June 1999
Volume 63 |
Number 6
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PRACTICE MANAGEMENT
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| Getting More From
Your Billing Operation |
Karin Bierstein,
Practice Management Coordinator
For anesthesiologists who spend most of their working hours in
the operating suite, the greatest practice expense after clinical
salaries is likely to be the billing operation. There is much
variation in the quality and cost-effectiveness of billing services
and staff. One way to bolster the likelihood of obtaining good
service is to tie compensation to performance.
Patrick Everett, CPA, CMPE, president of Millennium Medical
Management, Inc. in Alpharetta, Georgia, has more than 11 years
of experience in advising anesthesiologists on numerous facets
of the business in which they are engaged. Below are his suggestions
for creating a system of incentives for improving billing operations.
Linking Pay to Performance: How to Maximize Billing/Collecting
Results
Patrick Everett, CPA, CMPE
President, Millennium Medical Management, Inc.
"Hyde Manufacturing Co., Southbridge, Mass., maker of putty
knives, wallpaper scrapers and animal-hoof cleaners, last year
began quarterly bonus payouts to workers when certain profit
levels are reached, on top of other performance rewards the
company says have produced record sales. Of 1,800 employers
surveyed...51 percent said they give nonmanagement, nonsales
employees compensation tied to individual or group performance."
- Wall Street Journal, April 6, 1999
Billing and collecting for professional anesthesia
services bears little resemblance to manufacturing putty knives,
but the parallels of human behavior are similar. People tend to
produce better results when the rewards are visible, tangible
and quantifiable. That theory has long been embraced by corporate
America in compensating sales forces through commissions and upper
and middle management through stock options.
Though many anesthesia practices have moved toward compensation
systems for their physicians that tie pay to production (as measured
by ASA units, time, shifts, etc.), it is not uncommon for those
same practices to anguish over the annual rite of granting cost-of-living
and merit raises for their office staff. Until recently, there
has not been much published guidance on designing compensation
arrangements for office staff that reward performance but still
reflect today's economic realities.
One option being explored by more and more groups is the design
and implementation of a bonus pool program for their administrator/manager
and office staff which rewards these employees based on results.
The key elements of such a program include:
- establishing measurable standards by which to gauge performance
- funding of the pool based on past or expected profitability
- communication of the standards, pool amount and time frame(s)
- installing report mechanisms to allow assessment of performance
Groups who outsource their billing and collecting function to
billing services need not exclude themselves from applying the
same concept. The only substantive difference is that the bonus
pool is replaced with a carrot/stick arrangement that pays the
service a premium for meeting performance targets but reduces
their fee percentage if they fail.
As with almost any change in the status quo, implementing a
new approach to compensating a billing office or service poses
questions that must be addressed and resolved by group members
prior to executing the plan.
Key Questions to Resolve Before Implementing an Incentive Program
What is the anticipated reaction from your staff or billing
service?
It is very likely that you will hear both valid suggestions
to fine-tune your program and objections raised only in resistance
to change. Will you be able to distinguish between the two?
When is the most appropriate time to implement this new
idea?
If you maintain your own business office, a good time might
be upon the hiring of a new administrator or office manager, or
at the start of a new fiscal year. If you use a billing service,
the ideal time is to make the achievement of performance targets
part of your initial contract negotiations. Otherwise, your current
contract's renewal date presents an appropriate time to raise
the idea. Where the personal relationship with a billing service
is strong but collection performance is weak, implementation of
performance standards often serves as a last-chance opportunity
for the service to prove their value to the practice.
Will a performance-based program partially, or totally,
replace raises and bonuses for your office staff?
Some groups adopting the bonus pool idea still use discretionary
one-time payments as a way to reward particular merit or as the
vehicle to celebrate the holiday season. Others have replaced
merit raises with the bonus pool, but continue the annual cost-of-living
pay adjustment as an integral part of their compensation structure.
Will an annual, semi-annual or even quarterly bonus pool
arrangement work best for your practice?
In answering this question, the cost of the time to conduct
the analysis should be weighed against the possible benefit that
a more frequent payout might have on the motivation level of your
staff. Obviously, the funding of the bonus pool should be halved
or quartered accordingly.
How should the bonus pool be calculated and allocated
among your staff?
The amount placed in the pool should bear some relation to what
you have paid out in the past in the form of raises and bonuses
but must also be enough to inspire. The pool might be allocated
in proportion to seniority, base salary, individual performance
evaluations or a combination of the three. Once the amount of
the pool is set, it should never be adjusted downward between
the time you communicate it to your staff and the time it is paid
out lest you risk your credibility on future compensation matters.
Who will conduct the periodic analysis/calculations necessary
to appraise whether the performance standards have been met?
While you may very well have internal resources with the requisite
financial acumen and interest level, an external resource (e.g.,
CPA, consultant), familiar with the program, can bring those same
skills and the added benefit of objectivity to the analysis.
Performance Standards
The performance standards on which you choose to focus will
probably be characterized by either their analytical or
procedural nature. Analytical standards would include accepted
measurements of accounts receivable management such as "Days in
Accounts Receivable," "Accounts Receivable Percent > 120 Days"
or others. Procedural standards, on the other hand, might include
the quicker input of charges, successful implementation of new
software or a marked reduction in patient complaints.
Analytical
Students of basic accounts receivable management have always
understood the importance of keeping accounts receivable balances
low to demonstrate positive performance. More advanced students
quickly learn that there are more methods than just collecting
cash to keep those receivables low. For example:
- Taking contractual write-offs in excess of what is warranted.
This error often occurs when a payor reimburses less than the
amount agreed to under contract and, through inattention, a
write-off greater than necessary is taken.
- Writing off accounts to "bad debt" to cover for poor follow-up
efforts. Unfortunately, when an unpaid account receives
little or no attention for a long enough period, writing it
off often becomes the option of last resort.
- Failing to clear accounts with credit balances through
the refunding process. Overpayments by secondary insurers
and patients can cause accounts to reflect a credit balance.
Unless these overpayments are corrected by issuing refund checks
in a timely manner, they accumulate and offset true (debit)
accounts receivable.
Whether as the result of deception, oversight or negligence,
all of these practices serve to distort authentic financial results.
It is important to keep in mind that tying performance to one
analytical standard, i.e., "Days in Accounts Receivable," is somewhat
myopic. Focusing on the number of days in accounts receivable
without also considering bad debt write-offs is much like squeezing
an inflated balloon in the middle only to watch both ends bulge
with the displaced air.
In a recent contract negotiation, a five-anesthesiologist practice
in Florida implemented several analytical performance standards
for their billing service to achieve. Here is an example of one
of those standards:
For each three-month period beginning January 1, 2000, a calculation
will be made at the beginning of the period to determine the average
days in accounts receivable during the prior three months. Days
in accounts receivable will be calculated as the total receivables
at the end of each month divided by the average daily charges
for the previous three calendar months. Based on that calculation,
the monthly fee for the ensuing three months will be adjusted
from the X percent base fee in accordance with the following schedule:
Average Days in
Accounts Receivable
|
Increase (Decrease)
in Base Fee
|
| 64.9 days or less |
+ .20 percent |
| 65 - 75 days |
No change |
| 75.1 days or more |
- .20 percent |
Similar standards were established for other commonly accepted
measurements of accounts receivable management, each having 1)
a premium range, 2) an interval where "no change" was warranted,
and 3) a penalty range. The Florida group also required in its
contract that the billing service be able to generate the reports
necessary each calendar quarter to perform the calculations described
above.
Procedural
It seems that every business office or billing service, like
the human beings that comprise them, has strengths and weaknesses.
If those weaknesses impede the performance and profitability of
your practice and can be changed, monetary incentives can be a
useful tool to foster that change.
The business office for a 12-anesthesiologist group in Georgia
was less than diligent about turning over accounts to the outside
collection agency hired by the practice. The result was that the
group's receivables older than 210 days were virtually uncollectible.
One of the standards this group established as part of implementing
a $25,000 bonus pool arrangement with its office causes funds
to be deducted from the pool if certain account turnover
guidelines are not met. Here is the wording of that standard:
On or about June 30 of each year, an analysis will be made to
determine whether collectible, but uncollected, accounts were
turned over to the third-party collection agency on a timely basis.
In accordance with the results of that analysis, an amount will
be deducted from the bonus pool based on the following error rate.
| 4 errors or more |
-$4,000 |
| 3 errors |
-$3,000 |
| 2 errors |
-$2,000 |
| 1 error |
-$1,000 |
| 0 errors |
No change |
An "error" occurs when less than 30 percent of the average monthly
amount turned over for collection is submitted in a given month.
For example, if the average amount turned over is $10,000, a month
in which the business office submitted $2,500 to the collection
agency would constitute an "error."
Though this group could just as easily have added funds
to the pool if this performance standard was met, a penalty more
accurately reflected the group's belief that the practice of turning
accounts over to the collection agency in a timely manner was
expected, rather than a cause for celebration.
Summary
With today's economy roaring and everyone, it seems, complaining
that "good people are hard to find," now may be the time for your
practice to re-evaluate its time-honored methodology for compensating
the business office employees or third-party billing service.
If your reaction to reading this article is, "It sounds good,
but won't work in my practice," it may be time to explore ways
to help make it work. Don't be hesitant to float this idea with
your administrator, office manager or billing service representative.
Their (positive) reaction may surprise you!
Those groups who have switched from equal-share to production-based
compensation models know well the hard work that was required
to make the conversion work. The ideas put forth in this article
also require some upfront effort, mainly in the form of defining
appropriate standards and setting challenging, yet achievable,
targets for your staff or billing service.
Finally, no discussion of compensation issues is complete without
a reminder that monetary rewards work best when coupled with intangibles
like providing a pleasant work environment, knowing your office
staff by first names and verbally acknowledging your office staff
or billing service when they have performed well.
* * * * *
The world of billing services is no less competitive than the
world of anesthesiology practices. Some services choose to compete
by pushing the envelope of aggressive billing. It is important
to make sure that the individuals submitting claims on your behalf,
whether they are your employees or your contracted service, know
and follow the rules established by Medicare and by your contracts
with commercial carriers.
New Medicare Modifiers Will Allow MAC for Certain Complex Procedures
and At-Risk Patients
A number of Medicare carriers continue to use a "medical necessity"
policy that rejects claims for monitored anesthesia care (MAC)
for certain procedures. These carriers will not pay for codes
00100 (integumentary system of head) or 00400 (anterior integumentary
system of chest), for example, unless a particular diagnostic
code (ICD-9) also applies.
This policy has been controversial since its inception - notably
because of the notion of women undergoing breast biopsies without
any anesthesia - and many carriers who initially adopted the policy
have reversed themselves or accepted modifications. ASA representatives
have engaged in a protracted dialogue with the carrier medical
directors involved. The outcome of this dialogue is a Health Care
Financing Administration Program Memorandum sent to all the carriers
in April, giving them the option of using two new modifiers that
would indicate that MAC should be reimbursed in a specific case.
The modifiers are as follows:
G8MAC for deep, complex, complicated or markedly invasive surgical
procedure G9MAC for patient who has history of severe cardiopulmonary
condition
These modifiers will take effect on July 1, 1999, if your
carrier chooses to implement them; they are discretionary.
If the MAC "medical necessity" policy is in effect in your area,
you may want to contact the anesthesiologist who represents you
on the Carrier Advisory Committee (CAC) to make sure that your
medical director adopts the modifiers. Your state anesthesiology
society will be able to give you the name of your CAC representative.
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