Revenue Cycle Tightens for Physician Practices

by Vic Arnold, Managing Partner, A2M Resources

The current economic problems reported through the media are having an impact on healthcare that is profound. Large institutions in all parts of the country are announcing layoffs, reporting revenue declines and halting plans to build new facilities. Closer to home, physician practices are seeing a rise in ‘non-traditional' self pay patients as patients lose their jobs and move to COBRA or self pay status. Recent studies by the Institute of Medicine have even shown that the rise in the un-insured is impacting whole communities in a very negative way.

Efforts to 'improve the revenue cycle' are too often started after things are so bad that only radical (and expensive) change must be made and, money that could have been made is lost.

In the current economic environment, the need to maintain a well structured revenue cycle (meaning maintaining efficient and effective patient financial management, business office and contracts management functions) is in sharp focus.

Here are ten signs that the revenue cycle needs a tuneup:

1. The billing manager does not have an active performance improvement plan in place to achieve industry standard metrics such as: Days in A/R > 90, Charge Lag Variance Analysis, Net Collection Rate, and Write offs as a percent of the total A/R.

2. The claims payment first pass rate is less than 85%.

3. The electronic remits are less than 70% of total payments posted.

4. The billing office does more things than the following core needs:

• Charge Management & Edit Resolution
• Claim Production & Payor Claims Filing
• Payment Posting & Credit Balances
• Insurance Balance Follow Up
• Self Pay Follow Up
• IT functions to support the revenue cycle

5. The compliance plan has not had an external review by a competent firm or attorney in more than 3 years.

6. The charge master and charge forms (including electronic tools) have not been updated in more than 6 months.

7. The staffing plan for the revenue cycle has not been moved to a mathematically driven model based on transaction volume.

8. Payor meetings and reimbursement/contract reviews are not being done monthly/quarterly.

9. IT Vendors have not been on site to work with the staff in more than 90 days.

10. Cash collections have dropped more than 5% year over year and contracts have not been reviewed in over 6 months.

Given the economic climate, practices need to zero in and make a concerted effort to generate more revenue off the same level of physician productivity. Within the bounds of the compliance rules, physician groups should focus on the natural tendency of all systems (and the revenue cycle is a system) to go retrograde over time.