The Unexpected World of Medical Billing
Edition: July 2012 - Vol 20 Number 07
When I began work as a medical practice management consultant, my first exposure to the world of medical billing was a surprise. Having been an HMO member for my entire adult life, I hadn’t been exposed to the patient side of fee-for-service medicine; I was coming to the process completely green.
From a traditional business perspective, the revenue side of running a medical practice can seem a little bizarre. But, it’s helpful to learn a bit about how it works, since so many aspects of practice workflow are altered to accommodate billing constraints – and, some of these accommodations can impact a rep’s efforts to sell a product into a practice.
Bureaucracy and paperwork shape billing behavior
Medical practices are unusual businesses because they don’t collect most of their service fees from their customers; instead, they almost always claim reimbursement for services rendered to a third-party payer, i.e., a health insurance plan.
Determined to drive down costs, payers have successfully whittled away at physician’s billable activities, especially over the last 15 years or so. Primary care physicians are expected to bundle more and more services under a single, preventive care visit fee. Surgeries and maternity are also usually now reimbursed via a single, ‘global’ payment. Alongside this squeezing of revenue, increased practice auditing by payers – with Medicare’s contingency-based RACs leading the way – is an anxiety-provoking specter looming over many practices.
This trend may have improved billing consistency and compliance, but it has also prompted overly-cautious billing behavior by many physicians. For example, some physicians customarily bill at a lower code level (or habitually use the same low code for all office visits), sacrificing revenue, because they hope this could lower the risk of costly and disruptive audit. Unfortunately, this often backfires, since auditors look at a practice’s overall pattern of coding compared against averages – and significant differences in either direction can trigger examination.
Some practices have even stopped billing for certain routine services when potential reimbursement is small – even when they’re entitled to payment. Venipuncture, for example, is no longer reimbursed in many cases, and when it is, reimbursement is low. Some practices won’t bother billing for it if they are concerned the claim will be denied – believing this could red flag legitimate portions of the claim. But, even reimbursements of a few dollars at a time add up to significant revenue when billable hundreds of times a year. If your practice clients have doubts about what services related to your product are billable, you can help them out by developing best practice guidelines (working with payers and identifying billers among your clients who are handling the process optimally).
Patient collections strain practices
Another revenue trend that challenges practices is the shifting of more payment responsibility to patients through co-payments, co-insurance and higher deductibles. Collecting these payments from patients can be very difficult for practice staff, who may be uncomfortable asking patients for money. With patient responsibility payments now accounting for as much as 30 percent of allowable amounts under insurance plans, many practices lose significant sums by billing for payments they should collect at time-of-service.
When patients face substantial out-of-pocket bills and reveal that they find the expenses burdensome, physicians may want to be sympathetic. But being charitable by waiving patient payments can have harsh consequences for practices when it violates insurance contracts. Hardship must be demonstrated and clearly documented in accordance with the patient’s insurance plan.
For device makers and other vendors whose products carry significant patient-responsibility payments under health plans, cost can be an important decision-making factor for patients. Doctors don’t have control over co-pays, co-insurance or deductible requirements of patients’ health plans. Are your doctors armed with everything they need to persuade patients that your product will be better for their health than cheaper substitutes, and worth the extra expense?
Inventories strain practices, too
Another economic oddity that affects your business: Even when insurance plans cover costly treatments and devices, but they don’t incur the up-front cost – doctors do.
Biologics like vaccines and infusions, for example, can carry huge up-front costs – and require pristine handling. Practices must not only make significant cash outlays to purchase these products, they need to invest in refrigeration, monitoring, special handling by staff, even back-up generators to protect the investment.
When demand is not readily predictable, some practices opt out of offering vaccines altogether – leaving government clinics to fill the gap. Naturally, this has an impact on sales of these products – but it’s also an opportunity for vendors to develop creative ways to help physicians manage this financial risk.
Billers are often not employees
Billing has become so labor-intensive, complex and specialized, university curricula and certification programs (e.g., through the AAPC) have been established to turn medical billing into a full-fledged profession. Moreover, for many practices, it now makes sense to outsource billing to an external service, rather than keep up with all the constant changes.
From a sales perspective, this may make it harder for you to know how your clients are handling billing related to your product. But, on the plus side, if you are able to connect with your client’s external biller, you can learn how billing issues related to your product are handled by multiple practices. And, you’ll have the chance to share valuable information gleaned from your own payer relationships to the benefit of several practices at a time.