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If your practice is like most, you are facing lower reimbursement from managed care plans, yet you have to spend more for malpractice insurance and add more staff to take care of all the paperwork required by the managed care plans. That’s why looking for ways to improve the bottom line is one the most important things a medical practice can do, says Sherry L. Migliore, MPA, FACHE, eastern regional director of consulting for PMSCO, a subsidiary of the Pennsylvania Medical Society in Harrisburg.
PMSCO provides a variety of services to physicians and managed care organizations, including practice management, medical management, and medical data analysis. There’s no cut-and-dried answer to increasing profitability, Migliore says. "It’s a combination of getting a better handle on costs and making sure you are billing properly and collecting properly," she says.
But don’t be hasty in your efforts to cut costs, Migliore warns. For instance, because personnel costs are a practice’s biggest expense, many physicians falsely believe that cutting staff is the best way to save money. "Cutting personnel is not the best way to save money. Look at people in your practice as being your right arm, so to speak. The people on your staff can be your best asset," she says. If you cut back too much and patients can’t get through on the phone or staff are snappish with patients because they are pressed for time, you may lose patients, she says.
The first step is to get a handle on exactly what your costs are, Migliore suggests. "Doctors need to pay attention to their overhead and what types of things are costing the most money. We recommend that they look closely at how much it costs to provide every procedure they perform," Migliore says. "A lot of times doctors don’t realize what goes into providing these services, such as staffing and overhead," she points out.
The doctors and the business manager should look at the practice’s financial statements every month, Migliore suggests. Your cost analysis should include the work component (the physician cost), the malpractice component, and overhead or the cost of running your practice. Use your cost data to work with payers to change your reimbursement. If you show the payers your cost for a certain procedure vs. what they are paying, they may be willing to work with you. "Some practices have successfully gone to payers and negotiated a better fee. If the practice provides a unique service, the insurer may be willing to pay extra money if they need someone in the area to perform that service," Migliore says.
If a service is costing you money, consider discontinuing it. Some practices in Pennsylvania have discontinued certain high-risk services because of the cost of malpractice insurance, Migliore notes. For instance, a number of practices have discontinued providing obstetric services because of the expense of malpractice insurance.
The next step in increasing profitability is to make sure you are capturing all the revenues to which you are entitled.
Based on her consultations with Pennsylvania physician practices, Migliore offers the following tips for avoiding revenue shortfalls:
• When a doctor provides services in a hospital, make sure the practice receives the information necessary to bill for the costs. Physicians may participate in a procedure or perform an evaluation or consultation on a patient in the hospital and fail to provide the notes to the office staff. "If the office staff doesn’t have the information, they can’t bill for the service," Migliore says.
• When you do a procedure or treat a patient, make sure you fully document what you did so the practice can bill at the highest possible level. "Doctors are undercoding because they are concerned about billing at a higher level. We see far more undercoding than overcoding in our coding audits," Migliore says. Physicians should be aware of the Health Care Financing Administration’s (HCFA) stringent coding rules to make sure they get paid for the services they perform but don’t cross the line and run afoul of government regulations.
• Conduct a fee schedule review every year. "A lot of doctors think fee schedules aren’t relevant any more, but HCFA makes adjustments to Medicare payments every year," Migliore says. If you aren’t paying attention to what Medicare will pay for each procedure you perform, you could be losing money. For instance, if HCFA has raised its reimbursement for a certain procedure to $60 and you are billing the previous year’s $50, you will lose $10 each time you perform the procedure. "In the case of all payers, they will not pay more than what you are billing, even if they normally pay more," Migliore says.