Balancing Your Payer Mix: A Critical Necessity for Your Practice

March 17, 2012

Do you have a balanced payer mix? Here are some things you can do to ensure your practice is financially healthy.

We all know that having balance in all things is imperative for a happy life. You have your work-life balance. I'm sure your financial portfolio has some balance. Your diet (hopefully) is balanced.
Is your payer mix balanced? If you find that one of your consistent payers has more than 20 percent of your A/R, then it is time to roll up your sleeves and take a look at what can be done.

For a financially healthy practice, it is very important to make sure your income is not reliant on one to three payers. If you are heavy with HMOs, workers' compensation, or liens, this is an immediate red-flag that your practice could be in financial danger. Most HMOs pay very little. Workers' compensation typically takes 90 days from the date the patient was seen for any correspondence at all from them. It typically is not good news, and rarely are you paid immediately. They always want chart notes, or they state they did not receive the claims, or request authorization. Then, you wait an additional 45 days to 90 days for a decision to be made. With liens, some pay within a few months, but a majority of them will pay between 12 months and 16 months after the last date of service. So, with any one or all three of these types of payers, your A/R is very 120+ heavy. That is not considered “healthy A/R.”

If you have a heavy Medicare population and you rely on their consistent payments, what would happen to your cash flow if Medicare's system had some sort of glitch and didn't pay for several dates of service? Relying on a Blue Cross- or UnitedHealthcare-type payer can also be dangerous when they slice their payment significantly. Cascading has become a more popular practice with some of the bigger insurance companies like the Blues and Aetna, resulting in a lesser amount for you, and them taking what used to be yours. I foresee others to follow this type of payment model in the near future.

So, what can be done about it? First, identify what percent each insurance class comprises of your A/R. For whatever class you would like to increase, make sure the following is done:

• Update your website with a list of the insurance you take, listing the ones you want to increase, first. Say something like, “Now Welcoming Cigna Patients.” Even if you've taken them all along, it's a great way to capture those types of patients, quickly.
• Have a front or back office person check the insurance websites to make sure your practice is listed as in-network - have that information updated twice yearly.
• Do you get referrals from other physicians? Make sure they have a list of the insurances you take.

Do you want to decrease a particular class? Try these ideas:

•If you want to decrease your lien population, place a financial “cap” on the number of lien patients you can accept at one time. Have a colleague that takes liens, as well? Refer the patient to them, and ask your colleague to do the same for you.
• Workers' compensation and HMO class too high? Take a look at your contracts to see if you can renegotiate your pay per visit, and if that is not an option, stop accepting that low-paying payer. It may seem counterproductive, but you can fill that spot with a higher-paying payer class, and still come out on top.
• As with increasing a class, to decrease a particular insurance don't market so heavily to the physicians who typically send you these patients. Spend your marketing time focused on the physicians who send you the higher paying patients.

These sound very simple, and they are! They will also cost you little to nothing to implement.

Your practice's financial health is extremely important in the smooth and continuous running of your business. It's up to you to decide what you want your payer mix to look like.

Next week, we'll talk about your denials. How to review the EOBs and what you can do about them.

Find out more about P.J. Cloud-Moulds and our other Practice Notes bloggers.