Nine signs your billing process needs improvement

Key Points

As reimbursement declines and overhead rises, dermatologists can't afford anything short of a perfect billing and collections process.

Successful billing outcomes depend on many factors, and entrusting the entire process to someone else - either an external billing service or an internal business office - without appropriate oversight simply isn't smart business.

2. You have no idea where your contracts are. Your relationship with the insurance payer is defined in your contract with them. Since most payers include evergreen clauses in the contract, the relationship is established based on the initial contract and continues until one of the parties provides notice of ending it. If you don't have a copy of this contract, you not only are in the dark about the terms of the relationship, but you also have no means to improve it.

3. You don't know what a modifier is. Dermatology coding is undoubtedly complex, but it's unwise to assign total responsibility to a coder. Although coders are valuable assets to any dermatology practice, leaving this important task in the hands of one individual when you have no understanding of the process is foolish.

Imagine hiring a nurse when you aren't sure what duties he or she should be doing. You'd never hire a nurse in this context, so don't make the same mistake with a coder. Understanding the coding rules allows you to appropriately oversee the process and ensure that it is performed successfully.

4. You've never seen any money collected by your front office. Even though your billing process is primarily housed in the billing office or with a billing service, don't assume that your receptionists aren't also integral to the process. Indeed, your receptionists are billers - billers who must collect co-payments, due balances, coinsurance and unmet deductibles. The probability of collecting from patients plummets after the service is provided. If you don't see dollars changing hands at the front office, you're losing money.

5. You haven't seen your bank statement in months. Even if business is not your forte, you do need to oversee the financial management process. Unfortunately, internal fraud runs rampant in medical practices. With lots of transactions in the form of cash and checks, the specialty of dermatology is a prime target for transgressors. Don't let internal fraud wipe you out: Establish appropriate internal controls, and make sure you're successfully overseeing the financial management process.

6. Poor billing performance is always blamed on Medicaid. Sure, Medicaid isn't the greatest payer, but if your billers always blame poor billing and collections performance on an external factor (whether it's Medicaid or other payers), you're being kept in the dark. Watch key performance indicators like days in receivables outstanding, aged trial balance and net collection rate. Ask your billers to identify external challenges and internal opportunities for improvement.

7. Your collection rate is 102 percent. It's great to hear that you are doing better than 100 percent, but it's likely a sign of how your billers are making adjustments. When a claim is paid, the payer reimburses you in the form of an "allowance." The difference between your charge and the allowance is considered a contractual adjustment, which is taken at the time of payment posting.

The adjustment process breaks down when your billers treat other adjustments as a contractual adjustment. A claim not paid because the charge wasn't submitted in a timely manner, or a payer withholding remittance until it processes the enrollment of your new nurse practitioner, are examples of non-contractual adjustments. Be sure your billers recognize the difference. Otherwise, your 102 percent collection rate really isn't so glorious.

8. Your staff manually keys in all payments. If you can hardly see your billers through the mounds of paper piled in the billing office (or at your billing service when you visit its offices), your practice isn't taking advantage of the technology available to improve the process.

Tools include online bill payment, automated payment monitoring, electronic remittance and funds transfer, automated insurance verification, lockbox and remote deposit services, and automated, credit card–based payment plans. Even simple tools, such as using an online calendar and task reminder system (such as those available in Microsoft Outlook), help your billers prioritize activities and keep track of deadlines.

9. You send patients six or more statements. Don't get caught in the trap of spending tons of money on postage when patients don't respond with payment after 90 days. Remind patients of their responsibility to pay when they schedule appointments. Give them detailed information about financial responsibility at the time of service, request payments prior to and at the time of service, and hand patients their first statement at check out. Then send two statements, followed by a phone call, and, finally, a collections notice - all within 90 days of the service. If they haven't paid by this time, it won't do any good to wait another three months or spend the money to send out three more statements. Tighten the collections cycle to - at maximum - 90 days.

Many dermatology practices appear to be doing well on paper, seeing lots of patients, billing for services and maybe even showing admirable collection rates. Look beyond the flurry of activity around your billing office or billing service for the telltale signs of a sagging billing process. With today's slim margins getting ever slimmer, now is the time to carefully examine - and overhaul, if needed - your billing process.

Elizabeth Woodcock is the principal of Woodcock & Associates and a speaker and writer specializing in practice management. Visit her Web site at http://www.elizabethwoodcock.com/.