Robert Redling

When the U.S. Supreme Court upheld the Affordable Care Act (ACA) last June, the decision was cast as an affirmation of the individual health insurance mandate. For physicians, however, the new mandate is among the least important aspects of the law.

For physicians who accept Medicare or Medicaid, the ACA includes many provisions that will serve up more administrative burdens and regulatory risk.

Perhaps the most concerning are new rules aimed at reducing the cost of Medicare by cracking down on overpayments, including (but by no means limited to) fraud. Here's a guide to what's coming, and advice on what you need to do now to prepare.

Among its many provisions, initiatives, and amendments, the reform law dramatically broadened the scope of the False Claims Act, the federal law that allows the government to recover overpayments to its contractors, including healthcare providers, and to pursue allegations of fraud. Specifically, physician practices and other providers who take more than 60 days to report and return overpayments from Medicare and other federal health programs can face civil charges, even if the overpayment was caused by error.

"Now, if you get overpaid, even through an innocent mistake, and you become aware of it but don't promptly repay, you can be subject to prosecution under the False Claims Act for your failure to repay promptly," says Robert J. Saner, a partner in the Washington, D.C. law firm of Powers, Pyle, Sutter and Verville. "That has providers and those of us who counsel them pretty nervous."

Saner, who also is Washington counsel for the Medical Group Management Association, adds that the law's 60-day rule is troublesome, given the complexity of medical billing and the time it takes to track down what caused an overpayment.

"I'm not aware that the government has yet brought False Claims Act penalties under this ACA provision simply for allegedly missing the 60-day deadline to return an overpayment," Saner says. "But that will come, and when it does, everyone is going to get religion around this subject."

Until the government drafts regulations to address the expanded False Claims Act's application to physician practices and other providers, Saner suggests physicians work credit balances promptly, monitor for correct coding, keep an eye out for overpayments, and report issues to their Medicare Administrative Contractors (MACs). Saner does not expect MACs to take a hard line at this time, but he warns that future regulations could say otherwise.

An important step to reduce the risks to you and your practice is a comprehensive compliance program. Eventually, every health provider receiving payments from Medicare, Medicaid, and other federal healthcare programs will be required to have a compliance plan in place, says attorney Michael Ruggio, who leads the healthcare team at the LeClair Ryan law firm.

"The ACA has substantially eased the way to develop, refine, and prosecute False Claims Act cases, so your compliance behavior needs to be enhanced substantially," Ruggio says.

Not only is the government's ability to develop a False Claims Act case enhanced, but so is the ability of whistleblowers to bring cases, Ruggio says.

"It's important for physicians to understand that this is an expanding area of law and one that is going to expose your practice to more risk," Ruggio says.

While compliance programs have always been a good idea, they had not previously been mandated for most healthcare providers. The reform law changes that by requiring a wide range of providers - from solo physician practices to the largest integrated health systems - to establish compliance and ethics programs to continue participating in the Medicare and Medicaid programs.

The law also authorizes HHS to devise required core elements for compliance programs. Draft rules for skilled nursing facilities have already been rolled out; the agency will develop rules for other sectors of the healthcare industry, too.

While draft regulations for physician practices are still on the drawing board, count on them to reflect the Office of the Inspector General's (OIG) "

Seven Fundamental Elements of an Effective Compliance Program

." Those principles should form the basis of your compliance program.

Even when starting from a template plan, it's important to modify and expand it to the practice's unique risks, says Kevin Townsend, director of coding, compliance, and billing services with Doctors Management, a Knoxville, Tenn.-based consultant. But don't let that plan sit on the shelf, Townsend adds. "If the OIG comes in and finds an inch of dust on the document - that it is not a living, breathing plan, it doesn't speak well of the practice."

 "You can't just appoint the receptionist," Ruggio says. "They must be empowered to educate other employees, update physicians, call meetings, and, if need be, initiate corrective actions if there's a violation." Nurses, administrators, billing and office managers, and others with elevated responsibilities in the practice are good compliance officer candidates but must receive documented healthcare compliance training.

 Ruggio recommends compliance education for every new employee and annual refresher courses for all staff. Keep a file of the dates and content of each educational session, webinar, and other training that employees attend. "Include in the file a document the employee signs to certify they attended the course or read the material, and understood its content."

 Periodic chart audits -­ Ruggio suggests every six months, even if it requires hiring outside assistance - can help ensure that documentation supports the levels of service billed. "There is clearly a concern on the government's part with doing unnecessary medical services," Ruggio says. Documenting audit results, as well any as corrective actions and education efforts taken as a result of the audits, are also compliance plan musts, he says.

 "Once you've identified a problem, you have to document it and take direct, corrective action, which you also document," Ruggio says. "You are saying to anyone who investigates later that you took legitimate actions to deal with the issue and correct it."

 A user-friendly process to report fraudulent conduct should maintain the anonymity of both those reporting and those involved in the conduct. Additional communication mechanisms can include maintaining a compliance bulletin board, setting up an anonymous drop box, and posting the HHS-OIG hotline telephone number in a prominent location.

 The practice should publicize to employees its disciplinary standards, document findings of noncompliant conduct, and be prepared to issue sanctions to violators. Disciplinary actions can include reprimands, probation, demotion, suspension, and even termination and referral for criminal prosecution. The task gets especially tough when a physician is suspected. "Even if the person is an owner-partner, you need to take direct action," Ruggio says. "If you don't step up, you could be seen as a conspirator in a potential false claims act - the last thing you want to do."

 A small but growing number of practices are developing new compliance plans or revising old ones in advance of more specific regulations from the government. Townsend says his firm has already seen an upswing in requests from medical practices seeking help to revisit compliance plans or develop new ones.

"There's just so much more talk about it now and it's also fed by payers getting more aggressive with audits of practices' documentation, coding, and billing," he says.

A successful compliance plan sends a message to the staff, physicians, payers, and regulators that the practice is trying to prevent errors.

The seven elements described above were first published in the 

 in 1998, and experts have long advised practices to develop and follow compliance programs based on them. Although the reform law raises the stakes by beefing up enforcement of existing compliance rules, it would be wrong to say that practices should think about billing compliance only because of the ACA. A good compliance plan not only reduces the risk of costly False Claims Act allegations, it also reduces vulnerability to coding errors generally, as well as Stark violations and other risks.

"Compliance is the biggest risk area for physician practices, followed closely by the risk of thinking it is an unnecessary cost area," says Jim Hook, director of consulting services and principal with The Fox Group, based in Upland, Calif. "We don't have final rules for what physician compliance plans will look like yet, but they will come and so will enforcement, so it's better to start sooner than later."

Saner observes that few small and midsize practices have compliance officers, compliance committees, outside coders doing periodic claims audits, 24-hour-a-day reporting hotlines, and other elements of the full-blown compliance plans seen at large practices, hospitals, and academic medical centers.

"It has nothing to do with anyone's desire to not be compliant," Saner says. "It's just a matter of resources. Small practices are under a tremendous administrative burden from Medicare and private managed-care plans. They've got their hands full just getting through the day."

Perhaps, as Saner and other experts we contacted suggest, it's best to view compliance plans as preventive medicine to minimize mistakes that could end up costing much more than maintaining the plan. And, if the plan helps to increase accuracy in documentation and root out billing and coding problems, it could enhance the delivery of patient care and improve your practice's bottom line.

The OIG’s guidance to individual and small physician practices emphasizes that compliance plans must be active programs: "Compliance programs are not just written standards and procedures that sit on a shelf in the main office of a practice, but are an everyday part of the practice operations. It is by integrating the compliance program into the practice culture that the practice can best achieve maximum benefit from its compliance program."

Seven elements of effective compliance plans

The required components of mandatory compliance and ethics plans described in the Affordable Care Act are similar to the seven elements of compliance plans already spelled out by the OIG:

• Conduct internal monitoring and auditing

• Implement compliance and practice standards

• Designate a compliance officer or contact

• Conduct appropriate training and education

• Respond appropriately to detected offenses and develop corrective action

• Enforce disciplinary standards through well-publicized guidelines

 "Compliance Program Guidance for Individual and Small Group Practices" HHS Office of Inspector General, October 2000. (http://bit.ly/Physician-Compliance)

A key objective of the ACA is to rein in federal healthcare spending, so practices that accept Medicare should expect increased efforts to identify overpayment and fraud.

• Providers must now implement compliance programs in order to participate in Medicare and Medicaid.

• The law lowers the burden of proof for the government to bring False Claims charges against providers.

• Good compliance programs should follow the OIG's "

is a freelance writer based in Tacoma, Wash. He has been practice management editor for 

, Web content editor and senior writer for the Medical Group Management Association, and a speechwriter for the American Academy of Family Physicians. He can be reached via editor@physicianspractice.com.

This article originally appeared in the January 2013 issue of 

Articles

The Affordable Care Act will broaden the government’s efforts to detect Medicare overpayments and fraud, and will require you to implement a formal compliance plan. Here’s how to get ready.

Developing a Medical Practice Compliance Plan

Patients say they want transparency and instant access to their healthcare information, yet most remain on the sidelines when it comes to using these tools. Maybe that's no surprise when many physicians are still getting up to speed on EHRs. That may change - and soon. Stage 2 of the federal EHR meaningful use incentive programs requires that eligible providers make more healthcare information available electronically to more patients starting in 2014 - personal health records (PHRs) can help physicians reach that goal.

Still, meaningful use is not the primary motivator for PHR adoption, say medical practices using the technology successfully. Instead, it is driven by patient expectations, adept integration of information systems, and demands for value from physicians, patients, and payers.

So far, the PHR installations that seem to gain the quickest acceptance from patients share three elements: user-friendly technology, tie-in to a medical practice's website, and the encouragement of physician advocates.

Here's more information on what's driving the adoption of PHRs, what value they bring to practices and patients, and key tips for implementing them and encouraging patients to use them.

Although recent surveys indicate disinterest in PHRs among patients - about 10 percent of Americans used them in 2011, according to Deloitte Center for Health Solutions - Brock Morris, chief information officer at Redmond, Wash.-based Pediatric Associates, hears a different story from parents of the practice's patients. That's probably no surprise, he says. Many of the parents bringing their children to the 85-physician multisite practice also work for the city's top private employer, Microsoft Corporation. "The parents of our patients tend to be a technically-minded demographic," Morris says. "We get asked all the time: 'What new services and solutions can you provide us?'"

PHRs, he adds, are a natural extension of his patients' parents' everyday experiences. "The parents are used to having information at their fingertips and being able to control it. They are frustrated when they want their child's immunizations or a growth chart and are told they have to wait a few days. In almost every other environment today, people get information quickly and can manage it themselves."

As younger, more tech-savvy patients become more active users of medical practices, the drive toward PHR adoption will increase. Indeed, Morris notes that younger generations of patients, including the parents he hears from at Pediatric Associates, gravitate to websites, text messaging, and other forms of communication.

Pediatric Associates is one of several practices around the nation involved in pilot testing interfaces between Microsoft's Web-based HealthVault PHR and their EHRs - Greenway's EHR in the case of Pediatric Associates. The approach aims to tie PHRs to EHRs via websites and, potentially, tie both to the medical devices patients use at home.

Morris says the beta version his practice is trying out allows parents to pull continuity-of-care documents (CCDs) about their child's care from the EHR and into HealthVault. Parents also can hook up their child's glucose monitor - and soon, other home health devices - to electronically enter data into the PHR to share with the child's medical team.

The pilot projects hope to overcome a barrier hobbling the prospects of free-standing, or "untethered," PHRs - lack of tight integration with a patient's clinical records and his provider's website.

Any individual can use HealthVault on the Web or via apps to create untethered accounts. But because HealthVault also supports common exchange formats, like CCDs, it essentially becomes a tethered system capable of electronically connecting with home health devices and a configured EHR. 

When a PHR system is tied to a practice's EHR via a website it becomes a powerful tool, capable of drawing in patients to schedule appointments, view test results, renew prescriptions, and send messages to their physicians, says Johnathan Samples, executive vice president of research and development for Greenway Medical, which focuses its product line on the ambulatory care market.

"We're seeing the personal health record grow from just a single standalone repository of information to a system that is interoperable with other devices and mobile applications," Samples says. "The inputs are coming from a multitude of entities, not just the electronic health record."

Indeed, health systems that have implemented PHRs, such as Kaiser Permanente and the Cleveland Clinic, are now trying to tie together home medical devices, appointment scheduling applications, test results delivery, patient-physician e-mail, and other features. The result, they hope, will be a PHR that supports a coordinated, information-rich virtual medical home for each patient.

"A lot of the patient-centered care models and accountable care models center around getting the patient engaged and communicating with the patient," Samples says. "The personal health record is a perfect way to do that."

Although not a primary driver of PHR adoption at present, meaningful use will make more inroads on the 90 percent of patients yet to embrace the technology. To qualify for meaningful use payments, eligible providers must provide at least half of their patients with electronic copies of their health information (including diagnostic test results and problem lists) upon request, as well as clinical summaries for each office visit.

In Stage 2, providers can expect more fuel for the growth of the PHR market. New criteria include secure patient-physician messaging, and enabling patients to view, download, and transmit their health information online.

Federal Health IT Strategic Plan: 2011-2015

, in which the government asserts a goal of empowering individuals with information about their health in an electronic format.

PHR usage among patients doesn't just happen; it must be promoted. And there's no better promotion than having a powerful, useable, and well-connected system ready for patients to use, says Pamela Larson, director of consumer health at Kaiser Permanente Internet Services Group.

By June 2012, some 3.9 million of Kaiser's 9 million members were registered for My Health Manager, a home-grown PHR tied into the health system's patient portal. While not every registrant is a frequent user, usage rates in the first half of 2012 are encouraging:

• 2.5 million lab results are viewed by patients online monthly;

• 1 million e-mails are sent by patients between patients and physicians monthly;

• 827,000 prescriptions are refilled online by patients monthly; and

• 230,000 appointments are scheduled by patients monthly. {C}

My Health Manager users gain 24/7 secure online access to their lab test results, eligibility and benefits information, and secure e-mail messaging. The organization's Epic-built EHR, Kaiser Permanente HealthConnect, ties into the PHR.

"By making these tools and resources available to our members, we are able to see a level of engagement that we were not able to see in the pen and pencil world," Larson says.

While a well-designed PHR helps patients stay in touch with their physicians, Kaiser's internal feedback indicates that convenience is the biggest attraction for patients, she says.

In early 2012, the multistate health system upped the ante by optimizing its website for convenient viewing from smartphones, tablets, and other mobile devices. The result? In just the first five months of 2012, some 6.4 million visits to the Kaiser website. Sixteen percent of its total traffic in that period came from mobile users.

"People definitely want to do things on the Web, but the convenience of having your handheld device wherever you are in the world just adds to the benefit the PHR brings to patients," Larson says. "If usability is not working, it drives people away."

Samples, of Greenway, says there are three crucial steps when it comes to engaging patients on PHRs:

 "Physicians and staff have to talk about the PHR to patients," he says.

 "The PHR should allow patients to complete forms online, request appointments, ask for medication refills - functions that provide convenience," he says.

 "Secure communication with the physician is important because the patients will eventually leave (the PHR) if there is no conversation going on with the physician," he says.

Prior to promoting its PHR, like Kaiser, the Cleveland Clinic also spent time determining what aspects of a PHR would appeal most to patients, says internist Martin Harris, chief information officer, Cleveland Clinic. First, the clinic engaged physicians in the PHR's design. Then, it formed patient focus groups to determine what features to offer.

But it didn't stop there. It promoted the system through its website, printed materials, and signs in medical offices. Patients also received verbal encouragement to sign up during visits; and others were drawn in by kiosks conveniently placed in offices.

Harris says that promotion and focus on ease of use paid off. Its PHR, MyChart, blossomed from a small pilot study with 3,000 patients in 2005, to a system with 450,000 users in June 2012. Each month, between 5,000 and 7,000 new users sign up, he says.

A chief concern of physicians early on at the Cleveland Clinic was whether the PHR would give patients the ability to see test results or other diagnostic findings before their physicians had a chance to review them, says Harris. The initial usage guideline called for a five-day delay when releasing test results. That was reduced to three days after patients complained about the time lag. Now, except for new diagnoses of cancer or other sensitive matters, the system automatically populates the PHR after two days, regardless of whether the physician has seen test results. Physicians can also choose to release information sooner or put it on hold.

"It's important for all patients to be informed, but this information has real value, too, for the acutely ill," Harris says. "The office encounters can be very complex, with several events in a short period of time. With the PHR, the physician has a way to get more information and send reminders to the ill patients without requiring them to come in every time." {C}

A PHR can also erase the potential delays and missed opportunities when patients and physicians cannot meet face to face for important follow-up conversations. For instance, Harris credits the PHR, patient portal, and Web-accessible EHR for helping him quickly follow up with a patient after a concerning health issue surfaced in an office visit. By the time the patient's test results returned from the lab, the patient was off to Germany and Harris was on his way to San Diego. Harris was able to log in to the patient's record in the EHR from San Diego, assess the concerning test results, and then contact the patient in Germany for timely follow-up. That beats playing transcontinental phone tag, Harris says.

A more commonplace use of the PHR and its messaging capabilities involves stroke patients, Harris says. After discharge from the hospital, each stroke patient is signed up in MyChart so that the PHR can send patients functional status questionnaires to complete and return. "Formerly, the patients had to come into the office, but now we have the ability to get that information at the intervals we desire, and the patients don't have to leave their homes," Harris says.

Harris says the PHR has already reduced incoming phone call volume at many Cleveland Clinic medical practice offices.

"[MyChart] actually makes the office more efficient because the telephone has less demand and people who are calling in about an acute illness are getting through faster because their calls do not get backed up behind people asking for prescription renewals," he says.

But while PHRs and practice websites lead to smoother internal work flow, for instance, for patients the real benefit is clinical, Harris says. For example, scheduling is a Web-portal tool many patients wish to use. "The health information technology industry has always defined scheduling as an administrative tool, but at the Cleveland Clinic we think of it as a clinical tool, important to giving the physicians and patients a common understanding of what comes next," Harris says.

Personal Health Records (PHRs) are offered through employers, health insurers, health providers, and independent vendors. To get an idea of what's on the market and how many vendors there are, visit PHRsToday (

 ), which includes reviews and other resources.

Here's an overview of some of the key types of PHRs available:

Tethered PHR. These PHRs are integrated or connected with the information system of the provider organization, health plan, or employer. They allow users to view portions of their clinical record or an abstract of their health record or claims data. Some systems allow patients to add information about their health status, workouts, etc.

EHR-, website-powered PHRs. These systems give users access to portions of their clinical record through their provider's website. Functions can include secure messaging to physicians, appointment scheduling, prescription refills, and patient-generated requests for documents, such as immunization records.

Untethered (also called "standalone") PHRs. With no direct connection to the provider's or health organization's EHR, the user must type in, scan, or download the health information he wishes to track. Patients can move the system and its information with them if they change physicians, insurance companies, or employers. The information is not necessarily available to the patient's provider. 

Although public and private incentive programs are moving more medical practices to offer PHRs, the momentum also includes patient expectations and well-integrated information systems. Practices considering integrating PHRs should consider the following:

• The need for staff to promote the benefits of PHRs to patients

• Increased patient engagement in their own health

• Ease of access to medical information for both providers and patients

is a freelance writer based in Tacoma, Wash. He has been practice management editor for Physicians Practice, Web content editor and senior writer for the Medical Group Management Association, and a speechwriter for the American Academy of Family Physicians. He can be reached via 

This article originally appeared in the October 2012 issue of

Do you know what a PHR is? Hint: It's not another term for an EHR. A personal health record is patient-facing and patients are increasingly coming to expect it. Here's what you need to know about how these tools can help you engage patients in their own care.

Personal Health Record Usage and Medical Practices

Is your practice struggling to monitor payer performance? You may share Barbara Sack's view.

"Some days [monitoring payer performance] seems like the bane of my existence," says Sack, administrator of Midwest Orthopedics in Shawnee Mission, Kan. "It's another reason that it now takes more billing people than clinical people to see a patient, which is a frustration for all of us in healthcare."

When approaching the task of monitoring payers more closely, consider the advice of P. J. Cloud-Moulds, owner of Medical A/R Recovery, and a blogger on PhysiciansPractice.com.

"Just like a doctor might say to a patient, 'this is going to hurt but, in the long run, you are going to feel better,'" Cloud-Moulds says.

Some practices focus too much on payment rates when considering the value of their payer contracts, giving too little consideration to payer performance as defined by payment timeliness and accuracy, administrative hassles, denial rates and reasons, and more. Understanding a payer's performance as a partner in your business requires a complex and nuanced analysis of metrics that haven't always been easy to come by.

Yet for most practices, monitoring payer performance is usually worth the time and effort, even if it requires more staff, experts say.

You can simplify matters by focusing only on your biggest payers: Create a basic spreadsheet with your most important private payers and, within that set, scrutinize only those payments for the services that make up the majority, say 85 percent, of your practice's gross charges. It may be as few as 25 or 30 CPT codes.

Although even that number of codes can be onerous to monitor on a regular, payer-by-payer basis, consider the potential payoff of a careful performance-monitoring program: major commercial health insurers had an average claims-processing error rate of 19.3 percent in 2011, up 2 percent from the previous year, according to an analysis by the AMA.

And in athenahealth's just-released PayerView report, an analysis of payer performance based on real claims data from the national billing and practice management services company, payer performance has been declining as insurers shift resources away from improving their claims-management process and toward meeting new government regulations. Joe Hendrickson, vice president of athenaNet Intelligence, which compiles the annual PayerView data, says that the company's analysts are not expecting payer performance to improve next year. In fact, after several years of steady improvement following the debut of PayerView in 2005, it's possible that payer performance has more or less topped out, Hendrickson suggested.

The latest edition of PayerView, found that payers, overall, are taking longer to pay, that fewer claims are getting paid on their first submission, and that higher percentages of what's owed to practices are being pushed onto secondary insurers and other parties from which the practice must seek payment separately.

In other words, athenahealth found, it's getting harder to get paid.

*How are your payers performing? Find out with our in-depth national and regional data: 

Cloud-Moulds suggests that any program for assessing payer performance should include tracking the number of days each of the major payers' claims spend in accounts receivable (A/R). Faster pay means better cash flow. Additional areas can include watching for:

• Inappropriate application of coding edits;

Billing services and software programs can help with many of these tasks, but you may still need additional staff to manage the effort and make it pay off, Cloud-Moulds says.

"It's more monitoring and I'm sure that when we talk about it, the doctors are thinking, 'My staff is already too busy to do all of this monitoring,'" Cloud-Moulds says. "Adding a new position is certainly going to hurt a bit upfront but it will save you so much more in the long run."

It's tempting to jump right into the payer-monitoring effort by devising a report card, but make sure to get a few things in order first, says Dan Rodriguez, founder and president of Kareo, a practice management and medical billing software firm.

Rodriguez suggests a four-point plan to lay the groundwork for spotting payer payment inaccuracies.

 "Trust but verify," Rodriguez says. "We still see a lot of practices taking it on faith that they are going to get paid accurately instead of approaching this relationship with a healthy skepticism."

Because each payer has its own take on payment rules, coding, code modifiers, bundling, and so on, it's important to know what your contracts say. Keep a basic spreadsheet that shows contract highlights, he says. (See the box "The Contract Spreadsheet.")

Obtain data files of the fee schedules from your largest payers. Focus on your most common 20 to 30 procedures, or those that make up the majority of your gross revenue, Rodriguez says. Load those payer schedules into your practice management system or, at the very least, keep a basic spreadsheet for the top four or five payers by volume. If you are contracted to receive a percentage of Medicare, make sure the payer uses the proper year's Medicare physician fee schedule and does the math correctly, Rodriguez says.

If you can use an automated payment reconciliation system tied into your practice management system, it may not be hard to crank out daily reports showing variances between expected and actual payments. A billing service also may offer this feature.



Restricting oversight to just your largest payers and your most frequently billed codes will make good sense if you must monitor via the spreadsheet route instead of a fully automated solution. A more limited view also makes sense if your electronic data systems are not well integrated and require hands-on attention to produce variance reports. In those cases, conducting sampling audits of your five largest payers by volume will be worth the effort, Rodriguez says.

"Auditing for these variances can uncover some very attractive revenue," he says. "Our customers who are doing these things are collecting 12 percent more on average in insurance billing." 

When it comes to filing appeals, many practices simply run out of time to handle the workload before an appeals deadline closes. Often, they lack sufficient staff to push all the paperwork and have not tried to automate the process. Even creating a small repository of template appeal letters will help (download the sample appeal letters at 

While you are hard at work looking for mismatches between contracted rates and actual reimbursements, there are other components of the payer-medical practice relationship to watch. They include:

 Track by payer and watch for those whose days in A/R (time between claim submission and payment) are increasing or remain stuck at levels above industry averages.

 At least once a month, pull reports from your practice management system to show all denied claims. Sort by payer, denial reason, and dollar amount. Patterns may emerge to show if it is the practice or the payer causing the problem. Be wary of medical necessity denials and studiously appeal each inappropriate denial.

By monitoring EOBs, you are more likely to avoid writing off a portion of a charge when you should have appealed. Your staff may be writing off a health insurer's unfounded discounts instead of reworking those claims or filing appeals. A payer may cause noncovered service-related write-offs to increase by separating certain items (such as an EKG) from its coverage of routine preventive exams.

While the focus is often on the hard facts of payer performance, a report card is more useful with qualitative input.

Lucien Roberts, vice president of Pulse Systems, Inc., and a former practice administrator, suggests asking each employee in the practice to grade the major payers from A to F. Graders should include everyone who touches anything to do with a payer - front desk check-in, billing office, physicians, nurses, medical assistants, referral nurse, and so on.

"Ask them to assign the grades based on what it's like dealing with that payer from their unique perspective," Roberts says. Also ask graders to write comments on why they've given a high or low grade.

The goal of the subjective report card, Roberts says, is to give the practice's administrator a much better feel for what it is like to work with that payer. With these insights in hand, the administrator is in a better position to advise the practice's leaders when the time comes for the practice to decide whether to renew a contract, try to renegotiate it, or let it drop. 

You can build a sophisticated database or buy specialty software, but many medical practices find that a basic Excel spreadsheet program meets their needs for keeping track of payer contracts.

• Rates and conditions, such as percentage of Medicare for E&M codes and carve-out for other services;

• Amount of inflation adjustment factor (if any); and

• "Gold card" status services, if any (often for specialists - specific services or codes where preauthorization is not required).

This article originally appeared in the July/August 2012 issue of 

The latest data from PayerView, the annual ranking of insurers from billing services and software company athenahealth, shows payer performance in decline. But what about your payers? Here's advice on how to monitor the performance of your own top payers, plus key data from national and regional payers.

Understanding Health Insurance Payer Performance

Today's interlinked practice management and EHR systems can spit out reports on almost every conceivable measure of practice performance.

Want to know the number of new patient visits last week? No problem.

Want to view those numbers by payer? Easy.

Curious about the number of work Relative Value Units (RVUs) each provider produces per square foot of leased clinical space in your satellite clinic versus the main office. It's just a click away.

Now, add in all those reports from your payers, local hospitals, bank, outsourced billing vendors - can you say "information overload?"

There truly is gold in that mountain of feedback, reports, charts, dashboards, and such. The problem is selecting the numbers that best reveal the status of your practice's financial health.

We asked practice management experts and health system leaders the key performance indicators they use to keep tabs on a medical practice's financial health. Here's what they told us.

A medical practice needs two things to stay in business: patients and income, says practice management consultant Elizabeth Woodcock. But you won't get the income if you can't bill for it and collect it successfully. Here are the indicators that every practice needs to watch:

Days in accounts receivable outstanding (DRO). 

This tells you how long it takes on average to collect a day's worth of gross charges. For example, Medical Group Management Association (MGMA) surveys found that it took 31 days on average in 2008 for family practice groups to get paid, and almost 41 days for orthopedic groups.

Persistently high DRO or a big increase from month to month can signal a host of problems, Woodcock says. They include:

• Excessive claims rejections caused by patient registration errors;
• Failing to confirm patient insurance status before each appointment or service;
• Lackadaisical collection of patient copayments, deductibles, and other amounts at the time of service;
• Tardy filing of claims;
• Errors in coding;
• Incomplete documentation of services; and
• Weak efforts to rework denied claims.
• Be sure to subtract patient credits before computing the days in accounts receivables.

"A big credit balance deflates your receivables artificially and leads you to think you are doing better than you are," Woodcock says.

Administrative errors can produce those high credit balances. A common cause is when patient copayments and deductibles collected at the time of service are not linked to a specific charge. The credits problem will only get worse as more patients move to health insurance plans with high deductibles, Woodcock says.

"At the typical small family practice, it would take just one person on the front desk who isn't trained to add $1,500 to $2,000 in unnecessary credits in one day," Woodcock says.

Aging accounts receivables - balance over 120 days.

 The longer an account remains unpaid the more likely it will turn into bad debt that the practice will have to write off, Woodcock says. It is not out of the ordinary to have 15 percent to 18 percent of accounts receivable older than 120 days, she says. Reviewing this aging debt by payer can be helpful because you need to know if the portion owed by patients is increasing and why. Patient accounts are notoriously hard to collect and at higher risk of becoming bad debt the longer they go unpaid, Woodcock says.

This number reveals your success collecting the money you are entitled to collect. Practices should be able to hit a 95 percent rate or higher, Woodcock says. This net amount does not include contract adjustments so what remains is mainly bad debt, charity care, or administrative errors - all of which the practice can prevent, she points out.

New patients as a percentage of total patients.

 A National Ambulatory Medical Care Survey found in 2008, that new patients accounted for 7.9 percent of visits to primary-care physicians, 16.2 percent of visits to medicine specialists, and 20.1 percent of visits to surgical specialists. Averages will vary by specialty and community; the rates also should be higher for new practices and new physicians.

"This number is important even for primary-care physicians who are established because patients move away, transfer, pass away," Woodcock says. "It should be a red alert if you aren't getting many new patients or this percentage starts falling."

Charges and collections can vary quite a bit between practices, even in the same market. The target number also will depend on your specialty. Looking at collections in terms of RVUs reveals practice financial health much more clearly than the standard collections ratio, which is collections divided by charges. A favorable collections ratio could merely be the result of setting low fees, says Ashleigh Finley, director of business analytics for Halley Consulting Group.

"Comparing collections per production unit to the benchmarks for your specialty is what really shows how you are performing, and how well your practice is collecting for each unit of what you produce," Finley says.

As more patients owe higher deductibles and copayments, it's critical to collect these amounts before the patient leaves the office. Unfortunately, it's a process many practices have yet to master. The research paper "Practice Perspectives on Patient Payments" by MGMA found that practices failed to collect time-of-service payments from patients about 30 percent of the time.

"Patients are much less reliable payers than commercial and public payers," notes Finley. "That money is very difficult to collect if you don't collect it at the point of service," she says.

MGMA's analysis of its cost surveys shows that 52 percent of better performing practices collect between 90 percent and 100 percent of patient copayments at the time of service, compared with just 44 percent of other practices surveyed.

 Finley suggests tracking certain expenses as a percentage of net patient revenue. At minimum, track and view monthly your physician compensation and benefits, staff costs, clinical supplies, and building and occupancy as a percent of net patient revenue.

Beware of viewing some costs categories too-narrowly. For example, staffing costs may be going up, but is physician production also increasing? Finley suggests looking at staffing costs as a percentage of the medical revenue or work RVUs each provider generates.

MGMA's examination of practices that bested their peers in profitability in 2007 found that the better performers had higher staff cost per full-time-equivalent (FTE) physician ($184,209 compared with $153,743), but also produced significantly higher medical revenue after expenses per FTE physician ($280,000 versus $214,860).

Woodcock and Finley both suggest viewing the key practice performance and revenue numbers at least monthly, tracking trends from month to month, and comparing the data to benchmarks. External benchmarks can be obtained from MGMA, the American Medical Group Association, National Society of Healthcare Business Consultants, and many physician specialty associations.

Be careful with benchmarks, cautions Marc Halley, president and CEO of Halley Consulting Group. Don't mix and match data, for example, pulling physician compensation from one survey and physician work RVUs from another survey; you may end up setting unreasonable expectations for your practice's physicians or staff.

Another benchmarking pitfall is looking at benchmarks that are not at the median. Extraordinary performance at the extremes may reflect a small sample size with unique circumstances that don't apply to your practice or community, Halley says.

"The best benchmark is your own internal trend," Halley says. "Your target needs to be what it takes for you to remain financial viable."

Gene Good, senior management consultant with Doctors Management, recommends adding access measures to your dashboard of key performance indicators.

"Seeing patients is how you generate income," Good says. "The number of patient visits and the receipts per patient visit determine your monthly income, so look at whether you are making full use of the physician's time to see those patients."

Good suggests viewing each month's performance indicators for:

Compare the hours physicians want to work each week with the hours they are actually available to see patients. It's a number that can be obtained from the practice management system by calculating what percentage of each physician's and nonphysician provider's daily schedule was actually filled. Alarm bells should go off if the ratio falls below 80 percent, he says.

 On average between 5 percent and 7 percent of patients fail to show up for their appointments. Each missed appointment that goes unfilled by another patient is a direct hit to the practice's bottom line; in other words, it increases practice overhead for that month.

"Look at your system of patient recalls and patient reminders. Is your mechanism of getting in contact with patients effective? Are they getting appointment reminders one or two days prior?" Good asks. "Minimize no-shows and you maximize the physician's time."

To get at the causes of no-shows, look at two additional access measures: average time to next appointment and the results of periodic time-motion studies of patient flow. Good recommends performing a time-motion study of patient flow - from check in through check out - at least every other year.

"Do those things right - patient visits are beneficial and timely, appointment scheduling is timely, and you give timely responses when patients call for information - and you are keeping those patients for a long time," Good says.

Tracking data is only the beginning. In addition to reviewing the information, managers must work with staff and physicians where changes are needed. With more than 100 locations and almost 900 providers, engaging physicians was no easy task for Swedish Medical Group in Seattle. At one point, the hospital-owned system's financial department was producing 200 reports a month. Now, using an electronic dashboard powered by Athenahealth's Anodyne system, each physician in the group logs in monthly to view a personal dashboard. On a single computer screen are several performance indicators in a convenient graphical display which physicians can manipulate to get more information.

"We believe that physician engagement is essential so we are very transparent with them about what's going on in their practices," says Ray Williams, senior vice president of Swedish Medical Group.{C}

A new physician's benchmarks might include progress against an expected growth rate of patient volume. Established physicians might view their progress on clinical production to reach desired compensation levels.

To encourage physicians to help the Swedish groups maintain patient access, all physicians see their patient volumes benchmarked to how many patients they wanted to see on average. Physicians also view work RVUs monthly and get two views of their payer mix: total charges and patient volume.

Other indicators may vary by specialty. For example, primary-care physicians might view information about their RVUs, patient visits, and collections.

"If we can get the physicians to focus with us on quality improvement, customer service, and access then the economics will follow those three areas," Williams says. "That's where the alignment between the physicians and hospitals and health system can happen."

You may not have 900 physicians to align but just as much care should go into keeping them informed, adds Woodcock.

"Whenever you develop a report, pretend that you will not be sitting there when the doctor reads it," she says. "Use graphs, define key terms, and add a short summary explaining the report."

A regular diet of key indicators can produce better practice financial results. In other words, you may get what you measure.

"You can't manage what you can't - or don't - measure" goes the old business axiom. Among the important financial management indicators medical practices should keep an eye on are these four, shown with national medians for selected types of practices from the most recent Medical Group Management Association Cost Survey.

You've purchased the technology needed to keep tabs on your practice's operations. Now make sure you're looking at the right reports.

Author | Robert Redling

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