How Hospitals Can Maximize Revenue From Their Physician Networks

With the pressure to increase net income intensifying, hospitals are finding new urgency in the old saw, "every dollar counts." No longer can health systems focus their efforts on optimizing their largest sources of revenue and cost. Whereas thousands, or even tens of thousands, of dollars were once the unit of emphasis for greater efficiency, attention has now shifted to fifty, ten, even five dollars. Nothing is out of bounds anymore.

Given the situation, one would think revenue enhancement and cost reduction would be high priorities amid the continuing wave of group physician and specialty practice acquisitions by hospitals and medical centers. Yet before, during and after such additions, fiscal priorities are often overlooked, delayed, suppressed or ignored altogether.

"During acquisition negotiations, bigger issues like the clinical practice of medicine, salary, benefits and so on, are the focus," says Randy Roat, vice president of radiology services for Medical Management Professionals. "Billing and collections are often accepted as a given."

Maintaining a practice's level of revenue following an acquisition often entails far more complexity than hospitals expect. Not all integrated delivery networks have caught up with the need for more streamlined and efficient integration of business operations — a priority that can not only lower costs and increase revenues, but also improve patient care and satisfaction.

Maximizing ROI after practice acquisition requires a multifaceted, interdisciplinary approach. Here are a few of the major factors that must be addressed:

Billing systems. A fundamental difference is evident when comparing billing systems used by hospitals versus physician practices: often, hospital administrative IT systems are not equipped to pursue patient collections for small dollar amounts, nor are they likely to correct or resolve claims involving a lower dollar amounts. Yet this kind of "small change" is precisely the lifeblood of practices, so after acquisition, hospitals and IDNs need to develop this skill, which is often lacking.

Bill Garden, principal partner at MedicalSuite Consulting & Technologies, sums up  key system and process disparities between the two  care settings. "Hospital billing staffs speak DRGs [Diagnosis Related Groups] and are looking at charges in the thousands of dollars. Physician staffs speak CPTs [Current Procedural Terminology] and modifiers, and are looking at charges in the hundreds of dollars," he says. "From the perspective of a hospital biller, why would they waste their time dealing with a $50 bill when they have bills to collect that are in the thousands of dollars?"

For hospitals, the reimbursable unit of work is typically collective in nature. They deal in low volume, high dollar claims; physicians, by contrast, deal in high volume and low dollar amounts. Furthermore, physicians carry the burden of most prophylactic and preventive care — a clinical area most hospitals don't concentrate on.

A much more comprehensive approach is needed—which is why maintaining physician-focused revenue cycle management systems alongside hospital-class management applications is often the best long-term answer. Practice-focused RCM technologies are able to check eligibility before patient visits; what's more, the rejection/underpay analysis found in better physician RCM systems will expose procedural errors that may go unnoticed over long periods of time if a hospital system is used.

Another benefit of third-party clearinghouse or RCM technology is to cross-reference charges between the hospital and physician, ensuring clean, comprehensive and reimbursable claims are processed. Pointing to a common radiology scenario, MMP's Mr. Roat notes, "Typically a hospital will bill as soon as the exam is taken, rather than waiting until the MD issues the final report which may encompass another view or setting. For claims purposes, far greater accuracies can accrue when billing is based on the dictated report; this is the gold standard on what was found, versus billing based simply on the order."

Billing/Collections staffing.
The main business goal following an acquisition of a physician group should be to create an environment where operations are streamlined and net revenue is maximized. In terms of billing staffs, three alternatives are available to meet this goal: maintain the physician group's billing department as a discrete, separate operation; combine responsibilities and/or location with the hospital's billing department but keep processes separate; or fully combine the function.

It's important to note, when making this decision, that specialty practices have their own billing idiosyncrasies and compliance issues — some extremely nuanced. Bringing hospital systems and billing staff up to speed in these specialties is both time-consuming and expensive. No matter which option is selected, the staff that handles physician billing needs the proper skills, management, policies and procedures and, most importantly, technology and tools, to effectively pursue ambulatory bills.

Patient payments. Unemployment, as well as the changing insurance landscape, has transformed patient payment responsibilities. More than ever before, patients are forced to shoulder a higher portion of their routine healthcare costs.

Given the higher incidence of high-deductible plans, increased co-pays, and co-insurance, it's critical to estimate patient contribution at the time of registration. Pre-visit eligibility verification is an essential part of the process, as well as payment collection at the time of service. If revenue cycle management is shared or moved into the parent healthcare infrastructure, steps must be taken to ensure that pre-verification occurs and patient responsibilities are identified and communicated prior to service.

Single statement. A worthy goal for any IDN is to be able to provide patients not only with integrated care, but also integrated billing interactions. This means one statement covering all services.

Unified billing is more convenient for the patient, increases prompt payment, and lowers the chances of billing and claims submission errors. It can also reduce paperwork and improve profitability by better tracking the dollars owed. Making single statements a reality, however, means the hospital and its network partners must process payments in a way that meets the business goals of both the IDN and physician practices. Rules must be established for applying partial payments, and for splitting and posting payments into disparate administrative systems (e.g., the HIS system at the hospital and multiple PM systems at the physician or ancillary service level).

Payment reform. As pay-for-performance programs, medical homes, ACOs and bundled payments become more commonplace, reporting requirements to governments and payors will expand dramatically. The stress on revenue cycle departments and their underlying systems within both hospitals and practices will only continue to grow.

IDNs will need to develop — either by themselves or in partnership with a third-party RCM vendor — the capability to report performance under these programs. Hospitals and their network partners will also need to efficiently calculate, collect and track owed revenue. Finally, they will need the capacity to compute and distribute shares of payments received from these major revenue sources.

For hospitals building their physician networks, the charge is to find the most efficient solution for realizing and maintaining full payment from payers and patients.

"[Hospital] leadership has to look at ways that they can leverage the practices to increase revenue," says Randy Shulkin, principal consultant for Culbert Healthcare Solutions. "It's getting them the tools that work best in their environment. It's getting the electronic health record solutions to communicate back to the practice management system in terms of charges so they can get away from entering charges. It's providing them with a physician-focused clearinghouse that scrubs claims for them. There are a lot of tools to help today's practices."

Cross-delivery analytics. Once a practice is acquired, it needs to be measured in a way that provides insights into its operations in the context of the larger IDN. Again, a good RCM vendor can help fill in the financial and operational requirements quickly.

Working from claim and patient payment information, financial leaders have the ability to ascertain all manner of important information. Unlike ad hoc reporting solutions, specialized RCM technologies can provide this data without reinventing the wheel via customized technologies or workflows.

In summary, while the "square peg in a round hole" analogy may overstate the case, it's nonetheless true that hospitals face challenges accommodating the needs of physician networks. Health systems invest a great deal of time, money and effort building their networks; no one should place such investments at financial risk due to drop-offs in billing or operational efficiencies.

Adequate and thorough evaluations of how to best integrate the business processes of group practices are not only the keys to successful network growth, but also to maximize revenues for the larger institution. With the financial health of hospitals increasingly the issue, such decisions deserve careful consideration.

Kevin Weinstein is vice president of Marketing for ZirMed (www.zirmed.com), a nationally recognized leader in delivering revenue cycle management solutions to healthcare providers.

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With the pressure to increase net income intensifying, hospitals are finding new urgency in the old saw, "every dollar counts." No longer can health systems focus their efforts on optimizing their largest sources of revenue and cost. Whereas thousands, or even tens of thousands, of dollars were once the unit of emphasis for greater efficiency, attention has now shifted to fifty, ten, even five dollars. Nothing is out of bounds anymore.

Given the situation, one would think revenue enhancement and cost reduction would be high priorities amid the continuing wave of group physician and specialty practice acquisitions by hospitals and medical centers. Yet before, during and after such additions, fiscal priorities are often overlooked, delayed, suppressed or ignored altogether.

"During acquisition negotiations, bigger issues like the clinical practice of medicine, salary, benefits and so on, are the focus," says Randy Roat, vice president of radiology services for Medical Management Professionals. "Billing and collections are often accepted as a given."

Maintaining a practice's level of revenue following an acquisition often entails far more complexity than hospitals expect. Not all integrated delivery networks have caught up with the need for more streamlined and efficient integration of business operations — a priority that can not only lower costs and increase revenues, but also improve patient care and satisfaction.

Maximizing ROI after practice acquisition requires a multifaceted, interdisciplinary approach. Here are a few of the major factors that must be addressed:

Billing systems. A fundamental difference is evident when comparing billing systems used by hospitals versus physician practices: often, hospital administrative IT systems are not equipped to pursue patient collections for small dollar amounts, nor are they likely to correct or resolve claims involving a lower dollar amounts. Yet this kind of "small change" is precisely the lifeblood of practices, so after acquisition, hospitals and IDNs need to develop this skill, which is often lacking.

Bill Garden, principal partner at MedicalSuite Consulting & Technologies, sums up  key system and process disparities between the two  care settings. "Hospital billing staffs speak DRGs [Diagnosis Related Groups] and are looking at charges in the thousands of dollars. Physician staffs speak CPTs [Current Procedural Terminology] and modifiers, and are looking at charges in the hundreds of dollars," he says. "From the perspective of a hospital biller, why would they waste their time dealing with a $50 bill when they have bills to collect that are in the thousands of dollars?"

For hospitals, the reimbursable unit of work is typically collective in nature. They deal in low volume, high dollar claims; physicians, by contrast, deal in high volume and low dollar amounts. Furthermore, physicians carry the burden of most prophylactic and preventive care — a clinical area most hospitals don't concentrate on.

A much more comprehensive approach is needed—which is why maintaining physician-focused revenue cycle management systems alongside hospital-class management applications is often the best long-term answer. Practice-focused RCM technologies are able to check eligibility before patient visits; what's more, the rejection/underpay analysis found in better physician RCM systems will expose procedural errors that may go unnoticed over long periods of time if a hospital system is used.

Another benefit of third-party clearinghouse or RCM technology is to cross-reference charges between the hospital and physician, ensuring clean, comprehensive and reimbursable claims are processed. Pointing to a common radiology scenario, MMP's Mr. Roat notes, "Typically a hospital will bill as soon as the exam is taken, rather than waiting until the MD issues the final report which may encompass another view or setting. For claims purposes, far greater accuracies can accrue when billing is based on the dictated report; this is the gold standard on what was found, versus billing based simply on the order."

Billing/Collections staffing. The main business goal following an acquisition of a physician group should be to create an environment where operations are streamlined and net revenue is maximized. In terms of billing staffs, three alternatives are available to meet this goal: maintain the physician group's billing department as a discrete, separate operation; combine responsibilities and/or location with the hospital's billing department but keep processes separate; or fully combine the function.

It's important to note, when making this decision, that specialty practices have their own billing idiosyncrasies and compliance issues — some extremely nuanced. Bringing hospital systems and billing staff up to speed in these specialties is both time-consuming and expensive. No matter which option is selected, the staff that handles physician billing needs the proper skills, management, policies and procedures and, most importantly, technology and tools, to effectively pursue ambulatory bills.

Patient payments. Unemployment, as well as the changing insurance landscape, has transformed patient payment responsibilities. More than ever before, patients are forced to shoulder a higher portion of their routine healthcare costs.

Given the higher incidence of high-deductible plans, increased co-pays, and co-insurance, it's critical to estimate patient contribution at the time of registration. Pre-visit eligibility verification is an essential part of the process, as well as payment collection at the time of service. If revenue cycle management is shared or moved into the parent healthcare infrastructure, steps must be taken to ensure that pre-verification occurs and patient responsibilities are identified and communicated prior to service.

Single statement.  A worthy goal for any IDN is to be able to provide patients not only with integrated care, but also integrated billing interactions. This means one statement covering all services.

Unified billing is more convenient for the patient, increases prompt payment, and lowers the chances of billing and claims submission errors. It can also reduce paperwork and improve profitability by better tracking the dollars owed. Making single statements a reality, however, means the hospital and its network partners must process payments in a way that meets the business goals of both the IDN and physician practices. Rules must be established for applying partial payments, and for splitting and posting payments into disparate administrative systems (e.g., the HIS system at the hospital and multiple PM systems at the physician or ancillary service level).

Payment reform. As pay-for-performance programs, medical homes, ACOs and bundled payments become more commonplace, reporting requirements to governments and payors will expand dramatically. The stress on revenue cycle departments and their underlying systems within both hospitals and practices will only continue to grow.

IDNs will need to develop — either by themselves or in partnership with a third-party RCM vendor — the capability to report performance under these programs. Hospitals and their network partners will also need to efficiently calculate, collect and track owed revenue. Finally, they will need the capacity to compute and distribute shares of payments received from these major revenue sources.

For hospitals building their physician networks, the charge is to find the most efficient solution for realizing and maintaining full payment from payers and patients.
"[Hospital] leadership has to look at ways that they can leverage the practices to increase revenue," says Randy Shulkin, principal consultant for Culbert Healthcare Solutions. "It's getting them the tools that work best in their environment. It's getting the electronic health record solutions to communicate back to the practice management system in terms of charges so they can get away from entering charges. It's providing them with a physician-focused clearinghouse that scrubs claims for them. There are a lot of tools to help today's practices."

Cross-delivery analytics. Once a practice is acquired, it needs to be measured in a way that provides insights into its operations in the context of the larger IDN. Again, a good RCM vendor can help fill in the financial and operational requirements quickly.

Working from claim and patient payment information, financial leaders have the ability to ascertain all manner of important information. Unlike ad hoc reporting solutions, specialized RCM technologies can provide this data without reinventing the wheel via customized technologies or workflows.

In summary, while the "square peg in a round hole" analogy may overstate the case, it's nonetheless true that hospitals face challenges accommodating the needs of physician networks. Health systems invest a great deal of time, money and effort building their networks; no one should place such investments at financial risk due to drop-offs in billing or operational efficiencies.

Adequate and thorough evaluations of how to best integrate the business processes of group practices are not only the keys to successful network growth, but also to maximize revenues for the larger institution. With the financial health of hospitals increasingly the issue, such decisions deserve careful consideration.

Kevin Weinstein is vice president of Marketing for ZirMed (www.zirmed.com), a nationally recognized leader in delivering revenue cycle management solutions to healthcare providers.

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