Similar to the process applied in patient care, getting the outcomes you want from your business requires a data-driven, systematic approach we call Applied Business Intelligence. Here’s how it works:

Measure

It starts with defining and gathering business metrics, or key performance indicators (KPI) for your business. Key performance indicators help organizations achieve goals through the definition and measurement of progress. The key indicators are agreed upon by an organization and are indicators which can be measured that will reflect success factors. We’re not talking about pages and pages of reports here: in fact, quite the opposite. Instead, we’re talking about boiling your business down to a small set of performance indicators you track regularly. 
Analyze

Once you have measured the key performance indicators, it is important to drill down from the result and investigate the underlying drivers (i.e. what’s causing your KPI). You start with the key performance indicator, and then look for changes in underlying factors that lead to results. For example, if revenues are down at a particular clinic, what was the cause? Was there a drop in referrals? Was a therapist working fewer hours? Did therapist productivity drop? Did the payer mix change?
Act

Once you understand what is changing and why, you can take specific action. When you‘re armed with understanding backed by facts, you’re in a good position to address the issue.
For example, let’s say revenues for a clinic have dropped by 10%. By drilling down, you find that the clinic has fewer scheduled visits with new patients this month than last month. Drilling down on your key performance indicators further, you find referrals have dropped off. Investigating further, you discover it was a specific doctor that stopped sending referrals. You’re ready to find the root cause. You call the doctor, and find she stopped sending patients because no one was following up to ensure those patients scheduled a visit. You’ve now established the link between lost revenue to follow-up on referrals. You implement a program to have the front desk staff contact all referrals to schedule appointments, and notify the doctor of your renewed commitment to their patients. You’ve turned a problem into a business opportunity.
Systematize

Your business is like any living system, always changing. That’s why it’s important to have a system that makes it easy to constantly measure and manage your business. One thing is certain—the easier it is for you and your staff to measure, understand, and apply learning, the more likely you are to achieve the results that you’re after.

To learn about the 7 KPIs that successful practices measure, download our Tip Sheet.

ICD-10 promises to improve electronic communication by adding specificity to both diagnosis codes and CPT codes. The codes are fundamentally
different because they carry within the code additional information that characterizes anatomic site, severity and other clinical detail. This example provided by the AMA shows both the power and complexity of the new set of codes.

ICD-10 in action for diagnosis codes:

• S52  Fracture of forearm
• S52.5  Fracture of lower end of radius
• S52.52  Torus fracture of lower end of radius
• S52.521  Torus fracture of lower end of right radius
• S52.521A  Torus fracture of lower end of right radius, initial encounter for closed fracture

The result is that diagnosis codes grow from 13,000 to 68,000, while CPT codes grow from 11,000 to 87,000.  Anyone can see the concern major institutions have about hitting any deadline regarding this change.  In fact, there is mounting pressure on HHS to consider waiting for visibility to ICD-11 in 2015 before driving compliance, but that is another blog post in itself.

For Clinicient, buried in the slew of releases from the government was movement on a long-desired proposal.  HHS has proposed the establishment of a health plan identifier (HPID).  Similar to the NPI, an HPID would make unique ID’s for health insurance plans.  As a company that helps its clients submit claims to over 2500 health insurance plans, we have made it our business to create a payer database loaded with plan names and critical settings and payer rules so that connecting to a payer is as painless as possible.  What a boon it would be for the payers to submit to having a standard ID so we all agree which payers and plans we are talking about.

For more information on how you can access the power of our payer database with our physical therapy EMR and billing system, contact us.

Technically, Days A/R represents the number of days of revenue that is tied up in accounts receivable – the number of days of uncollected revenue. The metric by itself doesn’t tell you a lot because the payer mix of your practice will greatly influence your expectations of this metric. It is very important to understand your payer mix and collection cycle first, establish an appropriate Days A/R goal, and then compare your actual results with your goal. 45 days might be a good average goal that meets industry standards, but it may not be the right goal for your practice. For example, if you service a high mix of workers’ compensation payers that typically have longer payment cycles, then 45 days might be the right goal, or it might even be too low. On the other hand, if you service a high mix of patients with standard commercial insurance coverage, or even Medicare, you can collect much more quickly if you submit clean claims, and therefore 45 days might be too high. Understanding your payers payment practices and setting appropriate goals based on these practices is very important.

As Jim Plymale mentioned in his earlier blog post on A/R, the most important thing is to measure your Days A/R and compare it to your goal. If your Days A/R is climbing and/or higher than your goal, you could very well have a problem.  Jim points to three very common reasons we see for this behavior. If your Days A/R is lower than your goal, then take a look at your goal. It is always important to set goals that are aggressive and achievable with the right effort. Sometimes the industry standard goal of 45 days might be letting your billing and collection department off too easy!

Of course, you have to have the right system to effectively manage your A/R. Since Clinicient has been managing over $100 million annually in billing and collections for hundreds of physical therapy practices for over a decade, we believe our system is one of the best in the market to help your entire staff manage their revenue cycle. Days A/R is just one key metric we measure to ensure each claim is billed and paid as accurately and quickly as possible.  To learn more about how our system is uniquely set up to manage revenue cycles, contact us and we’ll set you up with a demo.

The first piece was offered by Jerry Henderson in his recent blog post on Fees Schedules and Allowed Reimbursement, and that is to use one fee schedule for all patients regardless of who will be paying the bill.  Offering lower rates to one or a group of insurance payers or self-pay patients, routinely waiving co-pays, etc. can trigger the Federal False Claims Act, state false claims acts, and state anti-discrimination provisions.

That doesn’t mean you cannot accept “discounted” payments from self-pay patients or occasionally waive amounts otherwise due from the patients. This is where our second piece of advice comes in – understand where it is okay and then proceed with caution. Generally, there are two situations where it may be okay to accept discounted payments:

1. The first is when a patient is paying cash at the time of service. Cash payments allow providers to save on billing related expenses, so the actual charge for the services rendered can be reduced for these potential savings. It is important to quantify and document the cost savings, and to remember that because cash discounts reduce the actual charge to the patient, the reduced charge must be accurately stated on claims submitted to Medicare and other payers.
2. The other situation where it may be okay to waive some or all of the usual charges is for a documented financial hardship. In this case developing and rigorously adhering to a written financial hardship policy is extremely important. As with discounts for cash payments, waiving some or all of the usual charges reduces the amount of the actual charge to the patient, and this must be reflected on any claims submitted to Medicare or other payers.

Remember, this is a complex area in physical therapy billing and business. We strongly encourage you to have your legal counsel review your policies before implementing and regularly review them with your staff to ensure compliance.

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To calculate A/R days, divide your total accounts receivable by your average daily revenue. Your average daily revenue is usually calculated over the last 3 months, so to calculate it you need to take your total charges billed and divide by the total number of days in the 3 months. This will give you your Days A/R.

Here are 3 common causes of high A/R and ways to improve your cash flow:

1. Your payer mix includes a large percentage of payers that pay slower than 45 days. You want to stay on top of your payers to make sure you’re getting paid within the normally expected time. We are hearing about slower payments since the payers started dealing with the ANSI 5010 requirements, so don’t fret if you’re also seeing slower payments for the beginning of 2012.
2. Slow patient payments. The best way to prevent this is to collect your patient balances while your patients are still in treatment. Stay on top of copays, and try to collect co-insurance and deductibles as quickly as possible. Also make sure you have a policy on how you will respond to and pursue slow paying patients and apply it uniformly. You have to make sure your bill gets priority with your patients. When you can’t collect or if you are sending balances to collection, make sure and write them off in your A/R so you don’t lose track of what’s really collectible by your billing team.
3. Billing errors and the resulting denials. These are usually preventible if you have good processes for collecting and verifying patient demographic and insurance information. Make sure you have a solid verification of benefits process in place with your front desk staff to prevent denials and writeoffs.

As always the most important thing to do is measure your Days A/R regularly and look for changes and determine the root cause. If it’s something you can impact, take action. Staying on top of this measure and using your learning to improve your business processes is the best way to prevent cash flow issues.

A/R is just one way to measure your and manage your cash flow. Clinicient offers free consultations to help you evaluate the performance of your practice against industry standards as well as comparisons against other practices in your area.

About 10 minutes before closing the coffee house employees began removing the tables and chairs from the sidewalk, shut off the open sign and once again told us they would be closing at 7:00. My companion politely thanked him and we began wrapping up our discussion. We wanted to be respectful and fully intended to depart at closing time. Two minutes before closing time (I checked my phone) the coffee house employees announced they were closed and then proceeded to say “You need to leave now”. I was shocked by the announcement. I spent years in food service and knew that closing even two minutes early and ejecting customers would have cost me my job. My companion again politely thanked the young man and we left.

Out on the sidewalk she looked at me and said “I have never been treated so rudely. That was completely unacceptable and the coffee wasn’t even that good.” She was obviously offended but handled herself with grace. I decided she would be a good fit for our company. I also decided that I would never frequent that coffee house again. There are way too many options that provide both good service and good coffee.  I left wondering how the coffee house owners would feel when they learn that their employees’ desire to close 2 minutes early cost them two clients.

It also reminded me how important it is to understand who really holds the success of your business in their hands. We tend to think in terms of the executive, the key engineer, the lawyer, the doctor but often it really is the person we don’t think of as pivotal. Think about who your patients see first when they enter your practice. Who is it that makes them feel welcome, like they are somewhere where people really care about them. Identify this position and hire well for it….they might very well hold the lifeblood of your practice in their hands. If the coffee house manager/owner had hired better they might well have kept an existing customer and gained a new one.

By and large, you should not charge different payers different fees for the same service.  If you do want to consider creating multiple fee schedules, talk to a knowledgeable healthcare attorney or consultant and have them walk you through the contractual, regulatory, and legal minefield of implications first.  We recommend ONE fee schedule for all payers and systematically tracking your expected payment in Allowed Reimbursement Schedules for accurate management reporting.

Charging all payers the same fee does create difficulty in using Accounts Receivable to accurately predict cash flow.  Applying a discount based on the relationship between your fee schedule and the amount you actually expect to be paid, and applying this to your Accounts Receivable is one method for better predicting cash flow. Choosing the right physical therapy billing software can simplify this for you. Clinicient helps you solve this problem by allowing you to systematically track your expected payment in Allowed Reimbursement Schedules, which can then be used to track the accuracy of payments from your payers, and to automatically determine the cash value of your Accounts Receivable.

Contact us for a free consultation.

Very cool story about Jerry and how he was helping people, but also a really good reminder of how our customers are helping people every day. Good thing to keep in mind as we help them be successful.

Standards and Policies

Even within the same organization, I have seen failed appointments counted differently.  Well designed, totally integrated physical therapy EMR software can help with this, but the software can’t set and enforce your policies. For example:

• Is an appointment that has been rescheduled a failed appointment? (It should be, in my opinion.)
• What is your standard for a cancellation that has been made with adequate notice or inadequate notice?  (I have an opinion on this as well.)
• Do you charge a fee for cancellations or no shows? (You should, and if you do, your front office needs to have a clear set of guidelines.)

Reporting Infrastructure

Even if there were more well designed physical therapy EMR systems and accepted standards, there is a lack of reporting across databases.  Since there has not been a better alternative, there have been attempts to get some idea about failed appointment rates by use of surveys. Although the survey data may be better than no data at all, I believe it is far from accurate because of a lack of accepted standards and self selection of survey participants.  I am guessing that most survey participants:

• Already closely monitor no show rates
• Have a no show rate that is better than their peers
• Have a standard defining when an appointment is considered failed
• Have a policy on what to do about failed appointments

At Clinicient, we have the ability to track metrics like this across organizations.  In future articles, we will share some of the metrics that we are able to monitor for PT, OT and Speech practices of all sizes and in different regions of the country.

How about front desk schedule management? 

We need to view the schedule in total, not just individual schedules.  We develop a wait list, move afternoon patients to the morning if able, and sell the appointments.

Sell the appointments?

Sure, the front desk is trained that one of their primary responsibilities is managing the schedule to keep the time slots full. We go through specific scenarios on schedule management:

• Develop a waiting list with desired appointment times.
• If an appointment becomes available during that time, use the list to
  fill the empty appointment slot.
• If an appointment early in the day becomes available and there is no one on the
  waiting list that can use the slot, call a patient scheduled later in the day
  to see if they will agree to come in earlier and use that time. If the patient
  does agree to reschedule to an earlier time, thank them:  “Thanks a lot, that really helps some other patients who need to be seen.  We appreciate it.”
• If a patient calls in at 12:30 PM to reschedule their 1 PM appointment and asks “do you have anything later today?” The answer should be “I’m sorry, no, it is too late to move that appointment, are you sure you can’t make it?”  If that same patient cancels or fails to appear for the 4 PM appointment, you have now lost 2 appointments.
• If a patient calls to schedule and can only come in at 4 PM and is normally seen by Paul, and Paul’s schedule is full at that time the front desk administrator will say “Let me go ask Paul.”  If Paul
  gives the OK, “I talked to Paul, and he says he would like for you see Harry and Harry has an opening at 4 PM, so that works out great!”

Any parting words?

 Remember the fable about the two brick masons: 

Two brick masons at a work site were asked what they were doing by a young boy. The first mason said “I am helping to build a beautiful cathedral that will be here for centuries. It will be an inspiration to thousands of people and used for beautiful concerts and weddings.”

The second mason said “stacking stones”.

Be like the first mason.

Read Part 1: Identifying the right problem and how your organization’s community reputation can influence your no show rate.

Read Part 2: How your organization’s philosophy can influence your no show rate

Read Part 3: Important Metrics to measure and managing therapists vacations