Learn How To Create A Budget For Your Medical Practice

In medicine, the mention of the word profit is often viewed or interpreted as a dirty word. It is as if the word does not belong in the lexicon when health care is addressed.
 Broke doctor
I argue (in the context of the private medical practice setting) that profitability is a medical practice’s responsibility for one simple reason. If the medical practice (also known as a business) doesn’t deliver profits, health care providers are unable to provide for those in need.

Why Profits?

Profits pay for infrastructure, technology, education and human resources, all of which translate to superior pediatric care when employed correctly.
Another way I like to put it is by saying,

 

…a broke doctor does do anybody any good.

 

Calling vs Profits

Indeed, our medical businesses differ from other companies in that we care for children. And the notion of withholding medical services or restricting access to a sick child merely by the patient’s parents inability to pay for health care services is simply not in a pediatrician’s DNA.
However, it is important to accept the reality that without a way for a doctor or the practice’s income to outpace expenses, health care providers are unable to provide services of any kind. At least not for the long term.

Is there a solution?

How do we reconcile these two competing issues? On one hand, it is necessary for a medical practice to deliver profits if it wants to remain sustainable. On the other, we have an intrinsic motivation to put the patient’s needs first.
I am glad you asked.
These two dichotomies can co-exist – and even flourish – alongside each other. There is indeed numerous tools and principles rooted in business that can help medical practices manage what otherwise appears to be opposing forces.

A Resource You Don’t Want to Miss

Today, I want to tell you about a resource I’ve been working on to help your office obtain financial success, while simultaneously providing unsurpassed pediatric care to your patients.

To help you succeed in your financial success, I’ve written a comprehensive eBook on budgeting that walks you through the process of creating a budget for your medical practice. The materials also cover basic principles necessary to put the exercise into perspective.

Budgeting is a major component of financial success. Moreover, financial success is essential to the continuity of care.

To read more about this offering, click on the image below.

Medical Practice Budgeting
Click on the image

I do hope that you buy the book, but more important, that you find the eBook helpful, useful and valuable.

Can Your Medical Practice Afford To Drop An Insurance Carrier?

I worked with a practice that was in a similar situation. The partners wanted to drop an insurance plan, but they had questions they wanted to answer before pulling the trigger, so to speak.

For example, one of the questions was how many patients would they potentially lose and how significant would be the financial impact if they dropped the insurance plan?

Screen Shot 2016-01-05 at 11.09.13 AMI received a letter from the University of Chicago Medical Center explaining that effective Jan 2016; they will no longer accept BCBS.

The announcement took me by surprise. Not because the hospital was dropping an insurance plan- but because they were dropping a major plan, BCBS.

BCBS has a significant market share in Chicago; which translates to a lot of patients having BCBS as their insurance carrier.

I can only imagine why the hospital decided to drop BCBS, but I think I can say with a fair amount of certainty that the decision must have been difficult for stakeholders of the hospital. Undoubtedly dropping such a large plan would affect a lot of patients, but also, shake up the hospital’s income.

CAN A PRACTICE AFFORD TO DROP A PLAN?

I worked with a practice that was in a similar situation. The partners wanted to drop an insurance plan, but they had questions they wanted to answer before pulling the trigger, so to speak.

For example, one of the questions was how many patients would they potentially lose and how significant would be the financial impact if they dropped the insurance plan?

INSURANCE DISTRIBUTION

To help them answer their questions, I worked with the practice manager to create a simple spreadsheet that I call an insurance distribution sheet. Below is a version of the spreadsheet already completed.

Screen Shot 2016-01-03 at 6.28.38 PM

To build the spreadsheet, we needed 3-data sets from the practice’s practice management system. Those three data sets were:

  1. Number of Patient Seen by Insurance Plan
  2. Gross Charges by Insurance Plan
  3. Net Receivables by Insurance Plan

The practice management system we were working with did not provide these data sets in one clean report. We had to run individual reports and enter the values into the spreadsheet.

Once the data was aggregated, we added a simple formula to translate the results into percentages. And the results is what the example above shows.


For those that are unfamiliar with Excel, click HERE to see a brief overview of how to calculate the percent of the total.


WHAT DO THE COLUMNS MEAN?

The first column is the insurance company patients had at the time of service. Percent of patients represents the ratio between all the patients seen, versus the patients seen with the corresponding insurance company. For example, let’s say the practice saw 1000 patients and of those, 300 had BCBS.

300 / 1000 = .3*

(*) BCBS represented 30% of the patients seen

Like percent of patients, percent of charges is the ratio of the practices gross charges divided by the gross charges corresponding to each insurance company. Example. Let’s say the practice billed $1,000,000. Of that million, BCBS represented $250,000.

250,000 / 1,000,000 = .25*

(*) Percent of charges for BCBS is 25%

The percent of receivables column follows the same math as percent of patient as well as percent of charges. And the cents/$ column calculates how many cents on the dollar the practice is collecting from the payor.

INTERPRETING THE GRAPH

Let’s look at BCBS and read across from left to right.

We see BCBS has 40% in the percent of patient column. Meaning, of all the patients seen, 40% had BCBS as their primary insurance. The next column is percent of charges. We see the BCBS represented 45%. This indicates that 45% of gross charges for the practice was billed to BCBS.

Percent of receivables is the next column over. It indicates that the revenue from BCBS accounted for 50% of the practice’s total income. And the revenue averaged 73 cents on the dollar. Another way to read it is, for every $1 billed to BCBS, the practice received 73 cents.

In contrast, let’s look at UHC. Only 8% of all the patients the practice saw for the period were UHC patients. UHC represented 9% of the practice’s revenue, and they averaged 60 cents on the dollar.

WHAT CAN WE GLEAN?

With an analysis like this, the practice can begin to find concrete answers to their pressing questions. For example, if UHC was the plan they were planning to drop, the sheet is able to show them what the impact would be from both a patient standpoint and financial standpoint.

UHC represents 10% of their patient panel. Which would have to leave the practice if they drop the plan, taking with them 9% of the practice’s revenue.

If the plan in question is BCBS, the numbers tell a different story. Fifty percent of the practice’s revenue would walk away with 40% of their patient panel.

Another observation is that Medicaid accounted for 37% of patients seen; but the State’s insurance plan accounted for 24% of the practice’s revenue. Something worth pondering.

HOW MUCH IS THE SHORTFALL?

For the sake of argument, let’s say UHC is the plan the practice was considering dropping. Doing so they would lose 9% of their revenue. This is not insignificant. If practice revenue is 1-million dollars, 9% represents $90,000. If practice revenue is 5-million, 9% is near $500,000. It’s less money no matter how you look at it.

PREPARING FOR THE SHORTFALL

When the doctors I was working with realized how much they’d lose, they got cold feet.

Here is what I explained to them…. the practice doesn’t have to see the same amount of patients to recuperate the 9% revenue shortfall. In fact, the practice can see fewer patients and still make up the revenue shortfall. How so?

Because of the cents on the dollar.

BCBS pays .73cents for every dollar billed. That’s 13cents more than UHC. By filling the schedule with better paying plans, like BCBS, Aetna or HFN, the practice will recuperate the 9% revenue loss faster because they are making more per patient than they would treating a UHC customer.

NOT ALWAYS SO CLEAR

Admittedly this graph does not give you a comprehensive picture. There are potentially other variables that a practice may consider. However, in the case of the practice that I worked with, this analysis was all they needed to answer their questions and move forward.

One last thing before you move one… don’t focus on the numbers you see on the graph and use them to compare with your practice numbers. Focus instead on the method, the process and the math with your numbers. Deal?


EDITORIAL UPDATE
The practice reached out to the payer to negotiate better rates. Armed with the data, they felt empowered (not at the mercy of the payor) and firmly request payment increases. The payer agreed. And they signed a contract that was competitive.

 

Let’s Talk About What Happened In Vegas

My friends from the Pediatric Management Institute (PMI) put on another great practice management conference in Las Vegas last January.Screen Shot 2016-02-21 at 10.55.37 AM

The content was excellent, thanks to the fabulous faculty PMI brought in.

The topics varied from customer service principles to fundamental changes happening in the health insurance industry and how those changes are – or soon will be – affecting doctors’ financial bottom line.

Below are a few highlights and notable points that resonated with me.

ANCILLARY SERVICES | INCOME DIVERSIFICATION

Dr. Jeanne Marconi presented an account of how her practice diversifies income streams by incorporating ancillary services into her practice.

Admittedly Dr. Marconi’s comprehensive – almost overwhelming – plethora of services (they even offer in-house exercise training programs for children with high BMI) is probably too much for the standard practice to implement.

But for me, her talk wasn’t an invitation to follow her footsteps, but instead, provide insight into what is possible, what can be done and what is available to practices.

Dr. Marconi dished out several challenges to the physicians in the crowd. But the one that resonated with me the most was her call for pediatric practices to challenge the status quo, expand their minds, think creatively (or to use a cliche, think outside the box) and begin to think about ways to diversify practice’s revenue streams.

HOW HEALTH INSURANCE COMPANIES ARE PAYING DOCTORS

Susanne Madden arrived in Vegas with her extensive knowledge and expertise of the health insurance industry.

Screen Shot 2016-02-21 at 11.10.10 AM
Dr. Jeanne Marconi and Susanne Madden

She presented attendees the sobering reality of how health insurance companies are adjusting, changing – even experimenting in some cases – with their models to continue delivering value to “their” shareholders. And by value, she means lower cost and higher profits.

Susanne underscored the importance of implementing quality measures such as P4P, HEIDIS, PCMH into our medical practices. But not for the reasons you might think.

While many of these health insurance programs are currently in place as rewards (e.g., enhanced or incentive payments) for medical practices that achieve quality measures thresholds in patient care, Susanne highlighted that these programs will soon become a requirement for practices.

What does this mean exactly? Insurance companies will soon stop offering enhanced payments programs to practices for achieving PCMH level III certification (or other types of incentives). Instead, they will reduce payments to doctors don’t meet PCMH certification.

As if that wasn’t bad enough, she added that many payers are evaluating providers based on how much the provider costs the company in benefits payouts.

How is that different than what they do now?

The difference is that they are not looking at the practice as a whole, but rather evaluating each provider individually.

The implications are that if you have physicians in your practice that don’t adhere to designated quality standards, payors can potentially pay each doctor in the practice different amounts.

HOW MUCH CAN WE AFFORD TO PAY AN EMPLOYED PROVIDER?

PMI’s very own Paul Vanchiere gave two of his hallmark presentations. The first one focused on customer service using the acronym KIDS (Kindness, Integrity, Dignity & Service).

His second talk was my favorite. Why? Because Paul took a complicated, MBA, executive consulting level exercise (determining how much can your practice afford to pay an employed provider) and distilled it into an easy to follow, step-by-step, process, which only requires one to understand a few financial concepts and enter value sets into a spreadsheet.

BROADEN YOUR CODE REPERTUAR

Dr. Rich Lander went over the fundamentals of proper coding. In addition to reviewing the differences between coding Level 2, 3, 4 & 5 for a sick visit, Dr. Lander stressed the importance of documenting “time” correctly in a patient’s chart.

Screen Shot 2016-02-21 at 10.56.21 AM
Joanne Blanchard and Dr. Richard Lander

Dr. Lander shared multiple clinical scenarios that we often encounter with patients. But some of the codes he suggested I wasn’t all too familiar with. I couldn’t recall if we used them.

So I wrote down a reminder to myself to check how well (or not) providers at Salud Pediatrics were using the full scope of codes available.

NO PRESENCE, NO INFLUENCE

Dr. John Moore – a new PMI faculty member – brought us up to speed with some of the new social media trends (Are you familiar with SnapChat and how kids are using it?)

Screen Shot 2016-02-21 at 11.10.19 AM
Dr. John Moore and Paul Vanchiere

One of the points that Dr. Moore articulated that I appreciated the most was the importance for pediatricians to embrace social media.

He said something that I’ve been saying for a long time; which is, had pediatricians adopted social media at a faster clip, the pro-vaccine vs. anti-vaccine arguments would have been balanced. Moreover, there was the potential to stifle the anti-vax movement.

CHANGE IS THE NEW STATUS QUO

You can always count on Chip Hart to deliver great wisdom and insight. Chip also gave two talks.Screen Shot 2016-02-21 at 10.56.11 AM

I’ve heard Chip speak many times, but this time, I felt his talks were different. Chip’s talks had a subtle, tough-love tone to them.

While addressing the challenges practices are facing today, he stressed that pediatricians have faced similar challenges before. He mentioned that during all previous tectonic shifts (aka industry changes) naysayers shouted out the demise of private practices. Much like many are shouting today.

Chip eloquently argued that not only are the doomsayers wrong, but that pediatricians are actually in a better situation than most think.

Chip wasn’t disregarding the challenges or downplaying the potential threats. We are indeed going through tough times. But these tough times were an opportunity to transform and reinvent our practices, he argued.

My takeaway was: If the plan is to defend the status quo and hedge the long-term success of your business on account that you have the initials MD after your name, thus somehow inoculated from change, the end is certainly near for you.

MEETING, CONNECTING, NETWORKING, SOCIAL LEARNING

Attending a seminar like this to learn from the speakers is certainly worth the price and the time. But more often than not, the icing on the cake, at least for me, is the immeasurable, intangible value I glean from networking.

The people who attend these events are the smartest and brightest in my opinion (and I’m not talking about the faculty, although they are good too).

Whether attendees are veterans in managing practices or opened their first private practices last week and believe they have no clue what they are doing, the truth is, there is opportunity to learn from everybody.

The faculty makes the trip worthwhile. But I would say the attendees make the event special.

Next year I hope to see you there. Especially if you didn’t get a chance to attend this year.

Place: New Orleans
Dates: Jan 27-28th 2017

 

Are You Following These 10-Steps Before Terminating A Physician- Patient Relationship?

This post was originally published on the Verden Group’s Blog. Written by Sumita Saxena, Senior Consultant, The Verden Group

It unfortunately can happen to anyone: You go above and beyond to provide your patients excellent care with uncompromising accessibility, and yet something somewhere goes wrong and the relationship quickly deteriorates.

Screen Shot 2015-08-29 at 12.13.02 PMAfter trying your best to mend the problem it becomes clear – the relationship has broken down beyond repair and for whatever reason you reach the tough decision to terminate the patient from the practice.

Before you act and send notice, please take a look at some helpful steps we have compiled for you to consider as you navigate this difficult subject.

Step One: Try to Work It Out With Your Patient.

Practically speaking, when faced with a difficult patient situation, the best course of action is to avoid a unilateral termination of the physician/patient relationship by addressing the problem quickly.

Communication is the key.

The patient should be advised of the situation and given a reasonable opportunity to correct the problem. You should make it clear that failure to correct the problem may result in the dismissal of the patient from the practice.

Step Two: Review the Applicable State Medical Licensing Rules.

State licensing boards govern the practice of medicine and the relationship between a physician licensed in that state and his or her patients. Accordingly, it is essential to review the medical board rules carefully before you terminate a patient from your practice.

Step Three: Consider AMA Guidance. 

The American Medical Association (the “AMA”) has provided guidance on terminating the physician/patient relationship. According to the AMA’s Code of Medical Ethics, physicians have the option of terminating the physician/patient relationship, but they must give sufficient notice of withdrawal to the patient, relatives, or responsible friends and guardians to allow another physician to be secured.

The AMA recognizes that there are times when a physician may no longer be able to provide care to a certain patient, including when the patient refuses to comply, is unreasonably demanding, threatens the physician or staff, or otherwise is contributing to a breakdown of the physician/patient relationship.

According to the AMA, terminating a physician/patient relationship is ethical as long as the proper procedures are followed.
The AMA has given the following advice for the termination process:

  • Giving the patient written notice, preferably by certified mail, return receipt requested;
    Providing the patient with a brief explanation for terminating the relationship (this should be a valid reason, for instance non-compliance, failure to keep appointments);
  • Agreeing to continue to provide treatment and access to services for a reasonable period of time, such as 30 days, to allow a patient to secure care from another person (a physician may want to extend the period for emergency services);
  • Providing resources and/or recommendations to help a patient locate another physician of like specialty; and
  • Offering to transfer records to a newly designated physician upon signed patient authorization to do so. American Medical Association (AMA), “Ending the Patient-Physician Relationship,” http://www.ama-assn.org/ama/pub/physician-resources/legal-topics/patient-physician-relationship-topics/ending-patient-physician-relationship.page

Step Four: Check Your Payer Contracts and Policies. 

A physician who is a participating provider (under contract) with the patient’s insurer (commercial or government payer) may be obligated to notify the payer and comply with additional requirements. You should review your provider contract(s) and policies in order to determine if the payer has a policy on patient termination.

For example, some insurance carriers require 60 or 90 days notice before dismissal (as compared to the 30 days notice required pursuant to certain state laws) and some require prior written notice to the carrier to enable the carrier to contact the patient.

There also may be specific requirements concerning pregnant or mental health patients. Medicare, Medicaid, and other government payers have strict policies on terminating a patient that should be reviewed before terminating a governmental plan beneficiary.

Step Five: Review Your Malpractice Carrier Requirements. 

Some medical malpractice insurance carriers have adopted rules or recommendations for terminating the physician/patient relationship. Accordingly, you should review your malpractice policy or contact the malpractice carrier when establishing the procedure for terminating the physician/patient relationship.

Step Six: Send Written Notification to Your Patient.

You should send written notification advising the patient that he or she is terminating the patient relationship. The notification should comply with the licensing board’s rules and the requirements of the applicable payer and the your malpractice carrier. Ideally the patient notification should be prepared or reviewed by experienced counsel before sending to the patient.

Step Seven: Provide Continuity of Care.

You should ensure that you provide the proper continuity of care when dismissing a patient from your practice, including any requirements under state licensing rules, their payer contracts and their malpractice policy. The AMA guidance recommends that the physician provide the patient with resources and referrals for other sources of care.
Step Eight: Do not Charge for Patient Records.

A physician who terminates his or her relationship with a patient should not charge the patient for copying the patient’s medical records.

Step Nine: Consider Risk Management.

Additionally, you should perform a risk management analysis before terminating the physician/patient relationship. You should consider the possibility (even if the patient’s position is without merit and you will ultimately be successful) of patient complaints, disciplinary investigations, litigation, or other action initiated by disgruntled patients.

Step Ten: Establish a Set Policy on Patient Terminations and Train Staff on the Policy.

In order to avoid any potential issues with former patients, the practice should have a set policy in place for the termination of the physician/patient relationship, including a sample termination letter. The policy should be applied to patients consistently and without discrimination. The staff should be trained on the policy and should document compliance with the policy.
By following the above steps you can be proactive and diligent in mitigating your risk if such a situation ever arises with a patient.

#23 Step by Step Guide To Setting Prices For Your Medical Practice [Pediatric Practice Management AwesomeCast]

At the end of last year, Chip and I talked about New Years resolutions. I shared a few things I had on my list of things I wanted to accomplish in 2014 and Chip provided several suggestions we could do as a practice. One of Chip’s resolutions for practices, was to adjust our pricing.

I wrote his suggestion down. The truth is, I haven’t looked at our pricing in a couple of years. So I knew it was time.

The thing is, I wasn’t sure if I was setting our practice’s pricing correctly, so I asked Chip to give me some direction. After talking about it a little we came to the conclusion that this would be a great AwesomeCast.

So here you have it. How to set up your practice’s prices, step-by-step.

Audio Only

You can listen to the AwesomeCast by visiting the links below:

iTunes

Pediatric Practice Management Media Cast 

#20 Key Performance Indicators Smart Practice Managers Measure [Pediatric Practice Management AwesomeCast]

Screen Shot 2013-11-07 at 7.42.08 PMFor today’s AwesomeCast, I invited my friend Paul Vanchiere from the Pediatric Management Institute. Apparently, Chip had more important things to do… Pfff. Family. So he was MIA for this recording.

If you don’t know about the Pediatric Management Institute, make a note to visit. Paul and his team are doing some really cool things to help pediatric practices manage their business better.

Paul knows a few things about key performance indicators, why they are important, and most important, how to calculate them. So I sat down with him and asked him a few questions regarding the topic.

On the AwesomeCast, Paul shares with us an area on his website where you can find explanations, formulas, examples and descriptions for all the key performance indicators.

For details check out this link: Calculators – KPI 

And if you want to learn about the seminars Paul and his crew is doing around the country, visit: PMI Seminars

Here are other ways you can check out the AwesomeCast:

#12 How Do You Know When To Hire Your Next Physician? [Pediatric Practice Management MediaCast]

Recently, Chip and I saw a question posted on the SOAPM listserve that addressed this notion of when is it the right time to bring on a physician. We thought it was a great discussion topic so we decided to dedicate an entire episode surrounding some of things one ought to consider when bringing on a new doc. To give you a heads up, below you’ll find part of the email that was submitted to the listserve.

I recently interviewed a potential MD candidate. She looks fine on paper and was nice enough in the interview. But how do you know if someone is going to be right for your practice? My practice is small so bringing in a bad apple would cause a huge problem. Plus, she is the only person I have interviewed. I would love to have more choices from which to select. How does everyone else go about recruiting? I can’t exactly run a want ad in the local paper…

…since I have never done this before nor have I ever been solicited by a practice for employment, how do I structure a new MD package? Salary vs production? Salary for a while and then production? At what point? And how much? What benefits? How specific do I outline work hours, call duties, etc? What happens if I can’t stand the person I hire after 3 months?

Finally, how do I even know if my practice is ready to bring in another MD? What numbers do you look at? Perhaps I should just get a scribe and bust my butt for the next 6-12 months to see if I can absorb the patient load myself without adding someone else right away?

We hope you enjoy this episode and remember, give us feedback.  Positive or negative. We don’t care (well, actually we do care). We’d love to hear from you.

Here are ways you can catch the episode. Enjoy!

Pediatric Practice Management MediaCast

iTunes

Google+ PPMM Community Page

I Don’t Know How Else To Put This, But My Ebook Is Kind of a Big Deal

If you are a regular reader of this blog, you probably know about my e-book, 101 Ways to Transform Your Practice.

If you haven’t picked it up (it is free by the way) I wanted to give you a little nudge to do so. Not everything in the ebook is going to work in your practice. But at the very least, I think the ebook will spark ideas that you would have not had otherwise.

If you are still not convinced, then let me share this little something that I got from a reader of PediatricInc recently that got the ebook.

Hi Brandon

Thank you soooo very much!

I  shared your book  with my staff, as the template for our practice meeting today, as we are forging ahead to re- engineer our practice, and I must say , afterwards our way forward became crystal clear.

In one day, we have created a Facebook page, developed an email template to thank new patients for visiting our medical home, and created three mini videos using myself and my nurse to welcome patients to Frontier Kids Care!

We have a new excitement about implementing our changes.

We are also looking at recalls, and the financial status of the practice.

We looked at our mission and are working on the charter.

Our improved website is due to be released next week, but we are going to be wasting no time in putting our new status on Facebook etc now.

I invite you to preview our before and after website at frontierkidscare.com

In Trinidad, obviously our needs are much simpler, we definitely do not have practice managers, but my solo practice has a nurse and a receptionist, and we cross train.

I definitely am challenged on  the business side, so I realize I need a business manager in some form or fashion.

So again thanks, and I wonder if your book has been published so I can purchase one.

Your practice is blessed to have you!

Take good care.

Rose Marie

I don’t know how else to put this, but my ebook is kind of a big deal. Pick it up for free by going here.

Insurance Contract Negotiations: 15 Tips From a Pro

Today’s guest blog post comes from David Horowitz MD. Dr. Horowitz responded to a question on SOAPM regarding how to go about negotiating with a payer. I thought his advice was practical, to the point and very useful, so I asked him if he had an issue with me posting his response. He graciously agreed to share his comments with readers of PediatricInc.
 
By the way, this is not an unusual response on SOAPM. Most comments are this good. Enjoy…

I have done the contract negotiations for my practice for 20+ years. In those dark ages, before Internet and AAP resources, there was no primer for doing this. One of my partners recently asked how she could get up to speed on this, looking to the point where I might retire – which is not anytime soon. So I started thinking about a few essential points to have in contracts. You may not be able to get all of them, but they are all worth fighting for.

  1. Do a payer analysis so you know ahead of time what % of your practice income comes from each payer and what each payer is paying you for the major E/M codes. This means learn spreadsheet 101 software. Sometimes you need to be prepared to tell a company their offer is not acceptable and walk away. You need to know ahead of time what this may cost you. You also need to know whether you are the only pediatrician for 30 miles or whether there are 3 other practices within 5 miles who would be happy to snap up your cast offs.
  2. Become familiar with RVU valuations. AAP book Coding for Pediatrics issued yearly is an excellent resource for this.
  3. Ask for fee schedules based on a percentage of a given years Medicare, rather than just “we will pay you $x for code y. If you are lucky enough to get them to agree to basing the fee schedule on the current year, be aware that Congress is still playing with something called the SGR, which, if not fixed, may cut payments from Medicare by 30%. Fee schedules based on prior years Medicare are fixed in stone at this point.
  4. Know your area. There are parts of the country where simply getting 100% of Medicare is considered good. There are other parts of the country with rates as high as double that.
  5. Try to get a concession that they will follow CPT coding guidelines. I have been unable to get this in any contracts. But by bringing it up, it opens the door to specific discussions of paying for –25 modifiers for well and sick care on the same day, and bringing up what services are or are not bundled into well care, such as vision, hearing and developmental evaluations and after hours care.
  6. If in office lab is a big part of what you do, insure that what you are paid doesn’t lose money. You can always threaten to send every kid who needs a specific test to the hospital if they don’t at least meet your cost.
  7. VACCINES: know you costs, know your overhead and make sure that you are paid appropriately. These are almost always carved out of every contract and can cost you tons of money. Inscos often try to pay less than your acquisition cost for vaccines. Try to get payment based on the CDC price list. http://www.cdc.gov/vaccines/programs/vfc/cdc-vac-price-list.htm. Also check out the AAP information on the Business Case for Vaccine pricing. This one piece of the contract can make or break you.
  8. Try to avoid forever renewing contracts. A good price today is going to look pretty poor in 5 years when it hasn’t changed. 2 years is a reasonable amount of time so you are not forever negotiating.
  9. It takes 6 months to negotiate a contract and they are almost always completed after the actual termination date. Stall is the name of the game for inscos.
  10. When you agree on a contract, make sure the contract they send you to sign is actually the one you agreed to. All the companies have boiler plate contracts. I have had a company agree to give me specific terms, but the contract sent to me was 3 or 4 drafts prior to what we agreed upon. I was told this was an “oversight”.
  11. Once you agree on the big things, like payment for E/M codes, don’t forget the little things. Will they pay for after hours care and in office labs are the main things here. If they don’t pay for a specific service, do they consider it “bundled” which means you can not charge the patient, or do they consider it “not covered” which means you can bill the patient.
  12. Not that I don’t trust people, but once you sign a contract, look at the EOBs that come in and make sure that they are really paying you what they said they would pay you. You’d be surprised how often the insco computers load the “wrong” fee schedule by “accident”.
  13. You may not win even if you think you won. A comeback offer from an insco may take the form, “We will give you 10% more on E/M codes, but pay you 5% less on vaccines.” You have to be able to know that this 2nd offer may actually pay you less than the first. It can only help you in negotiating when you come back to them with something to the effect of how disappointed you are that they think you are so naïve, so how about a real offer, not a trick offer. Know what they mean by “E/M codes”. In my experience, they mean only Office Visit and Preventive Care codes. And even though all the other common codes for hospital care, newborn care, in office counseling, etc. are in the E/M section of the CPT book, they usually are not included in the insco definition of E/M.
  14. Know a ballpark minimum offer that you simply can not go below. If you don’t get it, WALK AWAY. This is the hardest thing to do. But if you are losing money on a payment schedule, you can’t make that up by doing more volume.
  15. Start your 1st negotiation with a payer who is rather MINOR in your income. This way you can learn, get your feet wet, and mistakes (which I still make) are not so costly. Save the big payer negotiations for after you have gotten some experience.

This is a starting place. I’m sure others on this listserve will be happy to offer more critical points that I have over looked. And some of these items can be rather daunting. It can take a while to get proficient at Excel. If you have a spreadsheet wiz in the office, it might be reasonable to delegate this part of the task. And getting the Medicare fee payments for the common codes that you do may be somewhat hard if you are not good at Excel. The AAP and Chip Hart on this listserve have good sources of information about common CPT codes and their valuation.

Free RBRVS Calculator For Your Medical Practice

My friends over at Pedsource just published a free RBRVS Calculator based on 2012 data. According to the post, the data is using an annual conversion factor of $24.60. They caution that this number will change sometime between today (12/8/11) and March, 2012.

Because the AMA doesn’t let anyone provide a free RVU calculator that includes CPT codes due to their CPT copyrights (booo, booo), the great folks at Pedsource (yaaay, yaaay) created this tool for those of us who have a CPT license that allows for a use such as this. In theory, that should mean any practice that submits insurance claims.

What is this tool good for?

The tool allows you to choose your CMS-driven location, set a Medicare Multiplier, and then, on a code-by-code basis, determine your pricing level. Basically, you can use this spreadsheet with the data that you can download from CMS to make a fairly sophisticated RVU calculator in about 5 minutes.

One can then include your practice’s own common codes, volume and pricing, and the spreadsheet will determine your practice’s FACF (i.e., how much you charge, on average, relative to Medicare).

You can also put in your practice’s payment information and the sheet will compare it to the Medicare fee schedule.

(By the way, I recently used this exact tool before I sat down with UHC last week to get an idea of how UHC was paying based on the Medicare fee schedule. The sheet provided me with a lot of insight that proved valuable during my meeting with them)
 

How does it work?

  1. Download the OpenOffice version or the MS Excel version of the RVU calculator.
  2. Visit the CMS site and download the 2012 RVU zip file. You have to agree to the license and usage rules from CMS first before they let you get to the data. The link above points to version A in 2012; CMS usually releases a few revisions through the year, but they usually don’t affect pediatrics and primary care.
  3. Extract the PPRRVU12.xlsx file from the zip file.
  4. Cut and paste the entire page of data from the PPRRVU12.xlsx file into the tab marked “PPRRVU12” in the RVU Calculator spreadsheet (the one you downloaded in step 1). It is a big file, so be patience.
  5. Choose your locality with the pull down menu.
  6. Pick a Medicare Multiplier.
  7. Then, enter your top CPT codes in column A.
  8. Put some unit volumes (how many times your practice performed the code), prices, and payments in and watch what happens. Any field marked in a light blue-gray is a place where you can enter info.
Heads up –  I encountered a few minor issues with the Excel sheet that I wanted to warn you about. Sometimes, Excel converts many of the cells into ‘text’ fields. Even though you see a number (ie 99213), Excel thinks it is a word. The sheet has all kinds of fancy formulas. And those formulas are looking for numbers, such as 99213, not letters. So have that in mind when using the tool.  If you don’t know how to change text into numbers in an Excel cell, check out this link.

I want to thank Chip Hart from PCC for creating this gem and for letting me share it with you all. Talk about sharing the love.