A number of vendors have found a way to assist providers recapture "short payments" by insurers. This is especially true with the emergence of managed care contracts, and the limitations of current hospital information and practice management systems. The process requires taking contracts, and dissecting them to rates and service types. Using vendor software or decision-making algorithms, paid amounts are compared to recalculated amounts to determine the difference (if any).

Taking Allowances At Time of Billing

When the provider can take any contractual allowances at the time of billing, they are in a better position to guard against accepting inappropriate payments. Aside from giving a truer valuation of the accounts receivable, the net expected amount affords another important safeguard.

When a correct insurance payment is posted to an insurance balance, the result should be a $0.00 balance for that insurance plan. Since there are occasional adjustments to DRG rates, or minimal disparities often occurring at the beginning of a rate year, we suggest setting a minimal threshold (e.g., up to $25.00 to $50.00) variance. Any remaining insurance balance remaining after payment would be subject for review.

Typically, a payer may pay for a DRG different than the one that was billed, or a payer may have applied the wrong service type to a payment calculation. Of course, the first two conditions suggest that the payer is wrong. Often, the provider has erred in either assigning the appropriate insurance plan or rate code based on an error in receiving the verified insurance or in applying the benefits of the plan. With the limitations in provider systems, there may be no functionality to assign the right reimbursement rate to match the expected payment. In either case, the ability to identify these accounts can help ensure that incorrect payments are reviewed with the payer.

Payment Posting Review

While manual payment posting is generally viewed as a laborious task, it is important to edit for non-matching payment amounts to open invoices. The same holds true for electronic remittance posting, and there should be protocols that produce edit reports that flag these accounts. Like other functions, working these edit reports is important, if appropriate payments are to be obtained, and backlogs are to be reduced. Correct allowancing and payment posting can also speed any secondary billing that may result.

Using Insurance and Charge Master Files

A first line of defense will be to see if you can effect the appropriate coordination of benefits and proration of charges. This will ensure that only covered services prorate to a payer that is responsible for payment. Similarly, standalone contract management systems can be used to help determine the appropriate rate so that the correct allowances can be determined and applied.

Case Management Reviews

With the increase in cases being reviewed for clinical or quality issues, consideration should be given to reviewing these cases from an overall perspective--but with a focus on ensuring that the charges, allowances and expected payment are correct. Since many third party administrators or independent review agencies may be involved, there should be provider guidelines used to ensure your ability to maintain control over the review process.

Daily Allowance Indicators

Most systems will produce reports of allowances--in detail and in summary. Even a cursory review of these reports, especially to identify errant allowances, can be useful in spotting errors.

by Allan P. DeKaye, MBA, FHFMA

There aren’t any national statistics for it, but everybody seems to be encountering them--and at alarmingly increasing rates. D-E-N-I-A-L-S! Surprisingly, many are avoidable. The time lost in researching and reclaiming claims for correctable errors can often be traced to the insurance verification function. In many hospital settings, the traditional insurance verification occurs close to the admitting, but is generally after the admission has occurred--too late! In outpatient settings--it just doesn’t happen (at least with regularity and reliability), and in practice management settings comes the realization that it is more than just asking for and copying the insurance card.

Physicians’ Offices Holds the Key

Since most visits are appointed (some well in advance of the service date), the staff person who makes appointments needs to start taking more than just name and phone number. At a minimum, the office should ask for and record the insurance information including (but not limited to): company name, policy number, guarantor, patient relationship, policy number and social security number. Once obtained, the insurance company should be contacted (electronically or telephonically) to verify eligibility. While this is a must for all new patients, they should be checking the open account balances for all established patients to determine if there are any account problems. Even if only to verify the same insurance--it gives the office the opportunity to reiterate the need for the patient to remember to pay any deductible, co-payment or to ensure compliance with any utilization management requirements including prior authorizations or referrals. If the practice sends out any type of appointment verification notice, information about insurance requirements can also be included as a reminder. This proactive approach tends to reduce surprises at the end of the visit when the patient is asked for payment.

Physician/Hospital Data Exchange

Hospitals should work closely with their "top admitters" to be certain the practices convey to patients what is required both clinically and financially when the patient is referred for inpatient, outpatient or private ambulatory services. At a minimum, the physicians offices should fax (or data transfer if on the same systems platform) over a financial data set for all admissions. As the name--data exchange--suggests, the process should work both ways. The practice may have open account problems where the hospital has information. This kind of cooperation is necessary as hospitals and physicians form new alliances and alignments. This mutual effort can help both hospital and physician reduce its investment in accounts receivable.

Coping With Volume

With the growth in ambulatory services, the reduction in staffing, and the increases in managed care penetration--especially in Medicare and Medicaid--insurance verification has become an arduous task. Electronic eligibility systems can help automate the process, even though there are still limitations in payer connectivity and detail of the response. However, in selective situations, the combination of electronic transactions coupled with manual verification can be used in areas where claim rejections are higher. Try to avoid all or nothing solutions--because you are likely to have nothing in place.

In some instances, time doesn’t permit a thorough review of all patients prior to service. In which case, using a random method to review insurances should be considered. Taking a page out of most motor vehicle registrations and inspections requirements, try screening patients whose medical record or account numbers end in the same digit as the month we’re in (adopt some conventions for handling November and December). Either use the actual number or use color coding stickers to affix to cards to denote the month(s) that are being reviewed. Of course, you’ll have to consider your specific volumes to decide how many patients you could screen in a period.

Again drawing on technology and traffic patterns, consider the EZ Pass or electronic toll takers concept. When patients see an easier way to navigate your lines, they will seek it out. Allow patients who have confirmed insurance but fixed deductibles and co-payments to have an easier way to pay these generally smaller amounts. Use prepaid service cards that can be bought with credit card purchases to be used by bypassing lines and submitting the card or coupon right to the clinic registrar.

Analyzing Rejections

It is a good idea to analyze the rejections you receive by payer. Determining the reasons for rejections will help you pinpoint problems areas that require corrective action or staff in need of re-training. Many times, as a result of this type of review, providers determine that rejections or claim denials are inappropriate. Having this information can help you take a more proactive approach to dealing with payers.

A: Several of my clients already have, or are undergoing movement to CBO. Among the advantages:

1. Economies of scale--notably in the follow-up of open accounts
2. Leverage in negotiating any specialty outsourcing or collection agency rates
3. Uniformity in policies and procedures for front-end insurance verification requirements, deposit requirements and billing.

Among the disadvantages:

1. Initial concern over downsizing, and the potential loss of key supervisory or manager type positions
2. Need to transition from multiple HIS (Hospital Information Systems) to a single system to realize full economies of scale
3. Initial integration of first pair of facilities (generally less difficult for subsequent additions), although each new acquisition presents its own unique attributes, problems and opportunities.

There is a very thorough and interesting perspective on this topic presented in my new book, The Patient Accounts Management Handbook (Aspen, 1997) in Chapter 22, "Cost Savings and Efficiencies Attained Through Consolidation" (by Steven Kurz, The New York Hospital Care Network).

A: Forming a CBO can be tough enough, and unionization adds another factor to consider. One of your first tasks should include preparing an inventory of existing job classifications and functions performed at each of the three hospitals. Second, you'll need to compare and compile the following elements which will factor into your decision-making process:

1. Volume of admissions, visits, procedures, etc.
2. Hospital only, or physician billing, too
3. System(s) in use at the various facilities
4. Is Admitting and Registration part of the Business Offices at any/all of the hospitals

Next, you'll need to define what your "CBO" will do. The CBO may be a follow- up on open accounts area only, or it may also take on the billing function. Defining what remains locally based at each hospital (e.g., Admitting, Registration, Insurance Verification) may help you allocate "union" positions based on functionality.

This topic is also addressed in my book, The Patient Accounts Management Handbook (Aspen, 1997). Chapter 22, "Cost Savings and Efficiencies Attained Through Consolidation (by Steven Kurz)" provides some additional perspectives on how to deal with union and other factors in the centralization process.

A: I would like to suggest that you consider recommending to your association that they provide information about how they prepare these tables of values. In using statistical measures that purport to cover regional and national norms, the issuing organization should consider including subdividing the data into the following categories or including definitions to help the reader judge the relevance to their organization:

1. Regional, local or national compilation
2. Hospital only; inpatient vs. outpatient (further subdividing ER, clinic, PAT, ambulatory surgery, etc.)
3. Physician based office visits
4. Other ambulatory type services
5. Bed size

In order for the data to be viewed as useful to providers, payers, consultants and vendors, it needs to be considered reliable and valid--meaning that it can be replicated in similar study situations. We see this in the financial operational areas such as Accounts Receivable management data and other cash flow cycle benchmarks.

A: I think there would be little disagreement in the industry that collection at the time of service is far more effective than after service is rendered. And while many facilities still shun away from embracing this approach, results aren't always available because systems may be limited in how you can encode POS (point-of-service) payments. Unless you have local reporting capability or can use specific transaction codes, there is less likelihood that you'll be able to get comparable measures across localities, regions or nationally.

In my book, The Patient Accounts Management Handbook (Aspen, 1997), Part IV, "Where Cash is King: The Collection Cycle," there are three chapters that do put some percentages and descriptors on the efficacy of POS collections. Chuck Lund's Chapter 14 (The Self-Paying Patient) and Lawrence Friia's Chapter 15 (Following-up on Patient Accounts--Employing New Technologies) will give you some basis for estimating the percentage of collectibility at the time of service. Deborah Shapiro in Chapter 13 (Ensuring Cash Flow) provides an effective lead-in to Chuck's and Larry's strategies by focusing on various ratios and payer specific problems.

Q: How can we determine how many full-time employees are really necessary for billing and follow-up? Are there guidelines?

I caution providers about using so-called "averages" or standards. While they should be used as part of the benchmarking process, I prefer to apply "tests of reasonableness" to each situation, and then compare them to a reported standard. For example, in today's market you should have very few "billers," especially if you are billing electronically. Follow-up is a different story, and I prefer to see providers devote more resources to follow-up.

Actually staffing should consider how many open accounts there are by payer, and then weigh that against the total number of accounts in the aggregate (i.e., A/R effectiveness). If your "clean claiming" results in timely payment, assign fewer staff. More staffing for slow payers, or those who have placed more administrative burdens in your way, or if the payer has certain prescribed manual or electronic procedures to follow to secure payment. Finally, be reasonable: 2,000 accounts per staff for follow-up may be okay if you don't expect them to work each account every month, if each follow-up tasks 10-15 minutes.

Q: What are some basic things we should look out for or consider when reorganizing our Patient Financial Services department? What things (ie. Physician billing, etc.) should remain separate, if any?

A: Here are several factors to consider when re-organizing your department that have worked well for my clients in similar situations.

1. There are differences in hospital (and hospital-based clinic) vs. physician A/R that suggest keeping the functions separated even if at the same location.
2. Today, billing should have fewer staff if you have most billing done electronically. Given your high managed care financial class mix, be certain you have allocated sufficient staff if you have to issue paper UB-92's.
3. I prefer follow-up based on financial class and insurance plan; however, co-mingling of inpatient and hospital-based clinics is okay especially if you are planning on working accounts from "high to low" balances--which is more effective than alpha splits--especially with large volumes of open accounts.
4. Physician billing and follow-up should be separated when systems are different--but follow-up can follow the same guidelines as noted for hospitals.
5. The "customer call center" makes for good customer service as they receive and handle incoming calls--but be certain you have some self-pay collection follow-up given the sizeable percentage of A/R in this category.

Beginning January 1, 1998, a new federal law was enacted which requires home health agencies and home medical equipment suppliers to have their businesses bonded to the tune of at least $ 50,000 as security against fraud and abuse. The result: No bond = no Medicare reimbursed services. Evidently, the government believes that they will protect the Medicare and Medicaid program from fly-by-night providers that bill falsely and then cannot be tapped for overpayment.

While HCFA published surety bond regulations in the Federal Register on January 5, 1998, HCFA has recently extended HHA surety bond deadlines and made some favorable changes. Why? HHAs have been unable to obtain surety bonds and insurance companies do not intend to take on risk when HCFA would require unlimited liability for Medicare overpayments. Overall, it has been determined that about 10% of HHAs which have applied for bonds have received them.

Specific changes made:

1. Total liability will now be limited to the face value of the latest bond in force, even though some or all of the Medicare overpayments may have occurred in prior years.
2. HHAs lacking coverage will have until June or even later to obtain their bonds under more lenient standards HCFA has in mind. Once the final regulation incorporating changes is published, HHAs would have 60 days to submit proof of having obtained a surety bond to their regional home health intermediary.