By Anthony Wunsh, President/CEO Medical Pay Solutions, Consultant, Author, Speaker
JANUARY 14, 2015 – In my last post, I posed the hypothetical event of opening a practice.It mainly dealt with the steps prior to opening and getting prepared to open. One of the readers an MD, asked me to further elaborate by imagining actually being open. After much thought about this I have put the following together.
My biased against the third party would come into play in my imaginary practice, and so I would likely elect not to participate in the usual practice model. If you didn’t read the last post or have forgotten, I was pretending to be a GP, for the scenario. I want to stress that specialty would guide what I would do, and not in a small manner. Certainly I would not eliminate all insurance if I were a surgeon, or many other specialists that require high dollar payment. This would of course be something I really would have to consider and determine, as some specialties, like Endo or others a Concierge or Hybrid model may suffice for my desire to practice medicine and not be a data processor.
But, when deciding how to answer the question of actually getting open and running my practice, many questions came to mind which needed to be answered and these are critical business intelligence which would be needed to drive how I operate my practice. And thus I think asking these questions, stating them is an important exercise for all in practice today.
So, here are some things I need to know, if you are in practice now you either should know or need to ask, so you can make decisions on how to navigate the mine field that is healthcare today.
1). What is my average overall bill. And by this I mean total billing for the encounter. Don’t break it up by payer and patient pay. What is the total I average in dollars per patient. This is such a critical piece of data as it determines what changes in my model I can absorb. For instance, if my average bill is less than $300 per patient, I would have to ask myself why am I even taking insurance, processing claims and adding costs to be in this system or network. How many of you have this information? It is simple to attain, look at past months, review what the total allowable billing is for that month and divide it by the number of encounters or patients you took care of (careful of continuing care under the same bill) and get this number, do it for a few months to get an average.
Okay, this is critical for many reasons. One, if the average ticket is low enough, I now have to access what it could be if I didn’t have all the added costs of third party billing, what could I charge, what could I save and actually lower the average patient charges while perhaps making more bottom line dollars.
Example, and I am going to use the math I know to be true, if you wanted to actually do a specific analysis you could break down all the added staff, costs, losses associated with the post adjudication billing cycle, (by the way, the term billing cycle really chaps my behind, what other business has a billing cycle). But I know the cost usually comes to about 40% of my collected revenue. So in our imaginary practice, I could charge an average of $120 less than I am now and probably make more money and even have to treat less patients to do so. Trust me when you factor in the $35 to process a claim, the denial rate, the cost of statements and the loss associated with non payment, your $300 is worth far less than you imagine on the surface.
By the way, you can dig deeper and actually compare your bank account, (cash flow) to your allowable billed amount for the same period, but get ready to cry when you do. This is your reality, don’t sugar coat it, what you collect is far more important than what you bill and what you spend to collect it is more a true measure of you percent to collect.
Sorry number one is so long, but it is critical in determining what options I have in my desire of how I want to practice medicine and what model to choose.
2). Patient mix, this is also a critical factor in determining my model. Am I mostly Medicaid, Medicare, private insurer or self pay. If you don’t know, you must before a proper business decision can be made. If you are 80% Medicaid, it may be unreasonable to expect your patients can absorb any out of pocket and you may be forced to stay with what you are doing. Or move of course. But if the mix is all over the place, then some deeper level of analysis is required. Is one payer dominating my mix, how much in terms of percentage am I currently billing to patient directly as opposed to payers, (critical data), and you can did deeper, by payer what am I actually getting paid versus what am I billing, again cash is king, I simply can’t pay my bills by billing, I have to have the actual collected dollars.
3). In network, out of network, I am biased on this, I don’t believe there is any advantage to being in network any more. There are more patients than there are doctors available to treat them so the carrot of building my practice is gone and the stick of competing with me has no force. Patients are there for the taking no matter what. I make far more money out of network with less cost to earn it.
Okay there is probably more but I am sure I am losing you, so here is what I would do in my practice assuming I am a GP, or at least some options.
I would open as a cash only practice with reduced costs for patients. And to satisfy my desire to serve, I would donate my time one day a week at a non profit or community center, thus fulfilling my personal desire to be more than a business person.
To do this I do not need to hire billers, worry about Medicare regulation, EMR mandates, anything other than what I need to deliver care to my patients the way I want to do so. I would set my price based on cost, (discussed in my last post) and the margins I want to make. So a receptionist and a nurse is probably all I need.
However if necessary I may take insurance but set policies for anything under $500 I will not process the claim, the patient will have to pay me and get reimbursed and if the insurer does not agree to this then I will not take them. Remember it costs me money to process these which means I have to charge more.
Another option is retainer, and it is attractive for many reasons, residual money monthly, a patient panel the size I determine, and my time is mine to offer to my patients. I might add a tele-medicine component for after hours which is paid for by me through the retainer fee, I might negotiate with imaging centers for cash prices and labs the same thing and offer these discounts to my patients or include them in the retainer as well. Another added benefit is the value of my practice with recurring residual revenue is at least five times goodwill and patient panel today.
I guess the bottom line for me, is I would want to practice medicine most of the time and little else that distracts me away from that process.