Financial Reporting Issues for Medical Practices

by David Guier Medical Data Management Solutions

As with all enterprises, medical practices live or die, thrive or suffer because of financial events that result from physician/manager decisions and actions. Actions resulting from decisions based on solid data and appropriate analysis usually will surpass “business instincts” and “gut reactions.” This article covers a few of the areas of reporting that are useful in decision making.

In the area of production, capturing and reporting units are as important as capturing dollar charges. Starting with the obvious, a physician’s success hinges on seeing patients. Office visit charge and count totals should be reviewed monthly. In-office procedure charge totals could be reviewed, along with a count or a Relative Value Unit total. Considering counts instead of dollar amounts eliminates the effects of price changes on the comparison.

When evaluating productivity, benchmarks are required to provide perspective. There are many benchmarks to choose from. Were more patients seen this month than last month? Were more patients seen this month last year? Do my colleagues see more or fewer patients than I do every month? That information often leads to the question, “Why am I different in a particular area?” Although this can stimulate further review and analysis, it also should narrow the focus.

The same can be said for surgeries or other practice services. Data from other practices can alert a physician about procedures being paid that the practice has not been paid for in the past. Rules regarding global periods and bundling/unbundling conventions change from time to time and from carrier to carrier. Followup procedures that legitimately could be billed might have been missed.

Charges in dollars and units can indicate how hard you worked compared to last year, last month, or your specialty’s industry average. Collections, on the other hand, indicate how smart you’ve been working.

Collection activity is another area for review and analysis. First, you must know the revenue by source. What percentage of receipts comes from HMOs, PPOs, Medicare, and Medicaid? How are these percentages changing over time? Are low-paying HMOs crowding out patients from plans that require less administrative hassle? Is the practice being taken over by Medicare or Medicaid? Are referral sources changing? If collections in a category are changing precipitously, a closer look is in order. Are collections from PPOs increasing relative to HMOs? Generally, specialists would find PPOs to be preferable to the administrative hassle of HMOs. Changes in employee benefits have meant higher deductibles and copays for the patient. This situation will translate to fewer surgeries unless a solution (such as financing plans) can be found.

Variations in reimbursement rates, bundling of codes, and other actions by insurance carriers could be responsible. Variations of this nature would result in increased accounts receivable balances or increased adjustments due to fee schedule changes and multiple and incidental procedure adjustments. A review of the accounts receivable aging by insurance carrier will show if balances are growing with specific carriers.

When adjustments are posted, adjustment codes should be in place for the areas to be tracked. Fee schedule adjustments to write off the office standard charge against a contracted fee should be used when that is the case. Adjustments to write off incidental procedures or multiple procedure reductions should have their own code.

Claims written off because of missed filing deadlines should be uniquely identified and monitored closely to determine where the bottleneck is occurring. Was the charge not entered in time? Did the claim go to the wrong carrier because the patient was registered inaccurately? Did the patient walk the ticket and the charge was not posted until much later? If a pattern is detected, take steps to identify and fix this problem.

In summary, a practice management reporting system has four major areas:
Charges
Collections
Adjustments
Accounts Receivable

Subcategories include:
Accounts/Patients
Fee Schedules
Referring Sources
Insurance Carriers
Diagnosis/Procedure Codes
Facilities/Locations
Revenue Producing Equipment

Some reports should be received like clockwork (eg, Charges, Collections, Adjustments, and Aged Receivables). These reports used against the appropriate benchmarks will stimulate questions. These questions will be more focused in ad hoc reports aimed at answering some of the questions mentioned above. It is important that the basic elements are in place (such as codes and contracted fee schedules) so they can be summarized as well as detailed in reports focusing on questions raised in the monthly, quarterly, or annual reports.

David Guier is a CPA and president of Medical Data Management Solutions. He has held various financial and administrative positions in managed care and practice administration since 1979. His e-mail is Dave@mdms.us.