10 Handcuffs Keeping Your Medical Billing Business Small And Poor

The point of locus can be typified in the analogy between a bookkeeper vs. a CFO.

As a bookkeeper my focus is on receipts, the accurate posting of expenditures and income as debits or credits, and in properly documenting a paper trail. A comparison can be made here to a medical coder or biller who’s preoccupied with coding accuracy, insurance payer rules, and the timely filing of medical claims so that our doctor gets reimbursed correctly for each rendered encounter.

However, in contrast to a bookkeeper, as a CFO I’m concerned with the entire cosmology of causes that affect cashflow; be it high costs, slow sales, inefficient processes, high A/R, regulatory compliance, low productivity, or employee absenteeism––and it all boils down to a single person’s responsibility. When the question gets asked “where’s the money for payroll”, the buck stops with me.

So from the point of view of a CFO, let’s look under the hood at a typical medical billing service of say 20 physicians, with each doc billing approximately $35k per month in insurance, with an ordinary spread of payers such as 50% Medicare/Medicaid, 20% BCBS, and the rest to Commercial payers such as UnitedHealthCare, Cigna, Aetna, plus some Tri-care.

As a CFO, the first thing I need is a baseline, a reference point of what highly efficient billing departments look like––in a best case scenario, what are they able to achieve.

I read on the internet that outfits like AthenaHealth promise 94% first pass claim acceptance rates based on advanced technology, but they charge only 2.9% of collectables which is dirt cheap considering the results they’re promising; but what really jumps out at me is what they are seemingly able to achieve operationally, and then be a highly profitable company: In an industry where outsourced third party billing fees range from 4% to 7%, that low rate presents a high bar considering it comes with a 6% claim error rate, which is also far below the average physician practice rate of 27%.

So a look at high-end RCM companies like Athena gives us a baseline for what should be achievable by anyone assuming things are done expertly and with precision.

But as I begin to look at my own numbers, I notice how large the discrepancy between what I am able to achieve operationally compared to what my competitor is able to manage, I’m a taken aback at how my cost of doing business could possibly be as high as it is, or how my competitor can operate so efficiently – and still have millions left over for technology, marketing, and sales commissions; when I can barely afford to upgrade my billing software or take a short vacation.

As a CFO it forces me to make a far more detailed inspection to discover where the disconnect lies: By carefully examining every moving part, identifying each operational process, and isolating every possible revenue leak, hopefully I can vet each link in the process to determine just where efficiency is being compromised.

A granular investigation reveals that my billing service is typical of 77% of all Medical Billing Companies:

1. I have a stand-alone billing software (medisoft, lytec, medical manager)
2. My staff re-enter data by hand from superbills faxed over by the physician
3. Incomplete clinical data from my practices causes a communication snowball
4. I receive incomplete patient data from my practices
5. I receive incomplete Insurance data from my practices
6. I have many other manual processes that can be cited for claim errors
7. I have a lack of Revenue Cycle Management checks and balances, which means I don’t know what I don’t know.
8. My RCM ‘proactive control’ is my General Manager – nice, but still imperfect and a single point of failure.
9. The average A/R of my physician clients is well above 6%
10. My collections recovery levels are below 37%, and because I’m not on a cloud-based billing system, my physicians have little transparency into our daily billing activities, which can cause a great deal of tension when things are going less than perfect. To physicians who are hearing Athena’s claim of a 2.9% rate with 94% first-pass claim success, higher A/R deficits just sound like excuses.

So my closer examination reveals that I have fragmented technology (as opposed to an integrated end-to-end solution), no free EMR to offer my doctors, no unified system that creates a seamless front-to-back-office efficiency, and I have poor RCM reporting controls that allow me – at best, to react to problems forensically, after they’ve happened rather than preventing them from happening before hand.

In contrast, my competitor provides its doctors with an end-to-end unified system and gives them a free EMR which allows the doctor to achieve instant compliance with HIPAA, HITECH, OMNIBUS, PCI, eRx, and ICD-10, while at the same time providing the billing office with instant inter-office communication to obtain things like insurance cards, clinical notes, or to assign follow-up tasks to anyone in the billing staff or on the clinical staff –all within the same software; and they also have highly sophisticated RCM reporting features that tell the billing manger what’s about to go wrong before it happens so they can act proactively rather than re-actively.

My conclusion?

That until I get the same kind of RCM technology that my competitor has, I’m not going to be able to create the levels of efficiency required to reduce costs low enough to take that much desired vacation. It also explains why cloud-based RCM medical billing companies are growing at 25-30% per year while traditional medical billing companies are losing clients at the same rate. When my competitor tells a doctor, “Hey, I can make you more money”, and has the data to back it up, what else does the doctor need to know?