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Improve Your Practice's Financial Health: Focus On The Four Ps In A Pod (Patients, Payers, Payments And Productivity)
This is the second in a series of articles on the financial health of your practice. In the first article, "Conducting a Practice Financial Analysis: Three Critical Calculations," we discussed three critical ratios you should calculate regularly in order to know where your practice stands from a financial perspective.
In today's article, we will discuss credentialing and contracting with managed care companies to achieve the right payer mix for your practice's better financial health. The right patient mix boils down to knowing critical data on what we call the "Four Ps in a Pod: Payers, Payments, Physician Productivity and Patients."
Payers
Before you can analyze your payer/patient mix, you need to determine what percentage of gross charges each of your payers represents.
- Start with your Total Gross Charges for a period of time (month, quarter, or year).
- Make a list of all of your payers (you may choose to limit the list to your top 5-10 payers)
- Determine your gross charges for each payer over the same time frame as #1 (month, quarter, or year).
- Determine the percentage of Total Gross Charges by Payer (#3 divided by #1).
After completing such an analysis, you may end up with a breakdown as follows:
Medicare – 35 percent
Medicaid – 12 percent
Blue Cross – 15 percent
United Healthcare – 12 percent
Aetna – 10 percent
Cigna – 10 percent
Other – 6 percent
Payments by payer
Next, you need to analyze payments by payer for your top CPT Codes.
- Make a list of the top 30-35 CPT codes you bill.
- Put them in a spreadsheet with the CPT codes down the left hand side and your top payers (determined above) across the top.
- Determine your reimbursement for each code by payer. The best way to do this it to review EOBs from each payer to determine their "allowed" amount for each code. For analysis purposes, it is important that you focus on the "allowed" amount and not the "paid" amount as the paid amount doesn't include any co-pays or deductible payments made by the patient.
Physician Productivity
For purposes of this analysis, you want to look at the number of patients seen per working hour per physician per payer. This will take a little investigative time, but, the data will be invaluable.
- Take the number of patients the physician sees each day.
- Divide this by the number of hours worked each day by the physician. (For example: 30 patients seen per day divided by 7 hours per day equals 4.3 patients per hour). This will give you a baseline from which to begin your analysis.
- Next, take a closer look at several typical days. Break the number of patients down by payer to see if a certain patient profile requires more physician time. (For example: You will probably determine that physicians find it necessary to spend more time with older patients who are more than likely Medicare patients.)
Patient Mix
Analysis of the data captured above is oftentimes an eye-opening experience for practice managers. Many determine that the majority of their gross charges come from payers with the lowest allowable amounts per CPT code for patients who require more than the average amount of the physician's time per encounter.
What Can You Do?
- Consider revamping your patient scheduling system by blocking off new patient appointment times by payer in order to keep your payer/patient/payment mix in balance. For example: You may determine that you only want to accept a certain number of new patients per month from certain plans and so you block off the appropriate number of new patient appointment slots for that payer in your schedule. [Note: Make sure you review your contract to make sure this doesn't violate anything you have agreed to do in terms of accepting new patients.]
- Are there certain patient/payer ratios you would like to increase for your practice? Establish referral relationships with physicians/practices that have a greater likelihood of referring patients from those plans. Market to local businesses who offer those plans as part of their Employee Benefits Package.
- Use this information during your next contract negotiation with a payer. You may find that you are able to negotiate small increases in certain CPT codes even if you aren't able to negotiate an overall increase. If you are successful in doing so with your most common CPT codes, this could generate considerable additional revenue for your practice.
- See how you measure up. Benchmarking yourself against other physicians/practices is a great way to determine if you are doing all you can to maximize practice revenue/profits. Here are some resources to help you benchmark your practice's performance:
© 2010 Efficiency in Practice
About the Author
Sue Kay, Senior Consultant at InHealth, is the editor of Efficiency in Practice, the free eNewsletter for medical practice managers who want to save time, money and reduce risk. For more information and to access your FREE report, The 8 Things You MUST Know About CMS' RAC Program, visit www.efficiencyinpractice.com or check out our blog at www.efficiencyinpractice.blogspot.com.
This article can be reprinted freely online, as long as the entire article and this resource box are included.
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