SUPPLEMENT ARTICLE
Practice Management Peter L. Althausen, MD, MBA and Lisa Mead, MBA
Summary: The practicing orthopaedic traumatologist must have a sound knowledge of business fundamentals to be successful in the changing healthcare environment. Practice management encompasses multiple topics including governance, the financial aspects of billing and coding, physician extender management, ancillary service development, information technology, transcription utilization, and marketing. Some of these are universal, but several of these areas may be most applicable to the private practice of medicine. Attention to each component is vital to develop an understanding of the intricacies of practice management. Key Words: practice management, billing, ancillary services (J Orthop Trauma 2014;28:S12–S17)
Chief Financial Officer
This individual is responsible for managing the financial risks of the corporation. Usually this is a certified public accountant responsible for financial planning and record keeping as well as data analysis. They prepare all financial statements, manage debt, and provide all financial data required for decision making in an office setting.
Chief Operating Officer The COO is responsible for the daily operations of the company and routinely reports to the CEO. This individual is responsible for clinic staffing, patient flow, radiology and casting protocols, and personnel management. The COO makes most of the hiring and firing decisions across all departments.
GOVERNANCE As with any business, the governance structure of a healthcare facility is very important. All employees must understand the chain of command so that they know who makes the decisions, who they report to, and how to resolve problems as they arise. In a small private practice this may be a very simple decision tree; however, in a large private practice, the organizational chart can be quite complex. An example is shown here (Fig. 1). Depending on practice size, the practice may have several key employees serving the standard roles on major businesses such as the chief executive officer (CEO), chief financial officer, and chief operating officer (COO). It is important to understand the roles of each of these employees and their expectations.
Chief Executive Officer A CEO is the highest ranking administrator in any company. This individual reports to the board of directors and is in charge of total management of the organization. The CEO has multiple responsibilities including director, decision maker, manager, and executor. Usually this individual has an MBA and is well compensated with a base salary and bonuses based on achievement of certain performance metrics that incentivize constant vigilance to practice growth and improvement. Accepted for publication April 9, 2014. From the Reno Orthopaedic Clinic, Reno, NV. The authors report no conflict of interest. Reprints: Peter L. Althausen, MD, MBA, Reno Orthopaedic Clinic, 555 North Arlington Avenue, Reno, NV 89503-4724 (e-mail: palthausen@ sbcglobal.net). Copyright © 2014 by Lippincott Williams & Wilkins
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THE REVENUE CYCLE
To understand practice financial performance, set measurable performance expectations, and monitor them, physicians should first understand revenue cycle management. They should provide support for the implementation of practice-specific revenue cycle management strategies that will allow their practices to meet expectations. • There are 2 key differences between hospitals and physician practices in revenue cycle management: unit of work and its value, and per unit cost to collect. • Reducing a physician practice’s cost to collect requires, first and foremost, the right technology and functionality and the right staff. • Three advanced collections techniques—denials management, contract compliance, and fee schedule management and maintenance—should be examined for their potential value in ensuring that an owned practice is paid correctly for every service.
UNIT OF WORK AND ITS VALUE
Hospitals are paid based on a “patient day” or an “admission.” In the physician practice setting, charges are generated based on the services or procedures provided. Payers usually consider each physician charge individually and make payment decisions at the service level. As a result, the unit of work and its reimbursable value is much smaller: A single current procedural terminology (CPT)/service code may be worth only tens of dollars. Although each code may not be worth much, every dollar counts and no charge should be overlooked. When dealing with smaller dollars, it is even more important to be efficient, accurate, and timely. J Orthop Trauma Volume 28, Number 7 Supplement, July 2014
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Practice Management
FIGURE 1. Organizational chart for the Reno Orthopaedic Clinic demonstrating the complexity of a large orthopaedic practice.
COST OF COLLECTIONS Responsibilities for billing and collecting are either part of a specific employee’s job or shared among staff. Tasks such as finding and retrieving office notes to support a denied claim are often manual. The less technology a practice utilizes, or the lack of a sophisticated infrastructure, results in a greater need for human intervention—and thus a higher cost to collect for a practice’s unit of work. This can be an arduous task. For example, a patient is seen for a hospital follow-up in a physician’s office. In the context of an established patient office visit (CPT code 99,213), the patient has a benign lesion removed (CPT code 17,000). The patient is insured by Medicare, so the expected reimbursement for the 2 codes (based on the 2012 fee schedule) is roughly $65 and $70, respectively. Medicare pays for the office visit, but denies the procedure based on the diagnosis code on the claim. The practice receives the denial. Without an electronic medical record or billing management software, an employee reviews it, manually pulls the paper chart, sorts through it, finds the right note, and marks it. The chart is placed on the physician’s desk. The physician reviews the chart, decides that the diagnosis is incorrect, writes a note back, and returns the chart to the staff member. The employee then logs into the billing system, changes the diagnosis code, and resubmits the claim. The claim is paid 30 days later. The per-unit-cost to collect in the office setting, then, is as follows Table 1.
REDUCE THE COST TO COLLECT Managers responsible for practice revenue cycle management should focus on activities that minimize the 2014 Lippincott Williams & Wilkins
cost to collect and optimize the reimbursement per unit of work. The key is to promote policies, processes, and strategies that ensure a sophisticated revenue cycle management infrastructure.
The Right Technology and Functionality The right technology can help practices both minimize the cost to collect and optimize reimbursement. To raise the level of information technology sophistication in practices, certain functionality exists within their practices’ practice management software to automate 3 critical physician revenue cycle management processes: • Contract management • Front-end claims editing • Denials management If implemented and used correctly, newer capabilities such as workflow automation can also produce quantifiable operating efficiencies and cost reductions in specific revenue cycle activities. Contract management capabilities enable practices to ensure they receive not just payment, but correct payment at agreed-upon rates. These capabilities also give managers the tools to leverage any identified differences to recover cash and alter payer behavior. Robust claims editing functionality helps practices proactively address the increasingly complicated claims payment and reimbursement rules. By better controlling the quality of claims before submission, practices can increase cash turnaround while also decreasing denials. The result is a decrease in the overall unit cost to collect. Denials management modules allow practices to identify, track, trend, and report on denials. Using data, managers can pinpoint the source of denials (whether www.jorthotrauma.com |
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TABLE 1. The Electronic Health Record (EHR) Unit value for reimbursement:$70.00 $40,000 office staff person Reviews denial Pulls chart Identifies appropriate note for physician Reviews physician’s response Repairs and resubmits claim Total staff cost to collect $200,000 physician Review charts and notes Notes change for staffer Returns chart to front desk Total physician cost to collect Total practice cost to collect
1.5 min 1.5 min 3 min 1 min 2 min $2.88 2 min 1 min 1 min $6.41 $9.29 (13.27% of the claim)
a practice-based process, a provider error, or a payer mistake), as well as any systemic causes, and take action to correct the problem. Workflow automation tools allow staff members to set parameters under which specific activities, such as accounts receivable follow-up, will occur automatically. These tools also reduce the cost to collect by eliminating manual processes (e.g., communicating claim repair information via notes or running standard management reports).
The Right Staff Salaries and benefits generally constitute the largest practice expense. Therefore, effectively hiring and, more important, retaining qualified billing staff are among the most effective ways to reduce a practice’s cost to collect. As the rules and regulations surrounding provider reimbursement have increased dramatically over the past few years, so has the need for technology to automate processes that handle these complexities. As a result, the knowledge and expertise required of practice-based billing staff has increased exponentially. Practices now require virtually the same (if not a greater) level of staff billing expertise as hospitals. Hospitals should avoid the temptation, however, to simply shift their own coders, billers, and collectors to their physician practices. Effective practice-based billing staff should have detailed knowledge of the billing rules for the medical specialties the practice provides. They should be able to understand and monitor specialty- and procedure-specific claims requirements for the payers that matter most to the practice.
• Denials management • Contract compliance • Fee schedule management and maintenance Denials management is the process by which a practice tracks, trends, and evaluates its “zero pays”—those CPT codes for which it receives no payment, but attempts to recover payment when appropriate. Industry studies report that more than 35% of claims may be denied improperly. In any size practice, a number of this magnitude represents a significant revenue cycle opportunity. Any payment a practice recovers as the result of denials management increases the practice’s overall reimbursable unit of work. Contract compliance—a practice’s ability to compare actual payments received from a payer with its contractually agreed-upon rates—is no less critical. The same industry studies also find that up to 25% of a practice’s contractual allowances may be taken inappropriately and represent potential underpayments. To state it simply: Practices cannot afford to assume claims are processed appropriately. Payer consolidation, complex contract terms, and human error all contribute to a growing concern over inaccurate payments. Effective contract compliance monitoring requires that practices know their contractually agreed rates. Automating the process further requires that rates be accurately entered and maintained in the practice management system. In addition, fee schedule management should be implemented similarly. Because few patients actually pay full charges, fee setting often is discounted and underused as a revenue cycle management tool. Today, most payers set their rates as a fixed percentage of the current Medicare fee schedule. Likewise, payer contract language generally sets payment terms as the lesser of either the practice’s charge or the payer’s agreedupon rates. When insufficient attention is given to fee setting, practices run the risk that their charges will be less than the Medicare allowable (especially over time). In such cases, practices receive a lower reimbursement per unit of work than they should. Physicians can achieve success by implementing a sophisticated revenue cycle management infrastructure— including technology, people, and processes—and by focusing on techniques that optimize reimbursement per unit of work and minimize a practice’s cost to collect. These efforts may require financial commitment and reorganization of practice policies, staff, and technology. However, in practices where revenue cycle performance is weak, the improvement in outcomes will likely justify the time, expense, and investment.
OPTIMIZING THE REIMBURSABLE UNIT OF WORK
PHYSICIAN PAY
Realistically, most community-based practices have little or no leverage to negotiate rates. Therefore, increasing a practice’s bottom line by increasing its contracted rates (or reimbursement per unit) is not likely. However, implementing advanced collections techniques can help ensure a practice is paid correctly for every service—therefore optimizing payment per unit of work. Three techniques in particular should be examined for their potential value:
Multiple formulas and options for physician compensation have been utilized throughout the United States. Employed physicians most often hold a salaried position with bonus pay assigned for adherence to metrics and/or a production bonus. Common private practice agreements range from a collection-based system to a relative value unit (RVU)-based system. Collection-based compensation means that physicians are paid on the revenue they collect from
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patients. Overhead is divided according to fixed and variable components and paid accordingly. In an RVU-based system, the office collects revenue for all physicians and divides it based on work according to RVUs. The RVU concept was established by The Omnibus Budget Reconciliation Act of 1989. It breaks each provider service into work (wRVU), practice expense (pRVU), and malpractice (mRVU) components. In a pure RVU system, physicians are paid on wRVUs and overhead expenses are paid based on pRVUs and mRVUs. Pay formulas can become quite complex when groups combine both payment methods. It is crucial for all physicians to understand how they will be reimbursed when considering any contract or entering into negotiations. Misunderstandings can result in massive differences in take-home pay. Because many different formulas exist, it is clear that no perfect answer exists; however, physician pay should reflect work, promote ethical behavior, and support quality patient care. Physician pay is often not just a function of work performed in surgery or clinic activities. Members of large group practices have access to a variety of other revenue streams. These include ancillary service development, comanagement agreements, directorships, and other investment opportunities. Each of these options is addressed later in this section.
BILLING AND CODING Most private practice orthopaedic traumatologists are not salaried employees. As a result, it is important to understand the intricacies of appropriate billing and coding. There are several excellent coding courses that should be a prerequisite for any physician entering private practice. The Karen Zupko course offered yearly at the Orthopaedic Trauma Association annual meeting is excellent. The goal is to maximize revenue in a legal way to get the most benefit from our services. In a specialty where collection rates average 30%, we must be savvy. Even simple changes can affect revenues massively: for example, for irrigation, debridement, and closure of a surgical wound, one could code 13,160 or 11,043 and 13,132. The former is equivalent to 32 RVUs and $3600 whereas the latter equals 14 RVUs and $1200. Fraudulent billing can result in massive fines for you and your practice. The Code-X billing assistant program is recommended by the American Academy of Orthopaedic Surgeons (AAOS) and has been a fantastic learning tool for physicians and coders alike. The timely submission of bills is also extremely important. In trauma care, especially auto injuries, money for care is limited and available on a first come/first serve basis. It is imperative that surgeons submit their surgical charges within minutes of finishing a case. This also implies that your dictation is done immediately as well so that bill can be submitted. No one is as committed to your income as yourself. Keep a log of all cases you perform and check them with your coders. Most likely you will find several mistakes a month totaling thousands of dollars. A complete primer on billing and coding cannot be presented here; however, the following pearls are very helpful: 2014 Lippincott Williams & Wilkins
Practice Management
• Make sure to dictate a plan after each operation, especially if additional procedures or staged operations will take place. Without clear dictation, these future surgeries will not be covered. • Bill for closed treatment of fractures. One study demonstrated that 20% of practice income could be generated from this revenue stream.1 • Bill on separate days from surgery to maximize return. Especially if additional radiographs were required to make determination for nonoperative care. • Make sure to understand appropriate evaluation and management codes. • Make sure to understand appropriate modifiers. Large group practices often discuss whether billers and coders should be kept in-house or outsourced. This is different for every practice but the more doctors a practice supports, the more likely in-house employees benefit from economies of scale.
ANCILLARY SERVICES Under current healthcare law, ancillary service income is available to orthopaedic surgeons. Most commonly this consists of physician-owned physical therapy, magnetic resonance imaging (MRI) scanners, and surgery centers. In order to participate, it is essential to adhere to Medicare rules and physician self-referral laws (Stark Laws). In the era of decreasing physician reimbursement, these are becoming more sought after revenue streams. The ability to maintain these additional profit centers is regulated by both state and federal law. The laws are designed to keep the unethical surgeon from ordering unnecessary tests or therapy purely due to their own economic interest. If managed well, these additional services can generate a source of passive income for the orthopaedic surgeons involved. The most common services include: • Physical Therapy: This is a logical service for large orthopaedic groups to offer since they refer many postoperative and nonoperative patients alike. Employees include physical therapists and therapy aides. Some therapy aides can also serve as part-time athletic trainers to local high school teams to increase knowledge and office exposure. The benefit to in-office therapy is that questions about regimens, weight bearing, and other issues can be brought immediately to the attention of the treating surgeon. Satellite physical therapy offices can also be very cheap to run and manage while providing patients with a convenient service and consistent product. • MRI: Although reimbursements for advanced imaging are dropping, physician-owned MRI scanners remain a solid source of ancillary revenue. Such scanners may be purchased or leased. At a time when the future legality of physician ownership may be in question due to political agendas not patient care issues, it may be more conservative to lease a machine. Another benefit of such a device is that arthrograms and other procedures can be performed inhouse by the treating orthopaedic surgeon. • Ambulatory Surgery Centers: These can be extremely successful ventures for any orthopaedic group. Ambulatory www.jorthotrauma.com |
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surgery centers (ASCs) allow physicians to collect not only the professional fee but also the facility fee for each procedure. Ideally suited to outpatient arthroscopy, hand surgery, and fracture fixation, the addition of a 24-hour stay can allow for unicompartmental knee replacement and cervical spine cases. ASCs have shown lower infection rates, higher patient satisfaction scores, and better outcomes when compared with hospitals. Physicians must adhere to Stark Laws and Safe Harbor rules with regard to these centers. ASCs can be managed internally or by a management group which will siphon a portion of the profits but may allow for group purchasing discounts and economies of scale. • Durable Medical Equipment: Another source of revenue as well as patient care involves the provision of durable medical equipment (DME) in addition to simple casting services. DME is medical equipment used in the home such as braces, crutches, walkers, and wheelchairs. Having DME supplies in the office allows patients to get equipment they need in 1 place without a prescription. Although patients can always pay cash for DME, most insurance plans cover certain types of DME. Medicare will only pay for DME if the doctor or supplier is enrolled in Medicare. If managed appropriately, DME can be a profit center for your medical office of clinic.
RISK RETENTION GROUPS One significant practice expense involves malpractice insurance. This can be quite large depending on practice location and practice type. Spine surgeons and trauma surgeons often have higher rates. Risk retention groups (RRGs) are a way of managing medical liability, which can become an asset for your practice. This is a medical malpractice group that gives physicians the chance to control their own medical malpractice insurance company. The members elect whom they insure, which controls their risk. Members control the selection of managers, auditors, and lawyers to control the company. If well run and managed, members of RRGs can begin receiving dividends from the RRG to offset their malpractice payments. This is definitely an option that should be explored by any large orthopaedic practice.
PHYSICIAN EXTENDERS Once up and running, your practice can benefit from the addition of a physician assistant or nurse practitioner. If utilized appropriately, these individuals can help you be more efficient in clinic, spend more time with patients who need you, and complete your paperwork more accurately. In addition, they should be another profit center for the orthopaedic surgeon or the practice. Every year the AAOS annual meeting offers many symposia on the effective use of physician extenders for orthopaedic practices. Certainly these individuals can assist in caring for the large numbers of under- and un-insured patients given appropriate physician oversight. In situations where traumatologists cover several hospital emergency rooms in a single day, midlevel providers
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can be a key factor in improving response times and patient satisfaction and decreasing emergency room wait times, length of stay, and operating room (OR) transport times.2 The scope of practice can be limited by state law and each physician must be aware of their limitations to maintain compliance with individual hospital bylaws as well. Although some extenders can generate income from OR assist fees, most are more productive in office. From a practical standpoint, the primary difference between a physician assistant and nurse practitioner is that only physician assistants graduate with OR training and certification. Nurse practitioners can assist in OR cases with additional training, which usually requires 6 months of observed assistance.
URGENT CARE DEVELOPMENT In an effort to improve patient access, provide better patient care, improve the patient experience, and decrease overall healthcare costs, many centers are opening dedicated orthopaedic urgent care centers. Hospital emergency rooms average wait times between 4 and 6 hours and generate bills averaging $1400. Non-orthopaedic urgent care facilities have short wait times, much lower costs, but no access to specialists. In both cases, patients with orthopaedic injuries still require referral to orthopaedic offices. Dedicated orthopaedic urgent care allows low wait times, markedly decreased patient costs, and immediate access to orthopaedic specialists. In competitive markets, this urgent care option allows the orthopaedic office access to patients who might be referred to other physicians or those on call at neighboring hospitals. Because it is more cost effective, it may allow for direct contracting with workers’ compensation carriers.
MARKETING YOUR PRACTICE Multiple books have been written about healthcare marketing and individuals devote entire careers to this purpose. As a result, it would be impossible to cover all aspects of healthcare marketing in this format. However, it is important to cover the basics. The role of marketing in medicine is always debated but in this competitive environment it may be a vital component of your practice. Marketing services can either be outsourced or done in-house but the basic concepts are the same. Any individual hired for this position must not only have skill in the creative aspect of advertising but also possess the budgetary knowledge to plan appropriately. When deciding how to market your practice, the target audience needs to be defined. The 3 main audiences include referring physicians, patients, and hospitals. Each of these parties has different objectives and needs that an orthopaedic practice can satisfy. • Marketing to physicians should emphasize • Mutually beneficial relationships • Ease of scheduling • Direct access to physicians • Urgent care options • Staff who are nice to both physicians and patients 2014 Lippincott Williams & Wilkins
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• Good communication and clinic visit notes from specialist • Annual educational meetings • Excellence and fellowship training of specialists • Marketing to patients should emphasize • Ease of appointment • Access to physicians • Education and specialty training • Financial counseling • One-stop shopping • Kindness of staff • Marketing to hospitals should emphasize • Mutual economic benefit • Educational partnerships • Cost containment With so many possible marketing options, offices must decide what percent of the budget should be allocated toward this endeavor. The average amount spent by large practices for marketing is 1.5%–2% of gross revenue. When making marketing decisions, it is imperative that all parties involved understand the difference between marketing and goodwill. There are multiple modes of media for marketing and each has a different cost associated with its use. Each is designed to capture a segment of the population. Blanket marketing strategies are usually not effective so each group must focus efforts on specific programs utilizing the most appropriate modality. The most common media include: • Television • Radio • Internet • Billboard • Newspaper • Waiting room videos • Waiting room handouts • Yellow Pages • Direct to patient marketing • Web site and search engine optimization With the prevalence of the Internet, physicians must be familiar with the many Internet-based physician rating companies (e.g., vitals.com, healthgrades.com, Angie’s List). Patients now often use these unregulated sites to research their doctors. Bad patient reviews can be detrimental to
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a practice so care must be taken to review these sites and optimize their content. Many companies now offer reputation salvage for a price.
INFORMATION TECHNOLOGY Modern orthopaedic offices must take advantage of the technology available to both hospitals and medical offices. This is extremely important to the efficiency and financial health of the practice. Up-to-date systems are required and can be expensive. However, the costs of these upgrades can be depreciated for tax purposes and some government rebates are available. EHR use is a major initiative for hospitals, payers, and the government alike. Although costly, a good system allows for more accurate records, improved billing, and better data transfer. Currently, if physicians who have implemented EHR systems can meet “meaningful use” criteria, government rebates can be obtained. If EHR systems can integrate with hospital EHR, data transfer and medical information can be shared. This has the potential to improve patient care, increase efficiency, reduce the overall cost of care, and improve the patient experience. Another important aspect of IT to understand is hospital data systems such as “Crimson.” These programs collect surgeon data on OR data, infection rates, lengths of stay, etc. and then compare them to national and community data. Such data is now being used by hospitals and insurance companies to “grade” physicians. Much of this data is flawed but can still be utilized to restrict payment or contracts. As a result, it is imperative for physicians to understand how their hospital’s system works. In addition, it is even more important than ever for physicians to collect their own data. This ensures accuracy and transparency and allows for more effective contract negotiations with hospitals and payers alike. REFERENCES 1. Appleton P, Chacko A, Rodriquez EK. Financial implications of nonoperative fracture care at an academic trauma center. J Orthop Trauma. 2012;26:617–619. 2. Althausen PL, Shannon S, Coll D, et al. Impact of hospital employed physician assistants on a level II, community-based orthopaedic trauma system. J Orthop Trauma. 2013;27:e87–e91.
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Practice Management Peter L. Althausen, MD, MBA and Lisa Mead, MBA
Summary: The practicing orthopaedic traumatologist must have a sound knowledge of business fundamentals to be successful in the changing healthcare environment. Practice management encompasses multiple topics including governance, the financial aspects of billing and coding, physician extender management, ancillary service development, information technology, transcription utilization, and marketing. Some of these are universal, but several of these areas may be most applicable to the private practice of medicine. Attention to each component is vital to develop an understanding of the intricacies of practice management. Key Words: practice management, billing, ancillary services (J Orthop Trauma 2014;28:S12–S17)
Chief Financial Officer
This individual is responsible for managing the financial risks of the corporation. Usually this is a certified public accountant responsible for financial planning and record keeping as well as data analysis. They prepare all financial statements, manage debt, and provide all financial data required for decision making in an office setting.
Chief Operating Officer The COO is responsible for the daily operations of the company and routinely reports to the CEO. This individual is responsible for clinic staffing, patient flow, radiology and casting protocols, and personnel management. The COO makes most of the hiring and firing decisions across all departments.
GOVERNANCE As with any business, the governance structure of a healthcare facility is very important. All employees must understand the chain of command so that they know who makes the decisions, who they report to, and how to resolve problems as they arise. In a small private practice this may be a very simple decision tree; however, in a large private practice, the organizational chart can be quite complex. An example is shown here (Fig. 1). Depending on practice size, the practice may have several key employees serving the standard roles on major businesses such as the chief executive officer (CEO), chief financial officer, and chief operating officer (COO). It is important to understand the roles of each of these employees and their expectations.
Chief Executive Officer A CEO is the highest ranking administrator in any company. This individual reports to the board of directors and is in charge of total management of the organization. The CEO has multiple responsibilities including director, decision maker, manager, and executor. Usually this individual has an MBA and is well compensated with a base salary and bonuses based on achievement of certain performance metrics that incentivize constant vigilance to practice growth and improvement. Accepted for publication April 9, 2014. From the Reno Orthopaedic Clinic, Reno, NV. The authors report no conflict of interest. Reprints: Peter L. Althausen, MD, MBA, Reno Orthopaedic Clinic, 555 North Arlington Avenue, Reno, NV 89503-4724 (e-mail: palthausen@ sbcglobal.net). Copyright © 2014 by Lippincott Williams & Wilkins
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THE REVENUE CYCLE
To understand practice financial performance, set measurable performance expectations, and monitor them, physicians should first understand revenue cycle management. They should provide support for the implementation of practice-specific revenue cycle management strategies that will allow their practices to meet expectations. • There are 2 key differences between hospitals and physician practices in revenue cycle management: unit of work and its value, and per unit cost to collect. • Reducing a physician practice’s cost to collect requires, first and foremost, the right technology and functionality and the right staff. • Three advanced collections techniques—denials management, contract compliance, and fee schedule management and maintenance—should be examined for their potential value in ensuring that an owned practice is paid correctly for every service.
UNIT OF WORK AND ITS VALUE
Hospitals are paid based on a “patient day” or an “admission.” In the physician practice setting, charges are generated based on the services or procedures provided. Payers usually consider each physician charge individually and make payment decisions at the service level. As a result, the unit of work and its reimbursable value is much smaller: A single current procedural terminology (CPT)/service code may be worth only tens of dollars. Although each code may not be worth much, every dollar counts and no charge should be overlooked. When dealing with smaller dollars, it is even more important to be efficient, accurate, and timely. J Orthop Trauma Volume 28, Number 7 Supplement, July 2014
J Orthop Trauma Volume 28, Number 7 Supplement, July 2014
Practice Management
FIGURE 1. Organizational chart for the Reno Orthopaedic Clinic demonstrating the complexity of a large orthopaedic practice.
COST OF COLLECTIONS Responsibilities for billing and collecting are either part of a specific employee’s job or shared among staff. Tasks such as finding and retrieving office notes to support a denied claim are often manual. The less technology a practice utilizes, or the lack of a sophisticated infrastructure, results in a greater need for human intervention—and thus a higher cost to collect for a practice’s unit of work. This can be an arduous task. For example, a patient is seen for a hospital follow-up in a physician’s office. In the context of an established patient office visit (CPT code 99,213), the patient has a benign lesion removed (CPT code 17,000). The patient is insured by Medicare, so the expected reimbursement for the 2 codes (based on the 2012 fee schedule) is roughly $65 and $70, respectively. Medicare pays for the office visit, but denies the procedure based on the diagnosis code on the claim. The practice receives the denial. Without an electronic medical record or billing management software, an employee reviews it, manually pulls the paper chart, sorts through it, finds the right note, and marks it. The chart is placed on the physician’s desk. The physician reviews the chart, decides that the diagnosis is incorrect, writes a note back, and returns the chart to the staff member. The employee then logs into the billing system, changes the diagnosis code, and resubmits the claim. The claim is paid 30 days later. The per-unit-cost to collect in the office setting, then, is as follows Table 1.
REDUCE THE COST TO COLLECT Managers responsible for practice revenue cycle management should focus on activities that minimize the 2014 Lippincott Williams & Wilkins
cost to collect and optimize the reimbursement per unit of work. The key is to promote policies, processes, and strategies that ensure a sophisticated revenue cycle management infrastructure.
The Right Technology and Functionality The right technology can help practices both minimize the cost to collect and optimize reimbursement. To raise the level of information technology sophistication in practices, certain functionality exists within their practices’ practice management software to automate 3 critical physician revenue cycle management processes: • Contract management • Front-end claims editing • Denials management If implemented and used correctly, newer capabilities such as workflow automation can also produce quantifiable operating efficiencies and cost reductions in specific revenue cycle activities. Contract management capabilities enable practices to ensure they receive not just payment, but correct payment at agreed-upon rates. These capabilities also give managers the tools to leverage any identified differences to recover cash and alter payer behavior. Robust claims editing functionality helps practices proactively address the increasingly complicated claims payment and reimbursement rules. By better controlling the quality of claims before submission, practices can increase cash turnaround while also decreasing denials. The result is a decrease in the overall unit cost to collect. Denials management modules allow practices to identify, track, trend, and report on denials. Using data, managers can pinpoint the source of denials (whether www.jorthotrauma.com |
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TABLE 1. The Electronic Health Record (EHR) Unit value for reimbursement:$70.00 $40,000 office staff person Reviews denial Pulls chart Identifies appropriate note for physician Reviews physician’s response Repairs and resubmits claim Total staff cost to collect $200,000 physician Review charts and notes Notes change for staffer Returns chart to front desk Total physician cost to collect Total practice cost to collect
1.5 min 1.5 min 3 min 1 min 2 min $2.88 2 min 1 min 1 min $6.41 $9.29 (13.27% of the claim)
a practice-based process, a provider error, or a payer mistake), as well as any systemic causes, and take action to correct the problem. Workflow automation tools allow staff members to set parameters under which specific activities, such as accounts receivable follow-up, will occur automatically. These tools also reduce the cost to collect by eliminating manual processes (e.g., communicating claim repair information via notes or running standard management reports).
The Right Staff Salaries and benefits generally constitute the largest practice expense. Therefore, effectively hiring and, more important, retaining qualified billing staff are among the most effective ways to reduce a practice’s cost to collect. As the rules and regulations surrounding provider reimbursement have increased dramatically over the past few years, so has the need for technology to automate processes that handle these complexities. As a result, the knowledge and expertise required of practice-based billing staff has increased exponentially. Practices now require virtually the same (if not a greater) level of staff billing expertise as hospitals. Hospitals should avoid the temptation, however, to simply shift their own coders, billers, and collectors to their physician practices. Effective practice-based billing staff should have detailed knowledge of the billing rules for the medical specialties the practice provides. They should be able to understand and monitor specialty- and procedure-specific claims requirements for the payers that matter most to the practice.
• Denials management • Contract compliance • Fee schedule management and maintenance Denials management is the process by which a practice tracks, trends, and evaluates its “zero pays”—those CPT codes for which it receives no payment, but attempts to recover payment when appropriate. Industry studies report that more than 35% of claims may be denied improperly. In any size practice, a number of this magnitude represents a significant revenue cycle opportunity. Any payment a practice recovers as the result of denials management increases the practice’s overall reimbursable unit of work. Contract compliance—a practice’s ability to compare actual payments received from a payer with its contractually agreed-upon rates—is no less critical. The same industry studies also find that up to 25% of a practice’s contractual allowances may be taken inappropriately and represent potential underpayments. To state it simply: Practices cannot afford to assume claims are processed appropriately. Payer consolidation, complex contract terms, and human error all contribute to a growing concern over inaccurate payments. Effective contract compliance monitoring requires that practices know their contractually agreed rates. Automating the process further requires that rates be accurately entered and maintained in the practice management system. In addition, fee schedule management should be implemented similarly. Because few patients actually pay full charges, fee setting often is discounted and underused as a revenue cycle management tool. Today, most payers set their rates as a fixed percentage of the current Medicare fee schedule. Likewise, payer contract language generally sets payment terms as the lesser of either the practice’s charge or the payer’s agreedupon rates. When insufficient attention is given to fee setting, practices run the risk that their charges will be less than the Medicare allowable (especially over time). In such cases, practices receive a lower reimbursement per unit of work than they should. Physicians can achieve success by implementing a sophisticated revenue cycle management infrastructure— including technology, people, and processes—and by focusing on techniques that optimize reimbursement per unit of work and minimize a practice’s cost to collect. These efforts may require financial commitment and reorganization of practice policies, staff, and technology. However, in practices where revenue cycle performance is weak, the improvement in outcomes will likely justify the time, expense, and investment.
OPTIMIZING THE REIMBURSABLE UNIT OF WORK
PHYSICIAN PAY
Realistically, most community-based practices have little or no leverage to negotiate rates. Therefore, increasing a practice’s bottom line by increasing its contracted rates (or reimbursement per unit) is not likely. However, implementing advanced collections techniques can help ensure a practice is paid correctly for every service—therefore optimizing payment per unit of work. Three techniques in particular should be examined for their potential value:
Multiple formulas and options for physician compensation have been utilized throughout the United States. Employed physicians most often hold a salaried position with bonus pay assigned for adherence to metrics and/or a production bonus. Common private practice agreements range from a collection-based system to a relative value unit (RVU)-based system. Collection-based compensation means that physicians are paid on the revenue they collect from
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patients. Overhead is divided according to fixed and variable components and paid accordingly. In an RVU-based system, the office collects revenue for all physicians and divides it based on work according to RVUs. The RVU concept was established by The Omnibus Budget Reconciliation Act of 1989. It breaks each provider service into work (wRVU), practice expense (pRVU), and malpractice (mRVU) components. In a pure RVU system, physicians are paid on wRVUs and overhead expenses are paid based on pRVUs and mRVUs. Pay formulas can become quite complex when groups combine both payment methods. It is crucial for all physicians to understand how they will be reimbursed when considering any contract or entering into negotiations. Misunderstandings can result in massive differences in take-home pay. Because many different formulas exist, it is clear that no perfect answer exists; however, physician pay should reflect work, promote ethical behavior, and support quality patient care. Physician pay is often not just a function of work performed in surgery or clinic activities. Members of large group practices have access to a variety of other revenue streams. These include ancillary service development, comanagement agreements, directorships, and other investment opportunities. Each of these options is addressed later in this section.
BILLING AND CODING Most private practice orthopaedic traumatologists are not salaried employees. As a result, it is important to understand the intricacies of appropriate billing and coding. There are several excellent coding courses that should be a prerequisite for any physician entering private practice. The Karen Zupko course offered yearly at the Orthopaedic Trauma Association annual meeting is excellent. The goal is to maximize revenue in a legal way to get the most benefit from our services. In a specialty where collection rates average 30%, we must be savvy. Even simple changes can affect revenues massively: for example, for irrigation, debridement, and closure of a surgical wound, one could code 13,160 or 11,043 and 13,132. The former is equivalent to 32 RVUs and $3600 whereas the latter equals 14 RVUs and $1200. Fraudulent billing can result in massive fines for you and your practice. The Code-X billing assistant program is recommended by the American Academy of Orthopaedic Surgeons (AAOS) and has been a fantastic learning tool for physicians and coders alike. The timely submission of bills is also extremely important. In trauma care, especially auto injuries, money for care is limited and available on a first come/first serve basis. It is imperative that surgeons submit their surgical charges within minutes of finishing a case. This also implies that your dictation is done immediately as well so that bill can be submitted. No one is as committed to your income as yourself. Keep a log of all cases you perform and check them with your coders. Most likely you will find several mistakes a month totaling thousands of dollars. A complete primer on billing and coding cannot be presented here; however, the following pearls are very helpful: 2014 Lippincott Williams & Wilkins
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• Make sure to dictate a plan after each operation, especially if additional procedures or staged operations will take place. Without clear dictation, these future surgeries will not be covered. • Bill for closed treatment of fractures. One study demonstrated that 20% of practice income could be generated from this revenue stream.1 • Bill on separate days from surgery to maximize return. Especially if additional radiographs were required to make determination for nonoperative care. • Make sure to understand appropriate evaluation and management codes. • Make sure to understand appropriate modifiers. Large group practices often discuss whether billers and coders should be kept in-house or outsourced. This is different for every practice but the more doctors a practice supports, the more likely in-house employees benefit from economies of scale.
ANCILLARY SERVICES Under current healthcare law, ancillary service income is available to orthopaedic surgeons. Most commonly this consists of physician-owned physical therapy, magnetic resonance imaging (MRI) scanners, and surgery centers. In order to participate, it is essential to adhere to Medicare rules and physician self-referral laws (Stark Laws). In the era of decreasing physician reimbursement, these are becoming more sought after revenue streams. The ability to maintain these additional profit centers is regulated by both state and federal law. The laws are designed to keep the unethical surgeon from ordering unnecessary tests or therapy purely due to their own economic interest. If managed well, these additional services can generate a source of passive income for the orthopaedic surgeons involved. The most common services include: • Physical Therapy: This is a logical service for large orthopaedic groups to offer since they refer many postoperative and nonoperative patients alike. Employees include physical therapists and therapy aides. Some therapy aides can also serve as part-time athletic trainers to local high school teams to increase knowledge and office exposure. The benefit to in-office therapy is that questions about regimens, weight bearing, and other issues can be brought immediately to the attention of the treating surgeon. Satellite physical therapy offices can also be very cheap to run and manage while providing patients with a convenient service and consistent product. • MRI: Although reimbursements for advanced imaging are dropping, physician-owned MRI scanners remain a solid source of ancillary revenue. Such scanners may be purchased or leased. At a time when the future legality of physician ownership may be in question due to political agendas not patient care issues, it may be more conservative to lease a machine. Another benefit of such a device is that arthrograms and other procedures can be performed inhouse by the treating orthopaedic surgeon. • Ambulatory Surgery Centers: These can be extremely successful ventures for any orthopaedic group. Ambulatory www.jorthotrauma.com |
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surgery centers (ASCs) allow physicians to collect not only the professional fee but also the facility fee for each procedure. Ideally suited to outpatient arthroscopy, hand surgery, and fracture fixation, the addition of a 24-hour stay can allow for unicompartmental knee replacement and cervical spine cases. ASCs have shown lower infection rates, higher patient satisfaction scores, and better outcomes when compared with hospitals. Physicians must adhere to Stark Laws and Safe Harbor rules with regard to these centers. ASCs can be managed internally or by a management group which will siphon a portion of the profits but may allow for group purchasing discounts and economies of scale. • Durable Medical Equipment: Another source of revenue as well as patient care involves the provision of durable medical equipment (DME) in addition to simple casting services. DME is medical equipment used in the home such as braces, crutches, walkers, and wheelchairs. Having DME supplies in the office allows patients to get equipment they need in 1 place without a prescription. Although patients can always pay cash for DME, most insurance plans cover certain types of DME. Medicare will only pay for DME if the doctor or supplier is enrolled in Medicare. If managed appropriately, DME can be a profit center for your medical office of clinic.
RISK RETENTION GROUPS One significant practice expense involves malpractice insurance. This can be quite large depending on practice location and practice type. Spine surgeons and trauma surgeons often have higher rates. Risk retention groups (RRGs) are a way of managing medical liability, which can become an asset for your practice. This is a medical malpractice group that gives physicians the chance to control their own medical malpractice insurance company. The members elect whom they insure, which controls their risk. Members control the selection of managers, auditors, and lawyers to control the company. If well run and managed, members of RRGs can begin receiving dividends from the RRG to offset their malpractice payments. This is definitely an option that should be explored by any large orthopaedic practice.
PHYSICIAN EXTENDERS Once up and running, your practice can benefit from the addition of a physician assistant or nurse practitioner. If utilized appropriately, these individuals can help you be more efficient in clinic, spend more time with patients who need you, and complete your paperwork more accurately. In addition, they should be another profit center for the orthopaedic surgeon or the practice. Every year the AAOS annual meeting offers many symposia on the effective use of physician extenders for orthopaedic practices. Certainly these individuals can assist in caring for the large numbers of under- and un-insured patients given appropriate physician oversight. In situations where traumatologists cover several hospital emergency rooms in a single day, midlevel providers
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can be a key factor in improving response times and patient satisfaction and decreasing emergency room wait times, length of stay, and operating room (OR) transport times.2 The scope of practice can be limited by state law and each physician must be aware of their limitations to maintain compliance with individual hospital bylaws as well. Although some extenders can generate income from OR assist fees, most are more productive in office. From a practical standpoint, the primary difference between a physician assistant and nurse practitioner is that only physician assistants graduate with OR training and certification. Nurse practitioners can assist in OR cases with additional training, which usually requires 6 months of observed assistance.
URGENT CARE DEVELOPMENT In an effort to improve patient access, provide better patient care, improve the patient experience, and decrease overall healthcare costs, many centers are opening dedicated orthopaedic urgent care centers. Hospital emergency rooms average wait times between 4 and 6 hours and generate bills averaging $1400. Non-orthopaedic urgent care facilities have short wait times, much lower costs, but no access to specialists. In both cases, patients with orthopaedic injuries still require referral to orthopaedic offices. Dedicated orthopaedic urgent care allows low wait times, markedly decreased patient costs, and immediate access to orthopaedic specialists. In competitive markets, this urgent care option allows the orthopaedic office access to patients who might be referred to other physicians or those on call at neighboring hospitals. Because it is more cost effective, it may allow for direct contracting with workers’ compensation carriers.
MARKETING YOUR PRACTICE Multiple books have been written about healthcare marketing and individuals devote entire careers to this purpose. As a result, it would be impossible to cover all aspects of healthcare marketing in this format. However, it is important to cover the basics. The role of marketing in medicine is always debated but in this competitive environment it may be a vital component of your practice. Marketing services can either be outsourced or done in-house but the basic concepts are the same. Any individual hired for this position must not only have skill in the creative aspect of advertising but also possess the budgetary knowledge to plan appropriately. When deciding how to market your practice, the target audience needs to be defined. The 3 main audiences include referring physicians, patients, and hospitals. Each of these parties has different objectives and needs that an orthopaedic practice can satisfy. • Marketing to physicians should emphasize • Mutually beneficial relationships • Ease of scheduling • Direct access to physicians • Urgent care options • Staff who are nice to both physicians and patients 2014 Lippincott Williams & Wilkins
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• Good communication and clinic visit notes from specialist • Annual educational meetings • Excellence and fellowship training of specialists • Marketing to patients should emphasize • Ease of appointment • Access to physicians • Education and specialty training • Financial counseling • One-stop shopping • Kindness of staff • Marketing to hospitals should emphasize • Mutual economic benefit • Educational partnerships • Cost containment With so many possible marketing options, offices must decide what percent of the budget should be allocated toward this endeavor. The average amount spent by large practices for marketing is 1.5%–2% of gross revenue. When making marketing decisions, it is imperative that all parties involved understand the difference between marketing and goodwill. There are multiple modes of media for marketing and each has a different cost associated with its use. Each is designed to capture a segment of the population. Blanket marketing strategies are usually not effective so each group must focus efforts on specific programs utilizing the most appropriate modality. The most common media include: • Television • Radio • Internet • Billboard • Newspaper • Waiting room videos • Waiting room handouts • Yellow Pages • Direct to patient marketing • Web site and search engine optimization With the prevalence of the Internet, physicians must be familiar with the many Internet-based physician rating companies (e.g., vitals.com, healthgrades.com, Angie’s List). Patients now often use these unregulated sites to research their doctors. Bad patient reviews can be detrimental to
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a practice so care must be taken to review these sites and optimize their content. Many companies now offer reputation salvage for a price.
INFORMATION TECHNOLOGY Modern orthopaedic offices must take advantage of the technology available to both hospitals and medical offices. This is extremely important to the efficiency and financial health of the practice. Up-to-date systems are required and can be expensive. However, the costs of these upgrades can be depreciated for tax purposes and some government rebates are available. EHR use is a major initiative for hospitals, payers, and the government alike. Although costly, a good system allows for more accurate records, improved billing, and better data transfer. Currently, if physicians who have implemented EHR systems can meet “meaningful use” criteria, government rebates can be obtained. If EHR systems can integrate with hospital EHR, data transfer and medical information can be shared. This has the potential to improve patient care, increase efficiency, reduce the overall cost of care, and improve the patient experience. Another important aspect of IT to understand is hospital data systems such as “Crimson.” These programs collect surgeon data on OR data, infection rates, lengths of stay, etc. and then compare them to national and community data. Such data is now being used by hospitals and insurance companies to “grade” physicians. Much of this data is flawed but can still be utilized to restrict payment or contracts. As a result, it is imperative for physicians to understand how their hospital’s system works. In addition, it is even more important than ever for physicians to collect their own data. This ensures accuracy and transparency and allows for more effective contract negotiations with hospitals and payers alike. REFERENCES 1. Appleton P, Chacko A, Rodriquez EK. Financial implications of nonoperative fracture care at an academic trauma center. J Orthop Trauma. 2012;26:617–619. 2. Althausen PL, Shannon S, Coll D, et al. Impact of hospital employed physician assistants on a level II, community-based orthopaedic trauma system. J Orthop Trauma. 2013;27:e87–e91.
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