Authored by: Tim Anderson
Increased labor costs, rising overhead expenses, and payer compensation that isn’t keeping up have put medical practices in a difficult spot. While there are steps you can take to improve the revenue cycle, a commonly overlooked opportunity is reducing fees.
A recent poll found that medical practices pay fees they didn’t agree to when receiving payments from healthcare payers. Sixty percent report being charged a percentage of the revenue they’re owed when they receive electronic funds transfers (EFTs).
Understanding these fees, recognizing when they’re too high, and knowing how to negotiate them can help recapture lost revenue and offset rising expenses that impact profitability.
How to improve revenue cycle management by understanding EFT fees
The origin of EFT fees can be traced back to the launch of the Affordable Care Act, which required payers to allow providers to receive payment via EFT. Many health plans decided to use third-party vendors to facilitate this, but the challenge is that providers bear 100% of the transactional costs.
These fees can range anywhere from 2% to upward of 7%. They can add up quickly if you’re paying the higher end of the range. For context, you might pay 7% to outsource your entire billing function, but with EFTs, you’re not getting any extra value—you’re only being paid what’s owed.
Some practices handle this challenge by returning to paper checks, which is an option, although it involves manual processes. The larger issue is that some payers won’t allow it. Fortunately, there is another solution to recapture this lost revenue.
How to improve revenue cycle management by negotiating lower fees
Practices don’t always realize they can negotiate EFT fees; and if they do, they might attempt to start with a third-party vendor. However, I’ve found the best starting point is with the healthcare payer.
The first step is learning how much you’re paying. If you’re paying 5% to 7% of every transaction, talk with the healthcare payer and ask for help reducing it. This request is more powerful coming from the payer to the third-party vendor because the payer owns the relationship. As a result, they’re in a much better position than a medical practice to make that request.
Of course, handling this task takes time, and smaller practices might be tight on resources. If you find yourself in this situation, don’t hesitate to reach out to an RCM partner with expertise in negotiating these types of fees.
Other fees to watch
In addition to third-party EFT expenses, look for other fees cutting into your revenue. One area to watch is the value-based care programs you participate in and the associated administration fees.
For example, I’ve seen practices paying upward of 40% to a managing entity—and that’s clinical money. It’s money owed to the practice for managing a patient, and leaving those dollars behind contributes to the increase in administrative burden we’ve seen in recent years.
Contact your professional organizations if you’re uncertain whether existing fees are too high. Tell them what you’re paying and ask for industry norms. This information will help guide your negotiations and may allow you to reduce fees to recapture revenue.
Recapturing your lost revenue
Running a practice comes with many expenses—some fixed, others variable. While it’s challenging to influence the cost of your office lease or staffing expenses, other areas, such as EFT fees, can be targeted to offset rising costs.
By recapturing lost revenue associated with getting paid and ensuring you’re fully collecting everything owed, you can help improve the financial health of your practice.
And if you’re wondering, “How can an organization improve its revenue cycle management and lower fees?” reach out, and we can help you get started.