MDNews - Greater Boston

+++++++++++++++++++++++ + +++ +PRACTICE NoTES +++ +++++++++++++++++++++++ Keep Your Practice Simple foCus oN The oNe sTaTisTiC ThaT really maTTers By timothy diBona l iviNg iN The Information Age, we have access to so much data that it's often difficult to keep tabs on what really matters. When it comes to assessing the health of your practice, there is often a tendency to focus on too many statistics that have become trendy financial buzzwords. These data points seem to be important but, in reality, just distract you from the genuinely critical statistics. In this article, I will highlight some of those red herrings and then point you to the one statistic we tell our physician clients they should really be watching to determine their practices' overall success. The red herring of Collection Percentage This is one of the oldest and most frequently used barometers of success. Too many managers foolishly depend on it as a measure of profitability. It might be useful if all practices charged the same rate for services. Instead, practices can boast 60 percent collections and feel on top of the world. But 60 percent of what, exactly? If you simply match your charges to the MassHealth payment rates, you can easily boast more than 90 percent collections! But then, of course, you wouldn't be collecting nearly as much as the other insurance companies are willing to pay you. Remember, once you commit to a contract with a payer, it does not matter if you charge $200 or $300 for an office visit. The payer still pays you the contracted rate. If that rate is $150, the company charging $200 can boast a 75 percent collection, while a company charging $300 is collecting at only 50 percent. Yet their actual collections are identical. other red herrings Other buzzwords are similarly useless when evaluating the health of your practice. In recent years, accounts receivable with a healthy turnover ratio has been touted as a simple formula to determine efficiency. Finance directors often have difficulty separating the standards from one industry to the next. Unlike in department stores, writing off balances after 90 days to keep an A/R healthy is often a mistake in medical practices. Collection agencies will charge rates from 25 to 35 percent. Simple clerical error may yield 30 days of nonpayment. Patients with multiple carriers often require 60 days for bills to be satisfied. Aggressively pursuing a low turnover ratio will provide an impressive number at the board meeting, but it will come at the cost of lower returns. Another mistake is to fight for the lowest fee from a billing company without considering the ramifications of outsourced callanswering centers or failure to efficiently process your encounters due to a lack of staff. More than 25 percent of billing companies do not even appeal your denials. The gold standard So, what is the guiding statistic to keep things simple? How nice would it be to have a single statistic you can use to bust through the walls of confusion in your practice? The answer: average collections per encounter. This is the calculation that brings everything together. If your business is writing off balances too early, filing beyond the time limit or simply not appealing denials, this figure will let you know. The magical part of using this standard is that you can even compare it with peers in the same specialty. Determine the regional range for your group. Consider the payer mix. If you are not on the high end of the scale, it is time to find out why. This is a true "apples-to-apples" statistic you can depend on. Use it wisely. Timothy DiBona is the Business Director at Doctors' Management Service, Inc. and the President of Salus Resource Group. He has collaborated with hundreds of physicians in varying capacities. He can be reached at Tim@DoctorsManagementService.org. ■ 18 | Greater Boston MD News ■ mdNews.Com

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