Hidden Treasures in Payer Performance

September 4, 2008

There are many reasons to be annoyed with practice economics: Maybe it’s time to see what you can do to change things to your benefit.

There are many reasons to be annoyed with practice economics: Medicare’s annual threat to reduce reimbursement, third party payers seeking ways to ratchet down payments are just two. But you do have some control. Maybe it’s time to see what you can do to change things to your benefit, such as renegotiating payer contracts. Done right, it’s an effective strategy to boost practice revenue, and before you roll your eyes, rest assured that it can be done.

Case in point: I was recently in a practice that was seeing far more patients than average, and netting far less. Their expenses were under control, but after analyzing their payer mix, it was clear that this group would need to renegotiate certain contracts or make the tough decision to drop payers. One payer, who represented 10 percent of the patient panel, was reimbursing less than it would cost to treat a patient. Ouch!

To get a better picture of what your payers are paying, start working the numbers. Collect payment data for a six month period and put it in a simple spreadsheet that examines your top five payers and code utilization. You’ll want to compare the following:

  • Percentage of total revenue for each payer. This will tell you if you are top-heavy and, therefore, vulnerable.

 

 

  • Average reimbursement by payer for each of your top ten CPT codes, compared to your fee schedule. Also calculate average reimbursement by payer when the top ten codes are combined. In other words, where are you taking the biggest hit?

 

 

  • Analyze reimbursements against your average cost to see a patient. This can be estimated by dividing total revenue (over a six month period) by the number of patient visits in the same period.

 

 

  • Compare your average costs and reimbursements per patient to the national average using data available through your specialty society, MGMA’s cost survey for physicians, or the Physicians Practice Fee Schedule Survey.

If this analysis reveals a bleak picture, there are things you can do. First and foremost, develop a strategy to improve your payer reimbursements. Examine your practice performance and develop how you’ll renegotiate your contracts. Here are a few points to consider:

  • How much does your payer need you? If you are only one of a few physicians in your specialty serving a large pool of patients, this is a big advantage.

 

 

  • What do you do well? Are your emergency admittance rates and days in the hospital lower than comparable practices in your area? Are your patient satisfaction scores stellar? If you offer open access scheduling or some other patient-retaining service, tout it.

 

 

  • Seek out pay-for-performance initiatives that guarantee higher reimbursement rates or bonuses for top performers. You might be surprised how much this can add to your bottom line.

Next, if negotiation fails, consider dropping your worst payers. Remember, this doesn’t mean you are abandoning your patients. You can see patients out of network; just make sure you send out a letter informing your patients that you are no longer contracting with their insurance plan, but would like to continue their care. Be careful not to paint an unfavorable picture of their insurer.

 

While you’re at it, tighten up all of your financial policies, such as collecting copays upfront before treatment.

Most importantly, develop a plan and stay in charge of your own future. By focusing on your strengths -- providing great customer service, creating an environment where patients are at ease, and giving excellent medical care -- the rest will come easier.

Judy Capko is a healthcare consultant, speaker, and author of the popular books “Secrets of the Best Run Practices, 2006” and “Take Back Time, 2008.” She is a popular speaker at national and regional conferences. Judy is the owner of Capko & Company, www.capko.com, based in Thousand Oaks, Calif. She can be reached at judy@capko.com.