In Part I of this blog, Rodrigues addressed the first step in creating a survival plan for your medical practice as we approach 2014 — your financial plan. Here, he continues with two more steps: looking at your payers and your technology.
Step 2 — Your Payer Plan
The next critical area, and one that substantially impacts both revenue and billing success, is payer performance. Physicians should evaluate payer performance in two ways: contracted rates and actual performance.
Actual performance is often overlooked and can have a significant impact on practice success. For example, if a contracted reimbursement is $100 but only 90 percent of claims are paid, the effective contracted rate is $90. Practices should periodically review the contracted rates of all their major payers and then take a deeper look into the net numbers, accounting for things such as denial rates, underpaid claims, and bundled charges. This review will show how the payers are actually performing.
Another important component of payer performance is the cost of collecting claims. Payers may add steps, such as prior authorizations, medical records, or special billing instructions, to the billing process that have a direct cost component for the practice. Some payers require prior authorizations, which may require the practice to hire an additional person. These claims also have a higher rate of denial because it gives the payer another chance for scrutiny. Understanding actual contract performance by payer will lead to data-driven decisions about payer mix in the future while also providing valuable information for payer negotiations. It is important for practices to frequently evaluate payer performance and to establish specific actions to either improve payer performance or reduce the mix the payer represents in the practice's revenue. With all of the changes coming to the insurance industry due to the Affordable Care Act, it is more important than ever to understand and take action on payer mix and performance.
Finally, it is important for practice leaders to have a good understanding of merging practice and payer models, such as the new quality-based models like a Patient-Centered Medical Home, and the potential implications of these models on the practice over time. By understanding which models might have merit for the practice over time, the practice can plan time for further exploration and discovery at industry events, through direct research, and by seeking out providers on the path toward adopting a new model. Very few practices will be in a position to move to an entirely new model during the year, but all should be aware of the options and associated considerations of a model change at some point over the next few years.
Step 3 — Your Technology Plan
Technology is a real bright spot for the private practice today, although many practices may not recognize this. In the last few years, technology has progressed to the point where it finally fits the needs of private practices. Until recently, practices basically had their choice among solutions built more for the enterprise-sized environment — requiring expensive onsite implementation, IT investment, ongoing maintenance, and extensive training.
In the last few years, the two transforming trends have been mobility and the cloud. Today, a practice can access most of the core technology needed to run a practice and deliver care with a laptop and an Internet connection. These solutions have been built with the smaller practice in mind. They are intuitive, fast to deploy, available when and where needed, and require little or no investment in hardware, maintenance, or upgrades. What's more, key functionality is moving to mobile solutions providing access at the point of care in a non-intrusive way.
According to Estee Pummel, billing and insurance manager at Lifestyle Eye Center in Walla Walla, Wash., their practice would not be what it is today without the right technology. "I don't think [our physician] could have built up the practice this much without a practice management system that is easy to learn and use," said Pummel. The practice opened in 2010 and deployed cloud-based software from Kareo.
With this in mind, a practice should evaluate its current technology, how well it works for the practice today, and the direct and indirect costs. Then, the practice can assess alternatives that may not only cost less time and money, but result in far more effective administration and care delivery. The next step is to establish a specific plan for evaluating alternatives that will work better and cost less than legacy solutions. With some advanced planning, a practice can make the transition to new technology and quickly reap the benefits for the practice and its patients.
In Part III of this blog, Dan Rodrigues will discuss the final elements to a survival plan for medical practices as we approach 2014: having a plan for ICD-10 and patient engagement.
Dan Rodrigues is the founder and CEO of Kareo, the cloud-based medical office software and services platform he launched in 2004. Today, Kareo serves nearly 20,000 healthcare providers through its integrated practice management, EHR, and revenue cycle management solutions. Prior to launching Kareo, Rodrigues designed technology for healthcare, and other industries, as a co-founder and managing partner of Skematix, and earlier in his career, he also co-founded and led Scour, a popular search engine for finding music and video content online. He holds a Bachelor of Science in Computer Science from the University of California, Los Angeles and is a resident of Orange County, Calif. E-mail him here.