Anatomy of the Business Office

WHERE TO START? That is one of the most common questions we ask ourselves when beginning any task in life. It doesn’t matter if we are at the beginning of a project or in the middle of cleaning up a mess. We stand around, look at the open space or task at hand and try to decide the best and most efficient way to get started.

This is also a common scene in the business office, and many times we find ourselves in one of two positions. The first scenario sounds simple but becomes complex very quickly; a new practice is created and the entire back end of the office needs to be developed. Systems need to be purchased, staff need to be hired and policy and procedures need to be implemented. Sounds simple you say? Now add on the task of building management, marketing for patients, advertising for staff, interviewing vendors for supplies, treating patients, etc. and all of the sudden everyone is already in emergency mode even before getting started. With the obvious attention geared toward patient care and treatment many times the last decisions to be made are in the business office. Although up front this sounds reasonable it will financially catch up to you quickly. The second scenario is one that happens too often. One day we go into the office, look at our aging reports and ask ourselves, “How did this happen?” The accounts receivables has grown to the point of no return, cash is drying up and no one seems to have a reasonable answer as to how to correct the problem.

How does the business work?

In order to build or fix something you must first know how it works and understand how each part fits together making all the individual pieces work as one. Many times the business office is viewed as individual departments. Some examples include the admissions department, the verification department, the billing department, the followup department, and the IT (information technology) or systems department.

Although all these pieces make up what we consider the business office, if we do not understand how these parts must work together there will be a breakdown in the revenue cycle that will cause financial distress somewhere in the immediate future. One breakdown in any one of these areas can either delay or cause you not to receive payment. Just like an engine in a car, if all the parts are not working together as one the entire engine will not work. The revenue cycle in many ways is very similar. If you get 90 percent of your information or process correct it usually leads to your receiving zero percent of your money. A missed referral, one digit missing on an identification number, an incorrect code or billing format all leads to a denial of payment, even if everything else is 100 percent accurate.

These scenarios can be corrected through the same fundamental processes. Whether you are just beginning or in the middle of fixing a problem that took years to create, understanding the revenue cycle and how its moving parts work together is the key to creating a successful environment. I have seen groups that have dropped their DSO (day’s sales outstanding) by over 100 days in a six to eight month period (through cash collections) without changing systems or staff. All this was accomplished by creating a process to make the many moving parts within the business office work together and have the individuals driving the process better prepared to know how to make changes and when. In the following, I’ll dissect some of these moving parts that will assist you in your decision making process. Although there is too much detail to go into every area these keys points should provide solid direction for you as you move forward.

The topic of billing systems always brings up controversy and can be very subjective. The size of the practice and what you can afford will initially drive this decision. The first thing you must do if buying a new system is to have someone with extensive revenue cycle experience assist you. It is critical to have someone who knows the interworkings of healthcare point out to you specific features that you assist you the most when purchasing a new system. With dialysis being a niche healthcare field some systems will not handle the nuances of dialysis billing as well as others. Sales reps will tell you their system is great and has no flaws. You need someone on your team who can pick them apart and find out exactly what their system has to offer at a detailed level. This will be a huge asset.

The admissions and verification process is critical to the success of the billing cycle—especially in dialysis where coordination of benefit issues linger around every corner and patients normally have multiple coverages, which will change or alternate during their treatment. Social workers normally coordinate the initial gathering of patient information for the business office. At this time there is a verification process that takes place to make sure all coverage is active and the benefit plan is understood. Unfortunately this is where many breakdowns begin to occur and it usually happens because of one of the following reasons:

• Untrained staff who do not fully understand what questions to ask
• Lack of dedicated staff in this area
• No re-verification process

With the increasing number of IPAs, third-party administrators, HMOs and managed Medicaid plans being offered you need to have highly trained staff in this area. The verification process is becoming more complex every day. Patients change managed Medicaid plans by the month and it almost becomes a full-time job tracking them if you have a large population. Now take into consideration that many insurance companies have trouble understanding the COB process as it pertains to dialysis and you can understand why you are having trouble collecting your money. Therefore, it’s important to have highly dedicated and trained staff in this area. In addition, incorporate a re-verification process (some clearinghouses will provide this for you on a monthly basis for your electronically submitted commercial patients), and track all patients that require referral and authorizations based on plan types.

When it comes to billing the claims, there is an easy route to success. Bill electronic and as frequent as you can (some groups bill bi-weekly). You might say this sounds like more work and therefore will take more staff. In all actuality this will not only increase cash but will reduce the total amount of staff needed to collect it therefore increasing profitability. The increased frequency of billing accomplishes several things. It lowers the amount of the claim (therefore allowing it not to be flagged and manually audited by the payer due to the large amount being billed). This in turn reduces the amount of claims pended and staff needed for follow up. And if the claim gets denied you can catch it immediately (after only two to three treatments), and you can still fix the claim and get it paid within that month. If you bill monthly it will impact and delay a full months charges.

You can’t get paid if the revenue is sitting on your system and not with the payer. Tracking and trending your billing information is critical as well. This will allow you to take proactive measures in case anything goes wrong. Therefore, track all charges billed on a weekly basis (if you gross revenue is $250,000 per week you want to make sure that you are billing out at least that amount. It should actually be higher with the r-bills that go out). In addition, track and trend all electronic kickbacks (when they were denied, when they were corrected). You must make sure if a claim is denied it immediately gets corrected and resubmitted. Additionally if system or format corrections need to be made (to assure no further denials for that reason) they should be done as well.

Through a detailed reporting and tracking effort you should be able to tremendously decrease the amount of denials you get (through system or admission errors) and increase revenue. Most of these reports will need to be driven through a spreadsheet. The reports and templates can be easily created and maintained. Just because you current system does not provide a canned report does not mean it can’t or shouldn’t be done.

Cash posting is another area that is extremely important and can cause extra man hours if not handled properly. All too often this area is handled more as a clerical function, not taking into consideration the many facets or functions that exist and simply posting numbers to accounts. Does your cash department post zero payments or denials? Are the denials indicated in your system? Can they be tracked? Who are they forwarded to for correction and resubmission?

The cash department essentially becomes the director of the account once the remit is received, deciding the account’s next direction in the revenue cycle process. Using a denial management tracking system is critical. It does not have to be complicated but should allow you to determine the nature of the denial or underpayment, and the department that needs to be notified to correct the problem.

Cash should be posted within 24-48 hours from the time it is received. Any account listed on a remit (payment or not) should be entered into your system. Once that is done if the claim is not paid in full it should be placed on a work list that is determined by the type of action that is needed to correct the claim (i.e., admissions department if it is an insurance verification issue, the follow up department if the claim was underpaid, etc). Most systems will allow you to create your own denial or activity codes. Keep it simple and make it have meaning. Many times groups create a denial code for everything that in time means nothing because they cannot be trended or traced back to specific departments.

Hopefully by now the 80/20 rule is in effect. In order to have success with the follow-up of the claim you need to have 80 percent correct and paid up front, which would leave you the 20 percent to work. The way to be successful following up claims is to reduce the amount that actually needs assistance. Claim followup is definitely the heavy lifting area of the business office. It takes a lot of time, knowledge and energy to aggressively follow up insurance claims.

You would be amazed how much revenue can be collected quickly if a plan is implemented and managed. You cannot collect what you don’t know is there. Reporting and trending your accounts receivable is critical if you are to implement a plan that makes sense based on the actual revenue you have outstanding. Many times individuals are either not aware of the enormity of the situation or don’t even know the problem exists. Detailed accounts receivable analysis (which will probably have to de done outside your system, in Word or Excel) will provide you with a road map to follow and allow you to become more proactive.

I understand in the healthcare environment when budget cuts need to be made that they occur on the back end. You certainly cannot limit or reduce the level of care being provided to patients by cutting back the quality and number of staff or by not maintaining or purchasing the best equipment possible. The problem though is what finances the staff, equipment or purchases? Cutbacks will provide immediate relief but only worsen the long term problem. What happens after the initial money is saved through reduction and the cash is still not coming in? Now not only do you have less cash but worse yet you have less staff to recover more AR. RBT

Jamie Constein is vice president of operations with Brandywine Medical Management Services Inc. He can be reached at (610) 345-1092 or at jamie.constein@bmmsi.com.