, we have spent years working with a wide range of practices, specialties and hospitals. Here the Top Ten Metrics that we found that the most successful practices use to Maximize Their Practice s Revenue. 1. Verification of Benefits/Collecting co payments should be 100%. Believe it or not, it all starts at your front desk. Your staff should be using an up to-date, top tier, Practice Management System (PMS). They should use iverify, eeligibility or a similar system to automatically verify insurance coverage while scheduling the appointment. Then they can use this online system to check/double check the patient s deductible, co-insurance, co pay, etc. The key benefits from this best practice are to prevent lost/delayed revenue from billing the wrong insurance, and to arm the front desk staff with the information they need at the time of the patient encounter to maximize their cash collection of the patient s responsible portion of their encounter. 2. Pre Authorizations should be 100%. To prevent lost revenue from lack of prior authorization denials, it is essential that every procedure that requires pre- authorization is in fact preauthorized. The practice should utilize formal processes to ensure that all required pre-authorizations are performed at least 72 hours in advance of the procedure, and that emergency procedures are authorized within the required authorization window after the procedure. 3. Coding review and claim scrubbing should be 100%. Before submitting any claims, all procedure and diagnosis coding should be reviewed and scrubbed. Ensure that the ICD- 9CM, CPT, HCPCS codes and appropriate modifiers are billed. This will reduce the percentage of claims that are denied, delayed, or partially paid, and thus prevent lost revenue for the practice. Ideally, the coding review and scrubbing is performed by a combination of highly experienced and certified coders and highly sophisticated coding and claims scrubber software. A professional, full- service revenue cycle management company, like MediGain, has certified coders for specific specialties. 4. Clean claim submission rate should be greater than 95+% (best = 98-99%). Sending a claim which is complete and accurate the first time it is submitted is essential to increase cash flow, minimize days in accounts receivable, and prevent lost revenue from denied, delayed, or partialy paid claims. This will reduce the number of times that the Billing staff touches the claim. When reviewing your internal team or looking to outsource your billing, be sure to verify their clean claim submission rate. 5. Denial rate should be less than 5%. Technically, denials are claims that are adjudicated and rejected by the payer. Although there are specialty specific nuances, in general the best practices have an average of less than 5% denial rate when they submit their claims. The denial rate 3

is the percentage of claims denied by payers. (Some practices may measure this metric based on the percentage of charge line items denied.) The lower this number, the better a practice s cash flow and the less staff a practice needs to maintain that cash flow. Denied claims create the need for manual intervention, thus increasing practice costs, delaying payments and reducing revenue from any claims for which the denials are not timely and effectively addressed. A common problem with many busy practices is that many claim denials sit unworked since denials are usually the most difficult and time-consuming work for billing staff. Your revenue cycle management company should have a dedicated team assigned to handling denials and follow up, follow up, follow up. Average performers have a denial rate of 5 to 10%. Poor performing practices may have more than 10% of their claims denied on the first submission. To calculate your denial rate you should use a designated period of time (the last month, the last quarter, etc.). Then total the dollar amount of claims denied by your payers and divide that figure by the total dollar amount of claims submitted by your practice during that period of time. (Note: some use charge line items denied divided by total charge line items submitted.) If you would like to get into greater detail, do a denial rate analysis by payer, provider, remark code and/or category. A professional full service revenue cycle management company provides a dedicated team handling all the denials and follow up. Many in house billing operations tend to lack the expertise, sophisticated processes and software, and time to timely and effectively work all denials. In addition, many in house billers tend to avoid the hassle of following up on the smaller denials and only focus on the larger claims. However, if your in-house billing team does not follow up on several $20 claims each day, that equals a loss of over $10,000 from your bottom line each year. In addition, mistakes can be made in coding and charge entry. If your in house billers do not catch mistakes before they go out the door, it is costing your practice money. Metric #3 stated that 100% of your claims should be reviewed for proper coding and scrubbed to avoid denials. If your in house billing team or your billing and reimbursement provider do not review and scrub all your claims before they are submitted you should consider switching to a professional full service revenue cycle management provider. A professional full service revenue cycle management company with a dedicated denials team is a critical value- add to increase revenue and cash flow timeliness over most in-house billing operations. Work denials before the EFT is posted to the system. Report on top denials and provide feedback to your staff and providers 4

6. Accounts Receivables - 95% of your A/R should be paid within 60 days. This is a major factor regarding optimizing cash flow in your practice. If your practice has more than 5% of A/R greater than 60 days, you need to address these issues with your internal billing department or your billing service. Practices are often unclear about how to correctly calculate and analyze days in A/R. Days in A/R is a measure of how long it typically takes for a service to be paid by all financially responsible parties. The calculation features the outstanding money based on the practice s average daily charge. Days in A/R represents the average number of days that money owed to the practice are outstanding. To calculate days in A/R, divide your total current receivables, net of credits, by your practice s average daily charge amount. In order to net the credits, subtract the current credit balance (in effect, adding the balance because you are subtracting a negative number) from the current total receivables. For the average daily charge amount, divide total gross charges for the last 12 months by 365 days, representing the previous 12- month period. Depending on the specialty or certain circumstances some practices may find it beneficial to calculate their average daily charge on a three-month basis instead of 12. In this case, the previous three months would be divided by 90. The key is to make a choice, and use the metric consistently over time. Some important caveats: Specific insurance carriers whose days in A/R are higher than they should be: For example, if your entire practice s days in A/R is 44.95, but your Medicaid claims average 75 days, there is a problem with Medicaid that needs to be addressed. Make the same days in A/R calculation for each of your major payers so you can scrutinize the performance of all payers. If you don t break out days in A/R by payer, you may be missing potential trouble spots. The impact of credits: As noted in the calculation presented above, it is important to subtract the credits from receivables. Credits, money that is owed by the practice to other parties, actually offset receivables. Unless credits are treated correctly, a practice will get results that a skewed to the positive and you will not get a true picture of your practice s performance (not to mention regulatory compliance risks the practice may have as a result of not timely paying back credit balances). A recognition of collection accounts: For the majority of practices, accounts sent to a collection agency are written off the current receivables. Therefore, when calculating days in A/R, these funds are not accounted for in the equation. Submitting a large number of accounts to collections at once will cause your days in A/R to suddenly appear much better than they really are, so check what your team or provider is sending to collections. If they are sending a large amount of claims to collection right before you compute your days in A/R, this is a huge red flag. 5

7. Your Adjusted Collection Rate should be 98 to 99%. The adjusted (or net) collection rate is a measure of a practice s effectiveness in collecting all legitimate reimbursement. That is, it shows the percentage achieved out of the reimbursement allowed based on the practice s contractual obligations. This figure reveals how much revenue is lost due to factors such as uncollectible bad debt, untimely filing and other non contractual adjustments. A firm patient financial policy and billing protocol is necessary in order to achieve such a high net collection rate across the practice. One can look at just the insurance net collection rate, the patient net collection rate or the combination, but in any case there should be good patient billing practices in place to ensure those monies are collected to the fullest extent possible. Divide payments (net of credits) by charges (net of approved contractual adjustments) for a selected time frame. This calculation should be based on matching the payments to the charges that created them. This way, the practice avoids comparing charges generated in the current month with payments and adjustments taken on claims from many prior months (this can lead to great fluctuations in the results for this calculation). If your practice management system can t match payments with their originating charges, you should perform this calculation using aged data, typically from six months back, so it ensures a majority of the claims used for the calculation have had ample time to clear. To calculate the adjusted collection rate: divide payments net of credits by charges net of approved contractual adjustments, then multiply by 100. The total adjusted collection rate comes to a percentage. Additional caveats: Including inappropriate write-offs in the calculation of adjusted collection rate: Do not apply inappropriate adjustments to charges when posting payments - such as combining noncontractual adjustments and contractual adjustments together. Non- contractual adjustments must be appropriately designated, computed separately and placed in applicable categories indicating the reason, such as untimely filing, failure to obtain pre- authorization, and so forth. Tracking non- contractual adjustments based on their reasons will help reveal sources of errors and find opportunities to improve revenue cycle performance. Not having access to your fee schedules or reimbursement schedules for each payer: Without this data, you cannot truly know what you should have been paid. As a result, more inappropriate write offs may go undetected. 6

8. Accounts Receivable over 120 days should be less than 3%. Many practices are beginning to consider A/R over 120 days to be write offs. To calculate the percentage of A/R greater than 120 days, take the dollar amount of your receivables, net of credits, that is greater than 120 days and divide that number by your total receivables, net of credits. To calculate the percentage of A/R greater than 120 days, add together all the receivables in all the aging buckets greater than 120 days and divide that number by your total receivables (net of credits). For this metric, it is important to base your calculations on the actual age of the claim based on the date of service. 9. Reimbursement Ratio - Closed Claims vs. Overall Claims should be equal. This a measurement of two different collections ratios versus corresponding charges. A Closed Claim includes patient payment and full reimbursement from a Payor with any contractual adjustments made. The Closed Claim Ratio compares the Payor reimbursement and patient payment from claims matched exactly to the corresponding charges. The Overall Claims Ratio is the percentage of Total Revenue to every claim submitted, Total Charges, including those with any outstanding balance and all claims written off. These ratios when compared to each other should be as close to the same number as possible. A very well run practice may only have a difference of 1 deviation or less in this metric. 39% Closed Claims % vs. 38.5% Overall Reimbursement Ratio would mean that the practice receives almost all of their monies fully from Patients and Payors. A/R outstanding would be very low. If your Closed Claim Reimbursement Ratio is 39% and your Overall Reimbursement Ratio is 35%, the practice has 4% room for improvement of the Total Charges. This gives an improvement target for reimbursement overall at the practice. 10. Negotiating fee schedule. Of course you want to negotiate the best reimbursement rates because your time and skills are valuable. Here are four points to consider when negotiating your new contracts and help you get the contract rates you deserve: Average Paid Percent: Compute by dividing the sum of your payments by the sum of your submitted charges. This is just a gross collection rate that doesn t account for what the billed charge is or back out contractual adjustments. If you look at a gross collection rate, it will be greatly influenced by the billed charge amount. For example, a billed charge set at 200% of the Medicare allowable is quite different than one set at 300% of the Medicare allowable. The higher the billed charge is from the actual payment amount, the lower the gross collection rate. If a billed charge is set too low (such as 100% or even 125% of the Medicare allowable), the gross collection rate will look fantastic as it 7

would be close to 100% when in fact they may be leaving money on the table if the billed charge is set below some carrier allowables. It would also depend on the payer mix. In an ideal world, every claim you submit for payment would be paid at 100 percent. However, there are many reasons why this is not the case. Some examples include claim specific negotiated discounts, payment bundling, capitation, bad debt (ideally this would be below three percent) and previous payment discrepancies. For an average practice, the paid percent will be between 35 and 40 percent. The higher the percentage, the better your revenue will be. This depends heavily on the payer mix and fee schedule, since a good payer mix or low fee schedule will cause the paid percent to be higher, but the practice could still be losing a lot of obtainable revenue/reimbursement. (NOTE: You could use a net collection rate vs a gross collection rate as it negates the impact of carrier mix or billed charge amount - it boils it down to what percentage of the allowed amounts are being collected.) Medicare Allowable: You could use a percentage of Medicare allowable to compare the fees of different payers for different procedures to guide the identification of which payers and procedures to focus on for payer contract negotiations. Compensation for Top Procedures: This metric builds on average paid percent. Since you know the overall paid percent for each payer, you should consider how those payers are compensating you for your top procedures. If at all possible, sort your payments by procedure and by payer simultaneously. This will allow you to look at the top procedures for each payer and what their paid percent is for those procedures. This allows you to compare individual procedure payment rates between different payers. Average Reductions Percent: A payer s average reductions percent is the sum of the payer s contractual and other reductions divided by the sum of your submitted charges. This metric lets you determine which payers are consistently shifting more dollars than normal out of your payments and into contractual or other reductions (excluding patient responsibility). For the average practice, this figure is typically in the 47 to 53 percent range, but the lower the better. Again, this depends heavily on the payer mix and fee schedule, since a good payer mix or low fee schedule will cause the paid percent to be higher, but the practice could still be losing a lot of obtainable revenue/reimbursement. 8

ICD-10: Top 10 Things You Need To Do NOW! About MediGain Services, Inc. MediGain is a global full service revenue cycle management and healthcare analytics company devoted to improving billing, collections, and outcomes for healthcare providers and the patients they serve. With over 400 employees, MediGain provides solutions for physician groups, provider networks, ambulatory surgery centers and hospitals enabling them to reach their maximum potential through improved operational, financial, and clinical outcomes. For more information on how MediGain can maximize revenue, reduce expenses and allow you to spend more time on providing your patients with quality healthcare, visit www.medigain.com, call us at 888-244-4754 or email marketing@medigain.com. 2800 Dallas Parkway #200 Plano. TX 75093 www.medigain.com 888-244-4754