By Steve Rebagliati, MD, MBA

IN THIS ISSUE: How to Use Electonic Billing Services

1. My Story
2. Picking a Vendor
3. Learn More

1. MY STORY. You and your peers have told Physicians Practice that billing and collections is one of your major concerns when it comes to information technology. And rightly so. I learned that the hard way.

Six years ago I was a new doctor in a group practice that fell on hard times. Revenues were too thin for us to remain viable.

Payer mix had deteriorated. We had more Medicaid patients, and Medicare and managed care insurers put the squeeze on fees.

Finally, the practice collapsed. The founder retired early, and other doctors just left town rather than face what seemed an insoluble problem.

Being younger and perhaps overconfident, I decided to re-form the group under a new corporation, completely re-doing all business processes. I made quite a few blunders, including one unpleasant mistake that left me $40,000 short on cash. With a payroll to meet that couldn't wait, I had to make that shortfall up out of my own pocket. OUCH!

Fortunately, I was able to find a reasonably good third-party billing and collections service.

But I discovered that there was a lot more to fixing our problems than the service let on when I first hired them. In fact, the day the new physician group started, I discovered that no one had put in writing who would package the billing data. It took some emergency meetings to work out a solution.

We discovered that even with a poor insurance mix and terrible allowables, you can survive if you bill efficiently. One way to shorten your time to payment is by using electronic data interchange (EDI). You can do this yourself in your group or outsource to a full-service vendor.

In my own group, I used a third-party coder who took the dictations from the doctors, coded for accuracy and full charge capture, and then sent the bills to the insurers themselves. I still had to hire data support clerks who packaged the supporting information including a data disk with facility technical charges (laboratory, radiology). But you can't get away from hiring someone to make sure the process flows correctly.

2. PICKING A VENDOR It can be very hard to select a partner to work with on billing--you don't want to have a last-minute crisis like I did.

I asked Dr. Yuval Lirov for some pointers for all of us.

Dr. Lirov worked for five years at Bell Laboratories, followed by ten years on Wall Street in the financial services industry at Salomon Smith Barney. His most recent projects have compared performance in health care billing processes to Wall Street financial transaction settlements.

On Wall Street, financial transactions settle in one day. In contrast, 17 percent of the average doctor's accounts receivable are more than 120 days old. According to Lirov, there are four critical success factors you should be sure of when choosing a software billing package or third-party billing service:

1. Ask to see information on the percent of doctors' accounts that age more than 120 days without collection. When I ran a medical group, my billing service published a monthly report. You probably have the same report available. Vendors should be willing to show you data from other doctors' practices.

2. Look at the overall pattern of reimbursement to see where the bell curve is. You know that 95 percent of any data lies near the center of the bell curve. Here's a tip you won't find anywhere else: Take a sheet of blank paper and grab your last monthly billing report. On the paper draw a graph, with the x-axis (vertical) showing percent as 0–100, and the y-axis (horizontal) showing time as 15, 30, 45, 60, and 120 days. Now look at the receivables on your billing report. Draw a vertical bar on your graph at 15 days, to show the percentage of 15-day receivables, and at each other time increment the same way. Now draw your bell curve as a line connecting the tops of the vertical bars. A tight, narrow bell curve means your vendor has excellent performance in terms of predictability of cash flow. A wide, flat bell curve means that your vendor allows too much dispersion of your collections.

Your practice lives and dies on cash flow. Graphing your collections is a very important exercise. If you want more information on how to do this, contact me and I will show you how.

3. Your software should be interactive. You, the physician, are in charge. You can delegate management but not accountability. So YOU have to be able to look at an easy-to-read report you can access online.

When I ran a group, my vendor provided a software tool, a database, to let me look at this information. Unfortunately, the interface was hard to use and the data was downloaded only once a month. My $40,000 mistake happened because of poor data. Don't let this happen to you! Insist on some kind of online report availability with frequent updates.

4. Insist that your vendor provide 24/7 data availability. If they say it can't yet be done, ask them how close they are to providing it. This technology is changing every day because of Internet-based systems. Make your vendor tell you when 24/7 service will be available. In summary: Look at account aging, collection dispersion, interactivity, and 24/7 availability as the most important critical success factors for any software or service you use. It's YOUR money at stake here.

IF YOU WANT TO KNOW MORE...Click here to get information on this subject you won't find anywhere else: www.infotechfordoctors.com

In 2005 Learn from Physicians Practice's Experts Without Leaving Your Office

Steve Rebagliati is a practicing physician. He offers these resources, ideas, and tips for using information technology to increase revenues, decrease hassles, and free up more time so physicians like you can succeed in a changing world. He can be reached at (503) 534-3705 techdoctor@rebelcor.com.