Authored by: Peggy Kelly, Senior Vice President of RCM Operations and Victoria Richmond, MHA, CPPM, Director of Reimbursement and Data Analytics
The cost of operating a medical practice is rising rapidly. A recent survey found that practices increased their median total revenue per physician by 9.1% from 2020 to 2023, while their expenses rose by 26.5% during the same period. As expenses outpace reimbursements, many practices focus on revenue cycle optimization to recapture more of what they’re owed.
Having conducted payer audits for many years, we commonly see patterns where practices lose money. The good news is that once you know where to look, you can proactively create strategies to recapture that revenue and improve the health of your practice.
Revenue cycle optimization and taxonomy challenges
When physicians set up their national provider identifier (NPI) and taxonomy, they might unknowingly create revenue problems. For example, some rural hospital providers offer medical and behavioral health services. However, claims may face denials if the provider’s behavioral health taxonomy doesn’t come first with a payer.
As billing teams know, denials are expensive in terms of time and practice resources. If we suspect this type of challenge, our team will often go back to the enrollment files, determine whether there’s a setup issue, and contact payers to ensure the linkage is correct.
Incorrect fee schedules creating revenue leaks
We joke with practices that it’s our job to keep payers honest, but it’s not about them being honest. It’s more a simple missed click or not loading a provider correctly that leads to thousands of lost dollars (especially if left unchecked over time).
When looking for lost revenue, we create analytics that go back months or even further to find out when an issue started. We can usually trace a problem back to a specific date; Other times, we learn a practice has never received appropriate payment.
It’s also important to look at the minute details that cause revenue leaks. For example, staff may scan in a patient’s ID card but fail to notice the little logo at the top right that indicates it’s a Medicare patient. As a result, the card might not load appropriately, and the system may apply the wrong fee schedule. So, rather than just take the word of what’s loaded in the system, when something isn’t adding up it’s necessary to dig down more granularly.
Also, Medicare publishes new fee schedules annually, and the details may not be fully determined until March. As a rule of thumb, it’s a good idea to audit claims back to January to ensure any impacted claims are reprocessed.
Starting on the path to revenue cycle optimization and finding leaks
The first step to finding and fixing revenue leaks is understanding what you should be paid. Review your contracts and fee schedules to ensure you receive payments in accordance with them. Realistically, it’s not always as simple as loading the fee schedule and confirming, “Yes, we got paid,” or saying, “Oh, we’re a few dollars off.”
Variables within normal ranges are common for many reasons, including multiple procedure reductions or a midlevel practitioner providing service, resulting in a 20% to 25% reimbursement decrease. It’s not always cut and dry, and it helps to have someone with expertise support you.
Once you’ve determined that you’re being paid appropriately, review existing contracts and compare them against industry standards. If you’re not reimbursed within industry benchmarks, it’s time to consider renegotiating your contracts.
But overall, when it comes to recapturing revenue, the best strategy is staying aware. The sooner you spot a revenue problem, the better your chance of fixing it. If an issue goes on for too long, you risk losing significant amounts of money due to timely filing limitations.
And if you need help in identifying where you’re losing revenue and how to take steps to prevent it, we can help you with your healthcare RCM strategies.