Where You Might Be Losing Money at Your Medical Practice (Part II)

November 27, 2012
David Doyle

Downcoding, overstaffing, and lack of follow-up on denials are all possible places your medical practice is losing precious revenue.

Last week, we discussed two areas of inefficiency that can cost your medical practice money - properly collecting patient payments and missed charges.

Here are three more areas that medical practices should focus on to avoid losing hundreds, and even thousands, of dollars each year.

Downcoding

Downcoding, the practice of deliberately selecting a billing code that is lower than services actually rendered, is a common and expensive problem. Many physicians tend to be cautious with their coding and use a lower billing code instead of billing at appropriate levels out of fear of an audit. Downcoding can cost a single doctor $40,000 in lost revenue each year, according to a study published in Medical Economics.

Downcoding seems counterintuitive: would a plumber charge only $500 for a service that cost $1,000? So why does downcoding happen? Many doctors do not want to attract the scrutiny of insurance companies or auditors. But undercoding can also trigger an audit.Insurers and the government look at the frequency that doctors use one code, and when higher than normal usage is reported, call for an audit. (The federal government is concerned with improper payments, which means both underpayments and overpayments.)

Other reasons for downcoding include a physician not having a complete understanding of how to bill for E&M services. In the face of uncertainty, they tend towards undercoding.

Instead of downcoding, a physician should bill at the appropriate level and back up this coding by keeping accurate and thorough documentation of each visit. This documentation should always include the patient's name, reason for the visit, a patient's relevant medical history, the doctor's diagnosis or assessment, and the plan for care.

Using electronic health records can also guard against downcoding as the EHR will recommend a particular billing code based on what occurred during the office visit. Using the EHR suggestions can increase consistency in a doctor's coding. An EHR system can also be used during an audit to show that the coding was correct.

To gain a clearer picture of how your office codes, consider paying for a self-audit that looks for both forms of improper payments (underpayments and overpayments).

Denied charges never followed up on

Insurers deny charges for a variety of reasons, and medical offices stand to lose out on a large chunk of revenue if they do not follow up on those denials through an appeal. According to CMS, a full 30 percent of claims are denied or ignored on first submission. And a full 60 percent of those claims are never resubmitted, which means a medical practice never gets paid. (To get a sense of how many claims are denied by each major insurer, visit the National Health Insurer Reporter Card at the American Medical Association’s website.)

Common reasons for claims to be denied include incorrect patient information (misspelled name, wrong birth date), terminated insurance coverage, non-covered services, service requires pre-authorization, and timely filing. Before filing a denial, one must have an understanding of why a claim was denied in the first place and take real steps to correct the issue.

Every medical practice should develop a system for handling denials in a timely fashion. A medical office should keep track of how many claims are denied and the reasons for the denial. This can help guard against future denials by increasing awareness about mistakes to avoid. Preventing denials in the first place will increase your practice's cash flow and overall financial health.

Overstaffing

Overstaffing can quickly drive up the costs of your practice as employee salaries can take up a quarter of all of a practice's costs. Evaluate your managers: Are they efficient? Do they motivate the other staff to work hard? Do not settle for quantity over quality. Consider whether you would be better served with fewer office workers of higher caliber and work ethic.

Having efficient and competent front-desk employees and clinical assistants are key to a well-run office. The front desk serves as the initial point of contact for your office, and they can help make your practice run smoothly if they collect information accurately and schedule patients smartly. If a patient can move quickly and efficiently through an office - from front desk to exam room to billing - patients will be happier and doctors will be able to see more patients per day, leading to higher revenue. 

Attention should also be paid to whether employees are abusing overtime. One way to combat this is to require employees to seek approval for any overtime they need to work. Smart scheduling can help reduce the need for overtime - schedules can be staggered to cover all the hours staff are needed.

David Doyle is the chief executive officer at CRT Medical Systems, a top 100 medical billing company serving clients throughout Michigan and the Midwest. E-mail him here.