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The 21% cut to Medicare payments is looming.  Unless Congress rescinds, freezes, or otherwise blocks these cuts, practices will see a significant drop to their revenue – not only from Medicare FFS, but also from healthplans that base their reimbursements on Medicare rates.  While there is a lot of debate about whether the cuts will remain after April 12, when Congress reconvenes, and what the future of the Sustainable Growth Rate formula or other payment setting methodology might be, the best thing for practices to do is to look strategically at their practices and to be prepared for whatever comes.   

To make your practice stronger and more resilient to possible changes, ask yourself: 

What can we reduce without sacrificing quality?

What can we revise to make our organization more efficient, productive, and successful?

How can we redirect our efforts to maintain (and grow) our business?

Here are some ways that you can help ensure your practice survives these possible cuts and other external changes that may affect your practice in the future:

Reducing expenses is often the first thing practices think about when faced with decreased revenues.  It is definitely the easiest way to preserve the bottom line, but caution must be taken so as not to endanger the quality of services or give rise to negative perceptions.   Reducing inventory stores or the types of inventory can have both a short and long term boost to your bottom line.  Staffing strategies, such as alternate work weeks (i.e. four 10-hour days), job sharing, or options to work from home, are all ways to reduce operating costs.   Technology options, such as electronic health records and scanning documents also reduce supply and staffing costs.  Cutting perks, such as coffee for patients and special employee lunches, may have a short term impact to your bottom line, but long term effects of lost patients and poor morale may cost more than the savings.  As an alternative, changing to less expensive perks reduces costs while still showing consideration and appreciation.

Now is the time to look at your payor contracts and evaluate your revenue cycle procedures.  If contracts are based on current Medicare rates, be prepared to renegotiate them.  If contracts are no longer economically feasible for the practice, terminating the contract and providing services out-of-network may be an option.  Some practices also may consider “opting out” of Medicare.  For practices choosing to stay as Medicare providers, participating in the PQRI program can give a 2% boost to the practice.   With reduced revenue to the practice, it is even more important to make sure that you receive all of the fees in which you are entitled.  An evaluation of your revenue cycle and tracking of errors, denials, and rebilling will let you know where there are holes in your processes.   Make sure copays are paid, patient balances are followed, and penalties and interest (if allowed) are collected. 

Focus on the area of your practice that are successful and build on those areas.  For instance, a primary care practice might want to consider Wellness Programs to augment its preventative care services.   Limited pharmaceutical sales may be possible for practices in some areas and selling other retail products may also be beneficial to the practice as well as convenient for the patients.  Another simple way to increase revenue is to install vending machines (with healthy food of course!).  

Remember, just as the practice of medicine is always changing, so will the business side of healthcare.  Rather than fret about what will come, prepare for what might come and be ready. 

Having benchmarks to evaluate practice performance are useful tools in any practice.  Benchmarks are often published by well known organizations that claim to have data on best practices or data particular to your specialty.   While these can be good sources of information, they need to be taken with a “grain of salt.”  No two practices are exactly alike and the variables unique to each practice may make a particular benchmark more or less useful to a practice.  Also, pay attention to the sample size of the survey, as a small number of data points will not be statistically significant and may not in fact represent the “average” practice.   The best thing to keep in mind is what your goal is and whether the benchmark is helping you get to your goal.

One type of benchmark that is often used is the Percentage of  Accounts Receivable.   A rule of thumb is to have less than 20-25% of your total Accounts Receivable aged more than 90 days.   Hitting these numbers may be good for your practice, but it may also just be an arbitrary number that really doesn’t have anything to do with effective collecting.

For example, if your practice is 50% Medicare (clean claim paid in 14 days) and 50% PPO (clean claim paid in 30 days)and you bill electronically, very few claims should be outstanding at 90 days.   In other words, if  you have 20% of your A/R over 90 days, your collection efforts  may not be as  efficient as they could be.    On the other hand, if you have treat third party liability cases or contested workers’ compensation cases, where collections can take months if not years, the ratio of 20-25% over 90 days may be a benchmark that is futile to try to acheive.

Accessing benchmark information from reliable sources is valuable, but these need to be adjusted to your particular practice.   To help set your benchmarks for your practice, estimate when your collections should be received and identify any internal bottlenecks.  Also calculate your actual Days in Accounts Receivable and see how this compares to the contracted reimbursement.    If your Days in Accounts Receivable are much greater than your contracted terms, then your receipts are too old and the percentage of aged accounts is higher than it should be for your practice.

Changes in healthcare regulations and court settlements have led many healthplans to modify their provider agreements.   When renegotiating contracts or reviewing “updated” agreements, Administrators should pay close attention to the contract language.  Many of the paragraphs in updated contracts are the same as in the older version, but there are some significant changes that I’ve seen entering into the new agreements.   Here are some examples:

The words “all benefit programs.”  This means that you have agreed to serve all books of business that a healthplan may add, including Medicare Advantage, Medicaid, Work Comp, Third Party Liability or become a provider for Affiliate agreements between the healthplan and payor networks.  You may want to provide services for all, but better to select the ones you want, rather than automatically accept them all. 

Historically many contracts were one-year agreements with one-year renewals clauses.  As healthplans are trying to keep their network stable, I’m seeing more multi-year contracts.  Again, not necessarily bad, but the downside is being locked into the rates and other terms for more than one year.

With the extension of the initial contract period, the termination notice may also be modified.  Instead of a typical 90 day term in your old one-year contract, you may be tied to a two-year agreement that can’t be terminated until the end of the second year. 

As electronic billing has become the norm claims submission deadlines are also shortened in contracts.  For many practices this may not be an issue, but for others where documentation needs to be attached, this change may result in denied claims down the line.

1. Focus on contracts that comprise 80% of your business.
2. Understand the percentage of your business coming from each payor.
3. Note changes in referrals into your practice.  What insurances do your new patients have?
4. Having contracts with the same plans as the hospital in which you admit may be beneficial to practice growth.
5. Be aware of agreements with plans that have affiliates or linkages to other benefit plans.
6. Eliminate network contracts that discount your direct payor contracts without a benefit to your practice.
7. Periodically check to ensure all locations and physicians are linked to the correct tax ID and fee schedules.
8. Review your charge master yearly and update charges as needed.
9. Renegotiate your contracts before the termination date.
10. Rates aren’t everything – pay attention to the contract terms, structure, and billing procedures.  Optimal rates are wonderful, but not if you have to wait for the reimbursement.

The new website will include information on relevant topics, tips on how to make your practice more successful, and a place to ask questions or post a comment.  We hope you like the new look and the information presented.