Every dollar counts: Community practices must optimize revenue to succeed in the changing environment

Today’s dynamic healthcare landscape presents many challenges that can impact the financial health of community practices.

Consequently, it is imperative for practices to ensure they are collecting every dollar owed and that revenue optimization, along with patient care, is a top priority. Utilizing best practice processes and achieving industry benchmarks will enable practices to have the financial resiliency needed to continue to provide high-quality care while responding to the changing environment.

A challenging time for community practices

The uncertainty of healthcare policy is creating a high degree of anxiety among healthcare providers―community practices included. Since the implementation of the Affordable Care Act, many more HMO plans have come to the forefront, bringing more restrictive policies that complicate reimbursement. Unfortunately, PPO plans are trending in this direction as well.

The complex requirements for the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), the Merit-based Incentive Payment System (MIPS) and alternative payment models, such as the Center for Medicare and Medicaid Innovation’s Oncology Care Model (OCM), are causing practices to experience increased administrative burdens in reporting data to Medicare. While MIPS provides an opportunity for a positive payment adjustment, practices could also be subject to a penalty if they fall below peer performance levels. Unfortunately, practices will not know how they compare to others until all scores are submitted. Therefore, it is important that practices continually assess their performance and make improvements along the way to maximize their score. Additionally, under MIPS, some measures are lacking benchmarks, so practices do not know the level of performance they will need to achieve to earn a positive payment adjustment if and when benchmarks are established.

Increased payer scrutiny is also impacting practices. Prior authorizations are a common pain point, as payers have different requirements that are constantly changing. Since no uniform standard exist across the industry, it is difficult to establish strategies to efficiently manage this critical component of reimbursement. Prior authorizations can also negatively impact patient care, as some can take 15 to 30 days.

The fever pitch buying spree of hospital systems purchasing specialty practices over the past decade―which has endangered the very existence of community-based care―seems to have slowed. A new rule from the Centers for Medicare & Medicaid Services (CMS) concerning the 340B Drug Discount Program could further curtail this trend. Pending litigation and congressional efforts to intervene, the new rule would adjust payment to hospitals for drugs purchased through the 340B program to the Average Sales Price (ASP) minus 22.5%, rather than the current rate of ASP plus 6%. With this ruling, CMS appears to be moving toward a site neutral payment structure, bringing hospital reimbursement more aligned with community specialty practices.
While the rule could be viewed as a positive development for community specialty practices, it could potentially create issues for patients. Currently when practices have patients who cannot afford treatment, they may be referred to hospitals for treatment. If hospitals limit the number of these patients they care for due to reductions in 340B, it may be challenging for patients to access and afford the care they need. Several organizations have filed suit and petitioned Congress to stop the 340B reductions creating further uncertainty for hospitals and community specialty practices as they look to provide the care patients need in a manner that allows them to stay in business.
Medicaid is another concern, especially if hospitals curtail care to indigent patients. Practices must closely monitor their payer mix, paying close attention to the percentage of Medicaid patients, and constantly be aware of their own practice financials.

Optimizing the revenue cycle is crucial

All of these challenges can financially impact specialty practices, making revenue cycle management extremely important. The start of a new year is a good time for practices to take a fresh look at their process from end-to-end, fine tuning procedures and policies to ensure every opportunity is maximized. Following are a few tips to make the job a bit easier:

 Employ best practices for critical processes

Practices need to streamline their revenue processes wherever they can. Charge capture should be automated to gather all charges for care provided, with good edits and claim scrubbers in place to rid claims of errors and omissions that can result in payer denial or underpayment of claims. All clean claims should flow directly to the clearinghouse, with billing personnel only reviewing claims with exceptions.

Practices should also have strategies established, as much as they possibly can, to manage prior authorizations and denials. Practices should have a denial strategy in place to turn appeals around quickly.

 Develop patient collection policies and procedures

Patient collections can make up as much as 181 to 352 percent of a practice’s accounts receivables. These totals could climb even higher, as more insurance plans move towards high deductibles and copays, increasing patient financial responsibility. Obviously, the days of forgiving patient debt are long gone, as practices cannot absorb these losses and remain viable.

Practices must have a financial policy and a clearance process in place to collect patient payments at its most collectible point― at time of service. Financial counselors should be on staff to assure patients they will be available throughout their treatment, a discussion that can ease patient concerns. The practice’s financial policies and guidelines should be explained, a payment plan set up if necessary, and assistance provided if needed to help patients access financial resources, such as foundations, patient assistance programs, and drug copay cards. Counselors should help patients fill out forms and stay in close contact until the assistance is in place. Additionally, they should reach out periodically to ensure the patient’s financial situation has not changed. While physicians worry about treatment toxicity, the role and mission of financial counselors should be to help patients avoid financial toxicity.

Many practices overlook the importance of patient collections, but new value-based care models may bring the issue to the forefront. The way practices approach patient collections often impacts how satisfied patients are with their care, and patient satisfaction scores may soon become part of the reimbursement formula for many value-based payment models.

 Strive to meet or exceed key benchmarks

Benchmarking against industry peers is one of the most efficient ways to identify opportunities to improve revenue processes. The benchmark that often has the greatest immediate impact on practices is days to bill, which should be two days or less. Meeting this benchmark will help practices have lower days sales outstanding, which should be less than 20 days. Additionally, the first-time payment rate should be 95% or greater, meaning at least 95% of all claims are clean claims that go directly to the payer and are promptly paid. If practices consistently meet or exceed these three key benchmarks, the rest of their critical revenue metrics may be easier to attain.

For instance, accounts receivables over 120 days, another important benchmark, should be less than 9%. If the first-time payment rate is high, and days to bill and days bills outstanding are both low, the accounts receivable benchmark will likely be met or exceeded.

Other key benchmarks include bad debt of less than 1% of total revenue, as well as a charge capture rate of 99% or greater, which is the percent of practice charges that are captured electronically.

Revenue cycle optimization enables high quality care and financial stability

To remain strong and viable, community specialty practices must take advantage of every opportunity, building the financial reserves necessary to respond to today’s changing environment. Practices must streamline their revenue processes, incorporating automation wherever possible. Policies must be in place to collect patient payments at their most collectible point, when care is delivered. Additionally, key performance indicators should be utilized to monitor and drive staff efficiency, supporting both quality care and revenue optimization. With careful planning and execution, the business office can successfully manage the business end of care delivery, maximizing revenue while freeing physicians and clinicians to focus on what they do best―provide high-quality care to patients.


1athenahealth (2016). Discovering the Best Ways to Collect. Peak Performance Initiative Vol 2 Patient Pay, p2.
2med:evolve (2017). How to Run Your Practice by the Numbers webinar.

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