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Where Your Clients Might Be Losing Money in Their Practices


An article by David Doyle from the January/February issue of HBMA Billing.

img_throwmoneyThese are tough financial times for medical practices. Doctors are serving a greater number of patients, but at the same time, insurance reimbursement for medical care is being reduced. In addition to rising expenses, doctors have to deal with mountains of paperwork and must always keep compliance issues at the forefront in their practices.

Even with these rising pressures, there may be ways to save money in any medical practice – whether in a small office with a solo provider or a large practice with 15 doctors – by targeting common areas of waste and inefficiencies that, in turn, may be draining thousands of dollars from your business. This article lays out common sources of inefficiencies to ensure the continued financial viability of your clients' practices so they can focus on the health of their patients.

Lack of Discipline in Collecting Patient Receivables

Up to 35 percent of the average medical practice's total revenue now comes from patient payments, according to a 2010 report from McKinsey & Co. in "Overhauling the US Health Care Payment System." This means that thousands of dollars can be lost every year if a doctor's office does not diligently bill patients and collect outstanding balances from them. In short, patient receivables can be the difference between having a profitable and an unprofitable practice! 

Therefore, it is important to have written accounts receivable procedures so that everything runs in a streamlined and consistent fashion. Having procedures in place not only makes it more likely that practices will collect outstanding bills, it also protects against unintentional legal violations. If the accounts receivable process is streamlined and organized, the doctors will have a better idea of the total amount of money that is owed to them and they can make financial decisions accordingly.

Often, problems with collecting patient receivables stem from having untrained staff members. It is important to train staff thoroughly on how to collect at time of service, bill patients correctly, and adhere to established billing procedures. Even the best process is worthless unless staff can properly follow it. It is all about the approach; the way you ask for money and inform patients of how much they owe is crucial in getting the patient to feel confident that you know your insurance business.

Missed Charges

A large amount of collection dollars is lost due to CPT codes that are not coded to the correct levels. Proper coding and clinical documentation can make or break an otherwise well-run practice. Many practices are gun shy on choosing appropriate CPT codes as Medicare and commercial payors have cracked down on areas of poor coding practices. When documented appropriately, accurately, and in a way that indicates medical necessity, the provider should not hesitate to bill for the full services rendered. This use of coding will bring the practice's revenue in line.

Coding is a complicated process – coding claims completely and accurately will tell the insurance company about the patient's injury or illness and what treatment he or she received. Having a thorough record of care is critical for both the billing and collections process and for appeals management. Your patients and their insurance companies will both benefit from proper documentation and coding.

In order to prevent errors involving missed charges, staff must be properly trained. A member of the billing department who is well versed in the practice specialty can review the chart and coding sheet to verify that visits and/or procedures were entered correctly and double check with the doctor if they believe any coding errors are present. Classes are offered at colleges throughout the country for coding certification. An open and friendly office environment will also help, as the coder, data entry staff, billing department, and providers should all be comfortable communicating about the reported codes and charges. Offices should institute a regular review process to ensure that the coding process is working smoothly and efficiently.


Downcoding (undercoding), the practice of deliberately selecting a billing code that is lower than services actually rendered, is a common and expensive problem. Many providers tend to be cautious with their coding out of fear of being audited and use a lower billing code instead of billing at the appropriate level. Downcoding can cost a single doctor $40,000 in lost revenue each year according to a study published in Medical Economics Magazine.

Downcoding seems counterintuitive: would a plumber charge only $500.00 for a service that costs $1,000.00? So why does downcoding happen? Many doctors do not want to attract the scrutiny of insurance companies or auditors, but fail to realize that downcoding can also trigger an audit. Insurers and the government look at the frequency that doctors use one code, and when higher than normal usage is reported, they may call for an audit. (The Federal Government is concerned with improper payments, which means both underpayments and overpayments.)

Providers who do not completely understand the Medicare 1995 or 1997 Documentation Guidelines for evaluation and management (E/M) services may also downcode.
Instead of downcoding, a provider should bill at the appropriate visit levels and back up this coding by keeping accurate and thorough documentation of each visit. This documentation should always include the patient's name, reason for the visit, relevant medical history, diagnosis or assessment, and plan for care. This is clearly stipulated in the 1995 and 1997 Medicare Guidelines.

Using electronic health records (EHRs) can also guard against downcoding, as the EHR will recommend a particular CPT code that is based on what occurred during the visit. Using the EHR suggestions can increase consistency in a doctor's coding. The documentation derived from an EHR system can also be used during an audit to substantiate that the coding was appropriate.
To gain a clearer picture of your client's coding practices, conduct a self-audit that looks for both forms of improper payments (underpayments and overpayments).

Denied Charges That Are Never Followed Up

Insurers deny charges for a variety of reasons, and medical offices stand to lose a large chunk of revenue if they do not follow up on those denials through appeals. According to the Centers for Medicare and Medicaid Services (CMS), 30 percent of claims are denied or ignored on the first submission. A full 60 percent of those claims are never resubmitted, which means a medical practice will not be paid for those services. (To get a sense of how many claims are denied by each major insurer, visit the National Health Insurer Report Card at the American Medical Association's website.)

Common reasons for claims to be denied include: incorrect patient information (misspelled name, wrong birth date), terminated insurance coverage, non-covered services, services requiring pre-authorization, and timely filing. Before filing a denial, one must have an understanding of the denial reason and take appropriate steps to correct the problem and have the claim readjudicated so it will be paid.

Every medical practice should develop a system for handling denials in a timely fashion. A medical office should keep track of the number of denied claims and the reasons for denials. This can help guard against future denials by increasing awareness about mistakes to avoid. Preventing denials in the first place will increase your clients' cash flow and overall financial health.


Overstaffing can quickly drive up the costs of a practice as employee salaries can take up a quarter of all of a practice's costs. Evaluate the managers. Are they efficient? Do they motivate the other staff to work hard? Do not settle for quantity over quality. Consider whether you would be better served with fewer office workers of a higher caliber and work ethic, even if their salaries were a little higher.

Having efficient and competent front desk employees and clinical assistants are key to a well-run office. The front desk employees are the initial point of contact for your office, and they can help make your practice run smoothly if they collect information accurately and schedule patients smartly. If patients can move quickly and efficiently through an office – from front desk to exam room to billing – they will be happier and doctors will be able to see more patients per day, leading to higher revenue. 

Attention should also be paid as to whether employees are abusing overtime. One way to combat this is to require employees to seek approval for any overtime they need to work. Smart scheduling can help reduce the need for overtime – schedules can be staggered to cover all the hours staff are needed.

In conclusion, there are a number of avenues that can proactively increase practice revenue. As a billing company, you can speak to your clients and assist them in a number of ways. It can make a big difference.

David Doyle is the chief executive officer at CRT Medical Systems, a medical billing company serving clients throughout Michigan and the Midwest.

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