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. Once the job duties have been defined, it is important for the practice to review its staffing levels, comparing itself to its best-performing peers. Industry benchmarks show that better-performing practices have higher-than-average staffing levels and are therefore able to afford dedicated focus in all areas of the revenue cycle. Having appropriate staffing levels allows the practice to address any trend that is identified, such as increasing patient balances, sooner rather than later. In addition, because of the ever-changing environment in health care, it is important for the practice to promote continuous learning for all staff. The third step that best practices focus on relates to the current technologies necessary to generate the best results. These technologies include the right practice-management system, which can provide solid reporting; the right clearinghouse partner for insurance claims, patient statements, and reporting; and current technology for checking patient eligibility and benefits. The last of these technologies has become more critical as a result of the shift in patient responsibility, causing best practices to place more resources in the front office due to increased upfront collections. Reduced reimbursement from payors, coupled with increasing patient responsibility, means that medical practices must be even more diligent in monitoring and routinely assessing their revenue cycles. It is important to remember that the revenue cycle starts before the patient comes to the practice and is not completed until the practice receives final payment on the account. Monitoring and benchmarking the revenue cycle, putting the right number of the right people in place, and providing current technology will put medical practices on the right road to the best outcomes in their revenue cycles. For medical practices, it is time to address the fact there is a shift in the revenue cycle and to take the right steps to stay ahead of the curve.