by Gary Lewins

Financial affiliations with physician practices are rarely a major source of revenue for a health system — but they can be a major factor in a health system’s financial performance. That’s because today’s marketplace requires each component of a health system to operate efficiently in order for the system as a whole to succeed. As an example, consider referrals, which typically come from physician practices. That’s just one example, but it (and others) lead to the same conclusion: Effective management of the physician practice’s revenue structure is one way to ensure that a health system’s physician practices thrive.

Understanding the differences between hospital and physician practices

The second step in effectively managing the revenue structure is recognizing the differences between hospitals and physician practices. For example, hospitals typically have low volumes but high transaction values, while physician practices typically have high volumes but low transaction values. More differences are outlined in the table below

These differences create unique needs in the physician practice’s revenue structure. For example, because the clinical or operational staff is gathering financial information, they need unique training. Physician practices must collect repeatedly (for continuous visits) as opposed to once. They must be prepared for a higher volume of low-dollar statements, denials and accounts requiring follow-up. And, they must be prepared to control (via increased training, if necessary) a higher number of registration locations.

Addressing the differences between hospitals and physician practices

In order to optimize performance of the health system, it is important to address these differences. This can be done in six steps.

Step 1: Establish a separate organizational structure and separate procedures

A physician practice should be assigned separate staff, and goals for that staff should be based on the physician practice’s unique characteristics. For example, the financial staff may be evaluated on their collection of co-payments (more on that below).

Step 2: Install a separate information system

Physician practices process more claims than hospitals do. They require the use of a different billing form. Their patient statements and financial reports have unique audiences (and thus unique presentation issues). And, they have unique compliance requirements, such as credentialing. As a result, they require different information systems. These information systems should be able to handle a high number of transactions from many points of data entry.

Step 3: Share hospital and physician practice information

Integrating hospital and physician practice information can increase efficiency. For example, pre-certification, if needed, can be obtained for both the facility and the professional services at the same time. The sharing of demographic information can improve both the accuracy of the data and the efficiency of the patient registration process; it can also help locate and follow up with patients during the collection process. And, technical and professional charge accuracy can be verified at the same time.

Step 4: Implement a decentralized front-end process

Because physician practices typically have multiple locations and a high transaction volume, a special financial staff (in most cases reporting to the clinical operations group) should be established. This staff should be given control of the training of all staff involved in the patient registration process; the financial component of scheduling functions; and the reporting tool that monitors the quality of registration data. The financial staff also needs the support of the clinical operations group to address revenue cycle issues that cross both departments. To that end, the organization’s leadership should establish a culture that will support this relationship — for example, with a working group that consists of both financial and clinical operations staff.

Step 5: Modify the collection process

Two steps can be taken to improve the physician practice’s collection process.

First, establish a co-payment policy. Most commercial insurance plans require a co-payment of $10 to $25. It is critical to collect these co-payments at the point of service, because the billing and collection of such small amounts at a later date is not cost-efficient. Techniques to accomplish this include 1) establishing a collection policy requiring a $25 co-payment from patients who do not provide their insurance card at the point of service and 2) providing staff with a script to make such a request. Additionally, you should use your practice management system to provide the clinical operations group’s leadership with co-payment collection reports segregated by unit and by person. This provides an opportunity to manage the quality of the front-end staff.

Second, ensure that all payments are made electronically. Most physician operations already submit claims electronically, but payments should also be made electronically. This will free the staff responsible for the posting of payments. Their time can be redirected to other areas, such as the verification of payment accuracy and management of claim denials.

This latter point is worth discussing in more detail. When you implement HIPAA standard 837, you receive payment remittance denial information electronically. This simplifies the process of reducing losses related to denials — and the staff time acquired as a result can be used to analyze the cause of denials. One caveat: There are many causes of denials in most physician operations. Effective denial management requires that a multidisciplinary team (composed of financial and clinical operations staff) work together to determine the cause of denials and implement changes to avoid denials. They should set goals, delegate of responsibility, and establish of a timely reporting system to track the progress made toward achieving goals.

Step 6: Promote clinical involvement

Everyone working in the physician practice must support the new revenue structure, and to that end, physician buy-in is essential. One way to achieve this is linking physician compensation to production and performance. But remember, the clinical staff is often the physician’s link to the business side of the physician practice: If the clinical staff understands and supports new processes, the physician will as well. As a result, you should promote collaboration to physicians and the clinical staff.

Additional benefits of an improved revenue structure

Although this article recommends separate systems and processes for hospitals and physician operations, there are many ways in which the revenue structure suggested is actually more collaborative — and thus achieves shared efficiencies.

For example, sharing information about eligibility, authorizations for care, and patient demographics can reduce the staff’s workload. It can also improve the quality of self-pay patient information, thereby reducing losses.

Second, physician buy-in at the practice level can improve physician buy-in at the system level. If physicians have a personal financial stake in the physician practice and are educated via good reporting procedures, they will more easily understand effective revenue structure management principles.

Finally, an improved revenue cycle can lead to increased patient satisfaction. Patients often complain, when asked to complete a form, “But I just provided all that information to Department X!” Sharing information — in a manner that is HIPAA-compliant, of course — will reduce these complaints.

Gary Lewins, FHFMA, CPA, is a manager with Wipfli’s health care practice. Gary has more than 25 years of experience in operational improvement in health systems, health system-affiliated physician practices, and clinics of all sizes. Please call Gary at our Green Bay office at (920) 662-2971 or e-mail him at glewins@wipfli.com.