HEALTH CARE: The 10 biggest financial management mistakes

In The Business News’ May health care report, we explored five of the 10 biggest financial management mistakes made by medical and dental practitioners. They were:

· Failing to live within your means

· Not planning your work or working your plan

· Failing to use outside advisors

· False economies in practice expenses

· Building inefficiency into your routine

In this article we delve into the other five:

1. Skimping on Technology

Your rule of thumb should be to automate as much as possible. This will save time that can be redeployed in other areas, preferably direct patient care.

The most obvious areas we see practices keeping up with technology are diagnostic equipment and computerized billing and scheduling systems. Diagnostic equipment is especially important because not only does it provide another potential source of revenue for the practice, but it is a service that can save your patients time and money, and provide quicker response on test results.

One technological advancement that has been getting a lot of publicity is the electronic medical record. While not perfect, these systems are evolving rapidly and will be much more prevalent in the near future. Despite the substantial investment, electronic records should pay big dividends in the long run by making record retrieval a snap, improving reimbursement, and enhancing continuity of care and communication with colleagues.

A final area often overlooked is the phone system. Automated attendant service, in which calls to the physician’s office are answered by a computer, improve efficiency. They can be somewhat impersonal, but acceptance is growing.

2. Failing to manage your appointment schedule

Many practices are in the habit of neglecting to manage the appointment schedule. Frequently, scheduling is left up to one of the most inexperienced people on the staff. When a patient calls to request an appointment, there is no effort to find out the person’s complaint or to estimate how much time the visit will require.

Often, appointments are simply booked every 10 minutes. Because everyone’s medical needs do not fit neatly into a 10-minute time slot, patients soon stack up in the waiting room. They grow increasingly irritated as the office chronically runs behind. And it is always well after quitting time before employees can leave. But what can be done?

There is a way for doctors, in the same amount of appointment time to stay on schedule, finish closer to quitting time, and even see more patients. It is called the “modified wave” approach, which is just a fancy term for rational scheduling.

Because each practice is different from the next, you start by analyzing your appointments. Look for patterns in how many new patients, brief visits, and extended visits you have in the average day. Then, customize your scheduling using a combination of the three or four different appointment types.

For example, you might begin the day with four short visits, followed by an intermediate visit and a long exam. Then, 30 minutes after the long exam starts, you repeat the six-visit cycle. Continue that for the rest of the morning and resume the cycles in the afternoon.

Your scheduler must take the time to ask patients about their problems in advance, so that she can match them with an appropriate time slot. This vastly increases your chances of being able to stay on schedule throughout the day.

It also maximizes your efficiency enough to see more patients in the same amount of time. By clustering patients of similar types, you and your staff can be more efficient in taking care of their needs. Because you and your staff do the same things with each cluster of patients, you may average less than five minutes per patient.

3. Wholesale enrollment in managed care plans

When managed care plans first began proliferating, there was not much harm in signing up for each one that came along. However, in the past three to four years, many plans have become more aggressive with their reimbursement levels. A close examination of these plans reveals a different picture than at first blush.

For the most part, these managed care plans are really steeply discounted fee-for-service reimbursement contracts. What the HMO will provide to the doctor is a sampling of its current fees, which may only include one or two of the services that are normally delivered by your particular specialty. Of course, the reimbursements for these are acceptable. However, what you do not see, without asking for additional information, are the payment levels for your bread-and-butter services.

Your first line of defense is to carefully review each and every managed care contract you’re considering and the ones you are currently working under. Chances are you’ll find some that aren’t worth continuing.

The essential test is the percentage of your gross charges you actually receive from each payor. This varies widely from one plan to the next and by specialty as well. Roughly speaking, you might expect to collect at least 70 percent of your gross charges from the plan. If it is much less, like 50 percent, the warning light should go on. You should renegotiate or decide whether it is worthwhile to continue with the plan at all.

Your next line of defense is to ensure that no single plan represents more than 15-18 percent of your annual revenue, if possible. It’s probably safe to resign from a plan that accounts for only 10 pecent of your income, as opposed to one representing 25 percent.

Another pitfall to watch for is that most managed care contracts have provisions allowing the plan to alter its physician fee schedule by simple notification. This often happens on the contract anniversary date, but might be any time during the year. You will likely have 30 days to object or disenroll or else the new schedule goes into effect. It is not uncommon for bread-and-butter fees to be reduced in this manner. The moral is that if you receive a certified letter from a managed care plan, it is in your best financial interest to pay attention and read every word of it.

4. Failing to heed compliance requirements

Compliance has been the buzzword of the past couple of years. It refers to a variety of laws, rules, and regulations, but the potential big-ticket costs facing doctors right now involves Medicare fraud or abuse charges for improper coding and billing, or noncompliance with documentation guidelines.

Another area of compliance has to do with OSHA regulations regarding exposure to blood-borne pathogens and toxic substances. Ours is a highly regulated society, and medicine is no exception. You need to be aware of the regulatory expectations.

It’s particularly critical that physicians understand Medicare’s documentation guidelines and proper coding and billing procedures. The penalties for noncompliance are quite serious. The government can impose hefty civil and criminal penalties and fines, including imprisonment and permanent expulsion from Medicare, all with plenty of publicity.

No doctor is exempt from postpayment audits. It’s just a matter of time before you receive an official letter requesting comprehensive copies of documentation for 10 or so specific patients. Then, they will compare your records with your billings. If they find upcoding, they will send you a letter demanding repayment. Or worse, they may consider your noncompliance severe enough to come in and perform a massive audit.

You cannot afford to play games with third-party payors, nor should you adopt an ultra-conservative approach and purposely undercode “to be on the safe side.” Medicare has recently released new guidelines for small and medium-sized practices to help in designing and implementing a compliance plan. The smart move is to use the right code for the level of service you have provided, have good documentation, and bill for what you are entitled to.

5. Not minding the store

The failure to install simple feedback systems and financial controls has cost many doctors over the years. To avoid becoming yet another victim in an embezzlement horror story, you must make it your business to keep up with what’s going on.

In medical practices, cash is stolen mainly in two ways: most often through the billing system from receivables, but also through accounts payable. One common scam begins after a patient pays cash at the window. The office assistant either throws the encounter form away and makes a bogus entry in the computer system or does not record a charge for the patient that day. The cash payment is simply put in her pocket.

This embezzlement can easily be addressed by sequentially numbering every encounter form or superbill and requiring your staff to account for every single encounter each day. If one is missing it is tracked down. If no one can account for it, you may have reason for suspicion.

Balancing billing transactions (that is, closing out and reconciling the computer system every day) is a must, as is reconciling that information to the daily bank deposits. Occasionally, we still run into solo practices that do not make daily deposits. This is an open invitation to theft.

It is also easy for a savvy biller to steal an insurance reimbursement check, typically by making bogus insurance charge adjustments in the computer system, then pocketing the check. Let’s say the office bills a commercial insurance company for $150 in patient services. Three or four weeks go by, then a $95 check arrives written to Dr. Jones. It goes directly to the biller for processing. She goes to the computer and records $150 in charge adjustments, bringing the receivable down to zero. At that point, she is free to take the $95 check elsewhere. She forgets Dr. Jones’ signature on the back, then deposits it in her personal account through an ATM.

While fidelity bonding helps in cases like this, the real key is prevention through the segregation of cash-handling duties. You want one person posting all the charges and a different person opening the mail and preparing the bank deposits. Better still would be to have a third person entering payments and charge transactions in the computer system. Also, physicians should never relinquish check-writing authority to anyone. Moreover, they should never sign a check without back-up documentation, such as the original invoice.

Rex Rudolph is the leader of Rehmann Robson’s health care consulting practice in Traverse CIty. The CPA firm is one of the state’s largest.