Management of Pathology Practices
January 2010
Payor Relationship Management Strategies and Trends:
A Revenue Cycle Management Perspective
By Leigh Polk, PSA, LLC
Pathology practices are often surprised at how frequently claims are reimbursed at less than contracted rates. This issue has become more prevalent during these tough economic times when payors are also looking to control costs. There are several effective solutions available to pathology practices who want to avoid claim denials and this pattern of underpayment for other claims. However, before we discuss solutions, we want to point out a few trends. Focusing on pathology and clinical laboratory billing, PSA provides services to over 80 clients nationwide, representing over 500 pathologists. As a result, PSA has one of the largest databases of pathology billing and coding information in the country, which uniquely positions us to identify coding norms and payor developments while identifying trends in the market.
Trends
Denials, Denials, Denials
PSA has recently noticed a significant increase in denial rates from many payors. While in the past the denial range has been 10-15% of claims, recently the range is closer to 15-20% of claims filed. Pathologists are in a unique position in that they do not see the patient during the procedure and are dependent on the ordering physician to collect correct insurance information up front. So the number one reason we see for denials is lack of up-to-date insurance information, which is further complicated by increasingly restrictive timely filing limits. It is essential that your practice or billing provider have effective denial monitoring, trending and follow-up strategies. In addition, practices should have mechanisms in place to identify and educate referring physicians who chronically submit incomplete or inaccurate data.
Increasing Bad Debt
As employer groups and members themselves experience increased pressure to keep premiums low, patients have to bear a larger portion of the payment responsibility. This results in increasing bad debt and difficulty in collecting dollars that you are owed. For this reason, it is increasingly important for more emphasis to be placed on collecting payment from the patient. This may include a number of different measures designed to make paying their bill as convenient as possible. In addition to traditional return mail, also consider accepting payment information by phone, establishing secure patient payment portals on the Internet and extended service hours. In addition, a number of PSA clients now offer payment plans or prompt pay discounts.
MUE Style Edits
PSA has observed many MUE (medically unlikely edits) style edits which are not resulting in denials and therefore may not be detected by some typical denial management strategies. Instead, some payors have simply capped their payment at a certain number of units. For example you may bill 16 units and get paid for 12 or you may bill 10 and get paid for one. Instead of traditional denials, these tend to show up as contractual adjustments that could easily go unnoticed if not monitored. This again heightens the need to do good monitoring and make sure that those limitations are in accordance with policies versus some black box edit that may have been implemented incorrectly.
Protracted Enrollment and Credentialing Processes
The process of enrolling with a payor or remaining credentialed is getting more cumbersome in terms of what is being requested by the plans, and the enrollment process time frame has almost doubled over the past couple of years. This is fairly universal across both government and commercial payors. The recommendation here is if you are expanding your practice, have a retiring physician, are adding a new entity, or are enrolling with a new plan, start the process early, understand the process, and plan for cash flow implications accordingly.
Strategies
Managing relationships with payors is increasingly important for providers and can be broken down into three phases: Evaluating, Negotiating and Monitoring. Pathology practices often put more emphasis on the negotiating strategy but the evaluating and monitoring stage are just as important.
Evaluating
Before you begin negotiating with a payor, you should understand the demands of the market and what the market will bear. It is important to know what is reasonable when making requests. One of the first steps is assigning a responsible party to oversee this process. Whether it is a practice manager, physician or a consultant, it is important to select one person who will oversee this process from start to finish. The next step is to determine who your top payors are. When looking across the payor mix for a pathology client, PSA often finds practices are accepting payment from hundreds of plans, so it is important to zoom in on your top payors, knowing that 80% of your business is probably coming from your top 10-15 payors. This will ensure you have a focused strategy. Your billing provider should provide you with reports that list your charges, payments and adjustments for the previous six months by insurance plan in descending order. This will allow you to select your top 10-15 payors and see what percentage of your total billed charges they account for.
Once you have identified your top payors, you will need to gather your existing contracts and fee schedules. Often this is where the process stops because practices may have a difficult time getting a copy of their contact. You may have to contact the payor directly. Compiling information on your top payors into one spreadsheet will allow you to view your payor mix as a whole and compare pertinent information. For each of your top payors, include current fee schedule amounts, timely filing limits, contract date, % of Medicare Rate, % of Total Charges, and Net Charge to Gross Charge Ratio. Contact your billing provider or review your monthly billing report to obtain some of this information. Once you have identified your top payors, it is time to drill down in the same manner and review the top CPT codes by payor. Focus on your top 10-20 codes, which should account for 80% of your business. For each code, compare what the payor is historically paying to your current fee schedule to ensure they are paying according to contract terms.
Negotiating
Review all correspondence from payors and forward to the appropriate party. Be aware of any unilateral change notices which may befall your practice if correspondence is ignored. When renegotiating with a payor, review your existing data and be prepared to bring any current contract non-adherence issue to light and get them resolved. Be proactive and professional and be able to articulate your product’s value and differentiators. If the contract you are considering is based on a fee schedule with CPT codes, make sure all codes that you will be billing are listed and review both the professional component only and the global allowable.
Monitoring
We often find that once the contract is finalized, pathology practices don’t spend enough time monitoring reimbursement to ensure payors are paying according to contracted terms. Monitoring can be done at a high level, detailed level or in real time. A lot of this has to do with the sophistication of your billing system, availability of personnel, and capital resources. PSA utilizes a combination of all three. At a high level, you can calculate the claims paid percentage (payments divided by payments plus adjustments). This percentage should be calculated monthly and monitored from month to month. If you notice more than a 3 to 5% fluctuation for more than a couple of months, then this should be a red flag that a more detailed analysis is needed to determine the cause of the fluctuation.
At a more detailed level, you want to evaluate the payor by individual CPT code. For the top CPT codes, determine what the payor is actually paying and then compare that to your negotiated fee schedule. Any deviations from the negotiated fee scheduled could indicate that the payor has changed its payment policy or may be paying incorrectly. The process of reviewing contract variances can also be done in real time. Some billing companies have the capability to load fee schedules by carrier and run variance reports. There are also some new software products that provide evaluation variance tools which rely on electronic claim submissions, electronic remittance, and the fee schedule to identify variances. This process will certainly take personnel and resources to manage, but should provide an effective monitoring process.
In summary, the key to obtaining a good contract or maintaining the best payor relationship management strategy is to evaluate your market to ensure you have a solid understanding of your top payors and CPT codes. This will allow you to be proactive in your negotiations. Finally, implement processes which will allow you to continually monitor contract variances to ensure you are getting paid appropriately.
PSA provides billing, coding, marketing, and business support services to pathologists nationwide. For more information on PSA please visit www.PSAPath.com or call 800-832-270 x 2988.