Medicare is a federal health insurance program created in 1965 for:
- people age 65 or older,
- people under age 65 with certain disabilities, and
- people of all ages with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant)
Medicare Part A - 99% of patients don’t pay a premium for Part A (hospital insurance) because they or a spouse already paid for it through their payroll taxes while working. The $1,100 deductible for 2010, paid by the beneficiary when admitted as a hospital inpatient, is an increase from 2009. Part A helps cover:
- inpatient care in hospitals (excluding the physician fees), including critical access hospitals
- skilled nursing facilities (not custodial or long-term care)
- some hospice care
- some home health care
Medicare Part B – Part B (outpatient/doctor insurance) base premium for 2010: $96.40/month (no change from 2009.) Premiums are higher for single people over 65 making more than $85K per year and for couples making over $170K. Part B premiums cover approximately one-fourth of the average cost of Part B services incurred by beneficiaries aged 65 and over. The remaining Part B costs are financed by Federal general revenues. In 2010, the Part B deductible is $155. Part B helps cover:
- physician fees in the hospital
- physician fees in their offices and other outpatient locations
- other outpatient services (x-rays, lab services)
- some services of physical and occupational therapists
- some home health care
Medicare Part C – Medicare now offers beneficiaries the option to have care paid for through private insurance plans. These private insurance options are part of Medicare Part C, which was previously known as Medicare+Choice, and is now called Medicare Advantage. Medicare Advantage expands options for receiving Medicare coverage through a variety of private insurance plans, including private fee-for-service (PFFS) plans, local health maintenance organizations (HMOs) and regional preferred provider organizations (PPOs), and through new mechanisms such as medical savings accounts (MSAs), as well as adding payment for additional services not covered under Part A or B. Here is a great article by Maria Todd on how Medicare Advantage plans get paid.
Medicare Part D - Starting January 1, 2006, Medicare prescription drug coverage became available to everyone with Medicare. The so-called “doughnut hole” is the amount the patient pays between the initial coverage limit of $2,830 and the out-of-pocket threshold of $4,550 – a total of $1720 that the patient is responsible for.
- Initial Deductible: $310
- Initial Coverage Limit: $2,830
- Out-of-Pocket Threshold: $4,550
COMPARISON OF MEDICARE PLANS
Original Medicare Plan
WHAT? The traditional pay-per-visit (also called fee-for-service) arrangement available nationwide.
HOW? Providers can choose to participate (“par”) or not participate (“non-par”.) Participating providers accept the Medicare allowable and collect co-insurance (20% of the allowable.) Reimbursement comes to the providers. Non-participating providers may charge 15% more (called the “limiting” charge) than the Medicare allowable schedule, but the patient will receive the check, which is why some non-par practices require payment at time of service for Medicare patients. To be able to charge patients for non-covered services, patients must sign an ABN before the service is provided.
Original Medicare Plan With Supplemental Medigap Policy
WHAT? The Original Medicare Plan plus one of up to ten standardized Medicare supplemental insurance policies (also called Medigap insurance) available through private companies.
HOW? Medigap plans may cover Medicare deductibles and co-insurance, but typically will not cover anything Medicare will not. Medicare primary claims will “cross-over” to many Medigap secondary claims so the practice does not have to file the secondary Medigap claim. Patients may still have a small balance that is cost-prohibitive to bill for.
Medicare Coordinated Care Plan
WHAT? A Medicare approved network of doctors, hospitals, and other health care providers that agrees to give care in return for a set monthly payment from Medicare. A coordinated care plan may be any of the following: a Health Maintenance Organization (HMO), Provider Sponsored Organization (PSO), local or regional Preferred Provider Organization (PPO), or a Health Maintenance Organization (HMO) with a Point of Service Option (POS).
HOW? You have to have signed a contract or be grandfathered in (called an “all-products” clause) under an existing contract to see patients and get paid. Primary care providers may have to provide referrals and/or authorization for specialty services and providers. A PPO or a POS plan usually provides out of network benefits for patients for an extra out-of pocket cost.
Private Fee-For-Service Plan (PFFS)
WHAT? A Medicare-approved private insurance plan. Medicare pays the plan a premium for Medicare-covered services. A PFFS Plan provides all Medicare benefits. Note: This is not the same as Medigap.
HOW? Most PFFS plans allow patients to be seen by any provider who will see them. PFFS plans do not have to pay providers according to the prevailing Medicare fee schedule or pay in 15 days for clean claims. Providers may bill patients more than the plan pays, up to a limit. It would be a good thing to notify patients if your practice intends to bill above the plan payment.
Need more? Click on CMS (provider-oriented) or Medicare (patient-oriented.)
I’ve had lots of questions about financial policies since I did a webinar on patient collections last year. Here’s a short course on developing a new financial policy for your practice. The topic is addressed more comprehensively in my book.
I dislike financial policies that are long and wordy. I prefer a simple format that everyone can understand and use.
The format I recommend is one with three columns titled:
- Your Plan
- What You Do
- What We Do
Here’s an example of how the three columns would read:
Your Plan
Medicare
What You Do
Pay your deductible ($155 for 2010) and co-insurance (20% of the allowable.)
What We Do
We will file Medicare for you.
I use the front of the financial policy to list all the variations of plans that the practice accepts. For instance, the Medicares might include:
- Medicare
- Medicare/Medicaid
- Medicare/supplemental policy
- Medicare Advantage Plan (HMO/PPO)
- Medicare Advantage Plan (PFFS)
- Medicare secondary (MSP)
- Railroad Medicare
Lump together any like plans that you will treat the same. Then decide what you will expect from the patient at time of service or after, and what the practice commits to doing. Don’t forget to address patients being seen out-of-network and self-pay patients.
I use the back of the policy to cover everything that you would like the patient to sign off on. This could include:
- Receipt of Notice of Privacy Policies
- Receipt of Advance Directives/Living Will info
- Agreement to Financial Policy
- Assignment of Benefits to Practice
- Guarantee of Payment
When you put a new policy in place, you have a number of options to educate patients. Here are some:
- Put the policy on your website.
- Send a copy of the policy to all new patients.
- Discuss the policy when you call patients to remind them of their appointment.
- Discuss the new policy at check-in and/or check-out and let patients know it will be in effect at their next visit.
- Circle the patient’s plan on the front, have the patient sign the financial policy on the back, and give them a copy to take with them.
How you decide to educate the patients will depend on how much time you have between making the appointment and seeing the patient and the type of practice you have – primary care versus sub-specialty.
Also, don’t forget to educate your staff. If they have not had to discuss money before, they will need some coaching and some practice.
If you’d like a free copy of my sample financial policy, shoot me an email at marypatwhaley@gmail.com.
I took last week off to complete a project I’ve been working on since early this year – my first book!
It’s really a workbook and it guides the reader through a program to move their practice from a back-end collection process to a front-end collection process. What is the difference? A back-end program collects the majority of patient-owed balances after the payer has adjudicated the claim and has submitted payment to the practice. A front-end program takes all the available information about the payer/plan and collects payment or arranges future electronic payments with the patient at the time of service.
The book has step-by-step instructions for implementing the program in any practice, and more than a dozen worksheets and templates are included. Some examples are:
- Patient Collections Benchmarks
- 30-Day Project Calendar
- Responsibility Assignment Worksheet
- Budget Template
- Sample Job Description and Hiring Worksheet
- Product Evaluation Forms
- Sample Financial Policy and Financial Policy Template
- Patient Frequently Asked Questions (FAQ)
You really can implement a program like this in your practice in 30 days. It’s hard work, but well worth the effort.
I invited readers of MMP, colleagues on LinkedIn, and Tweeps (friends on Twitter) to comment on my post “101 ideas for Increasing Revenue and Decreasing Expenses.” I’ve listed their ideas below and hope you’ll chime in on the comments with even more ideas! Thanks to everyone for contributing.
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Partner at B2B CFO® – Experienced CFO for Rent. Fast, Effective, Affordable.
Consider adding a part-time CFO to the mix. Many medical offices have very weak financial capability or understanding. Assistance can range from better financial reports, capital expenditure analysis, budgeting and exit plans.
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Eastern Region Sales Manager – Billing Tree
1) Build a relationship with the patient before he/she leaves the practice.
2) Make sure they know you are expecting payment on the portion they owe, and when you are expecting that payment.
3) Let them know what your process is for collecting, and when they will go to an outside agency.
4) Enable a web site to take payments 24 hours a day.
5) Set up an IVR system to take phone payments after hours.
6) Communicate your available payment acceptance methods in writing, on the phone and every time you speak with your patients.
7) Send the invoice or statement when you intend to send it.
Re-inforce the payment acceptance methods on the first and any subsequent invoices.
9) Adopt a plan for following up with any patients that don’t pay after 10 days.
10) Get email addresses from all of your patients and their permission to contact them in that manner.
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Sr. Product/Process Trainer and EDI Implementation Consultant
One suggestion would be to integrate the revenue cycle mangement function with your clearinghouse {for electronic billing} with integrated solutions like Coding database and Updates, Industry Broadcast, Performance and Audit reports for Claim Edits, Transmission and Rejects. Also, better training resources for billing staff actively into the practice management system.
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Consultant at Pacific Women’s Medical Group
I would add effective cash management (even if interest rates are so low).
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Medical and Business Consultant at Transworld Systems
Utilize a Flat Fee Collections Agency for Non-responsive Patient Pay concerns.
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Principal Consultant – Culbert Healthcare Solutions
- Do you collect co-payments on the way in rather than on the way out?
- Does your PM/Scheduling system show the patient co-payment and outstanding patient balance in the appointment screen? If not, then can you download a listing for your front desk staff?
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DPT Healthcare Consulting & Training
I’d like to add “acknowledge the patient with eye contact” and offer “polished customer service” and they will WANT to return = return on your $ $
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Managing Partner, Dynamic Grape Companies
One other thought… don’t be afraid to try new technology. For example, one of my clients has developed a kiosk that allows patients to take their own weight and bp and electronically feeds the data into their EMR. The whole set up costs about $3500 and can save a ton of staff time. Tele-health in general should also be considered.
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VP at Operations
If you select a reasonably priced EMR and you implement enhancements then you more than save on staff cost. Keep in mind that my practice rolled out the EMR five years ago, so we have had time to get it right. Here are some of the savings/revenue opportunities:1. We utilize our electronic technology to send text messages and emails to our patients to remind them of their appointments. This function alone saves my practice one FTE. Not only do we save with staff time we improve patient satisfaction, as our Blackberry users loves the email or text that they can directly add to their calendars. The revenue enhancement to this function, we decrease no shows and lag time in our physician’s schedules.
2. The robust reporting within the EMR allows the organization to assemble important quality measures that we use in contract negotiations. Without the EMR this would be a labor intensive task.
3. We are able to push a secure message to our patients regarding their pathology results saving staff time on the telephone and increasing patient satisfaction by eliminating a visit just to obtain a normal result.
4. No more chasing charts for a phone message. My call center takes ALL clinical messages. This is attached to the patient’s electronic chart and routed to either a nurse to respond or a physician. This process greatly reduces staff time, decreases the time it takes to respond to the patient’s issue and provides a legal record of the telephone call which is often missed in a paper environment.
5. We receive a discount on our mal-practice insurance because in an electronic environment it is guarantee that your notes are legible.
6. The formulary function built into most EMR’s provides the physician will a real time snapshot if a prescription that he/she is about to write is covered by the patient’s health plan and provides alternatives if available.
I have just highlighted only a couple examples of the administrative benefits. There are many more. It is tough to imagine going back to a paper chart.
I have done the math and we could cover our current EMR with the incentives offered through the government initiative.
I will comment that physicians need to be trained on how to use the EMR. You can lose site of the patient and focus the entire visit on the computer versus the patient, however, we teach our physicians that the patient first and then chart completion. We conduct patient satisfaction surveys and I rarely receive a complaint regarding the physician’s time at the computer. I do however, receive praises from patients regarding the ePrescribe as it decreases their wait times when the arrive at the pharmacy, the prescription is ready.
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Okay Readers, it’s your turn – what’s your secret weapon for increasing revenue or decreasing expenses?
Mary Pat
BUILD ON WHAT YOU’RE CURRENTLY DOING:
1. Add physician hours – add evening or weekend hours; start your office hours earlier and end hours later.
2. Reduce physician time off – decrease vacation or change weekly days off to 1/2 days off.
3. Set a minimum number of providers to be in the office seeing patients at all times the office is open.
4. Have each provider add one new patient visit to his/her schedule weekly.
5. Add ePrescribing to recoup additional Medicare revenue and streamline prescribing (there are free ePrescribing software packages available, but evaluate them carefully so they don’t add more complexity to the system instead of less.)
6. Report PQRI measures to recoup additional Medicare revenue.
7. Charge patients an out-of-pocket fee for completing patient forms – disability forms, etc. and reserve office visits for treating patients.
8. Choose an EMR that qualifies your practice for the ARRA money (although it has been widely promoted that in a larger practice, an EMR and its associated work will cost more than you will get from the government.)
9. If you are in an underserved or rural area, check to see if there might be grants or funds available locally, in the state or federally, for adding a service to your practice.
10. If your practice does Independent Medical Exams (IMEs), reviews records or depositions, make sure that your fee schedule for such services is current and that the fees are collected before the physician provides the service.
ADD TO YOUR CURRENT SERVICES:
11. Allergy testing & treatment
12. Dispensing pharmaceuticals
13. Dispensing nutriceuticals
14. Dispensing Durable Medical Equipment
15. Group patient visits
16. Coumadin Clinic
17. Heart Failure Clinic
18. Diabetes Education Classes
19. Add primary care to specialty care practices
20. Add specialty care to primary care practices
21. Research
22. Joint Ventures with other practices or hospital
23. Lease space to other entities
24. eVisits (virtual visits or email visits)
25. Elective procedures or services
26. Mid-level providers
27. Walk-in clinic
28. Occupational medicine: drug screens, employment physicals, etc.
29. Hospitalists
30. Medical Director of local nursing homes
31. Complementary & alternative medicine (CAM)
32. Aging in Place services
33. Social worker
34. Concierge practice
35. School team physician
EVALUATE YOUR REVENUE CYCLE MANAGEMENT:
36. Are you renegotiating payer contracts regularly?
37. Do your scheduling staff know how to educate patients about what payers you have contracts with and are in network with and what the patient’s financial responsibility will be?
38. Do staff know what typical new patient charges are to tell the patient?
39. Do you check every patient’s eligibility for insurance benefits immediately prior to every service?
40. Do you have patients sign a financial policy to acknowledge what they are responsible for based on their payer type?
41. Do you copy the patient’s insurance cards at every visit, or at least compare their current card to the card you have on file? Are you able to scan patient insurance cards and driver’s licenses into your practice management (PM) system?
42. Is your PM system able to download the information from the scan into the patient registration screen? If not, do you have a way to confirm that demographic and insurance information has been entered correctly from the cards?
43. Are your charges being posted daily?
44. Does the person who provides the service, or a documentation coding specialist, choose the CPT and ICD9 code?
45. Is the documentation for the charges being completed within 24 hours of the service?
46. Is your encounter form up-to-date with current CPT and ICD9 codes; do you order smaller batches of them so you can change the codes as new services are added in the practice?
47. Do you check the CPT and ICDD9 matching to make sure the codes are valid for the year, the codes adhere to NCCI and LCD edits before you finalize the charges?
48. Do you regularly audit medical records for coding and documentation and give providers feedback on where coding could be improved?
49. Are you using ABNs for Medicare patients who want services that Medicare might not pay for?
50. Do you file claims daily?
51. Do you correct claims daily when they are rejected at the practice management, claims clearinghouse or payer level?
52. Do you correct claims daily when they are rejected at the claim level and are not paid for for reasons that can be corrected?
53. Do you have your contract allowables in your PM system so you know when you are not being paid correctly by contract?
54. Do you appeal unpaid or underpaid claims?
55. Do you check recoupments or requests for refunds from payers and make sure they truly should be refunded?
56. Do you send insurance and patient payments to a lockbox to be scanned and stored digitally for your staff to post from?
57. Do you make payment arrangements in the office for balances after insurance has paid, or payment plans by drafting credit or debit cards?
58. Do you have a policy of not sending statements?
59. Do you collect the patient’s portion of the service at the time of service?
60. Do you collect fees for elective services prior to providing these services?
61. Can your patients make payments online through your website?
62. Do you file a claim with a patient’s estate if they have died?
63. Do you accept cash only from patients who have passed bad checks?
64. Do you accept cash only from patients who have filed bankruptcy with your practice?
65. Do you inadvertently see patients who have been dismissed from your practice?
66. When adding a physician to the practice, do you timeline the credentialing appropriately so the physician can see patients with insurance as well as those without?
67. If your new physician is only partially credentialed with payers, do you have him/her see the patients with payers they are credentialed with and add payers to their schedule load as the credentialing comes through?
68. Do you meet with representatives from your largest payers monthly to establish relationships and bring problems to their attention? (the squeeky wheel theory of payer relations)
69. Are you pre-certing everything that needs pre-certification or pre-authorization or pre-notification to be sure the service will be paid?
70. Are you receiving payments via electronic funds transfer (EFT)?
71. Are you receiving explanation of benefits (EOBs) or remittance advice (RA) electronically?
72. Are you posting your RA electronically?
73. Are you protecting your practice from embezzlement? (see my post on this here.)
74. Is someone in the practice responsible for staying current on changing coding requirements for Medicare, Medicaid, Tricare and commercial payers?
DECREASE EXPENSES:
75. Eliminate overtime. Evaluate the need for additional staff (part-time?) vs. overtime.
76. Send some staff home (sometimes called “low census”) when there are no patients to be seen.
77. Use volunteers. Tap into the local hospital volunteers, or recruit and train your own.
78. Hire an after-school student employee to do routine jobs.
79. Discontinue paying staff for inclement weather closings when the practice is not open.
80. Shop everything. Negotiate existing service contracts. Do not assume anything is non-negotiable. Negotiate the rent.
81. Get rid of yellow pages advertising. It rarely brings you new patients and is primarily a place to look up phone numbers. You will still get your white pages listing free with your phone service.
82. Utilize pre-employment testing to make sure job applicants have the skills you need.
83. Shop postage machines or look into stamps.com.
84. Join a group purchasing entity (hospital, professional association, etc.)
85. Improve your accounting cycle. Invoices and statements are matched up with packing slips and negotiated prices. Use purchase order numbers.
86. Get the payment discount by paying on time or early – ask vendors for an on-time or early payment discount.
87. Make sure office supplies are not going home with the employees. Make sure office supplies that are ordered are “really need” and not “sure would be nice.”
88. Remind patients of their appointments to decrease no-shows. Call patients who no-show and attempt to reschedule (unless they feel better!) Track no-shows and evaluate the reasons for them.
89. Consider charging for no-shows or dismissing patients for no-shows.
90. Have a good recall system in place. If patients leave without scheduling a needed follow-up, make sure that they are called if they have not scheduled within a certain amount of time. Keep track of annual wellness visits and remind patients to schedule them.
91. Take advantage of any discounts offered by your malpractice carrier by completing risk management surveys and having speakers give annual updates on decreasing malpractice claims. Some carriers give discounts for managers who are members of MGMA or Fellows in the ACMPE.
92. Evaluate any discounts on services or products offered by your physicians’ professional associations and societies.
93. Evaluate your leases - are those big old copiers and faxes worth paying for a service contract?
94. Consider speech recognition/voice recognition and eliminate transcription.
95. Review your computer maintenance contracts. Are you paying for maintenance on equipment or software that is no longer being used?
96. Take advantage of online CME for physicians, midlevel providers, clinical staff and managers.
97. Make plans to attend face-to-face seminars well in advance to take advantage of early enrollment discounts and good flight deals.
98. Evaluate outsourcing. Think about outsourcing transcription, coding, billing, pre-authorizations, credentialing, switchboard, payroll, accounting and medical records copying.
99. Replace your answering service with an answering machine educating patients on the limited reasons for calling after hours and giving the number of the physician on call.
100. Destroy archived financial and medical records that you are paying to store, once you have ascertained that they exceed the required time limit.
101. Hold a brainstorming session with the staff and ask for their ideas for increasing revenue and reducing expenses. The people on the front lines will have excellent ideas. In return, do not nickle and dime the staff to death by charging for coffee, reducing parking stipends or eliminating uniform allowances. Keep in mind that for your rank and file staff, having to pay for their own uniforms or paying more for parking might be a deal-breaker that causes them to search for work elsewhere. Try to focus on the bigger items for savings and make sure the staff know you are trying to keep their small benefits in place in appreciation for their work.
Recent news stories about manager embezzlement give us all a black eye. What can managers do to limit their liability, and how can physicians protect the practice without managing the day-to-day operations themselves?
Here are nine suggestions:
- Perform a thorough background check before hiring a manager, and have your manager bonded.
- Have your bank statements sent to the physician’s home address and/or make sure the physician has the master access to the bank accounts online. Physicians, have a personal relationship with your practice banker and make time for a short meeting with them quarterly.
- Have the physician sign your practice checks. Each check should be attached to an invoice that lists the goods or service purchased. Do not order a rubber stamp of the doctor’s signature.
- Insist on a duplicate, numbered receipt book for staff to give receipts to patients for all over the counter payments.
- Have your insurance and patient checks sent to a lockbox.
- Make sure the manager takes time off – at least several weeks a year. Managers who are “too busy” or “can’t ever get away” are a red flag. The physician should review all mail during the manager’s vacation.
- Check the monthly credit card statement carefully before making the payment. Keep the card restricted to a relatively low limit to manage your liability. Do not pay practice bills routinely on the card to build frequent flyer miles as this makes it much easier for an employee to hide non-approved expenditures.
- Have a budget and make sure variances can be explained.
- Hire a CPA to review the books quarterly. Even if you do not need the services of a CPA for your statement reconciliation, taxes or partners distribution, hire one to review the expenses and receipts, and ensure that the retirement plan is being funded appropriately.
A qualified, ethical manager has nothing to hide and will thank you for following these nine rules. The rules protect the manager as well as the practice.
Photo credit: © Yuyang | Dreamstime.com
A typical standard operating procedure in many practices when adding a new physician is to phase in his/her schedule as s/he becomes credentialed by each payer. Traditionally, new physicians have been able to see Medicare patients immediately due to the Medicare guideline that allowed for a practice to retro-bill for Medicare patients seen before (up to 27 months, actually) the doctor was officially credentialed.
Now all that has changed, and starting April 1, 2009, practices can only retro-bill for Medicare patients seen 30 days prior to the date the credentialing form was filed (if it was ultimately approved.) What are the implications of this? (more…)
I got the idea for this post from an article titled “18 Financial Terms Every Leader Should Know,” by Dan McCarthy at Great Leadership. I thought it was a great post and created one of my own, borrowing a few good ones from Dan and adding examples for typical scenarios in healthcare. Oh, and I decided on 17.
1. Cash Basis Accounting. This was a question on a management test I took a long time ago! In this method when you pay a bill it is accounted for and when you receive payment, it is accounted for. Your receivables are recorded when you make deposits and your payables are recorded when you generate your payments online or by checks. Most physician-owned practices use the cash method of accounting, give the doctors a draw against their earnings, then distribute any additional earnings on a quarterly basis. To smooth out expenses, any bills that are quarterly (malpractice sometimes is) or annual (profit-sharing usually is), are accounted for to make sure money is not distributed prematurely.
2. Accrual Accounting. In the accrual method, when you receive a bill, it is accounted for, and when you bill someone, it is accounted for at that time instead of when you are paid. Your receivables are recorded when you charge the patient and your payables are recorded when you receive a bill. (I’ve never worked in a practice that used this method of accounting.)
3. Allocation. The process of deciding how each expense should be attributed, whether to the practice at large or to an individual physician. For example, individual physicians may be allocated expenses for specific staff, or allocated overhead for resources that only they use.
4. Amortized expenses. The costs for assets such as medical equipment and computers, which are depreciated (expensed) over time to reflect their usable life.
5. Cost/benefit analysis. A form of analysis that evaluates whether, over a given time frame, the benefits of the new investment, or the new business opportunity, outweigh the associated costs. This could be an analysis for a new lab machine, or a new satellite office.
6. Gross Collection Ratio. The total collections divided by the total charges gives a gross collection ratio, but this number usually is not meaningful as most practices make significant adjustments for contractual rates with payers.
7. Net Collections Ratio. The total collections divided by the charges less contractual write-offs gives a net collection ratio. The number should be meaningful, and ideally is not decreasing in this high-deductible, medical bankruptcy, high-unemployment economy. Collections ratios are the least useful when used for a monthly analysis, and most useful when used to evaluate charges and collections over a year or more.
8. Revenue Cycle. The process of collecting insurance and billing information from the patient, collecting any monies due at the time of service, documenting the medical service provided, translating the service into ICD9 and CPT codes, filing the claim and collecting the contracted amount from the payer.
9. Equipment lease. A contract to purchase or rent equipment and/or purchase service over a period of time. The monthly cost includes the purchase price and interest and although the cost over the life of the lease is significantly more, it allows the practice to avoid a significant cash investment all at one time.
10. Capital expenses. The purchase of a piece of equipment, furniture or sometimes software (usually $500 or more) that will be expensed through depreciation. A capital budget is one that includes all large expenditures the practice anticipates making during the year.
11. Operating expenses. Expenses that occur in operating a business, for example employee salaries, benefits, rents, utilities and marketing costs. An operating budget is one that includes all expenses incurred in the daily running of the business.
12. Revenue Budget. A budget that estimates the revenue the practice expects to collect based on physician and ancillary productivity and applying the previous year’s average collection percentage to the anticipated charges.
13. Benchmarks or Key Indicators. Indicators such as cost per RVU (relative value unit), cost per case in surgery, or days in A/R (accounts receivable) allow practices to compare their performance to the performance of successful practices.
14. Return on investment (ROI). A financial ratio measuring the cash return from an investment relative to its cost. You may calculate the ROI on an automated appointment reminder system and calculate the cost of the system versus the reduction in no-show appointments over several years.
15. Time value of money. The principle that a dollar received today is worth more than a dollar received at a given point in the future. Even without the effects of inflation, the dollar received today would be worth more because it could be invested immediately, thereby earning additional revenue. This is important in collections, as getting a partial payment from a patient today may have more value than getting a full payment from a patient in 2 years.
16. Variable Costs. Costs/expenses that are incurred in relation to providing services to patients. Examples include the cost of medical consumables, patient education materials and merchant services fees for taking credit cards. As the volume of patients increases, the expenses increase.
17. Fixed Costs. Costs/expenses that are incurred regularly regardless of patient volumes. Examples include rent, utilities, and liability insurance.
I am writing this post in response to seeing a lot of questions recently about making deposits. (If you are looking for information about making personal bank deposits, go to the top of the page and click on the Lexicon and look for “Bank Deposits.”) Even if you know how to make a deposit, you could copy this post into a word document and with a few changes, use it for a protocol for your office. So, here goes:
- Make sure all mail and checks that you receive are for your practice. It’s easier and less costly to return it to the sender if you catch the mistake on the front end, instead of refunding it after it has been deposited in error.
- Open the mail and separate the checks into four piles: (a) all insurance and other non-patient checks, (b) all patient checks, (c) all correspondence from insurance companies without checks, such as denials, “no-pays”, and requests for additional information, and (d) patient credit card payments.. Run two adding machine tapes each on the insurance check pile and the patient check pile to get an accurate total.
- Some practices receive checks for medical records, depositions, honorariums, call pay, etc. and handle these monies outside of the standard deposit protocol. Other practices handle them as a part of the process and post everything to a patient account or a dummy account specifically for non-service related revenue. Either way is fine if it works for your practice.
- Give the credit card payments to the person in your office who processes credit cards, and have them add these payments to your other credit card payments from over the counter. Once the credit card payments are successfully processed, give them to the billing clerk to post to the patient account on the computer. Be sure to always post patient payments ASAP (over the counter and mail) so patients don’t inadvertently receive a bill from the practice that does not reflect their recent payment.
- Give the insurance company correspondence to a billing clerk to process after stamping the date on each first page.
- If your office is big enough, split the duties between three people of (a) opening the mail and running two matching adding machine totals on the checks, (b) preparing the deposit and running a third matching tape total, and (c) posting the checks. Make sure all adding machines are set to count the number of items and that item numbers match on all tapes.
- Paperclip each check to its documentation. Recycle the envelopes. Some detailed people keep the envelopes with the patient checks until matching the address on the check and on the envelope and on the statement stub in case the patient has moved.
- Stamp today’s date on the paperwork and EOBs (Explanation of Benefits) that accompany the insurance checks. Give the EOBs and one tape to a billing clerk to post.
- There are two schools of thought at this point. One school believes that no check should be deposited without first posting it to the patient’s account in the computer. A second school (to which I belong) believes that the money should go right into the bank, and post the payments to the accounts within 2 business days.
- Some offices have the technology to scan all deposits and all EOBs, and some offices will choose to photocopy checks to use as reference documents. Some banks offer online images of deposited checks. Refer to my post on lockboxes and remote deposits for other options.
- Separate all insurance checks from their EOBs and stamp the back of the check (on the correct end) with your bank deposit information. Separate the patient checks from the statement stubs and stamp the back of the checks with your bank deposit information. Give the statement stubs to a billing clerk to post the patient payments, checking first that the information on the stub and the check match, including the amount paid.
- Deposit slips are carbonless and each deposit uses a set of two slips: one goes to the bank and one stays in the book. Look in the back of the book for the piece of cardboard that you use to slide behind the two slips to keep the writing from bleeding through.
- Date the deposit slip. If you happened to have received cash in the mail, add the total of the cash where indicated on the slip. Run a third adding machine tape for the insurance checks and the patient checks, verifying the correct amounts, and fill in a total for each category (I do not recommend you list each check separately!), totaling at the bottom of the page, and filling in the number of items. Most deposit slips also have a place to fill in the total on one side of the deposit slip.
- Most banks charge by the number of deposits, so it is typical to make one large deposit, regardless of the number of checks in the deposit. Tear the top copy of the deposit slip off, put it on top of the checks, paperclip or rubber band the stack together and take it to the bank.
- Once you’ve made the deposit, bring the receipt back and tape it on the back of the deposit slip copy in the deposit book. Enter the amount of the deposit into your accounting system (Quickbooks, Peachtree, Great Plains, etc.)
- Rest until tomorrow’s mail arrives
Note: smaller or larger offices may use a simplified or a more sophistocated version of this process. Feel free to comment and let me know how you do it!
