Accounts Receivable: Money Chest or Money Pit? How to Win the Claims Game
July 2010 Issue
"Some of these insurance companies are absolute nightmares! Their constantly changing rules are a moving target. You send the additional information they ask for, and they come back and want more. They keep dragging on, and if you don't have [billing] people who are really on top of things, you get into the problem of timely filing, and then you have no recourse except to write off the claim."
-Joyce Perrone, practice administrator, De La Torre Orthotics & Prosthetics, Pittsburgh, Pennsylvania
Perrone's words echo a general, across-the-board frustration in O&P. Although many payers do pay with relatively little hassle upon receiving clean claims-those that meet the payer's requirements-others make O&P companies run an obstacle course to get paid. Joe Sansone, founder and CEO of TMC Orthopedic and The Amputee & Prosthetic Center (TAPC), Houston, Texas, concurs: "Some payers have become more adept at playing the delay game by requesting unreasonable medical justification, such as requiring an LMN [letter of medical necessity] for crutches for a post-operative ACL repair."
Difficult payers are just one problem confronting O&P companies and their billing and collections teams in managing their accounts receivable (AR). The importance of your AR and the personnel who manage them can be summed up with the following question: If you were a deep-sea diver, how important would your air supply be? Aaron Sorensen, CPO, president and founder of Orthotic & Prosthetic Billing Solutions, Nashville, Tennessee, notes that the "billing staff is in charge of your money-and that's your lifeline." Sorensen is also the owner of Restorative Health Services, Nashville, a six-office O&P firm, so he knows firsthand the challenges O&P businesses face.
Lisa Lake-Salmon, president of Acc-Q-Data, Boca Raton, Florida, and writer of The O&P EDGE's monthly reimbursement column, "Got FAQs?" likens AR to either "a money chest or a money pit." She says, "If you're not getting paid, they are a money pit." Even though tax write-offs on unpaid insurance claims and patient invoices can soften the pain, they don't totally replace the loss.
The Game Is Getting Tougher
Slow-paying insurance companies are only part of the problem. The game is getting tougher, the playing field more difficult, and the rules more complex. Trends impacting providers and patients include the following:
- Insurers are shifting more healthcare costs to the patient via higher deductibles and co-pays.
- Coverage for certain previously covered treatments and devices is being reduced or eliminated.
- Medicare has reduced the time for filing claims and appeals, and many Medicaid programs and insurance companies are following Medicare's lead.
- Some payers are increasing efforts to reduce payment or deny claims.
- More healthcare consumers are delaying O&P care, likely due to the economic downturn, job loss, costs of services, and tight budgets.
Paying More for Less
Recent changes involving the Centers for Medicare & Medicaid Services (CMS) policy of covering fewer items is starting a trend that insurance companies profit by following, Sansone says. "A typical example of dwindling coverages is CMS' denial of elastic and neoprene knee sleeves, elbow sleeves, etc. In the past, we found that insurance companies often took quite a while to follow Medicare's lead. That's not the case anymore. If it saves the insurance companies money-and costs the provider-third-party payers are quick to jump on the bandwagon."
Cathie Pruitt, president and CEO of PrimeCare O&P Network, Cordova, Tennessee, discusses reports detailing how difficult it has become for companies, especially small businesses, to continue to provide comprehensive healthcare benefits in the face of soaring healthcare costs and premiums. The result has been cost-shifting to employees and those with private insurance via higher premiums, co-pays, and deductibles, leading many consumers to take plans with über-high deductibles to keep premiums affordable. Also, many companies have simply dropped employee health coverage.
This trend will continue in 2010, according to an article, "U.S. Health Care Inflation to Far Outpace Salary Increases in 2010," by Stephen Miller, posted September 2009 on the Society for Human Resource Management website (www.shrm.org). Referring to The Segal Company's 2010 Health Plan Cost Trend Survey, Miller says, "U.S. health-plan cost trends will continue to be more than four times greater than the annual increase in average hourly earnings-even as the U.S. consumer price index for urban consumers remained relatively flat or negative in 2009."
Impact on O&P
Since patients are paying more out-of-pocket to meet higher deductibles and co-pays, or they lack insurance, many are cutting back on O&P care in order to meet more pressing needs in a cash-strapped environment. "A trend we're seeing is more patients choosing to forgo our products and services," Sorensen says. "It's an erroneous assumption that healthcare is recession-proof. People with an 80-20 or 60-40 plan or high deductibles are thinking, 'Hey, this knee brace isn't so bad. I can live with it for another year,' or, 'This prosthesis is getting me by-I'll just add extra socks to make the difference in this ill fit that I have.'"
However, there is a counter-trend as well. PricewaterhouseCoopers' Health Research Institute (pwchealth.com) reports that many workers who are expecting to be laid off are using more services while they still have insurance. The report also points out that, despite overall decreased utilization of services, providers "will create new services to retain their revenue stream" and "may raise prices to cover losses on Medicare and Medicaid."
What about Healthcare Reform?
When we asked our panel of experts how the recently enacted Patient Protection and Affordable Care Act (PPACA) will impact O&P, the prevailing answer was, "We don't know yet. It's too early to really tell."
"We won't know what's going to happen until every step is implemented," Sorensen says. "There is too much that could happen politically in the next 24 months," he adds, pointing out that midterm elections could affect funding and implementation of the various parts of the law.
"There's a lot of fear," Sorensen continues. "I've talked with business owners in several healthcare fields, and many are nervous about what is going to happen. What I've started to see in the last few months in different parts of the country is an increase in smaller healthcare businesses being put on the market."
At the time of this writing, Pruitt was collecting information and analyses for a PrimeCare white paper on the healthcare-reform law and its effects. Results will be released to the media; however, Pruitt mentions one foreseen change: the role of nurse practitioners and physician assistants will be widely expanded, thus providing another potential referral source for O&P. Pruitt urges O&P providers to take a positive, proactive approach and focus on positioning themselves to take advantages of whatever opportunities open up.
Five Steps to Improving Your Bottom Line
Achieving a rosier AR picture and improving your bottom line are within reach. After interviewing our panel of experts, The O&P EDGE gleaned the following "Fab Five" steps:
- Verify the patient's coverage and benefits and have payment arrangements in place before you begin treatment.
- Collect co-pays and deductibles up front.
- Document all steps of claims processing, including all interactions with payers, with dates, times, and person contacted.
- Follow up promptly on all unpaid claims and requested additional documentation/information. Always keep in mind that the clock is running on timely filing rules.
- Develop a topflight billing and collections team that knows how to stay on top of the game, and give them the best playing field you can.
Verify, Verify, Verify
Many practices are failing to verify benefits, co-pays, and deductibles on the front end, leading to unpleasant surprises for both the provider and patient, according to interviewees.
Pruitt stresses the importance of verifying a particular patient's benefits when verifying coverage and obtaining a pre-authorization for payment. The fact that some patients with a certain managed care organization (MCO) receive certain benefits does not mean that all their enrollees have the same coverage. As healthcare plans come up for renewal, the coverage and benefits they offer may change. What had been covered and paid for the last five years may not be the same going forward, a fact that can escape both the patient and the provider.
Collecting Up Front
Verifying deductibles and co-pays and obtaining payment before treatment begins is a must for Sansone. "Patients expect to have to make co-payments," he says. "To blindside a patient in the middle of the delivery process is a recipe for failure."
"We need to counsel the patient on what their payment responsibilities are going to be and why it is that much," Pruitt says. "We have to know that we can collect from that person."
"We have found that we collect very well at the front desk without offending anyone," Perrone says. "If you wait to send out a statement, that's costing you."
Sorensen has devised a system for making the payment process less painful for both patient and provider. First, when a new patient or an existing patient who requires a new product or service comes in, a staff member verifies coverage. Patient education is the key. "After verification, we call [the patient] and say something along the lines of, 'Mr. Smith, as a courtesy to you, we have called your insurance company. Since there have been many changes regarding covered items, co-pays, and deductibles, we want you to be aware of your policy. Although you may already know the particulars, we would like to take a minute and go over it with you.'"
Most of the time the patient is appreciative and often does not completely understand his policy; changes at renewal time may have missed his radar, Sorensen says. For instance, he might have thought his $20 co-pay is for all services and did not realize it only applies to physician visits and not for ancillary services such as O&P. If costs are higher than patients expect, "They may not be happy, but they usually accept it better. We explain we are just the bearers of the news and that is just how their policy works," he says.
When a patient has a high-deductible plan and is unable to pay the total amount up front, Sorenson says, "We try to collect as much as we can, then work out a payment program. If the patient is a hardship case, we may be able to waive part of the deductible or co-pay."
The terms of the payment plan should be put in writing with a copy to both patient and facility.
Credit cards offer a more convenient way to pay-for both patient and O&P facility-versus sending out monthly statements, Sorensen says. The patient's credit card is charged monthly for the amount and on the date agreed. "CareCredit® [www.carecredit.com] is another option," Sorensen adds. "Of course, you lose a percentage to CareCredit, but at least you are not struggling to collect."
Know Your True Costs
Another trap to avoid is unwittingly accepting contracts, waiving co-pays/deductibles, or agreeing to offers from third-party administrators that actually end up costing you money. If your cost exceeds your reimbursement, those accounts truly become a "money pit." Know your true cost for the devices you produce-components, other materials and supplies, and labor-so you will know how much you can afford to accept in a contract, fee change, waiver, or cost negotiation.
Document, Document, Document
When collecting from difficult payers, careful documentation becomes especially vital. Sorensen describes the following scenario in which a payment is unreasonably delayed: "We call them and say, 'We know you got a clean claim. Our electronic records show you received the claim on [date]; we verified it on [date]. Then we called Thursday at 3 p.m., and Mary Jo told us we have a clean claim.'
"When we tell them, 'We have the date, the time, the name of the person we talked to, and if you want to make sure, we can pull our recording, and now where's our check?', we usually get results."
Collecting from really difficult payers provides an additional obstacle; however, it is not an insurmountable one. Taking the insurer to the state insurance commissioner may help although some providers have not received much assistance from the commissioners.
In her provider-education workshop, Lake-Salmon points out that the legal theory of equitable estoppel also may help. Lake-Salmon provides the following legal definition of equitable estoppel: "A bar preventing one from making an allegation or a denial that contradicts what one has previously stated as the truth. A rule of evidence which precludes a person from denying the truth of some statement made by him of the existence of facts whether existing or not which he has by words or conduct led another to believe in. If a person by representation induces another to change his position on the faith of it, he cannot afterwards deny the truth of his representation."
She explains that a type of estoppel is that which bars persons from adopting a position in court that contradicts their past statements or actions when that contradictory stance would be unfair to another person who relied on the original position. "For example, if a representative of an insurance company provided answers to your specific questions, and you relied upon those answers to provide services in good faith that they would be paid, and then that insurance company refuses to pay your claim, they would be estopped from asserting this right to refuse payment based upon the previous documented representations from one of their employees."
Building a Great Staff
|Rob Benedetti, controller, and Joyce Perrone, practice administrator (second row, fourth from left) pose with the De La Torre billing team.|
Every member of your staff contributes to creating a successful practice with positive cash flow, so it's essential that every member of your team is top-notch. "You can have the best clinician in the world," Perrone observes, "and that won't help if you are not getting paid."
Our experts identified two foundational practices to help build a great staff: Pay them well, and create a good working environment.
Sorensen describes the plethora of responsibilities of the average member of a billing team: Verification of benefits; accounting for all supporting documentation, including doctor's prescription, delivery receipts, necessary clinical notes from the hospital, physician, and therapist, internal notes, and pre-certification, plus making sure the pre-certification does not run out of time before delivery or securing an extension if needed; billing; cleaning up denied claims; making appeals; and working the aging AR. "Even for a small practice, that's a lot for one person to do."
If possible, the biller should not be expected to do double duty as a receptionist. If employees are overburdened, they may only be able to do each task half as well as it should be done, he points out. "From a cost-benefit analysis, providers may find that hiring one more person is worth it."
Practice-management and billing software can be an enormous help in keeping on top of AR. "Typically, the better your tools, the better your products and services," Sorensen says. However, software is only a tool; efficient time management, processes, and procedures still need to be in place. Sorensen likens the billing process to building a car: "Think about what raw materials you have to put onto the assembly line to come out with a finished car, or in this case, a paid claim."
Jason Whiteaker, business development manager for RemitDATA (www.remitdata.com), headquartered in Memphis, Tennessee, points out the value of having the staff well trained on any software so they know how to leverage all its capabilities. "Having a consultant come in and work for a day with your team...can pay dividends above the cost of the consultant." Whiteaker encourages business owners with thriving practices not to become overly complacent: "There are great resources out there. Get active, get involved, because everything is changing. If you don't keep up, you will get left behind."
A friendly work environment that promotes openness, support, and trust paves the way to greater productivity. This writer had the opportunity to listen in on one of the De La Torre billing staff's monthly meetings. The meeting included 16 persons, including some from other company departments that profit from being kept abreast of the AR picture. Perrone facilitated the discussion, keeping the agenda moving along productively without participants bogging down on any one point. She brought up spreadsheets on each item via a computer and big-screen TV in the conference room as the staff moved through discussions.
I was impressed by the relaxed, warm atmosphere. Everyone participated freely and felt comfortable enough with one another to laugh and joke. "We've actually had people coming from other organizations, such as doctors' offices and hospitals, where speaking up or speaking out is not welcomed," Perrone says. "At first they're often rather quiet and a bit shocked at how open everybody is-then they start coming out of their shells and contributing. The one thing we don't allow is [for people] to hold back pertinent information."
De La Torre's approach has worked. Perrone says the company enjoys an AR collection rate of 90 percent.
Sansone notes that his company, TAPC, has been named number one or two on the "Best Places to Work" list by the Houston Business Journal for three years in a row, with the parent company, TMC Orthopedic, earning the number two spot one of those years.
Sansone makes the following recommendations:
- Sit with your staff and identify problems and opportunities.
- Solicit feedback from your employees to garner their support.
- Establish written procedures.
- Train your staff on new procedures.
- Monitor productivity.
- Quantify and establish goals.
- If you can't count it, you can't monitor it.
"Employees truly want to do well at their job," he concludes. "A savvy employer will give his employees a set of rules to live by and then assist them toward their goal. We realize that happy employees are productive employees. Treat your employees right and keep them happy, and they will go to bat for you! "
Miki Fairley is a freelance writer based in southwest Colorado. She can be reached at