Management: Fixing the Leaks

October 1, 2008

If you’re trying to go broke, our list of common money-losers will get you there fast! We can show you how to tighten those nuts and bolts, and stem your cash drain.


Can you imagine having your own personal biller assigned to you?

That’s essentially what each physician and nonphysician provider at Hawthorn Medical Associates had two-and-a-half years ago, when Matthew Nivison came on board as the practice’s patient business manager. With 60 people in the billing department and 68 providers, “it was almost a one-to-one ratio,” he recalls.

Yet that ratio was necessary given the setup at the time. “The clearinghouse we were using couldn’t get to some of our payers. We would send electronically, but then they would drop to paper and send. We were getting tons of [timely] filing limits.”

Today, the Dartmouth, Mass.-based multispecialty practice uses Navicure, a Web-based clearinghouse with a rules-based claims scrubber. Denials now come back within hours or even minutes, not 30 to 40 days - the previous standard. Average days-in-A/R is a low 34 days. Cash-on-hand is up 7 percent. And with a current billing staff of just 36 people, Hawthorn Medical Associates has saved more than a half-million dollars in salary and benefits by not needing to pay a larger staff.

Persisting with the wrong technology is one of many in our list of common ways practices lose money - usually without knowing it. Most practices are committing one or more of the money-sucking mistakes on our list. Is yours?

The wrong billing technology is just one of many IT-caused cash drains killing practices. Want another? Well, is your front desk using an old-school light or flag system to alert your nurse to a patient’s arrival? We say that’s a no-no, because these tools divulge so little useful information: Which patient? Why is he here? Do you need to check for his lab results? Your staff must spend extra time on these questions before rooming the patient, slowing down their work flow and reducing - significantly over time - the number of patients you can see. Instead, use readily available tracking software to flow your patients through appointments quickly and accurately.

Here’s another example: Getting patients back in for annual physicals, rechecks on PSA levels, and the like is difficult, as is keeping track of who needs to come in for what. Take the tedium and time waste - read: money waste - out of this by using the appointment recall function on your practice management system. You do have an up-to-date practice management system, right? Keeping this practice underpinning as technologically leading edge as possible will save you big money, simple as that.

You let others take your money

Two out of three physicians will be victimized by embezzlement at some point in their careers, says practice management expert Elizabeth Woodcock: “And most embezzlers don’t want five dollars. They want $50,000.”

Apparently, stealing from busy docs is disturbingly easy. A common scenario? An employee - perhaps a nurse in charge of exam room inventory - sets up a fake company with a collaborator, often a relative, at the helm. She regularly “orders” supplies from there, and you sign off on the invoices. The price on the invoice is inflated by, oh, 30 percent or so, which she and her partners pocket before paying the real vendor through the fake company.

Another way to pick your pocket is through bogus refunds. Legitimate refunds are common within practice finances - overpayment on a copay, for example. Trouble is, says Woodcock, there’s usually no oversight of refund processing, so it’s easy to approve fraudulent payments to associates. All it takes is setting up a real-looking patient account to start the erosion.

Put controls in place. Make sure at least two people are involved in any transaction where money changes hands. Also, review your accounts regularly, looking for patterns. Patient refunds are common, but not to the same person over and over. Finally, be wary of the dedicated employee who refuses to take a vacation: It may seem like dedication, but thieves know they are more likely to get caught when they lose oversight, even temporarily, of whatever operation they’re stealing from, so they often guard it zealously.

You’re a pushover with payers

Renegotiating payer contracts is as much fun as cleaning the deep fryer at Burger King, only greasier, so it’s no surprise that it ranks below the bottom of many practices’ to-do lists. Cheris Craig, practice manager for the six-physician, Atlanta Women’s Obstetrics & Gynecology, says it’s particularly tough if your practice is small, offers a common subspecialty (such as obstetrics), and has a lot of nearby competition. “Many carriers won’t even start negotiations with our practice,” she says.

What to do? Stop selling yourself short, stop taking your cues from what “they” say, and don’t allow the assumption that you won’t succeed to be your excuse for not even trying. Occasionally, you will succeed in affecting changes in payer policies - and those changes will add up, but only for the practices that ask. Woodcock says that in her city (also Atlanta), “we have a lot of Medicare Advantage plans. They [tend to] pay 85 percent of Medicare, but if you pick up the phone and say, ‘You’re Medicare. You’re supposed to pay me Medicare rates,’ they usually say ‘Oh, OK’ and do it. But nobody picks up the phone.”

Before you pick up that phone, though, arm yourself with the facts. Gather all the numbers you need, including reimbursement rates and denial rates compared to other payers. Wills Family Clinic in Sherman, Texas, purchased Abaxis’ Piccolo in-house lab about a year and a half ago. Every time a payer contract comes up for renewal, the clinic’s office manager, Becky Sanders, contacts the carrier and requests reimbursement coverage for the practice doing its own labs. She explains how X percent of the clinic’s patient load is with that payer, and if the clinic does its own labs, it saves the payer [enter-calculated-amount-here]. “I really don’t get much resistance,” she says. “They’re willing to look at the numbers.”


In most places, payers are reluctant to reimburse practices for lab work. But the story is different in rural areas where large lab chains like LabCorp may not have a presence. Sanders makes sure she points out that for patients at her practice, an hour’s drive from Dallas, in-house labs will help to cut way down on the number of claims generated. “I previously worked for an insurance company,” Sanders says. “If someone could present me with a way to generate one less claim, woohoo!”

She also notes how in-house labs have skyrocketed patient compliance, which saves the insurance company money.

You leap without looking

We’re all for adding ancillary services that make sense. But what does that mean? It means that patients want it, that your practice can handle it, that your providers are interested in doing it, and that someone by golly will pay for it.

We can’t tell you how many times we hear about a practice that added a new service only to find out later that, oops, its payers won’t reimburse for that service. In-house labs are a good example: They seem like a nice patient convenience and a way to generate extra money, and practices add them without checking whether payers will reimburse them - only to find that many will not. Payers often get a better deal by sending all their patients to large chains. We’ve seen other practices add a service without considering whether its physicians really have an interest in providing it, or asking what the affect will be on the lives of the physicians who perform it. Will the doctors’ hours increase? Will it require them to travel to a new location? How much will it increase their incomes?

The best ancillary services are often the ones that patients in your market are clamoring for - so much so that they’re willing to pay for it themselves. That way, you can collect up front without bothering with the insurance companies. But even in these cases, you need to do some market research to determine whether patients would come to you for it - or whether rival outfits already have it covered. And you need to know how it will affect your work flow.

Finally, any new service should be consistent with your overall mission and values as a practice. Will it really add to your patients’ quality of life or make them healthier? Or is it just a way to make a buck?

Your piggy bank is broken

Little things add up, with coins quickly becoming dollars. You should do anything you can to streamline your processes. Here are a few ideas to plug the holes:

  • Scrutinize your maintenance contracts as they come up for renewal. Do you use all the services you’re paying for? Trim out the fat wherever you can.

  • Got an EMR? Be as paperless as possible. Develop and strictly adhere to a “no-print” mindset across your practice, and save yourself the cost of unnecessary printing.

  • If you must print, use paper of the right quality. Printer paper descriptions include a “brightness” number; the higher, the whiter - and the costlier. For material you and your staff will refer to often, such as a staff manual, spring for the extra, as brighter paper causes less eye strain. You won’t have to buy much of this pricey paper. For everything else, the store brand is fine (bought in bulk, of course).

  • Control your credit card costs. Credit cards do offer patient-pleasing convenience, so you don’t want to eliminate them, of course. But know that each merchant takes between 1.5 percent and 3 percent off the top of each of your credit card transactions. If your practice accepts, say, half a million in credit card payments, that’s between $7,500 and $15,000 of surcharges you’re paying to card merchants - ouch! You can mitigate this incursion into your profits, although not by passing the surcharge to your patients - that’s strictly illegal. Instead, come at it from the opposite direction by offering a small discount for paying with cash or check.

  • Be careful about your use of collection agencies. Don’t send an account to collections without first making a legitimate collection effort yourself - they’ll keep a third or so of whatever they collect. One the other hand, don’t turn your office into a collections agency. It’s ineffective. Send, at most, three invoices, each with increasingly stern language about the consequences of nonpayment, and make one or two calls, tops, then send the account on to the collection agency.

You don’t collect copays consistently

Three years ago, the Hey Clinic in Raleigh, N.C., didn’t have much of a system for collecting copays from patients. “It was totally haphazard,” recalls Cathy Sentgeorge, the clinic’s practice manager. “‘Oh, don’t worry about it; we’ll bill you’” was the practice’s modus operandi, says Sentgeorge. Today, there’s no question: “You’re here; you’re paying.” Copay collection rates have gone from 20 percent to 99 percent.

Her advice: Tell your patients up front what to expect. Do this in writing, with reminder phone calls, and in person when patients arrive. Make it part of your normal patient communication - just one other thing you’re informing them of when you leave an appointment-reminder message, for instance. Patients know they’re supposed to cough up a copay; making it a consistent part of your communication sends the message that you’re serious about actually collecting it. Also, set a firm, clear process in place for your staff. If your copay collector gets flak from a patient, have her get the billing coordinator involved. This, too, clarifies that patients (and your staff) can’t simply blow it off.

Train your staff to be extremely upfront and proactive about collecting on outstanding balances. Getting cooperation starts with your attitude, says Woodcock. Presume a patient will pay when he walks up to the front desk. “While you’re asking for money, start writing the receipt,” she says. “Part of it is setting expectations.” She espouses full and constant communication between the front and back offices. “Have the front-desk employees report to the billing office to make that tie,” she says. “The leakage happens the moment the patient calls. There’s an outstanding balance, and nobody says anything. Meanwhile, the back office is sending out balance statements and tearing its hair out.”

Another effective way to tighten in-office relations is to hold regular staff meetings. Make them as transparent as possible. Everyone, from the phone-answerer to the physician, should know what’s going on in the practice, and everyone’s input should be well-received. Sentgeorge says she doesn’t consider herself an expert on everything. “I know I need my team,” she says. “I see the bigger picture; they have a lot of the solutions.”

Your marketing is half-baked

So you buy a local mailing list and send out a flier on your spectacular practice, in hopes of generating new patients, or a different type of patient. Fine, except that the flier’s been copied so many times over the years that it’s fading and hard to read. The information needs updating, too: Dr. Smith retired from the practice a few months ago; the new PA you hired in the spring isn’t mentioned (heck, she was probably in high school when this flier was printed); and oops, isn’t that your practice’s old phone number?

You’re busy, we know. But lackadaisical marketing won’t cut it anymore. Why are you even spending money on printing and postage for a flier, anyway? Instead, put that information on your Web site, (No Web site? Get one.) and focus on more effective marketing techniques, like offering free presentations on health topics to libraries and senior centers, and carefully tending referral relationships. Pay some attention to your office environment, too: Your waiting room shouldn’t look like a bus station, your front desk should greet people with a smile, and you shouldn’t be so overbooked that patient wait times are excessive and their time with you is too short. Patients are your best referral source. Improve their experience, and more will come.

You walk too much

Yes, walking is good for you, but you’ll serve your practice best by keeping your strolling to your off-duty hours. Practices make money only when healthcare providers are providing healthcare, so when you’re wandering the halls in search of Pap kits, tongue depressors, and who-knows-what-else, you’re not treating patients (read: generating revenue). In short, every exam room should be fully stocked with everything the doctor needs, and all supplies should be in the same place in every exam room.

Related to improperly stocked exam rooms is a poorly supplied practice. Take a hard look at what you’re ordering and why. Practice demographics can shift dramatically as the years pass. If your pediatric clientele has declined by 25 percent, why are you robotically ordering the same quantity of child-sized gowns? Buying in bulk to save only makes sense if you actually use the products.

Get organized. Sentgeorge posts a list of needed supplies and ordering thresholds in each exam room. Once a month, she places an order, only reordering if there are five or less of an item on the shelf.

Standard lists and protocols will keep you on track in other areas as well, she says. “I made lists for groceries, for marketing, and for the office supplies.”

You let the cynics get to you

When Hawthorn Medical Associates switched to the Navicure clearinghouse, Nivison heard from a lot of change-resistant naysayers. “The staff said, ‘This will never work.’ But now, they’re very much on board.”


That’s great, because every time a foot drags it leaves money behind: The slower the learning, the longer it takes to master a new system or protocol and perform efficiently, and the longer it takes to see a positive return on investment. For pricey purchases like an EMR, negative mindsets can cost big.

When you’ve got a change coming - a new process or service, a large purchase, a different work flow - start the attitude adjusting early, during the research that leads to the change. Get input. Encourage physicians and staff to voice everything that’s wrong with buying some piece of technology, renovating the reception area, or the like. Write it all down and take it seriously; this is more than just giving someone an opportunity to vent. While much of it will be “I-hate-change” bluster, you’ll likely find a gem or two of worthwhile advice as well. When it’s time to implement, you’ll have more staff on board - much more than if you wait to inform everyone that the roll-out date is this Thursday.

Such careful staging worked for Hawthorn. “I even have doctors who log on and look at their denial reports,” says Nivison, and jokes, “I take great pleasure in saying, ‘I told you so.’” Well, he’s earned that right, with all the money saved.

You’re not well informed

Does anything change more often than insurance regulations? And what’s going on legislatively? Were you ahead of the learning curve for getting an NPI number, or did you find out the day after Medicare’s long-publicized, March 1 deadline because all your fee-for-service claims to CMS bounced?

The sheer volume of need-to-know info is surely daunting. “It’s virtually impossible to submit claims and get them paid time after time,” says Woodcock. “You’re going to have situations every day where the rules change, or such-and-such insurance company pays differently in this state than that state. The algorithm is almost too difficult for a human being to grasp. Every time [a claim] is denied, that costs you money. If you don’t notice it, you lose the money.”

Luckily, there are also a myriad of ways to stay informed:

  • RSS feeds - Many Web sites now offer direct feeds that will automatically push information you want directly to you.

  • Alert services - Think of an alert as a cross between an e-newsletter and an RSS feed. It only comes when it’s got something to say. For example, The Verden Group offers an alert service to apprise you of important regulatory changes with insurance companies. The alerts can be tailored to the payers you contract with. Or check out Modern Healthcare’s alert service, which covers a broader swath of must-know healthcare news.

  • Professional societies - Many medical societies these days have super Web sites that strive to keep their members informed. They also make it easier to get involved in advocacy campaigns.

You’re in a 99213 rut

CPT’s code 99213 is by far the most popular E&M code. Sometimes, it’s the right code to choose. But the higher-paying 99214 should be getting much more play. Many doctors don’t really understand the rules of coding, and, largely because of fears of being audited, they choose a lower, less flag-raising code. Since E&M codes are the mainstay of primary-care coding, this play-it-safe mentality costs their practices a fortune. Consider that if you collect the $21 difference between a 99213 and a 99214 just twice a day, every day, for a year, you’d bring in nearly $11,000 in additional revenue.

The key to solving this is to educate yourself so you can confidently code as highly as appropriate for every patient visit. And it does matter, financially speaking.

So the point is this: Provided you know what you’re doing, you have total control to code at higher levels - legally. And you should. It’s your money; why shouldn’t you collect it? But it’s on you to code correctly. Otherwise, payers will happily - and lawfully - keep what’s rightfully yours. They don’t care if you undercode, and indeed, why should they?

Three factors determine an E&M code: the amount of history taken; the level of detail of the exam; and the level of decision-making.

The chart on page 36 (though far from a complete rubric for properly determining a visit code) illustrates how to classify your patient exams.

Don’t let semantics and numerical positioning confuse you. A straightforward office visit, or 99213, falls in the middle of the five “established visit” codes. But it’s vital to remember a 99213 is not meant for visits that require a moderate - read, “middle” - level of medical decision-making; that’s 99214 territory. Unfortunately, this is a psychological track hurdle that many physicians fail to clear.

It’s also absolutely essential that you comprehend the difference between what you charge and what you get. A good way to illustrate this is to look at the results of Physicians Practice’s annual Fee Schedule Survey, which provides a baseline off of which you can bounce your own fee schedule. For example, in 2007, the reported average amount on Southeastern physician fee schedules for a 99213 was $94.12. For a 99214, it was $131.23.

Here’s the kicker: It’s what you are paid by the payers that fills the practice coffers, not what you write in your fee schedule. According to our survey, payers reimbursed on average just $44.14 for a 99213 in the Southeast region - less than half of what physicians there were hoping for.

So the most expeditious way to emerge from a 99213 rut is to fully understand what’s going on coding-wise; code appropriately - and as highly as possible - and get paid what you deserve.

Shirley Grace is an associate editor on staff at Physicians Practice. She can be reached at sgrace@physicianspractice.com.

This article originally appeared in the October 2008 issue of Physicians Practice.