| New Performance Standards For MD Billing |
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Page 2 of 2 Benchmark Statistics With the claims processing turnaround times we are seeing from the major payers in the region, we believe that the benchmark of 35-40 days of revenue in A/R is a reasonable goal for private specialty groups. Furthermore, we believe it is realistic to achieve the following profile for accounts receivable aging:
These parameters are based upon a true aging from the date a service is billed. Many billing systems will re-age an account or claim if it is transferred from one payer category to another. This is not a true aging, and it skews the aging to younger aging categories. Exceptions to the Rules The benchmark A/R of 35-40 days or revenue is not attainable by all practices. Academic practices or hospital-based specialists will usually have more days of revenue in A/R than private practices. The revenue cycle in academic and hospital based practices is more complex with additional billing steps and built-in delays that drive up the A/R. These practices face increased rejections, more erroneous claims and longer turnaround times because of factors such as numerous duplicate patient accounts, slower turnaround times from Medicaid and Medicaid HMOs and difficulty in obtaining accurate referring physician information. Practices with a high portion of Medicaid or Medicaid HMOs or those with a significant number of workers compensation, injury and legal cases will also have an accounts receivable higher than the benchmark. On the other side of the benchmark, highly capitated primary care practices often beat the 35-40 day benchmark. Insurance Contractual Allowances It is possible to achieve an A/R of 35-40 days of revenue, but the challenge is to do this while simultaneously minimizing write-offs. Write-offs fall into two categories: insurance contractual allowances (C/A) and write-offs taken by the practice. A variety of errors can occur with insurance contractual allowances and, for some practices, these errors represent the largest amount of lost reimbursement. The most common errors in contractual allowances include writing off rejected services as contractual allowances rather than resubmitting the claim and accepting partial payments from payers and writing off the balance as a contractual allowance. A specific example of an erroneous contractual allowance involves a service that is denied by an insurance company as "not medically necessary." A payment posting clerk may interpret this rejection as a contractual allowance when actually it is a claim error that could be corrected. The rejection often stems from a non-specific or inadequate diagnosis, rather than a payer’s benefit limitation. The claim is often reimbursable if an adequate diagnosis is reported. This type of error may go undetected for a long time because both the payment posting clerk and the billing manager may not know all of the diagnosis edits used by each payer. There is no universal benchmark for contractual allowances. The level of contractual allowances varies by payer, service mix and the practice’s fee level. Each practice should develop its own contractual allowance benchmarks by payer. The payer-specific benchmarks should be derived from a reasonable sample of adjudicated clean claims. It is important not to overlook co-pays and deductibles or other variables such as procedure code that are not covered by a particular payer. Some billing systems facilitate this process with "transaction analysis reports" that show payments and contractual allowances by payer. In spite of the lack of a universal benchmark for insurance contractual allowances, there is an informal benchmark. The fee schedule in many specialist practices is set based upon Medicare reimbursement or Medicare RVUs. Practice fee schedules for surgical and diagnostic procedures generally range from 150 percent to 300 percent of Medicare reimbursement. In our region HMO and PPO reimbursement is less than Medicare reimbursement for most services, and this has the effect of increasing allowances. Blending the Medicare and private payer contractual allowances yields a "rule of thumb" contractual allowance range of 60 percent to 70 percent of charges. Once the benchmarks are set, procedures need to be implemented to
continuously monitor contractual allowances and write-offs. More
importantly, every practice should have procedures to prevent
unjustified contractual allowances and write-offs. By Thomas W. Reinke & Timothy C. Hilbert, CPA |
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