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Main Subject - Relative Value Price-Performance Calculation for Outsourced Electronic Medical Billing Service
Internet-based technology has been applied effectively to reduce medical billing costs, especially at the stages of electronic submission and scrubbing. However, excess focus on reducing costs of individual process components while ignoring total billing quality exposes medical practice to significant financial downside. Quantification of billing quality and its inclusion into price-
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
performance equation of billing service yields more comprehensive financial picture and better decisions about billing service selection and its management. Such an approach also results in substantially higher remittance and better regulatory compliance. It is effective, however, only subject to billing performance guarantees and transparency.
Traditional sequence of management steps
Traditional sequence of management steps
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
to rationalize medical practice billing and reduce its costs requires the physician to invest in processes, personnel, and technology:
- Study your denials to eliminate errors by using claims-scrubbing software
- Educate your front-end employees about the billing process and know how to be a part of it
- Investigate tools for electronic submission and take a
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
dvantage of technology
Set guidelines for which claims and which dollar amounts merit appeals
Provide patients with clear payment policies up-front
ROI in Claim Processing Technology
For illustration, consider a case of a three-office practice with 17 internists and a patient panel of 20,000, quite similar to Potomac Physician Associates (Dona
ROI in Claim Processing Technology
For illustration, consider a case of a three-office practice with 17 internists and a patient panel of 20,000, quite similar to Potomac Physician Associates (Dona
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
to, 2003), in Bethesda, MD, who in 2002 brought their claims submission and practice management services in-house. Assuming three FTE’s working the billing and using Vericle’s technology, the costs would be about $120,000 for personnel and $36,000 for technology. For reference, Vericle technology performs comprehensive claim validation, patient demographics and eligibility test prior t
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
o visit, electronic claim submission, and comprehensive reporting for followup etc. Additionally, using Vericle technology, 98% of claims are now clean, adding further value for the investment in claims processing technology. In this case, billing costs add up to $156,000 annually. This is a significant accomplishment in terms of billing processing costs, because without advanced tech
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
nology, the same practice may need at least seven FTE’s, at cost of $280,000.
Accordingly, the previous arrangement prior to installing the Vericle technology costs at least $292,000 (assuming 1/3 of cost for an alternative albeit inferior billing package). Thus, an investment of $36,000 in superior technology saved at least $136,000, which is obviously an impressive ROI on $36,000.
H
Accordingly, the previous arrangement prior to installing the Vericle technology costs at least $292,000 (assuming 1/3 of cost for an alternative albeit inferior billing package). Thus, an investment of $36,000 in superior technology saved at least $136,000, which is obviously an impressive ROI on $36,000.
H
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
owever, this approach does not account for the entire spectrum of costs associated with in-house billing approach. It ignores the total revenue aspect of the billing function, which is its ultimate purpose.
Quantification of Losses Caused By Insufficient Billing Process Quality
To receive a more comprehensive perspective, let us compute the total losses of this approach gener
Quantification of Losses Caused By Insufficient Billing Process Quality
To receive a more comprehensive perspective, let us compute the total losses of this approach gener
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ated by uncollected payments. We will proceed by establishing a convenient baseline and figuring out a way to approximate the losses.
In our experience, the likelihood of payment shrinks dramatically with time. With few exceptions, the unpaid claims for more than four months are eventually forfeited. Hence the importance of A/R beyond 120 days. Therefore, to compute the total losses
In our experience, the likelihood of payment shrinks dramatically with time. With few exceptions, the unpaid claims for more than four months are eventually forfeited. Hence the importance of A/R beyond 120 days. Therefore, to compute the total losses
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
we must start with computing the total revenue and then use the days in accounts receivable as a proxy for the underpayment.
For the case study in hand, we estimate the total practice revenue by assuming average physician revenue of $300,000, which, for 17 physicians, adds up to a total of $5,100,000. Next, since the stated percent of clean claims for electronic submission is about av
For the case study in hand, we estimate the total practice revenue by assuming average physician revenue of $300,000, which, for 17 physicians, adds up to a total of $5,100,000. Next, since the stated percent of clean claims for electronic submission is about av
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
rage (98%), we will also assume an average nation-wide A/R beyond 120 days, which currently stands at about 17.7% (Lowes, 2004). This number indicates that the amount of losses on the billings of $5,100,000 approaches $902,700. Even if 40% of that A/R were eventually collected, we would still face a revenue loss of $541,620 .
Therefore, while the practice saved $136,000 on personnel,
Therefore, while the practice saved $136,000 on personnel,
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
it still lost an estimated $541,620 on billing quality despite the newly installed technology.
The lesson of this illustration is that the costs of billing function may be grossly underestimated because of the following common pitfalls:
Pitfall #1: Focus on costs of individual components of the billing function instead of computing the bottom line cost to the practice.
Pi
The lesson of this illustration is that the costs of billing function may be grossly underestimated because of the following common pitfalls:
Pitfall #1: Focus on costs of individual components of the billing function instead of computing the bottom line cost to the practice.
Pi
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
tfall #2: Underestimate the costs of these components such as benefits, sickness, management, replacement, education, and vacations in case of personnel costs.
Pitfall #3: Focus on the numbers or quality of claims instead of billed and paid numbers of dollars.
An alternative, bottom-line oriented approach, guarantees improved revenue before spending a dime:
Pitfall #3: Focus on the numbers or quality of claims instead of billed and paid numbers of dollars.
An alternative, bottom-line oriented approach, guarantees improved revenue before spending a dime:
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Measure your current percentage of A/R beyond 120 days and assume (for the sake of conservative management) that money is lost.
Find a billing service provider with significantly higher performance levels than your own solution
Base your management decisions on total cost/performance metrics.
Price-Performance Computation
A billing servic
Price-Performance Computation
A billing servic
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
e provider with guaranteed performance levels will typically charge a percentage of payments. This approach aligns the interests of the biller and of the physician and results in dramatically lower A/R beyond 120 days, often as low as 4% and even 2%.
In this case, the difference in remittance between the two approaches amounts to $463,020 or 9.08% more to the bottom line.
Note that bi
In this case, the difference in remittance between the two approaches amounts to $463,020 or 9.08% more to the bottom line.
Note that bi
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
lling quality is a key component of the billing cost computation and the decision to outsource the billing service is based on a multi-fold improvement in billing quality. Such an improvement must be so great that only a specialist-billing provider can create and maintain the required volumes and economies of scale. Therefore, one should consider outsourcing only after due diligence est
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
ablishing that the billing provider delivers superior performance, the difference in performance is quantifiable and significant enough for a bottom-line growth, and such performance can be verified independently and continuously. A rule of thumb is that the new combined percentage of fees and uncollected revenue must stay below in-house A/R (billing quality measured in terms of % of bi
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
lled amount in A/R beyond 120 days).
Additional Benefits of Quantitative Approach to Billing Outsourcing
Note also that by outsourcing to the right billing service provider, the practice liberates itself from multiple additional issues associated with process, personnel, and technology aspects of billing. Specifically, the only remaining billing function for the practice owne
Additional Benefits of Quantitative Approach to Billing Outsourcing
Note also that by outsourcing to the right billing service provider, the practice liberates itself from multiple additional issues associated with process, personnel, and technology aspects of billing. Specifically, the only remaining billing function for the practice owne
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
rs is the periodic review of cash flow and accounts receivables, in other words, an entirely bottom-line driven supervision. There is no need to micromanage the submission process, reconcile rejections, appeal to the payers, etc. Similarly, there is no more need to manage billing employee team, their vacations, sick days, benefits, teamwork, and turnover. Finally, there is no more nee
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
d to deal with any technology issues, such as installation, maintenance, backups, disaster recovery, HIPAA compliance, and upgrades.
References:
References:
- S. Donato, “Three Steps to Fewer Denials. Getting Claims Management Under Control”, Physicians Practice, April 2003.
- R. Lowes, “Practice Pointers: How to Cut A/R”, Medical Economics, September 3, 2004.
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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