Using Adjustment Coding to Manage Practice Compliance

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The October 2008 ImagingBiz.com article Keep Payors Honest With the Practice Receivable System concentrated on advanced techniques for monitoring the insurance companies that compensate radiologists for their clinical services. This article will move the telescope a little farther away to illustrate quick ways to check how the revenue system is functioning and monitor how compliant the practice is within its rules-based environment.

The key to this process is how best to categorize noncash credits that are indications of avoidable actions. After establishing codes for these credits, it is important to build a report that helps visualize patterns of loss to help a practice understand both the economic implications and their timing.

A practice has been chosen that functions in a very complex clinical environment with a relatively difficult payor mix (one with a great many compliance requirements). It is not the purpose of this article to describe, in great detail, the noncash credit categories. They have been purposely disguised, as the billing company considers this proprietary information. They are all influenced either by payor rules or by the clinical/demographic environment in which the practice operates.

Table 1 is an example of how extensive the adjustment coding can be in a complex environment, and it implies the challenges facing medical practice in securing payment for clinical services. The code designations have been retained; their descriptions are generic. They are organized in groups to facilitate their use in a readable trend report. The grouping is a key administrative strategy because every practice will differ in the priorities placed on transactions that cost it income.

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Facsimile of report

The listing has been both color coded and numbered to indicate the grouping of the 60 codes.

Refunds: These are debit entries (cash being the credit) aggregated against gross receipts in the report.

Contract adjustment: This is generally the largest noncash credit. It is the difference between the practice fee and the payor allowance. There is nothing a practice can do about this credit, except at contract-negotiation time.

File limit: This credit depicts an avoidable loss and is particularly significant for this practice, due both to the number of large payors with short claim-submission windows and to a chronic problem within the practice in amending flawed dictations that are sent back by the billing company for addenda.

Credentialing: This is a single-code item quite significant to this large practice. Newly hired radiologists must be approved by the payors; the paperwork is extensive. While most billing companies offer to handle the procedural issues, they still require the practice and radiologist to supply critical licensure information far enough in advance of the radiologist’s start date to ensure that payors will accept claims. This has been a chronic and costly problem for this group.

Compliance: This grouping has the largest number of individual codes. Some of the reasons are avoidable, especially where they concern justifying why an exam was performed. Practices are at the mercy of the referring physicians and hospitals, both of which may not comply with the rules for precertification. If a practice has a large amount of cases performed in its own freestanding centers, it can control the process by requiring the referring physicians to document properly why they need exams for their patients.

Medical-assistance write-offs: The size of the state medical-assistance population using this hospital system necessitates isolation of credits that might otherwise be in the compliance grouping. There is also a file-limit code that, in this case, I have elected to keep in the file-limit grouping. This is a particularly difficult payor to manage because neither the state programs nor the patients readily respond to inquiries for necessary information.

Courtesy: It is important to segregate free care because radiology practices do not have access to the same types of state pools that hospitals have. If the amount continues to climb, it could be useful to keep track of these credits as a tool for negotiation with the hospital. The next report will show the level of credits for a single division of this large practice.

Bad debt: These codes identify losses on self-pay balances. The largest will be accounts that are transferred to a separate agency unrelated to the billing company. Other accounts are