Critical technology for a medical practice: how to stop money from falling through the cracks

Physician Executive, March-April, 2004 by Patti Rosenberg

When you think about the incredible volume of billing and reimbursement transactions that move between medical groups and payers, it boggles the mind. Football-stadium-sized claims centers handle millions of bills with hundreds of millions of line items and codes, and cut checks--not all of which are accurate.

Without a practical means to verify accuracy, most medical practices accept what they are sent and write off what they cannot understand or recover. But this is highly troubling as the probability of errors is great because many of these transactions are processed manually on both ends, or electronically with systems that do not use the same rules of logic for claims payment.

Consider one story from a medical practice where a major payer with claims offices in five cities each reimbursed a different amount for the same CPT code even though the contract with that provider is for only one amount. The medical practice accepted each of the five payments over and over again, even though only one was correct.

Lacking the automation to flag these discrepancies, medical practices don't really know what amount should be reimbursed for a given CPT code so they simply accept any amount that seems reasonable. Add in that most practices have multiple contracts with multiple payers and the math becomes dumbfounding. Practices are simply out of control. Something has to be done.

"Needle in a haystack"

Physician practices today capture the services they provide to patients (or members) in the form of CPT--and other standard or non-standard codes--and bill them out according to a single fee schedule. This fee schedule has nothing to do with what has been negotiated in terms of expected reimbursement from any of the practice's contracted payers.

As a result, the payer receives an amount that is not correct, according to the negotiated contract, and applies automated or manual rules logic to it to "adjudicate" the claim. This adjudication process:

1. Determines what, if any, portion of the service is covered

2. Changes the amount of the provider's charge to the contracted rate

3. Deducts any co-payments, deductibles or co-insurance that should have been paid directly by the patient

4. Sends an explanation of payment back to the medical practice along with a check for substantially less than the provider's original charge

The practice receives the check, applies the payment, and adjusts the balance according to the provider's explanation of payment. But it's a very difficult and cumbersome manual process for the practice to actually go back and check to see if the payment amount has been issued according to the negotiated contract.

Without most current systems, medical practices would literally have to have someone look at every claim that comes in and compare it to the negotiated contract to make sure the payment is correct. Manually verifying the accuracy of hundreds, if not thousands, of bills seems so impossibly expensive, time consuming and disruptive that it would cancel out any possible benefits.

This "needle in a haystack" is a very serious problem that many practices face and technology vendors are finally responding.

Today, automation is no longer more pain than gain. Systems are coming into their own and are collecting more money with fewer personnel. The questions to ask are:

* "What functionality is most critical?"

* "Which system and process of implementation will deliver the most value to your practice?"

On the front end

Automation of the end-to-end revenue cycle lowers costs and increases accuracy of billing, payment posting and collections. Integrating front desk automation with back office automation provides the greatest value because patient-owed amounts can be calculated, collected and posted at the time of the office visit, reducing back office handling and the number of bills mailed.

Front-desk payment posting and benefits verification

At a minimum, front-desk personnel who receive patient co-payments, co-insurance and other payments need to be able to post those amounts correctly and to reconcile cash to payments posted at the end of each day.

They should not be allowed to make any adjustments to the account. To achieve this, it is important to pay attention to the security capabilities within the system. Some systems require practices to give levels of security (i.e., level 1 thru 9, for instance) rather than screen- or field-specific security. The latter provides better flexibility and allows front-desk personnel to assist in the collection of co-pays.

The front desk will seem more knowledgeable and be able to assist greatly in collecting money due from patients if the system allows benefits verification and estimation prior to and during the patient's visit.

Without this functionality, practices will either write off these amounts unnecessarily or have to send a bill to each patient to collect. Handling patient responsibility amounts at the front desk during the visit is less costly and results in higher collections than handling it on the back end.