Physiatry Practice Management Resources

Throughout the nation, health care providers are struggling in the face of a national medical liability crisis: insurance premiums continue to be high; physicians are leaving states to practice in more physician-friendly states, physicians are retiring early; and physicians are not performing certain higher-risk procedures. Median verdicts in medical malpractice cases are staying high, as well as frequency. According to Jury Verdict Research, the median verdict in 2003 was $1.2 million.

The costs of a professional liability claim are often underestimated, except by those physicians who have experienced it. It takes a toll on your emotions, on your staff, on your office atmosphere, on your personal life, and your patient care; and can lead to databank issues and licensing implications; not to mention the financial burden. The first step is prevention of lawsuits. It takes many strategies, including traditional and innovative risk management strategies in order to affect the frequency and severity of lawsuits in a positive fashion.

We know that often malpractice does not cause malpractice claims. Data reveals that communication and service lapses not only lead a patient to a plaintiff’s attorney, but also increase severity. Plaintiff counsel is taking advantage of the service issues, the lack of collaboration, and the lack of event management. They showcase these issues in the courtroom in front of the jurors (patients) – driving up severity.

Therefore, it is time for physicians to take control and to attack risk in order to change the liability equation for them. What can you do now to impact your personal risk profile? One of the new trends in physician’s offices is the creation of a Quality Assurance Committee.

In efforts to affect liability risk in a positive fashion at the same time that physicians increase patient safety and patient satisfaction, an emerging trend in the physician’s office is the creation of a Quality Assurance Committee. A Quality Assurance Committee consists of physicians within a medical practice who evaluate patient safety and quality of care to patients in efforts to minimize patient safety concerns, to manage current patient issues, and to prevent future patient safety issues.

Historically, quality assurance and peer review activities have been housed in the hospital setting, where physicians have had little impact on the process, the quality improvement measures, and the conclusions reached. By incorporating a QA Committee into the office practice, physicians can gain more control and affect their own specific risk. Physicians can get to the root cause of frequency and severity, and use the QA Committee as a vehicle for changing the liability equation.

The QA Committee can be structured so as to have any of several tasks such as:

· Review pending claims.

· Review quality assurance issues.

· Identify areas in need of improvement.

· Promote movement to best practices.

· Review and analysis of risk management issues.

· Oversight of event management process.

· Prioritize risk management activities.

· Tracking and trending of data.

· Patient concerns.

· Physician concerns.

· Investigation.

· Developing risk management strategies in response, education and training.

· Remedial solutions.

· Determine educational endeavors.

· Police quality concerns of colleagues.

· Determine the need for ad hoc or focused loss control activities.

· Review data and trends of events and claims.

· Discuss and prioritize specific risk management initiatives in an effort to develop best practices from a risk management and quality assurance perspective.

As for organization, one of the most important aspects is having in place a structure to aid in confidentiality of information used by the QA Committee. There is a general recognition that, in order to promote disclosure by health care providers of events, the fear of having the information used against them must be mitigated. This requires confidentiality protections to prevent disclosure in a civil or criminal action, to prevent disclosure in a disciplinary action (whether about licensing or medical staff privileges), and to provide general confidentiality protections. However, there needs to be a balance. We cannot be so concerned about confidentiality that participation in quality assurance efforts does not take place. A structure can be created to reduce the risk of discoverability and use of the information against our physicians.

Confidentiality measures available include attorney client privilege, attorney work product doctrine, and peer review protections. In Pennsylvania, peer review information is protected by statute: Pennsylvania’s Peer Review Protection Act provides protections to a committee which undertakes certain peer review activity defined by the statute. If the requirements of the statute are met, the Act provides for confidentiality of information generated by, or for, a peer review committee, prohibiting disclosure in a civil action against a health care provider on the same subject matter reviewed by the committee. Notwithstanding the Act, plaintiffs will often claim that certain information is not protected in efforts to obtain it. For this reason alone it is important to have in place appropriate protective measures and evidence of the same to further aid in the ability to defend such attempts, and also to have legal counsel involved from inception.

Alternative risk insurance vehicles such as risk retention groups lend themselves to quality assurance activities by physicians, where physician-insureds are owners of the insurance company. This structure allows for the creation of mandatory, positive loss control efforts, including event management and quality assurance activities, where data can be blended to understand and identify trends.

One of the benefits of the alternative risk financing environment is that the Quality Assurance Committee can identify risks among the pool of physicians and provide solutions to all insured-physicians. Quality improvement recommendations can be made to the individual practice, loss control tools and strategies can be created and provided to all physician-members, and the information obtained can also be used to determine loss control/risk management educational programming.

In order for any Quality Assurance Committee to be successful, every physician and staff person needs to have an understanding of the QA efforts, their importance, and the internal QA process. This may begin with a mission statement for your practice which includes a commitment to QA efforts, which you can use on your materials, brochures, advertisements and website.

Part of the infrastructure should include the adoption of policies on the QA Committee. The policy should include a detailed description of the committee: what it is, the membership, and the functions and purpose. It may, for example, be a committee of three physicians whose purpose is to review medical records, medical care and quality concerns; set quality standards; review all mortalities; and recommend quality and performance improvement. Confidentiality of the Committee should be addressed, including confidentiality protections, immunities provided, and authorities for the same.

The procedure for the Committee should be addressed. It should not be a burdensome nor time consuming responsibility. The Committee could meet quarterly for an hour to an hour and a half.

A reporting policy should be in place which addresses the reporting procedure (the infrastructure), reporting forms (if any), and what should be reported. Sources of information will be important to identifying issues. Sources can include patients (complaints, patient satisfaction surveys), pending claims and lawsuits, physicians, event reports, self assessments, and reports from outside sources (auditing and surveying, for example). Recently, a study showed that patients can accurately report on quality of care by physicians in such areas as appointments and scheduling, communication skills, and referrals.

As you begin to create your Committee, select physicians who are known to be committed to the QA cause, and educate them about their duties. Prioritize initial objectives and goals. Review the Committee goals annually. As the Committee matures, begin with reporting of incidents. Develop a mission statement for the QA Committee.

Beginning like this, you are well on your way to a successful quality improvement effort. Set up timetables for each of these steps. The Committee can tackle more, as it matures. The Committee can truly be customized to meet your organizational needs, but it must have in place the structure and protections needed to make it truly effective.


By James W. Saxton, Esq. & Maggie M. Finkelstein, Esq
James W. Saxton, Esq., is Co-Chair of Stevens & Lee’s Health Law Department and Chair of the Health Law Litigation Group. Maggie M. Finkelstein, Esq., is an Associate in Stevens & Lee’s Health Law and Litigation Departments.
Source: Physician's News Digest

Preferred Provider Organizations (PPOs) are frequently among the best payors. However, physician practices must be vigilant to assure that only patients entitled to a discount are receiving the negotiated fee. Otherwise, your practice will be extending a discount to individuals and payors who should be paying your billed charges in full.

Assume the following scenario: An individual insured by a small regional insurance company in Montana is visiting Pennsylvania and becomes ill. He calls your practice because he saw your ad in the Yellow Pages. Your scheduling person "squeezes him in," and he is treated by you.

Since your practice does not have an agreement with the patient’s insurance company, you should receive your total billed charge. (The insurance company would generally pay an amount it determines to be the usual, customary and reasonable fee, and the patient is liable for the balance of your charges.) Many practices will not require any payment from the patient at the time of the encounter (other than co-payments noted on the insurance card), but will wait for the payment from the insurance company, and then "balance bill" the patient for the difference between the billed charges and the amount paid by the insurance company.

Instead, your practice receives an explanation of benefits for that patient claiming a discount based on the PPO fee schedule of MegaHealth (a PPO your practice has contracted with). Since you have contractually agreed not to bill MegaHealth enrollees for amounts in excess of the negotiated fee, this discounted fee is all you get.

Here is what happened. The Montana insurance company, when it received the bill from your practice, began shopping for a discount. MegaHealth provided its list of preferred providers, and they saw they had a match with your practice. The Montana insurance company sent the claim to MegaHealth for "repricing" (insurance talk for applying the MegaHealth discount to your claim). MegaHealth sent your practice an explanation of benefits on the usual MegaHealth forms, with payment at the MegaHealth discounted rate. MegaHealth billed the insurance company for the discounted fee paid to your practice, plus an extra fee. The extra fee is often based on a percentage of the savings to the insurance company, based on the MegaHealth discount as opposed to your billed charges. Your practice was just victimized by a "silent PPO."

There are several ways a practice can protect itself from silent PPOs. One of the most obvious ways is to heed the old saying that if something appears to be too good to be true, it probably is. Insurance is a very competitive industry, and most employers base their purchasing decision predominately on price. To keep prices competitive, networks and insurers use their purchasing power to reduce fees to physicians and other providers of health care. If a network offers fees significantly above those of other payors in the area, you must be especially vigilant. How can they compete if they are paying you so much more than other networks or insurers? One possible (perhaps probable) answer is that they are not competing at all. Their business plan is simply to reduce the fees otherwise paid by insurers to your practice, and to take a profit from selling the discount they have obtained from your practice through the preferred provider agreement.

You should have competent legal counsel review each managed care agreement. In this regard, the definition of "Payor" in the PPO participating provider agreement is critical. Many plans define a "Payor" as "an individual, organization, firm or governmental entity, or self-insured account that has executed an agreement with MegaHealth." This definition would allow MegaHealth to "rent" its network in the manner set forth above. In other words, the contractual language quoted would give MegaHealth the authorization needed from your practice to run a "silent PPO." Presumably, you granted MegaHealth a discounted fee in return for inclusion in a provider directory, which "steers" patients to you. Of course, in the scenario discussed above, it was your Yellow Page ad that drove the patient into the office.

To address this issue, the definition of "Payor" should very clearly provide that the term relates solely to MegaHealth, affiliated entities in the insurance company holding group, and self-funded employee benefit plans that use MegaHealth as an administrator. It would be helpful if the definition of "Payor" specifically provided that the discounts being negotiated will not be accessible to any party other than those described above. Even better, some health plans are willing to provide a list of self-funded employers which have access to these discounts. It would be prudent to assure that such a list is given, and to check the list regularly against explanations of benefits received, to assure that the discounts negotiated with MegaHealth are not being "rented" to other parties.

In addition, the participating provider agreement should provide that the MegaHealth discount is only available to enrollees who present an insurance card with the MegaHealth logo on the card. If your practice copies the patient’s insurance card at the initial encounter (especially when the patient is a new patient) and compares the card to the explanation of benefits received, a silent PPO can be detected relatively quickly. If the MegaHealth logo was not on the insurance card, then no MegaHealth discount should be allowed. This precaution will help your practice administrator focus quickly on which preferred provider agreements to focus on first.

In many areas of Pennsylvania, physician practices are being pushed to the limit with escalating costs and declining reimbursements. Make sure that your practice only provides a discount to payors that are entitled to the discount.

Dennis Hursh, Esq
Dennis Hursh, Esq., is a principal in Hursh & Hursh, P.C., a Middletown, Pennsylvania law firm concentrating on representation of physicians and physician group practice
Source: Physician's News Digest

In my work as a health care attorney, I have reviewed and drafted hundreds of physician employment contracts. Here are some of the key "lessons learned" over the years.

Termination. Every contract runs for its full length (term), such as one or two or three years, including renewals, unless it is terminated according to the contract’s terms. Therefore, it is critical to include termination provisions. Without a proper ability to terminate the contract during the term, the physician practice will be "on the hook" for all salary payments that are to be made during the term, if the physician must be terminated during the term.

Generally, there are two ways to terminate a contract: with cause, and without cause. "Cause" is often a defined term. "Cause" generally means loss or suspension of license, loss or suspension of hospital privileges, loss of malpractice insurance, abuse of drugs or alcohol, conviction of a felony, or theft or other dishonesty. Generally, these events allow for immediate termination, thereby removing the "bad" physician from the practice, and terminating the practice’s responsibility to provide continuing salary. However, these cause provisions are not complete without a catch-all "material breach" clause. This will enable the practice to terminate for other unspecified material breach of the contract, such as the associate’s failure to perform duties, turn over fees to the corporation, and abide by its policies. Oftentimes there is a period for "cure" by the associate. This essentially means that the physician must be given notice of the material breach, and an opportunity to fix the problem to the reasonable satisfaction of the employer.

The attorney representing the medical practice should be careful not to permit a cure proviso to apply to some of the more serious "bad acts" such as loss of license or privileges, since these acts are really not capable of cure (they cannot really be fixed). Thus, while it is possible for a physician to cure his work habits (arriving to work tardy), it is not really possible for him to cure an act of embezzlement, or loss of license, as in such cases the physician’s ability to provide services, and/or the practice’s trust in the physician, has been irreparably damaged.

In addition to cause termination, we recommend a provision permitting termination without cause. This is any termination that is not a cause termination. Because it is without cause, it does not require justification. Typically such a proviso would say the physician can be terminated "for any reason or no reason, upon 30 [or 60 or 90] days’ advance notice to the physician."

Some newly hired physicians resist a provision allowing termination without cause, although in fact it has become standard in associate physician agreements. The associate worries that the practice will act arbitrarily in terminating his or her employment. In fact, our experience with hundreds of physician practices is that no decision to terminate, even without cause, is made on the spur of the moment or a whim. Generally, it is made only after considerable soul searching and delay, after the parties have long since devolved into a dysfunctional working relationship.

In terms of the amount of advance notice required, this is simply a question of money. Typically, a without cause proviso includes an additional sentence or two that enables the practice to suspend the physician’s active provision of services to the practice, so long as the practice continues to pay salary and benefits for the given notice period. This enables the practice to get the associate out of the practice, where he or she cannot say bad things to the staff about what has happened, or contribute to a bad atmosphere with his negative attitude, and so forth.

Thus, the bottom line on the amount of notice provided is simply the amount of money that the practice will pay to make the associate go away

Bonuses. Volumes can be written about bonus provisions. A typical bonus provision gives the associate physician a percentage of his collections if those collections exceed a certain threshold, oftentimes, two or three or 3.5 times base salary (or times base salary and benefits).

Once the associate’s production exceeds this level, then the associate is normally entitled, as a bonus, to 20 percent, 30 percent or even 40 percent of collections in excess of that threshold.

Be clear about what is included in the revenues that are counted, and what period is used. For instance, will ancillary services ordered by the physician count as "production?" In some practices, this can be substantial.

A conservative bonus provision will provide that only collections for personal services rendered (i.e., excluding all ancillaries) will be included. That arguably makes better sense than including all ancillaries in the bonus calculations because (1) Stark restricts the Practice’s ability to pay for various "designated health services," rendered to Medicare or Medicaid patients and (2) the availability of ancillary services is really not a function of the associate’s work efforts (which is what the bonus is designed to reward), but rather reflects investment by the owners of the practice in the technicians, equipment and supplies necessary to furnish the ancillary service.

Fringe Benefits. The typical package of benefits for a new associate physician includes health insurance (family coverage), malpractice insurance, dues, licenses, journals and CME costs. In addition, the practice will normally provide a vacation allowance of two to three weeks for an associate, plus a week in each year for continuing medical education. Typically, there is also a separate proviso for sick pay at five to 15 days per year, as needed.

One consideration is with respect to vacation/CME time. Oftentimes, in lieu of vacation/CME and sick pay, the practice will provide a "paid time off." With PTO, it does not matter why the physician is absent (vacation, sick, CME, etc.) only that he or she is absent. The PTO concept is helpful to the practice as it limits the total amount of time off that the physician may take.

Questions also arise regarding "maternity leave." Generally all that is required by federal anti-discrimination law is that the practice does not discriminate against pregnancy-related disability. Thus, if the practice normally provides ten days of sick pay for a broken leg, or illness, it cannot deny ten days of sick pay if a female employee goes on bed rest, or for recovery from childbirth. In other words, there is no legal requirement to provide for extra paid time off for a pregnant employee. Some practices provide paid "maternity leave," which is paid leave over and above that provided for other illnesses or injuries. However, that is purely discretionary, not required by law.

Malpractice Tail. This is typically a hotly negotiated item. In the past, most medical practices paid 100 percent of the tail cost for a departing doctor. However, many practices are now shifting this cost, in full, to the associate. In response, associate doctors frequently propose the following: the tail will be paid by the associate if he resigns voluntarily, or is terminated with cause, but it will be paid by the practice if the physician is terminated involuntarily and without cause.

The intent of such a proviso is to allocate the tail cost to the party who is "at fault" for the termination of the relationship. Thus, if the associate leaves voluntarily, he must pay for the tail, since he acted under his own volition, whereas if the practice terminated the associate, without cause, then the practice must pay. The problem with this formulation is that it is difficult oftentimes to determine whether or not a termination is voluntary or involuntary. If the relationship is not working out, the associate may be tempted to provoke his own termination, so that he is terminated without cause, and therefore is not responsible for the tail. Accordingly, to avoid such ambiguities, the parties should clearly specify the allocation of tail in the event of any termination, whether that is 100 percent to the doctor coming on board, or a 50/50 split, or 100 percent to the practice.

Non-Compete Provision. Again, volumes can be written on this subject. A non-compete in the Commonwealth of Pennsylvania needs to be "reasonable" in terms of duration and geographic scope. A typical debate with respect to the non-compete is when it should apply. As with tail, the associate may argue that it should not apply if he is terminated without cause. However, like tail, this is far too important an issue to be turn on such niceties as whether the physician left voluntarily or in fact was terminated without cause, involuntarily.

Thus, we generally advise that the non-compete should apply in all circumstances. If the associate maintains that the employer has breached other terms of the document, so that he should in turn be released from his non-compete obligations to the practice, this can be dealt with by a clause that says that "breach is not a defense" to enforcement of the non-compete provision. In other words, any alleged breach by the employer has to be litigated separately, and does not vitiate the non-compete obligation of the associate.

The practice should also specify that it can recover its attorneys fees if it prevails in the non-compete litigation. Thus, if the practice seeks to enforce a reasonable non-compete, it can be assured that it will be made whole, in terms of its attorneys fees, if it does prevail.

These are the key provisions to watch for in a physician employment contract. The employment agreement is a key document that needs to be drafted with care, as any of these provisions can cost the practice considerable money.

By: Daniel M. Bernick, Esq. M.B.A.
Daniel M. Bernick, Esq. M.B.A., is a Principal with Health Care Law Associates, P.C. and The Health Care Group, Inc. in Plymouth Meeting, Pa.
Source: Physician's News Digest

Collecting Accounts Receivable Efficiently


One of the most challenging issues facing the back office of any medical practice is the efficient use of personnel in the collection of accounts receivable. On a normal day, an office may see anywhere between 25 and 75 patients per physician. At the same time, there are hundreds, if not thousands, of outstanding accounts receivable that must be continually monitored for optimum collection. Most practices would consider collecting accounts receivable more efficiently to be one of their priorities. So how does a practice go about doing this?

One of the first issues that should be addressed is the evaluation of the amount of time spent by the staff on accounts receivable collections. It is important to ensure that the A/R staff is spending their time as effectively and efficiently as possible. In order to do this, it is necessary to empower the staff with the appropriate tools. This starts with an appropriate accounts receivable/billing system. Any good system will have the ability to differentiate between those outstanding accounts that need attention by the staff from those that are simply in the normal timeframe of collection from the appropriate insurance company. If your system has the ability to identify "expected payments" for each service rendered (this is normally based on the insurance coverage by the patient) combined with the information from the contract your group has with the insurance carrier and the payment history for the same procedure codes, then your system can routinely advise management of the total amount of collectible accounts receivable by insurance carrier. Monitoring this amount, and having an aged accounts receivable by carrier, will allow for better use of billing staff time.

The use of electronic records for incoming Explanation of Medical Benefits paid (EOB) documentation will additionally allow the computer system to provide optimum tools for the staff to use. Whether your computer system provides the ideal circumstances or not, the staff needs to spend time first on the older and larger accounts receivable. The ability to sort accounts receivable based on age, as well as on dollar amount, will lead to the best use of the staff time available.

One of the other issues that will frequently raise its head in the billing function is a particular insurance carrier delaying payment or changing their pattern of rejections. For this reason, it is very important to continually monitor the outstanding accounts receivable aging by carrier. Whether it is done electronically or manually, certain parameters should be applied to each insurance company based on a contract and their history of payment. As an example, if XYZ insurance routinely pays clean claims in 40 days, there should be a trigger for any claim that is outstanding to that carrier for 60 days. If the carrier begins to fail to meet their required timeframe, two things should happen:

· The carrier should be notified in writing, as well as with a phone call to the Group’s representative, to determine if there is any problem.

· The insurance company should be notified of the imposition of any interest or other penalty as appropriate in the contract.

The use of this technique will help "nip in the bud" the occasional changes that may occur in an insurance company’s payment policies.

An additional area that requires attention is: Secondary Insurance Companies. When a patient has more than one insurance company, the "primary" insurance company will always be billed first. Once the primary insurance company has made its payment, billing to the secondary or tertiary insurance company should then be completed. In certain circumstances (primarily Medicare patients who have MediGap coverage with a carrier related to a Medicare intermediary) the secondary insurance payment will be made automatically. In many circumstances, however, the billing office must generate a new claim which, in some circumstances, may require the initial EOB to be attached to the secondary insurance claim. The ability to quickly identify those claims requiring secondary insurance billing and to generate the bills on a timely basis will greatly enhance the speed of collection and reduce the overall time needed in the billing department.

An area that is often overlooked is collection at the time services are rendered. It is far more effective and efficient to collect funds at the counter when the patient is there than it is to send a bill and try to follow-up after the service is completed. This is especially true when patients have co-payments and deductibles at the beginning of the calendar year. Simply asking the patient whether they have a co-payment and/or deductible will sometimes provide the correct information, leading to the ability to then request payment. An efficient way to obtain the co-payment and/or deductible information would be to get that information directly from the carrier in advance of the patient visit. One to two days before the patient is scheduled to visit, a call to the carrier for this information will provide a practice with the ability to notify the patient when they are in the office of their responsibility. The ability to then accept credit card payments and/or checks will again speed up cash receipts and reduce the collection efforts significantly.

It may also be important, depending on the practice, to establish a policy with regard to uninsured or uncovered services. Most practices will attempt to maintain their fee schedule at an optimum level for total reimbursement by all carriers. Nonetheless, it is understood that many carriers, through contractual relationships, will pay substantially less that the fee charged. In most instances, it is allowed (and may be appropriate) for a practice to offer a discount to an uninsured patient, or one undergoing a non-covered service for prompt payment. Again, the ability to make the collection effort at a time that services are rendered will reduce or eliminate the need for follow-up effort by the billing and collection staff.

It is a good idea to review your A/R reports with your administrator and billing manager on a monthly basis with a good solid review each quarter to make sure your staff is collecting all the money due you. Often, it is discovered that practices are not optimizing their collections, not because the staff does not want to do a good job but because they are either overwhelmed with the current insurance company climate or the department is understaffed.

The ability to determine which carriers are rejecting claims, and necessitating the billing department to start over – both delaying the ultimate receipt of the funds and costing dear time for the limited staff - will also enhance the efficiency of the office. Many practices will perform an analysis of rejections by carrier and by staff member. Each type of rejection can then be tracked to limit or eliminate repeat occurrences of the same issue, often avoiding the issue being confronted later in the case of a second carrier following the same protocol at a later date.

The ability to perform the analysis of what has gone wrong before, and to correct the internal policies and procedures to avoid these same issues being repeated, will usually be well rewarded. By way of example, the knowledge that Carrier A is rejecting otherwise clean claims due to a lack of a referring physician in the case of an office consultation can lead to either an additional claims "scrubbing" routine or a manual review of this area before the claims are submitted to this carrier. Also, the knowledge that biller C is responsible for 35 percent of the rejections due to lack of date of birth on the billing submission, while she is only responsible for 10 percent of the practice’s billing will lead to the knowledge that additional training and/or supervision may be required. This type of enhanced information on the rate and type of rejections can lead to a better incentive system for the billing department, and the front desk staff, based on a reduction of the rate and type of rejections from the base lien level.

Let’s not forget there is another option. Your practice may benefit from outsourcing their billing. This is a common issue that often arises when a medical practice is deciding whether to buy a new updated practice management system because they have recently found out that theirs will not be supported in the future or because they are having trouble finding quality billing staff and their accounts receivable balance is climbing. It may be a good idea for the medical practice to at least explore the billing company option to see what it can offer and how much it will cost compared to what they are paying now.

The ability to maximize the use of staff time and optimize the efficiency and effectiveness of the billing department relies upon a complete and coordinated cycle in the collection process. This cycle begins at the billing desk when the patient is there, collecting those funds that are available, and making sure that all insurance and mailing information is correct and updated, and then, utilizing the time appropriately, making certain that those items that begin to fall behind are caught early. Most practices find that these steps greatly increase the total efficiency of the accounts receivable collection function.

David H. Glusman, CPA, is a principal at Margolis & Company P.C. and is co-chair of the firm’s Healthcare Services Group.