10 Ways Medical Practices Lose Money


This MGMA podcast is sponsored by CareCloud. The rapid rate of industry change, increasing in staff turnaround, and patients becoming payers make it challenging to stay in control of your practice, performance, and get paid for the services you provide. Master your revenue cycle with the number one Cloud-based revenue cycle management solution, CareCloud Concierge, a strategic combination of modern and intuitive software, real time analytics, and an expert RCM team to help your practice improve profitability and eliminate administrative burdens while staying ahead of industry change. Please visit or call 1 (877) 342-7517 to learn more and request your free custom revenue cycle assessment today.


Chris Erps: Hello, and welcome to this MGMA podcast. I'm Chris Erps and your editorially manager. Today I'm joined by Patty Peets, senior director of revenue cycle management for CareCloud, where she helps ambulatory clinics and hospitals improve their financial performance process improvement, automation, and other services. Earlier this year, Patty spoke at the 2018 MGMA Financial Conference in Orlando, Florida, discussing the ways to identify and use a medical group practice's performance intelligence to establish benchmarks for performance assessment and use it to improve a practice's revenue cycle management. Patty, thank you for joining me today.

Patti Peets: Thanks, Chris. I'm so happy to talk to you today.

Chris Erps: I bring up your session from the financial conference earlier this year because there were some key takeaways from it that I think are really vital for today's practice administrators and managers to maintain and grow their revenue. It starts by knowing where the practice might be losing money. I'm referring to your top 10 reasons practices lose money. Can you briefly give listeners a high level overview of that list?

Patti Peets: Absolutely. I feel like I've been doing this for so long that I finally came up with my own top 10 list. You know, failure to maintain comprehensive policies seems pretty obvious, but this business really isn't getting any less complex, therefore it really demands that you revisit those policies and procedures very often, and ensure that you have the controls in place that are evolving as the medical economy evolves. So, that's number one. Number two is really a failure to collect patient co-pay and co-insurance. This is really always been necessary, but years ago, we all admittedly didn't do a great job of that, but it wasn't as devastating financially as it can be today. So, many practices have tightened down on that, but there's still things that can be done to ensure that you're making every effort whatsoever to get that done. It is so critical.

And hiring the wrong people and or the wrong number of people can certainly be a reason for lost revenue. Staffing is a real concern. You know, you mentioned the financial conference that I spoke at back in Orlando. I had a number of practice administrators tell me they believe staffing is their biggest challenge right now. Unemployment definitely is very low for business operation positions in this industry, so it can be hard to find the right people and really afford to pay them what you need to pay them in order to keep them, but also many practices don't realize the increase in staffing requirements over the last 10 years. Overall, there's been about a 7% increase in the staffing required per FTE position from like 2006 to 2016. Part of that is the shift to value-based care and the shift of patient responsibility because it's such a big piece of how you're handling your revenue cycle management.

Another top 10 on my list is the failure to handle denials adequately. Now, this will always be on everyone's list, and it will continue to be on the list forever and ever. You have to manage those denials, and the best way to manage them, obviously, is to avoid them. So, there's definitely things you can do to minimize your denials and increase your first pass resolution rate so that you get paid on that first submission.

Another top 10 list is taking unnecessary write-offs. Taking unnecessary write-offs and adjustments makes the list because it's really critical that you don't take unnecessary adjustments and it's critical that you know what's being adjusted off and the reasons behind those adjustments. So, if you are not categorizing your adjustments using accurate reason codes, you can easily mislead yourself and your physicians by having healthy AR numbers, for example, and it will really mislead you on how well you're financially performing. So, it's so important to understand what's being adjusted off, and more importantly what is the reason associated with that adjustment.

Another item is inadequate focus on patient collections. This definitely, like we already mentioned, the collecting co-pays and co-insurance at the front end, is critically important, but also just the focus on patient collections in general. If you don't collect it at the time of service, you better have adequate focus on patient collections on the back end, and there's some clear and new ways that really you can do that effectively. Although we'll always agree that the best way to collect patient money is to collect it at the time of service.

Another item is the failure to verify insurance and check eligibility, but 100% of your patients need the insurance verified and the eligibility verified. So, there's really not an option here. I get a lot of questions about this because with today's technology, you want this to be as automated as possible, but there will be a human element to some degree. So, yes, automate as much as possible. Use enhanced eligibility, if that's available, to check specific services and what's covered and what's not covered, but the important thing is that 100% of all patients that you're going to provide service for, you have insurance verified and eligibility verified for the services that you're going to render.

Not using a claim edits engine and an E and M coder can also lead to lost revenue. Now with technology that you have today, you want to use a robust rules engine, which is really similar to the same type of rules engines that the payers are using on the front end. So, the most robust rules engine that you can get your hands on is the one that you're gonna want to use because then you can know exactly what's going to be paid before that claim is even submitted. I'm not talking about clean claims, because we've talked about clean claims forever, for 30 years, and those are claims that aren't gonna get rejected, but I'm talking about scrubbing them to the point where you know they're gonna get paid, not just avoid rejection.

Another item on the list is the failure to satisfy the new demands of patient consumerism. Patient consumerism might be a concept that's somewhat new to a lot of practices, but if you think about, the reality is, is that patients are consumers. In our modern consumer world that we live in daily, patients are now expecting that same technology when they visit a doctor. We baby boomers are great users of technology if you just give it to us. Like give me technology and I absolutely, I prefer to have everything auto-drafted, everything electronic. I don't like paper.

But if you're a millennial, it's quite a different story. They actually expect that technology. Data shows that they will leave your practice if you're not providing them with that type of modern experience. So, on the revenue side, providing that type of technology, not only helps you retain your patients, but data shows they pay their past due balances, as well, and provides them the experience they're looking for, like for checking in and paying their current visits. I think that the patient consumerism, although it's a newer concept, it's real and it's here. And the data is showing it needs to be addressed.

The last item that I really have on my top 10 list is the failure to measure key performance indicators consistently. I can talk about that for hours and hours. I think that every day of my life I spend looking at key performance indicators and analyzing practices. I think it's something that practices don't do consistently and regularly. If you're failing to measure that, I have a lot of my colleagues that actually make fun of me because I literally a dozen times a day, I will make the comment that if you can't measure it, you can't improve it. So, all of these things tie into your key performance indicators. If you're not measuring those or tracking those, then you really are not identifying where the areas of improvement actually exist.

Chris Erps: That's a really good list. It touches on so many different things happening in the industry right now. I'd love to take a few minutes and dive into a few of those areas a little bit deeper. These are areas where many practice administrators struggle with. This is an era of patients increasingly being covered by high deductible health plans. In particular, there's a lot of administrative burden in terms of time and employee resources that are required to do this kind of work, whether it's insurance verification, primarily on the front end, and collecting proper co-pays and co-insurance. And that can happen at different points in the office visit, depending on a practice's policies. Where do you see practice leaders needing to simplify this process when it comes to the policies needed and making sure their staff perform these duties to satisfaction?

Patti Peets: I mentioned the need for 100% of insurance eligibility, no option. 100%. One of the things you can do is make sure you have as much of that automated as possible, so you can move into what's called management by exception. Those are the types of processes that you want to implement in your practice. That really enables you to spend your time on what needs to be touched, instead of having to touch every single item. That's what's gonna lead to more efficient processes, which is gonna give you more time that is required in order for you to handle this burdensome task on the front end. So, you really need to look at staffing roles and responsibilities as well, and make sure that you're covered.

Again, you can automate as much of that as possible, and have clear responsibilities on who is accountable. For those that don't automatically go through from the eligibility standpoint, you want to make sure you have claim edits in place as well that's checking that as well. So, if something does fall through the cracks on the front end, it's gonna be caught through the claim edit in that very same day. There are some enhanced eligibility services that you can also look at that drill down to the specific service. CPT code and payer specific rules that you also are utilizing if you have that available to you. Recommendations on collecting copays and then coinsurance on the front end. You know, I believe the front end is more critical now than in the 30 years that I've actually been in the rev cycle business because of a lot of the things that we've already spoken about, but you want this to be as efficient as possible, and there's nothing wrong with collecting copays at check-in and then again at check-out to look at the coinsurance for the current day's service.

So, the key is to know how much of the deductible has also been met so you know if you should be collecting the full amount of what's going to be the patient responsibility for that day. So, that's one area that I see a lot of people don't take the extra step or implement some kind of technology that gives them that information to see how much of a deductible has actually been met.

With these high deductible plans that patients have, a lot of patients, literally, if you think about it, are paying 100% of their healthcare out of pocket, and so if that's going to be their responsibility, you need to have processes in place to collect that money at the time of service or at the very least offer some type of a payment plan arrangement so that you can set them up on a payment plan.

You should also have a process in place to make sure that any past due balance is part of that check-in protocol so that money needs to be collected and at very least also a payment arrangement made around any past due balances. Offering payment plans can be very effective. You've got credit card on file, that can also be effective. Front end operations are critically important and can impact every corner of the business. It, by far, is something I spend a great deal of time with as I work with practices focused on those front end operations.  

Chris Erps: That's a great point, and we know that not addressing patient balances can adversely affect a practice's bottom line. You're mentioning the staffing end of it and trying to automate as much as possible, but there's always going to be a human element. Here at MGMA, the digital payment progress report that we did last year found that only 43% of patient balances are collected at time of service compared to 37% after service, then another 20% ultimately gets written off as bad debt.

We also know that historically the front office has been one of the highest areas of staff turnover. When you're looking at this and those high demands of patient consumerism you mentioned, what's the risk to your ability for those collections to occur according to your plan, if your front office isn't properly staffed? And I think this comes back to your point about having either the wrong number of people or not having the right people.

Patti Peets: Yeah, so you're absolutely right. That ties exactly into the staffing piece of the component on the top 10 list, right? I think I mentioned that staffing was a major challenge from the practice administrators when I spoke at the financial conference. You know, one thing you can do is use newer technologies. That's going to make that as efficient as possible because if you think about it, if you take the time with every patient at the front desk and do every single thing that needs to be done, it's going to be very, very tough unless you have like two front desk clerks for every physician in your practice and you're staffed at that level. Now, I work with practices every day, and more than likely you are not going to have two front desk clerks per FTE physician for your front desk operational staff.

You mentioned the turnover of that staff. Revisiting your staffing levels and the roles and responsibilities is important. Most practices are understaffed, especially in the area of the front end operations in my experience, and because the front end is more critical than ever, then every patient, 100% of them need to go through that every step, and that includes everything from demographics verified, insurance verified, eligibility of the services that you're rendering that day, authorizations obtained if that's required by the payer, past due balances collected or payment arrangements made, current copays, current co-insurance, collecting the amount that's going to get applied to the deductible. I mean, think about that. I mean, it's just impossible with the staffing levels that I know practices are staffed at today. They're just not staffed at that level.

You mentioned how does the patient consumerism play into all of this? Well, it really plays very nicely because if you can provide that newer technology that I'm talking about and the experience to the patient that enables them to do some of this themselves, it's really a win-win. Patient consumerism is being addressed, and you're having time saved on the front end operations that you probably aren't staffed for anyway, so you're saving time. You're also providing that patient with that experience that they're just thriving for.

You know, if you can provide them, for example, like an app on their phone and then they can sit in your parking lot or in your waiting room and do a lot of that stuff via their iPhone or their smartphone, that's going to be a win for you, and at the very least, if you don't have an app for their phone, hopefully you have some technology that you could implement where you hand them an iPad. When they walk up to check in, you hand them an iPad, and it enables them to take the iPad and sit down in the waiting room and do a lot of that stuff. So, this really helps you possibly if you are understaffed. It helps you handle all of that while providing those patients with that experience that's similar to every other aspect of their days.

Chris Erps: Those are really good points on embracing new patient experience technology, making sure you've got your staff members in the right place at the right time and actually able to manage the patients coming into your practice. I think those are really solution focused. One of the things that I think is really helpful for a lot of practices, and you alluded to it in your list at the very end, is knowing what you're measuring and you're key performance indicators. If you need to do a process improvement, like looking for a technological solution or being able to schedule people out in new ways, what is important for a practice leadership team to know in terms of getting a handle on where they stand with their current revenue cycle management and accounts receivable with those KPIs?

Patti Peets: Yeah, well you actually hit the nail on the head. All of these things that we've been talking about impact every corner of the practice, and every corner of the practice drives their overall performance. So, the best way to really know how you're doing is to measure these KPIs and identify where the areas of improvement actually exist.

You need to start with knowing what your KPIs are and which KPIs matter to your practice. So for example, if you look at your accounts receivable metrics that are important, when you're looking at your days in AR or how much of your AR is over 120 days old. If your AR over 120 is like 25% or higher, that's a huge red flag. So, if you were to see that, what would you do about it? Well then what you want to do is you want to go and look at your AR over 120 for every single payer, and if you see payers that are under 10%  and you see a payer that's at 35, then what's happening with that payer? That allows you to then go dig in and find out what's happening with Blue Cross.

I mean, something obviously is happening if that particular payer has a higher percentage of AR that's over 120. Then that will drive you into then analyzing what denial reasons are you getting. What's getting denied? What are you doing about that? Which will then lead you into what are your processes on denial management and some of your internal processes, and how well are you doing that, which then will lead you into analyzing your staffing roles and responsibilities to make sure that you have the right person in the right job doing the right thing very effectively.

So, each one of these KPIs will take you into second and third and fourth tier questions that will drive you down to finding exactly what you need to do to make that improvement.

Another example would be if your days in AR is like over 35 or 40. You need to understand that the days in AR for each payer and start to determine what's happening with that particular payer that's driving that KPI to be higher than it needs to be. So, personally I like to see a days in AR between 30 and 35. Now different specialties, it may be reasonable and acceptable for you to have a days in AR of 40 or 42 or 38, and there's other specialties where you really ought to be striving to have more like a 28 or a 30. So, it definitely depends on a couple of things. Your specialty can drive what that benchmark really needs to look like. Your payer mix can also drive that. So, you need to determine what's healthy for you, what is your benchmark that you're trying to hit and drive towards, and really understand what those KPIs are.

I always caution practices about only looking at one or two KPIs, especially the accounts receivable KPIs. So like if you're looking at days in AR, AR over 120, any of the KPIs that kind of involve your accounts receivable, you need to be a little bit cautious, and so think about this: You can get your accounts receivable down by doing a great job collecting money from the insurance, collecting money from your patients, getting your claims adjudicated in a very quick and efficient manner. having very, very few denials so that everything's getting paid on the first claim submission, collecting all those copays and coinsurance on the front end, and then you can have a very, very healthy AR.

But guess what? You can also get your accounts receivable down by adjusting things off. So, if you remember one of those things that we talked about, those unnecessary adjustments or not really classifying those adjustments to the appropriate reason codes so that you can really identify why those transactions are being adjusted off, then you can really have a healthy accounts receivable and healthy KPIs around your accounts receivable, but if you're adjusting things off that otherwise could have been collected. Then, you don't want to just look at those KPI's because then you may think you're healthy, but in fact there's still money that's being left on the table, or money, or revenue that's being lost. You need to look at more than just your accounts receivable KPI's.

One of the key performance indicators that I feel like tells you the clearest picture of all, is your net collection rate. It can be tricky to calculate that sometimes, because a true net collection rate is going to tell you based on your charge value, how much of that are you collecting? There's several things that have to happen in order for you to be able to really calculate what that true net collection rate is. You need to know what the charge value is. You need to know that if you look at your gross charges, you need to know how much of those gross charges are contractually obligated to be adjusted off. Then, that's going to leave you with a number that is the charge value, and tells you what your collectible dollars should and could be.

Then you want to know, how much of that did you collect? That is your true net collection rate. If you have the ability to calculate that, that is one KPI that will not mislead you. That will let you know exactly if you're leaving money on the table, so you definitely want the net collection rate to be 95% or higher. Based on MGMA's standards, and it's really important to understand how both patient responsibility, as well as the insurer responsibility, go into these calculations, and how they're impacting your KPI's all across the board.

Chris Erps: You made some really good points about looking at your payer contracts, and checking against those. I want to quickly touch upon more of the patient responsibility side. As I mentioned earlier, we know that up to 20% of patient balances can end up being written off as bad debt. That ties into one of the other top 10 issues you mentioned, taking unnecessary write offs. When those accounts, let's have a scenario here. When those accounts get sent off to a collection agency, they can fall out of the AR aging equation. What would you say to a practice leader who may not be calculating their AR with accounts sent to collection, and what can be done to avoid the larger issue of those unnecessary write offs?

Patti Peets: Yeah, so that's a great point. I'm definitely not suggesting that you carry patient AR balances forever. I know that there's a protocol, and a process that's completely realistic and understandable, that you at some point want to write things off to bad debt, or send things off to a collection agency, and what is that process? Once you send it to a collection agency, are you adjusting it off of your AR as bad debt? Most practices will.

Also, most practices are looking at probably a realistic timeframe of 180 days or so. If you're carrying a patient balance to 180 days, you need some kind of a process to either send it to a collection agency, or adjust it off of the books. Again, using that appropriate reason code on why it's getting adjusted off. Because, the reality is, if you're sending three to five statements, and that's not effective, it's very costly to collect that patient balance money after that, whether you're sending it to a collection agency, or trying to internally make efforts to collect it yourself. Either way, it's costly. That is why most people will take a, have a process in place where they will adjust it off of the AR.

Then, to your point, where you've got 20% of patient balances end up being written off as bad debt. How does all that play in? Well, I would have to say that if you're looking at ... One thing you can do, is when you're looking at your KPI's, you can look at your KPI's by using your accounts receivable with, and without bad debt. If you know how much is sitting in the collection agency, it's always healthy to look at your days in AR, and your amount of AR over 120, and add in your collection agency bad debt accounts. A lot of people deem those as collection accounts. When you're looking at your KPI's, you want to look at them both ways. You want to look at the KPI's with your collection agency accounts, and without them. Then, that will give you a good picture.

If it's all patient responsibility that's getting written off as bad debt, then obviously you need to focus on what are those processes, front end processes, and how are you going to improve your patient collections? Those, you can go right back to that top 10 list, and you can look at you need better processes to collect co-pays, you need better processes to look at co-insurance, you need to look and see how much of deductibles have been met. Possibly offer payment arrangements, look at credit card on file, offer newer technologies so that the data shows that if you're giving patients that technology, they are more apt to pay past due balances because they can do it right there from their smartphone.

But, you also want to kind of explore and see if any of that bad debt that's being written off is due to inadequate claims processes. For example, if you're not getting eligibility verified, and you have a lot of denials that come back because of coverage related denials. Now all of a sudden you have a balance, and the patient ends up not having insurance at all. Chances of you collecting that money from that patient because you didn't verify their eligibility and insurance on the front end, and you find out later that they don't even have insurance. Probably, they're going to end up in bad debt write off as well. It could indicate that you need tighter processes on eligibility verification. Every time you look at every single KPI, whether it be the process, or how your AR aging plays into that equation, it will lead you into deeper and more extensive research into your data to actually uncover that information.

Then, of course, don't forget to communicate the KPI's to your staff, and your physicians and owners. Because, as we said in the beginning, it starts with measuring. Once you measure and communicate it, then that's when you can start to drive the improvements.

Chris Erps: Those are excellent recommendations. Thank you so much Patti. Before we close I'd like to point out that Patti will be sharing more insights like these during her session on October 2nd, at the MGMA 2018 Annual Conference in Boston titled, "Finding Revenue Hidden Across Workflows, Growing Collections for Every Payment Source." To learn more about joining us in Boston visit Patti, is there anything else you'd like to add before we close?

Patti Peets: No, I just appreciate the time so much, and the opportunity to speak to you today Chris. I really have a passion for helping practices analyze their performance, and I wish that every practice could be a top performer. I think that it's very illustrated very well by MGMA as well, that KPI's are true indicators. You can truly see the difference in a top performer, versus someone who isn't performing quite as well. It gives you a lot of things to think about. I really appreciate the opportunity to talk to you today.

Chris Erps: Hey, thank you very much again for your insights today.

This MGMA Podcast is sponsored by Care Cloud. The rapid rate of industry change increases in staff burnout, and patients becoming payers make it challenging to stay in control of your practice performance, and get paid for the services you provide. Master your revenue cycle with the number one Cloud based revenue cycle management solution. Care Cloud Concierge, a strategic combination of modern and intuitive software, real time analytics, and an expert RCM team to help your practice improve profitability, and eliminate administrative burdens, while staying ahead of industry change.

Please visit, or call 1-877-342-7517 to learn more and request your free custom revenue cycle assessment today.

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