Consumer-driven Health Care: Dealing With the Impact on the Physician Revenue Cycle

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The health care industry will be facing significant changes in the future, and a medical practice’s success is becoming increasingly linked to its revenue cycle. Reduced reimbursement from payors, along with changes in third-party reimbursement, has significantly affected how medical practices need to deal with the revenue cycle for their practices. Though consumer-driven health care is intended to provide a possible solution to rising health care costs, medical practices have already begun to feel the impact of this prominent trend.

The move toward consumer-driven health care is creating a world where patients must take more financial responsibility when it comes to managing their health, and this shift is forcing physicians to pay closer attention to the revenue cycle for their practices. As few as 20 years ago, when patients sought medical care, they understood that they were financially responsible for any services that were rendered. Insurance was only there to help reimburse them for their expenses. It was during these years that managed care developed nationally and became the standard reimbursement model, replacing the traditional model where patients carried much higher financial responsibility.

Under the managed care model, patients had little, if any, financial obligation relating to their health care. The return of financial responsibility to the patient under consumer-driven health care is a dramatic economic shift for medical practices and patients alike. This new emerging health care world—which includes catastrophic deductibles, increased coinsurance and copayment amounts, and gaps in coverage—is completely foreign to patients (consumers), as there exists an entire generation of health care consumers who have never had to bear the financial responsibility for their health care.

To help understand how best-performing practices were addressing this change in the revenue cycle, LarsonAllen teamed up with Gateway EDI, a national clearinghouse located in St. Louis, to conduct an extensive review of medical billing practices. The result of this joint research is the Physician Gold Standard Study, which offers insights into the success of top performers.

This report specifically analyzes operational indicators, such as the aging of accounts receivable, coding, staffing, cost performance, fee-schedule pricing, and denial management. The group studied indicators across a range of groups, including the median performance of large, midsized, and small practices.

The study identified the strategies and methods that helped produce the best outcomes for top-performing practices. Attention to nine focus areas helped produce the best-performing revenue cycles for medical practices:

  • people and accountability,
  • internal monitoring of systems,
  • processes,
  • coding,
  • third-party accounts receivable and denial management,
  • collections,
  • reporting and measuring,
  • technology, and
  • managed care contracting and fee-schedule review.

Continual Self-assessment

Practices that participated in the study actively addressed the nine focus areas that were identified, continually assessing and improving their processes. The first step in this process was to recognize market and consumer trends and the direct impact that these trends had on the revenue cycle. Reporting, benchmarking, and monitoring all aspects of accounts receivable have become critical elements in managing a practice’s revenue cycle. The best practices look at every angle of their receivables and use multiple reports from their practice-management systems to get a comprehensive view of what is happening with their accounts receivable. Practices create their own scoreboards, monitoring key indicators every month and addressing negative trends as soon as they are identified. In addition, these key indicators are shared with the staff, creating ownership and accountability for the revenue cycle.

The second step for best practices is to make sure that the right people are doing the right jobs relating to the practice’s revenue cycle. Complete job descriptions ensure that someone is held accountable for all of the vital tasks required for a successful revenue cycle. In addition, it is important that the practice evaluate each staff member’s role—again, to make sure that the right person is doing the right job. Clearly communicating duties and responsibilities, as well as setting measurable goals and expectations, is critical in helping staff achieve the best outcomes.