Keep Payors Honest With the Practice Receivable System

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It is not a completely fair analogy, but the differing agendas of payors and providers place receivable processing in something of a battle zone. The payors seek to limit payments to no more than absolutely necessary to cover the contractual benefits of their beneficiaries. They put up a gauntlet of compliance rules to ensure that the providers justify their claims for services. The mission of the insurance company is not only to cover its beneficiaries, but to maintain positive cash flows as an organization. Naturally, providers seek to maximize income for services rendered.

Nothing pleases payors more, it seems, than rejecting claims for lack of compliance, because it slows down cash outflows. They may eventually pay the claims, but at a later time. They will gladly delay their initial response until absolutely necessary and hope that the provider system has sufficient inefficiencies that corrected claims are seriously delayed, or never even resubmitted.

Payors use a variety of tactics to delay cash outflow, and providers are well advised to monitor the payment records of individual payors using several basic accounting reports.

Practices can never assume that insurance companies pay the correct fees 100% of the time. Insurance companies negotiate with providers to pay a fee for each authorized CPT® code-based procedure over a contract term. Many commercial payors prefer a fixed fee; others will use a schedule that changes, depending upon a market benchmark. One of the most commonly used is the annually published Medicare rates. These are unique to either a state or a region within a state and generally change each January. Payors with adjustable-fee contracts are betting on declining Medicare rates to reduce their costs.

Multiple Product Lines

One reason for payment errors is the multiple product lines that health care insurers offer to companies, where the fees are based upon the type of contract. The lowest fees are generally linked to HMO-like product lines that limit provider options. These sometimes carry a small patient copayment requirement that is administratively bothersome because it is costly to bill a small patient balance.

The next level of product line will be the PPO, which expands patient choice and generally pays higher fees to providers. The third type of product, becoming increasingly rare, is an indemnity-like programs that pays a percentage of fees, rather than using a fixed schedule, and may even allow full-balance billing. The patient has full discretion over provider choice. These programs are the most expensive to the employer purchasing coverage for employees.

The challenge for radiology billing systems that rely on hospitals for demographic data is that the type of payor product may not be distinguishable at the time of claim submission. Therefore, a practice will often send all payor claims to a single address and will not know what the product coverage is until response. This has the added effect of making it difficult to assign a primary payor code, which is essential to the monitoring process described here.

Many systems have touted a feature that checks the payor allowance at the time of cash posting, but none of them deliver on this promise. This feature requires, to be useful, the correct primary payor designation and the correct fee schedule for a date of service.

The fee-schedule data require maintenance of multiple file libraries because date-based changes will require the system first to check the date of service and then to cross-reference the correct schedule. On average, a radiology billing system will be filing claims with more than 250 different payors per month; 20 of those are likely to account for over 90% of a practice’s revenue. It is possible to construct a payor schedule independently if it is based on a specific Medicare year; the formula will be a multiple of the Medicare fee. As will be shown later, it is easy to verify the formula. Fewer and fewer payors are using an internally produced fee schedule not based on Medicare; often, it is one they are unwilling to share with providers. This leaves the provider with the option of acquiring the fees by monitoring the remittance advice that accompanies payments.

Mounting a Defense

Medicare is the simplest payor model for which we have access to data.

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This is a Medicare population for December 2007. The database extraction was performed nine months later, meaning that all but the most troublesome