Billing practices can improve payment patterns - column

Healthcare Financial Management, April, 1989 by Charles A. Mowll

Billing practices can improve payment patterns

The process hospitals and other healthcare organizations use to bill third-party payers has become extremely complex. Many years of healthcare cost containment efforts has produced significant changes in the way hospitals and other providers bill for their services.

Comprehensive legislation has dramatically changed Medicare billing practices, creating a tremendous challenge for financial managers.

Changes to the Medicare claim payment requirements for outpatient physical therapy claims, the required use of the Health Care Financing Administration's Common Procedural Coding System (HCPCS) for all ambulatory surgery and outpatient radiology procedures, and the new benefit and coverage provisions of the Medicare Catastrophic Coverage Act are examples of regulatory changes that have significantly affected the providers' billing process.

Additional payer billing requirements have greatly increased the per-claim billing data necessary for timely claim payment. Provider billing staff have been forced to learn new clinical coding systems, new billing forms and data element requirements, and new payer coverage and payment methods.

For example, a Medicare claim must first pass the 18 Medicare Code Editor screens before it will be considered for payment. Provider billing personnel must be thoroughly familiar with each of these prepayment edits so that the claims submitted are approved.

Medicare is not the only payer to initiate major changes to its claim payment requirements. Many state Medicaid programs have initiated Medicaid diagnosis related groups (DRG) payment systems, and Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) implemented its DRG-based payment system during 1988.

In addition, many healthcare providers have negotiated service arrangements with local employers, consumer groups, or insurers to protect market share and to attract new patients to the facility.

These contractual arrangements, often referred to as preferred provider arrangements, may call for one of a variety of payment mechanisms including discounted charges, per diems, or a per case method of payment.

Each of these preferred provider arrangements requires a unique set of billing procedures, separate administration, and specific staff training, further complicating an already burdensome billing environment.

INCREASED RECEIVABLES. A major operational cost of the new billing procedures has been an 11.3 days overall increase in the average hospital receivable levels (as measured by the days revenue in receivables ratio), from 60.9 days in July 1980 to 72.2 days this year.

By extending this average increase per hospital to all community hospitals (5,611) and multiplying that sum by the net daily revenue that hospitals now average ($126,500), hospital industry receivables have increased by more than $8 billion, a heavy reduction in expected cash flow.

PROVIDER RESPONSE. There is no magic solution to the problem of increased receivables levels that have accumulated as a result of the complex billing requirements now mandated by payers.

Billing blitzes intended to eliminate billing backlogs and occasional appeals to major payers for interim payments may provide short-term cash flow relief, but long range cash flow protection can only come by maintaining solid billing policies and procedures (see Exhibit 1).

It is extremely important to specifically identify the major payers from whom a provider traditionally receives its cash. A written understanding of the payer's claim payment criteria and a definition of a "clean" payable claim should be obtained from each payer representing a substantial portion of the provider's annual cash flow.

The Medicare Hospital Manual contains these definitions and instructions regarding Medicare billing requirements. However, fiscal intermediaries are still required to provide additional training and guidance in interpretation of the manual instructions to provider billing personnel.

Educational sessions should be conducted routinely to review existing payer-specific billing procedures, claim pre-payment requirements, and new billing requirements being imposed. Sufficient staffing should be maintained to ensure that bills are submitted for payment on a timely basis and that electronically submitted claims are properly edited prior to submission.

Providers should electronically submit claims data to bill third-party payers. Electronic billing generally speeds payer processing and payment of provider claims.

HFMA's Survey of Medicare Accounts Receivables Trends (SMART) has revealed that providers who bill a high volume of their Medicare claims electronically enjoy an 11 day lower average days revenue in receivables ratio than do those providers who primarily submit paper claims.

FOLLOW-UP. Collection follow-up should begin at the same time the bill is submitted for payment. A bill cannot be paid if it is not received by the payer. To confirm receipt, the provider should send a "claim receipt acknowledgement form" and a return envelope with each claim, or batch of claims, submitted. Providers may wish to establish a claim dollar threshold for implementing this procedure, such as all claims of more than $500.