Revenue cycle and billing; why and how to keep billing in house

One of the most commonly discussed topics in our soloeyedocs thread is whether to do billing in house or outsource billing. There are many billing companies that will do your billing for a charge of 6% of collections. If you are retina, be sure to negotiate out drug costs or you will be taking a hit every time you inject lucentis or eyelea. Keep in mind that if your overhead is 40%, this is 10% of your pretax take home pay!

EVERY doctor that opens their own practice is too scared to do their own billing. I know when I first opened, I sure was. It was only through the encouragement of Ho Sun and Matt that I was “brave” enough to do it myself. Now most of the docs on our thread who started up from scratch do their own billing. That’s because when you’re seeing five patients per day, you have ample opportunity and time to work every denied claim to the bone, find out why denials occur, and what to do the fix them. And you don’t have to personally make the phone calls; that’s what your employees are for. You also have time to draft sample dispute letters for every situation.

Then when you’re seeing twenty to thirty patients per day, your billing is on autopilot and works efficiently. Many of the articles you read in throwaway magazines about how frequently denials occur are scare tactics to get you to hire a billing company and have these take away your hard earned money. I can’t imagine outsourcing my billing; it would be a tremendous waste of money.

For the most part the folks on our google group who continue to use billing companies are ones that purchased a busy practice and stepped in, or started from scratch and got busy before they realized doing billing in house. Once something is up and running, it is difficult to go back and change it. Many of them are trying to bring their billing in house due to dissatisfaction with outsourced billing companies.

Just like I can’t find someone in our google group that’s happy with Zeiss customer service, I can’t find anyone who is thrilled with the efficiency and cost of their outsourced billing service.

On the other hand, most of the docs in our group who do their own billing (keep it in house) say it was one of the BEST decisions they made. Everyone is scared to- but do you want a $17/ hour employee controlling the livelihood of your practice? When I drive into work, I hear advertisements on the radio about how to “take this course and become a medical biller.” These are not astrophysics PhDs from MIT that are doing your billing!

I’ll write the calculations at the end of this post, but the time I spend doing billing comes out to saving me about $200-250 an hour. So unless you’re taking home more than $400,000-500,000 per year, it is worth your time and efforts. If you’re making more that $500,000 per year, you can just delegate more of the work out to your employees.

Here’s the down and dirty on the revenue cycle:

First you need to determine the correct CPT (procedure code) and ICD10 (diagnosis code). Some of he most common procedure codes that ophthalmologists use are 92004 (new patient eye code, comprehensive), 92014 (return patient eye code, comprehensive), 92012 (return patient, intermediate), 66984 (cataract surgery with IOL). ICD 10 codes are suggested by my EHR system.

When patients come in, their insurance and benefits are verified.  This is done through our practice management (PM) system. First, check to make sure the insurance is active. Secondly, we check if the patient has a copay, deductible, or coinsurance. Sometimes even if the front of the card states there is a copay, the copay applies only after the deductible is met. Other times, even if there is a deductible, it applies only to procedures (including in office testing as well as surgeries) and there is only a copay for the office visit. At the same time we make sure prior authorization isn’t needed. The only plans I am contracted with that require prior auth are Triwest (VA choice) and Tricare. Many managed Medicaid HMOs in California require prior auth.

My front desk tries to take care of this the day before the patient comes in. If she knows we are doing testing (such as a visual field, 92083 or OCT, 92133 or 92134) a note is made verify the benefits and collect the proper amount. We bill patients after the fact if we do testing that was not initially anticipated. I haven’t been burned too badly by patients not paying.

In theory you can check eligibility and benefits for free without a practice management system by logging into individual insurance company websites or a website called Availity. When you first open and are seeing four patients a day your employee has time to go to various websites. But once you get the least bit busy, this becomes very cumbersome to login and re-enter patient information, so it’s worth paying your practice management system for eligibility and benefit checks from the get go.

All of our insurance cards (as well as ID to prevent insurance fraud) are scanned into our EHR. Besides the member ID number, the EDI number for the insurance company and the claims address are two important components. Every insurance company has a unique EDI number, and the benefits are verified based on member ID and EDI. During training for your practice management system, the company should show you how to define insurance companies and enter in pertinent information under the company to make sure claims can be submitted. (You only need to enter the EDI number once, but every time you get a new insurance you need to set it up with the EDI number). Every plan is different- sometimes Medicare advantage plans use a different EDI number from the same insurance as a commercial PPO! Just last week we defined some new insurances.

To determine the amount we collect, we have a chart at the front desk that shows us the allowed (contracted) amounts for each different insurance for each CPT code. When you are signing your insurance contracts with insurance companies make sure you get all of this information! You should have this chart made before you open. If you didn’t get it at the time of signing the contract (I didn’t), you can often find out your allowed amounts for commonly used codes from a request form on their website, through your provider rep, or even trial and error when submitting claims and getting EOBs back.

Medicare and Medicaid rates are not negotiable, everyone in your locality gets the same rate (Medicare rates vary from state to state and even within localities within a state), but commercial plans often give more favorable rates to big groups. One way for a solo doctor to potentially get a higher rate is to contract with a plan through a IPA (Independent Physicians Association) or ACO (Accountable Care Organization).

Although this sounds like a lot of work, keep in mind that over 50% of the typical ophthalmology practice is Medicare (and most patients have supplements that cover the 20% that Medicare does not) and in my practice 10% is Medicaid for which there is no patient responsibility. So you’re verifying benefits on less than 40% of patients.

If they have coinsurance or a high deductible, it is collected to the best of our ability (sometimes we don’t know if I’m going to do a OCT for example).  To me, this is the most important part of the revenue cycle if you want a high collections rate.  If done correctly, once you get your EOBs and payments back, most of your accounts are closed.

We also verify that medicare patients aren’t in a replacement/ advantage plan that we are out of network for.  Many patients try to give us a medicare card and initially we got back zero EOBs since they were in a HMO advantage plan.

Surgery payments are collected before surgery or the surgery is postponed (amazingly enough, I have had minimal pushback, although some surgeries have been postopned).  We do not do payment plans; every single patient we’ve tried hasn’t paid us (your area/ population may vary).

If a patient has a medicare deductible but is not on plan C, F or J for their supplement, they are responsible for the deductible (obviously unless they have medicaid, tricare, or a commercial that pays the deductible as their secondary).  We collect the deductible, but for the few patients that resist, especially at the beginning of the year, we hold the claim.  It doesn’t make as much sense to hold the claim towards the end of the year. If a patient comes in December 15 and doesn’t see any more doctors that year you might have to eat the claim if it isn’t collected at the time of service and the patient doesn’t pay.

In California and most other states for dual Medicare / Medicaid patients you lose big $ unless you hold the claim until the deductible has been met.  Ho Sun thoroughly discusses this in his excellent post.

Does your billing company or you hold the claim (and submit higher paying CPT codes first to meet the deductible)? If not your billing company is bleeding money for you.

My EHR has buttons for codes such as 92004, 92134, etc and can even suggest codes such as 66984 when I do cataract surgery, or 62028 for a intravitreal injection as reason for visit.  Then I select the modifiers, push a button, and the charges get sent to my practice management system.  This is why it is easier if your PM system is compatible with your EHR. Note that compatible doesn’t mean that they must both be from the same company (mine aren’t).  If they weren’t compatible I’d have to hand enter (or get my front desk to) enter all the billing codes, diagnosis codes, date of service, etc which introduces room for error.

At the end of the day, I post the charges, which takes about a minute.  This just involves verifying that there is a CPT code, ICD 10 code, defined insurance company, and referring doctor for every charge. If a prior auth is needed, I enter it with the charge at this time. You can even use a paper book as a backup. In theory I could do my billing without software and just a black book.  I check to make sure all of my patients have charges sent and that all tests are included- another reason to do billing yourself- ask your biller, do they reconcile the patients you saw for the day with billing codes to make sure each patient has a charge sent out?  I also make sure that I didn’t forget to use modifiers (very rare that I use them). Then I click on about five buttons and the charges are sent from the practice management system to my clearinghouse.  The clearinghouse then sends the claims to the each payor, as long as the payor electronically accepts claims. As an aside, my clearinghouse costs me about $120 per month; my practice management system about $280 per month, and my EHR $300 per month.

For patients whose insurances don’t accept electronic claims (some Medicare advantage plans or third party administrators for self funded companies), my receptionist is instructed to print out a CMS 1500 form (you can order boxes of these online, your practice management system should show you how to print them out- takes maybe 20 seconds) and provide me with an envelope for the correct address (the one on the back of the card) for the claim. You can pay your clearinghouse extra to do this for you, but to avoid sending to wrong address I do it myself (one of my payers with one EDI number has multiple addresses).

Then, I post the patient payments for each day and write them in my book.  Takes about 20-30 seconds per patient.  So the above steps maybe take me 10 minutes at the end of the day.

The clearinghouse sends me a electronic 277 form to my practice management system to show whether claims are accepted or rejected to be sent to the payor.  If a claim is rejected, my front desk figures out why and will phone my clearinghouse if she needs help (we can often find the reason ourselves- most often name in PM system doesn’t exactly match insurance card, or transposing digits on insurance card #, CPT code and ICD 10 code not valid, or no/ invalid NPI number for referring provider). We fix the claim and resend it.

A explanation of benefits that includes the insurance company adjudication and payment on claims come back in two forms; ERAs and EOBs.  ERAs are electronic so obviously you should try and get as many companies to issue ERAs.  This can be done once you are credentialed, sometimes you need to submit a claim and get back a paper EOB before you can enroll in ERA.

All you do is click on some buttons in the PM system, and the charges post and it (usually) shows either what the patient owes or a zero balance.  Sometimes something is funny so you need to make an adjustment.  You should also arrange for direct deposit of as many insurances as possible (this can often be done through a insurance company website provider portal).  EOBs often come with a paper check if you haven’t signed up for EFT, and you need to enter the charges manually into the PM system (many of us who do our own billing train a employee to do this and I will start to do this too).  It probably takes me 10-30 minutes per day to post my EOBs and ERAs and instruct my front desk what to do.  Sometimes I even do this between patients if it’s slow or I want to take a break. I was out of the office for four working days earlier this month, to post 5 days of EOBs took me less than 2 hours.

I’d say most claims get paid promptly, over 95-97%.  Medicare takes two weeks, BCBS and tricare are fastest at two days, some commercials and secondaries are anywhere from 1 week to one month.  Anything that is not paid correctly (due to issues such as mixing up the primary and secondary insurance, thinking we are vision rather than medical coverage, wrong codes used, etc, coverage no longer active) my receptionist will contact the insurance company to clarify on Wednesday or Thursday mornings when I am out of office or in surgery.  She claims she spends less that two hours a week doing working these claims.  We are very persistent in calling to make sure we get paid!

If there is an insurance mix up we ask the patient to help us clarify it; after 30 days it becomes their responsibility.  This includes if they changed to a plan we are out of network for, or if they gave us the wrong information when they checked in.

Sometimes patients have secondary, or for medicare, supplemental insurance. On the bottom of the medicare EOB it will state “Claim sent to: United Health Care”. You don’t need to do anything else, Medicare automatically sends the claim to UHC for you. For the Medicaid plans in Arizona, we need to print a CMS 1500 and send it with the medicare EOB to the medicaid plan.

For commercials you often need to print the EOB from the primary and mail it with a CMS 1500 form to the secondary insurance. Medicare as secondary only accepts electronic claims, and you need to put the reason why medicare is secondary in your practice management system (usually “12- medicare secondary working age beneficiary or spouse with employer group plan”)

Since everything is collected upfront, it is unusual that patients owe me anything; usually once the EOBs are posted the accounts are closed. We create a list of any patients who owe our practice money. We also have a list of all claims under dispute with the insurance company, with a date to follow up. For patients that owe over $5, we send three letters about one month apart and make about 1-2 phone calls before sending to collections.  The first statement is sent immediately, the follow up statements done weekly. We only send balances over $40 to collections.  I aim to send to collections under 90 days from when the responsibility was transferred to the patient. The agency is local and groups debts with debts to other offices that use their services, and credit reports delinquent accounts. Their recovery rate is about 20% of what I send them.

Not surprisingly, the amount I collect is 99.3 to 99.6% of the allowed amounts. The industry benchmark of acceptable is about 96% and 98% is considered good. This might vary depending on your payor mix and area.

Let’s run the calculations to see if it’s worth your time to do your own billing. Say a relatively new practice collects $500,000 in revenue a year (the average for comprehensive ophthalmologists is about $800,000 to 900,000). If I used a billing company that charged me 6%, even if you assume they duplicated my 99% rate, I would have paid $30,000 in fees for my $500,000 collected.  If you assume I average 3 hours per week/ 12 hours per month, I spend 144 hours per year. That’s $208 per hour, or $433,333 over a year assuming 2080 hours/ year.

If the billing company only got 97% (which is still respectable, compared to the “industry standard” of 96% as being minimal acceptable), then it’s a loss of another $10K or total of $40,000 which would be $278/ hour, or $577,000 over a year assuming 2080 hours/ year.

A $400,000 job where you could theoretically work from home?  When I retire from practice I plan to set up a billing company and work remotely from La Jolla or Kauai. Even if I doubled the amount of time I spent on billing it’s still a lot per hour. Some on our thread who have become busy have tasked their employees to check and send charges, and to post EOBs, but watch it like a hawk to make sure there is no funny business such as embezzlement. You can’t really monitor your employees unless you understand the revenue cycle yourself. If a employee tells me it takes 30 minutes to post four EOBs, I know they aren’t doing their job and action will be taken.

Finally, if you learn from your mistakes, you will make less mistakes for the future thus increasing your revenue.  If you outsource, is your billing service giving you feedback on why claims are denied and what you need to do in the future to prevent it? If a patient has the wrong copay, or if their secondary has a coinsurance, we notate it in a pop up in our practice management system so next time we won’t even have to send a statement.

Many folks in our google group will be happy to chime in and agree with this email. It is worth learning the ins and outs of billing so you can make your revenue cycle run smoothly for the rest of the existence of your practice, to find out common reasons for denials so they can be prevented and disputed, and to maximize your revenue. They were just as scared as you reading this are that it will be a utter disaster. It won’t be.

It’s more likely to be a disaster if you outsource it to the “experts.” Kind of like “financial advisors” who charge you a 1.5% AUM fee and tell you to get whole life insurance, billing companies are parasites that suck the blood physicians. Ironically, most of us who worked in big groups before going solo now realize how much money we left on the table by NOT understanding our coding and billing, because we thought magically someone else would get it right. Everyone should learn about and do their own billing so they keep it in house.

4 thoughts on “Revenue cycle and billing; why and how to keep billing in house

  1. If billing is done out of house, what is the best method to follow-up that you are maximizing the collections rate on the insurance allowed amount? I’m a new associate and have been told that getting me the EOBs for each patient is too cumbersome.

    • Good question. You’re at the mercy of your employer. They may not want you to know the allowed amounts for every code which is on the EOBs. And even if you saw the EOBs you’d need access to their practice management system in order to determine if the patient responsibility was collected.

      As a practice owner I’d agree that getting you each and every EOB is cumbersome but maybe they could allow you to audit 10-12 patients per month.

      What is their overall collections rate? While 96% of allowed amounts is supposed to be the industry accepted rate, many practices are higher.

      If your overhead is 50%, a difference of 3.5% is one years’ salary in about 14 years!

      Another number to look at is the collections per patient seen. This includes surgeries and postops. Take total revenue and divide by encounters. This number can fluctuate depending on payer mix, how aggressive (inappropriate?) you are in testing, how many premium lenses you do, etc.

      Good luck!

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