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Plan ahead when creating a central billing office

Group Practice Solutions Discontinued, June 1, 2005

Today's environment of declining, slower reimbursement coupled with increased regulatory oversight and higher expenses challenges groups to think differently about how they function. For multisite group practices, one solution to streamline billing and enhance collections is the creation of a central billing office (CBO).

A CBO may require fewer staff to perform all your back-office billing functions in one location. As appealing as that may sound, potential personnel savings pale in comparison to other advantages such as vastly improved charge/collection percentages at each site, says consultant John W. McDaniel.1

Boost collections via enhanced expertise, oversight

"The most overwhelming reason for creating a CBO is to improve the adjusted charge/collection percentage [calculated by dividing net payments by net charges over a number of months]," McDaniel says.

For example, say you have three clinics with an average adjusted charge/collection percentage of close to 90%--80%, 94%, and 95% respectively. That means if the lowest-performing group has adjusted charges of $1 million, it only collects $800,000. By raising that to 90% with a CBO--and increasing collections to $900,000--you have a $100,000 benefit.

However, "you can't figure out billing problems by looking at statistics [alone]," says consultant Randy Bauman.2 "Sometimes you have to get down into the systemic aspects of billing and collection." For example, in the above scenario you might first look at why one practice's collections fall so far below par.

Examine factors such as how the practice distinguishes between contractual adjustments and write-offs, who approves write-offs, etc. You may be able to adjust the one clinic's processes, staffing, or training and correct the problem without a CBO.

But if you want a way to better ensure that all of your sites maintain peak performance, a CBO may indeed be your answer, Bauman says. "By having [billing] centralized, it is easier to standardize, monitor, and make sure follow-up is done consistently. Better centralization of oversight and management is almost always going to help you," he adds.

Strive for the best structure

In addition, CBOs deliver dramatic results because they bring together a concentration of expertise. Instead of having your billing personnel spread out at several clinics, you have all of your best and brightest in one place and thus better able to collaborate with and complement one another, says McDaniel.

To optimize this effect, consider how you structure staff within your CBO. There are two common options:

1. By third-party payer. Although there is no perfect configuration, McDaniel is partial to dividing the office by payer. For example, a practice that works with Medicare, BlueCross, and Aetna may have six people in the CBO--two people per plan.

By having staff specialize in dealing with one payer, they get to know the nuances of the plan and become familiar with its policies, contracts, and even personnel. Establishing personal relationships with health plan personnel can be especially helpful to staff conducting claim follow-up over the phone because they can batch their calls and have one health plan staffer handle several matters at once, Bauman says.

2. By medical specialty. Bauman has seen CBOs structured by medical specialty, particularly in multispecialty groups. Like staff who know the nuances of each payer, these staff are familiar with the coding rules unique to their specialty.

However you decide to set up your CBO, try to staff the office with the right number of "experts" in each area to suit your patient base. For example, if you structure your CBO by insurer and 40% of your patients are on Medicare, calculate how many Medicare specialists you need to process all of those claims.

Another important decision is to whom your CBO staff will report--your chief financial officer (CFO) or chief operating officer (COO). Just because billing involves money does not mean that oversight truly belongs with the CFO, Bauman says. It's really more of an operational issue.

Whoever leads the effort will interact regularly with physicians and nurses at the clinic sites--possibly not the best role for a COO, whose primary expertise is in accounting and finances. Although there are no hard and fast rules, it's something to think about because operational efficiencies are critical to a CBO's success, Bauman says.

Ensure efficiency with planning, accountability

"A CBO can create a lot of efficiencies in a practice if you hire the right manager and . . . establish the right policies, conduct the proper training, and monitor those policies and retrain as you need to," Bauman says.

Especially if the CBO does not have access to patients' medical records, it is crucial for the front-desk staff to thoroughly and accurately collect data needed by the "back office" CBO to resolve claims (e.g., insurance eligibility, provider number, patient demographics, etc.). "Historically, probably 95% of all claim denials and rejections are because of misinformation gathered at the front desk," McDaniel says.

A CBO will also make it easier to hold staff at individual sites accountable. "It's one thing to tell staff to make sure they collect copays," Bauman says. "It's another to have a report every week or month that shows how many copays were not collected." A CBO will allow you to collect this information and connect it back to particular people and sites.

Beware resistance to change

Although front-desk and CBO staff job descriptions won't necessarily change, their day-to-day work lives will. Front-desk staff can expect to hear patients complain about now having to call a central phone number to resolve billing problems and that they can't discuss these matters with people they know.

"You do lose a little bit of personal touch," McDaniel says, noting that medical practices resisted automated telephone systems for years for that reason. However, most patients are now generally accustomed to such systems.

Remember that taking collection responsibilities (other than copays and deductibles) away from staff who interact with patients can allow your practice to become more businesslike, Bauman says. For example, pre-CBO, a practice could lose thousands of dollars through lax collection policies and staff who felt uncomfortable pressing sick patients for cash.

A CBO also means that you will either have to let go of your back-office staff or move them to the central office. At the CBO, staff will generally perform the same duties--billing, handling denials and rejections, following up with insurers, managing accounts receivable, monitoring payer contract compliance--but they will do so in a totally different environment. Instead of interacting with doctors, nurses, and patients, they will interact with accounts, McDaniel says.

Be up front with staff about what this change will entail and get a good sense of whether your practice culture will be able to adapt. "On paper, CBOs make all the sense in the world," McDaniel says. "But like every concept, it takes people to execute it. It's in the execution where failures come in" if you're not prepared, he adds.

Anticipate CBO impact on cash flow

As with any new endeavor, you may need to spend money to make money with your central billing office (CBO). Before deciding whether to create a CBO, answer the following questions. Will

  • you require additional office space?

  • -you convert to a new billing information system?

  • -clinicians need to obtain new provider numbers and tax identification numbers?

    If you answered yes to any of the above questions, anticipate a slowdown in cash flow and plan how you will fund it, either through current operations or by obtaining a line of credit.