Make your practice financially healthy while making your patients physically and mentally healthy.
Compared to other industries, healthcare’s billing and collections process is a tough climb. I call it the Mount Everest of invoicing, and you don’t learn how to climb it in medical school. Your goal should be healing, not versing yourself in the payment models of nearly 1,000 U.S. insurers. Thank goodness for modern technology solutions to these challenges, right?
But tech isn’t enough by itself. The key to making it more valuable is understanding the profitability of each healthcare encounter. Most physicians don’t know their precise expenses every time they do a hip replacement or fix a broken bone. Nor do they know how much insurers will eventually pay them. This leaves them operating in the dark when it comes to profitability. It’s putting the very survival of their practices at risk.
That’s why it’s time to place the burden in someone else’s hands. Here what that person should know, and what they should do for your practice and your tech.
Of poor technology and confounding payers
I’ve worked on major transformation and restructuring projects across all industries. My experience says that roughly half of all businesses don’t have a firm grasp on their service level profitability, meaning the profit – or lack thereof – from each sale or service.
I thought that I had seen it all. Yet I was shocked when I saw healthcare.
The average U.S. business writes off 1.5 percent of its billings. In healthcare, that figure soars to 8-17 percent. Worse, due to dated technology and confounding payment models, you’re often treating patients at a preordained loss.
Say you’re doing a hip replacement. Insurer A pays $3,000. Insurer B pays $2,000. Your final payment inevitably slides downhill from there.
Nearly one-third of your bills will initially be denied. It’s why the average physician spends 15 hours a week on administrative work. You eventually accept $2,500 from Insurer A – unaware that by simply filling out an additional form, you could’ve reached the $3,000 amount.
The same process applies to Insurer B. Unfortunately, you’ve never taken the time to analyze the true cost of the surgery. What if it’s $2,100? You’re not only battling for reimbursement, but your efforts won’t net your practice what the procedure cost.
This predicament becomes more alarming as medicine moves to value-based care. If that hip replacement fails under fee-for-service, you’ll be paid to do it again. Yet under the flat fee of the capitation model, the risk shifts to the doctor. Profitability means fixing patients’ problems the first time, keeping your patients healthy and having an intimate understanding of what each procedure costs. You need to know how many patients you can reasonably handle, and whether that fee will allow you to survive and thrive.
The same goes for bundled payments. If you don’t know the true cost of surgery or aftercare, you have no way of knowing whether you’re getting a fair share.
It’s time to hire business and technology experts. Even if their wages or fees run well into the six digits, it’s still cost effective. Remember those write-offs? The value of your new hires can more than offset those losses.
Physicians with whom I speak often balk at this advice. They’re resistant to change, particularly smaller practices. But they – and you – simply don’t have the time to become profitability-calculation experts.
The sophistication to thrive
A good business partner will run sophisticated analyses that quickly identify the true costs of operating your practice and calculate how much each procedure costs. They’ll identify improvements, such as where certain payers’ rates are too low, costs are too high, or which payment-denial areas need attention.
A technology partner will help your practice select and use modern tools effectively. It’s like hiring an outside accountant. You wouldn’t think of taking on a bookkeeper’s role. You certainly don’t need the added duties of an IT specialist.
This person may insist you upgrade your technology. Yes, this requires an investment. But, considering the savings of cloud-based payment structures and the sizable write-offs plaguing the industry, rewards come quickly.
Your partners, enabled by the tech they onboard, will identify opportunities with contractual rates and denial analytics, in addition to streamlining costs. If Insurer X is consistently paying 85 percent of the bill, you can begin to understand where those denials are coming from and how to solve them. Spread such gains across a roster of payers, and you’re suddenly looking at double-digit revenue growth.
Your new hires can also help you establish a data lake. Though the phrase might make your eyes gloss over, it simply means placing medical records, billing, and accounting information in one place. This allows you to develop a dynamic model to understand each procedure’s profitability, along with key performance indicators across operations and the business.
With business and tech partners, you’ll have a more nuanced view of your practice. You can begin to realize that, while the rates of Insurers X and Y allow you to operate in the black, the contract with Insurer Z has you destined for the red.
In a Doximity poll last fall, 88 percent of clinicians expressed concern over the surge in consolidation. Smaller players are conceding the field, lacking the backroom sophistication to survive on their own. But for providers large and small there are solutions that will quickly increase the practice’s profits and financial health.
Don’t be afraid of healthcare’s billing and collection Mount Everest. Let the experts conquer it so that physicians focus on patient care and be at financial ease.
Meade Monger is founder and CEO of CenturyGoal.