Peter Masucci, a solo pediatrician in Boxford, Mass., is glad that he outsourced the bulk of his billing and collection to athenahealth, a revenue cycle management firm in Watertown, Mass. His days in accounts receivable has dropped from over 60 to 23 days, “and at the end of the month, there’s money to pay my bills.” Far more of his claims are going out “clean” to insurance companies, so more of them are paid on the first pass. Plus, he cut expenses by eliminating a part-time billing position; now he has only one billing person.
Even with the fees he pays athenahealth, Masucci says, his overhead is lower than it used to be and his revenues are higher. The practice has finally written off $250,000 in A/R that accumulated over the years because older debts weren’t pursued. Now his net collection percentage is close to 100 percent.
Masucci’s practice has benefited from outsourcing its RCM partly because it was somewhat disorganized to start with. But it can also be argued that this approach helps some practices due to the nature of their specialties.
Peds-friendly option
Richard Ferrelli, executive consultant to the Pediatric Health Alliance, a 42-doctor group based in Tampa, Fla., points out, “Pediatric practices have very small claims compared to a surgical practice. Those small bills are harder to work than the large claims. So you’ve got to make it a priority, and do it in a technologically savvy way, or you’ll have a lot of people working those claims.”
That was one reason, he said, why Pediatric Health Alliance chose to work with Med3000, based in Pittsburgh. Med3000 offered the group a choice of Web-based practice management systems, and it had the required expertise in technology and financial operations.
Would it make sense for your practice to hire an RCM firm? That depends on a number of factors, notes Rosemarie Nelson, an MGMA consultant based in Syracuse, N.Y. “The major reason to outsource is a lack of expert staff. If you don’t have the expertise inhouse, you can refer your most important asset to a specialist, just like you’d refer a patient to a specialist.” On the other hand, she observes, there are many other steps that practices can take to improve their billing and collection processes on their own.
Here are a few things you should know about RCM companies if you’re considering whether to hire one.
The argument for outsourcing
RCM vendors maintain that they can do a better job than practices can on their own. Not only do they specialize in getting revenue in the door, they note, but they also have economies of scale that allow them to offer a more consistent, effective approach using start-of-the-art technology. They point out that health plans have complex rules that are changing all the time, making it difficult for practices to prevent claims denials that increase staff work.
Of course, some groups do just fine on their own. For example, the St. Louis consulting firm LarsonAllen surveyed 23 practices that submitted accurate claims to their clearinghouse 99 percent of the time. Those practices had average days in A/R of 40 and a net collection ratio of 97 percent. They posted bills within a day and payments within two days, and they worked denials within 48 hours. They had processes in place to understand why claims were denied and to take corrective action.
Most practices, however, do their own RCM in an “unsophisticated environment,” says Richard Schickele, executive vice president of the physicians services division of Med3000, which has about 2,500 clients in 25 states. “They don’t even realize the opportunities they’re missing. They only look at cash coming in the door.”
When practices come to Med3000, Schickele notes, their claims denial rates are typically above 10 percent. The RCM firm, which receives a percentage of collections, works with practices to get the denial rate below 5 percent, “because that’s our margin. If we can’t get these claims going clean, it’s never going to work for us. And the client will also be unhappy, because we have to keep calling their office to fix the claims. So both sides are incentivized to get those denials down.”
This is one key difference between a revenue cycle management company and a billing service: Whereas the latter merely handles billing, usually for a percentage of collections similar to that taken by RCM vendors, an RCM firm partners with a practice to improve its internal processes. Some RCM services also provide a practice management system and will train your staff to use it properly.
All of these management systems are Web-based, and practices typically pay an upfront fee for training and implementation. While that can be several thousand dollars per doctor, it might be worth it. Pediatric Health Alliance, for instance, was formed from the merger of several smaller practices, each of which had its own billing system. After looking at the cost of buying a new system for the whole group, the physicians decided to outsource instead.
RCM firms offer various technology options. Athenahealth requires clients to use its own billing and scheduling system. Med3000 gives customers a choice among several leading practice management systems, including Misys, Sage, GE, and Allscripts. And MedSynergies, a Fort Worth, Texas-based company, offers the GE Centricity and IDX Groupcast systems.
Especially if your practice is small, RCM companies may be able to provide a system you could never afford on your own. “We’re aggregating physicians to be able to deploy a high level of technology,” says Frank Marshall, chief operating officer of MedSynergies, which serves about 4,000 physicians in 35 states. In addition, RCM firms take care of software updates and server maintenance — something that Peter Masucci especially appreciates.
