January 2007 Billing Performance Index (BPI) underperformed December 2006 value by 2.3%, replacing four participants in the list of top ten performers and dropping the index from 13.1 down to 15.4. This article describes an 8-th iteration of a rule-based chiropractic billing index, including its coverage definition, update cycle, volume weighting, and provided information.

BPI = 15.4 means that the average of ten top performing payers working with Billing Precision clients have 15.4% of Accounts Receivable beyond 120 days. BPI is a key billing performance characteristic, as it is a proxy of the claims that are never paid. Obviously, the lower is the index the better is billing performance. The table below also lists the top ten performing payers and their relative index as recorded in the Billing Precision’s system.

* Billing Precision Index 15.4
* Blue Cross Blue Shield Illinois 9.4 (up from 10.6 in December)
* Blue Cross Blue Shield Texas 10.3
* Cigna 11.2 (up from 12 in December )
* Blue Cross Blue Shield South Carolina 12.7
* Medicare New Jersey 14 (up from 16.3 in December)
* Blue Cross Blue Shield New Jersey 16.9 (up from 18.5 in December)
* Aetna 18.3
* United Health Care 19.2 (down from 7.1 in December)
* Medicare Illinois 25.9
* Medicare Wisconsin 29.1 (down from 18.5 in December)

Dropped participants from December BPI:

* Triad 3.5
* Blue Cross Blue Shield Wisconsin 4.4
* Medicare Florida 5.6
* Health EOS 11.9

Improved participants with respect to December BPI:

* Blue Cross Blue Shield Illinois 9.4 (up from 10.6 in December)
* Cigna 11.2 (up from 12 in December )
* Medicare New Jersey 14 (up from 16.3 in December)
* Blue Cross Blue Shield New Jersey 16.9 (up from 18.5 in December)

Underperforming participants with respect to December BPI:

* United Health Care 19.2 (down from 7.1 in December)
* Medicare Illinois 25.9
* Medicare Wisconsin 29.1 (down from 18.5 in December)

New participants with respect to December BPI:

* Blue Cross Blue Shield Texas 10.3
* Blue Cross Blue Shield South Carolina 12.7
* Aetna 18.3
* Medicare Illinois 25.9

Coverage

BPI is rule-based, i.e., payer participation in the index is defined by dynamically rules at the time of computation and not by a static listing of specific payers. Therefore, any specific payer may start or discontinue participation in the index, dependent on satisfaction of rule’s conditions.

Current selection of payers for participation in the BPI is based on fifty top-volume providers across all United States that have received Billing Precision services for more than six months and have more than two hundred claims in their current Accounts Receivable.

Update Cycle

Volume Weighting

BPI is volume weighted, which is important to accommodate future growth of provided information, index combinations, and sensitivity across multiple indices.

Information Provided

BPI computes the percent of Accounts Receivable beyond 120 days. Note that national average across all medical specialties of percent of accounts receivable beyond 120 days is 17.7%.

Summary

Medical Billing Performance Index helps the development of billing industry standards. Medical service providers can use the index to benchmark their billing performance and to guide its improvement over time. Rule-based index definition allows for automated inclusion and exclusion of payers in the index based on payer attributes, such as numbers of processed claims, accounts receivable distribution, certain mix of CPT codes, or patient demographics. Relative payer index provides billing process improvement direction.

In this installment of medical billing and DME software, we’re going to cover the topic of item inventory. We’re going to explain how the inventory functions work, what information inventory tables contain and how this all ties in with the medical billing of a claim.

Item inventory is a very large part of the DME system. Because DME billing is for durable medical equipment, thus the name DME, a lot of items get dispensed to the patient. These items range from small things like test strips for diabetics, to large items like wheelchairs, beds and oxygen concentrators. Some of these items are sold and some are rented. There alone lies a big distinction and the reason why the inventory tables have to be broken up into what are called purchased items and serialized items. Purchase items are pretty well self explanatory, but some explanation is needed for why rental items are referred to as serialized items.

Rental items are referred to as serialized items because each item that is rented has a unique serial number attached to it. This serial number is tracked for the purposes of billing monthly rentals, which is usually how either the patient or insurance company pays for these items. If a rental item has to be replaced because it is defective or broken, then a new item has to be issued and its serial number noted for future billing. The old item is then put back in inventory and either fixed or thrown away and deleted from inventory.

The information that is contained in inventory is more than what most people realize. It is more than just the description of the item. For purchase items, it includes how many of the items are in stock, how many sales of the item were made, so that companies can track how well an item performs, reorder points so that they don’t run out and a number of other things. For rental items, the information includes when the item was rented, how many months of billing have occurred, when the item is scheduled for maintenance and a host of other items. Most normal inventory records contain anywhere from 30 to 100 fields depending on how much information the company wants to track and the capability of the software itself.

How does this all tie in with medical billing? Well, the biller has to know how each item needs to be billed. So for starters, they have to know if it is a rental or purchase item. They have to know the price of the item. They have to know when maintenance is due on a rental item so they can send a bill for that maintenance. They have to know when an item is low so that they can notify inventory, just in case they’re not aware of it, which they should be. If a biller has to replace an item, they have to know what replacement items are available. The list of things that a medical biller needs in relation to inventory is endless.

The world of medical billing has come a very long way. In the old days, you’d go to your doctor, have your treatment, for whatever it may have been, get your bill, submit your check or give him cash and that was the end of it. Of course, if you had insurance, which back in the stone ages was as rare as hens’ teeth, the doctor then sent a paper bill to the insurance carrier, whether it be a private carrier, Medicare or Medicaid. We all know how easy it is for paper to get lost. Well, those days are long behind us. Yes, some doctors still live in the stone ages, but the majority have entered the modern era with the rest of the world and have begun to utilize what is known as electronic medical billing.

Understanding how electronic medical billing works is really not hard. Understanding what is actually involved with the whole process is a different story. So we’ll try to keep this article as simple as possible so that you’ll have a basic understanding the next time you have to go to the doctor for medical services.

Electronic billing is paperless billing. The bill that is printed out and given to you by the doctor or provider, such as with a clinic, is then entered into the computer along with a lot of information which covers just about everything including who your insurance carrier is, which is the most important piece of information. Without this information, the insurance provider would not know how to process the claim so that the doctor or clinic gets paid.

After the information is entered into the computer, using a specialized medical billing software program, the information is then electronically submitted to the carrier via a modem. A modem is a device that utilizes your phone line in order to transmit information, similar to a fax machine. The difference is that with a fax machine a piece of paper is inserted into the machine, a copy of it is electronically made and passed along the phone line to another fax machine which prints out a copy of the paper on the other end. With electronic billing, there is no paper at all. The information is typed into the computer and then the software itself takes that data and transmits it over the modem to the carrier.

In order for the carrier to be able to read this information, it needs to be sent in a certain format. This format is called NSF format and is standard for every carrier. Having said that, a special program has to be made for each carrier because even though the format is standard, not every carrier uses every field in the format. Because of this, if certain fields are transmitted that the carrier doesn’t use, they may reject the claim. But that’s another problem altogether.

We’ll more closely examine the NSF standard format in a future article in this series while going into more detail regarding the red tape of medical billing. This is one of the main reasons that medical costs are so high.

They say that any organization, project, idea, or anything is only as strong as its weakest link. That is no more true than in the world of medical billing. The problem is, medical billing has so many weak links in its structure that it is a miracle that anything at all gets done. In this article, we take a look at just a few of these potential disaster areas.

The biggest weak link in medical billing is the system itself. Oh, you can make all the arguments you want about how they’re doing the best that they can with a system that was doomed to fail from the start but it doesn’t change the fact that the medical billing process is a nightmare to begin with.

Let’s start with the billers. Because of all the regulations, a ton of knowledge is needed in order to bill a claim correctly. The truth is, there’s not really a lot of training for medical billing personnel. Most of it is on the job training. As a result, a lot of mistakes are made. Now, in most businesses, when a mistake is made, it can be corrected quickly and no harm done. But in medical billing, a mistake means a claim that goes out with the wrong or incomplete information. This results in the claim being denied. The claim then has to be corrected and resubmitted in order to be paid. While there are no hard and fast statistics on the number of claims that are billed incorrectly, it is estimated that it is somewhere in the area of about 10%. That means, theoretically speaking, each day the workload increases by 10% because of claims that have to be resubmitted. This explains why there is such a backlog on claims that need to be paid. It’s a never-ending cycle, right out of the gate, that’s never going to get any better.

Then there is the inefficiency of the people on the receiving end of these claims. Because the largest claim processors in the United States are from government agencies, these people are not really given the most incentive to do a fast job. So the claim processing process itself, by design, is very slow. This only compounds the problem. But the worst part of it is, the claims that have to be resubmitted are given the lowest priority. This makes it even more critical that claims be submitted properly the first time through.

Finally, as if the above two major problems weren’t enough, you have the problem of poorly designed methods for doing the billing itself. This can range from anything from badly designed software, of which there is plenty, to step by step procedures which are inefficient to say the least. Plus, there is no standardization in the industry itself. Once upon a time, there was only one way to bill a claim. Now you have the standard HCFA 1500 form, NSF 3.01 for electronic billing and UB-92 and other formats as well for the electronic transmission of claims. No two medical billing companies do things the same way.

Health Business Resources (HBR) of Montrose, Colo., has selected CPU Medical Management Systems Inc. to provide its Web enabled medical financial management product, Web MED/ FM. HBR provides account management and billing services for radiologists in the Montrose area, and it processes around 1,800 claims and bills for 2,000 patients each month.

Remove the mystery from medical bills

Not long ago, employer health insurance costs were considered an insignificant footnote to a company’s annual report. Now, however, they are more likely to be viewed as an out-of-control monster that threatens the economic well-being of corporate America.

There’s no denying it–health costs have increased dramatically in recent years. The average employer paid about $2,100 per employee for health care in 1988, an increase of 31 percent since 1984. This year, the figure is expected to climb to at least $2,400.

One proposal, the Resource Based Relative Value System, developed by researchers at Harvard University, may help clamp down on high costs. RBRVS was developed at the request of Congress to provide a more rational and equitable Medicare physician payment system. And since private insurers tend to follow precedents set by Medicare, it’s likely RBRVS will be adopted by the private sector as well.

A new base

Traditionally, Medicare and insurance companies have paid physicians according to schedules drawn up from what physicians in an area have usually charged for various services and procedures. RBRVS differs because it takes into account all of the resources–physical, educational, mental, and financial–that physicians use when caring for patients.

Providing primary care services (such as taking a complete medical history and physical examination, diagnosing a problem, or taking time to counsel patients or explain test results) have been undervalued and should cost more, according to the RBRVS study. Relatively less should be paid for certain high-cost procedures, such as some surgeries and x-rays. In effect, RBRVS would help ensure that medical decisions are based solely on what is best for the patient rather than the financial reward for performing expensive services.

Because physicians would be compensated better for spending more time with patients, medical care would improve–in terms of quality and accessibility. Fairer compensation for primary care would also attract more physicians to the specialty–a handy benefit since the growing elderly population is demanding more of these services.

What RBRVS would mean for employers is more predictable medical bills, better informed decisions on best buys in insurance plans, and the likelihood of reasonable prices for new medical technology and procedures.

An RBRVS fee schedule alone won’t lower health spending nor should it be considered the cure-all for Medicare. Costs, after all, reflect price and volume. While RBRVS addresses the price side of the equation, volume will have to be tackled through other means such as practice guidelines or standards.

Fostering competition

The RBRVS concept needs to be refined, but nevertheless, its advantages are obvious. In addition to slowing down the use of high technology or procedures, RBRVS would help put medical costs out on the table for all to see. Patients would know exactly what their insurance plans would pay for a given service and could then deal more intelligently with their physicians when discussing charges. It is likely that consumers will shop around for health services once the mystery has been taken out of fee-for-service medicine.

It’s likely that some form of physician payment reform under Medicare will take place this year. I think the Harvard RBRVS proposal offers the most promise for producing the predictability and equity that patients, employers, insurers, and physicians themselves need. RBRVS is an idea whose time has come–perhaps just in time for American business.

Hospitals today face a challenge in confirming whether all the demographic and financial information submitted by patients is accurate. Some patients may be intentionally misleading healthcare providers in order to receive free care.

In July 2006, Parkland Memorial Hospital in Dallas publicly announced that it was conducting an investigation to identify the number of patients who appeared to be taking advantage of taxpayer-supported free care. The announcement created heavy media attention, with newspaper reports and editorials, TV reports, and radio call-in shows all commenting on the situation. The viewpoint of the media was that it was unfair of some patients to take advantage of the free care system. Subsequently, Dallas County began pursuing approximately 120 patients who had given incorrect information and who owed more than $4 million.

One case involved a woman who presented herself as a Dallas County resident, but who in fact owned a large home in another county and a business in another state. Her treatment for breast cancer totaled more than $100,000. (When questioned, she agreed to work out a payment plan.)

“We are a tax-supported institution, and we have a fiduciary responsibility to the taxpayers of Dallas County,” says Jim Perry, vice president, revenue cycle, at Parkland. “Based on automated demographic and financial information, investigators literally found millionaires coming in for free care at Parkland.”

The hospital reported the patients to the Parkland Hospital Police Department. “We are trying to protect the reputation and integrity of our charity program,” says Perry. According to Texas state law, if a public hospital in Dallas County treats a patient from another county, the county in which the patient lives must pay the hospital–but only for those who live at 200 percent of the federal poverty level or below.

Parkland Memorial Hospital has emphasized in its statements that it is committed to providing high-quality health care for all Dallas County residents, and wants to treat all patients fairly.

How Parkland’s Workflow Changed

Parkland needed to change both business practices and workflow for demographic validation and patient financial analysis. The hospital’s registrars required a way of checking whether the information provided by patients was current and correct. Anecdotally, they knew some patients were not being truthful; also, the amount of returned mail generated from invoices indicated the hospital needed a more sophisticated way of identifying and confirming demographics. Admissions and billing staff recognized that their processes were paper-intensive and that they were unable to focus their resources properly.

While looking for a way to find and verify data efficiently, the hospital also was implementing a new health information system. Among other things, the new system included software that could integrate demographic validation, prediction of payment, and automatic charity processing directly into the registration system. Before the hospital went live with the software, its administrators thought the benefits of double data entry would be worth the time and trouble it would require. As a result, Parkland used a web-based version of the automated software for about six months, until the integrated software went live.

Developing the new workflow raised a number of important considerations, including the possible use of automated approval or denial based on automation results, whether charity applications should be completed by the patient or by Parkland staff online in real-time, how priorities should be set for patient follow-up, what documentation requirements are necessary when patient-supplied information conflicts with automated data, and what kind of prompt-pay discount policy should be established. After these issues were all considered, workflow was revised based on Parkland’s policies and procedures.

It is important to understand that Parkland implemented the new software not to “go after” patients who might be lying about their financial circumstances, but to improve accuracy and better assist patients. Parkland views changing the way it processes patient information primarily as a means to ensure that patient statements are sent to the correct addresses.

Parkland also is interested in using resources more efficiently, including using prediction of payment, or risk segmentation, to determine which collection efforts are most productive. Parkland managers now routinely assess payer mix and self-pay demographics, use portfolio modeling, and identify bad debt and charity cases on the front end. These new processes allow them to collect the most money possible while expending the least amount of collection resources. Automation has provided ways to create a more intuitive workflow for end users, reduce the need for manual audit, and identify or correct human error.

Common Workflow Obstacles

Implementation of the integrated software required a front-end workflow redesign and staff training. For example, automated demographic validation gives registrars real-time address updates. However, if a registrar sees system information that conflicts with information the patient is reporting at the time, the registrar must know how to discuss the discrepancy tactfully with the patient.

The Centers for Medicare and Medicaid Services has clarified that it pays nonphysician practitioners directly for services rendered in the hospital. According to CMS, carriers will pay for hospital professional services furnished by nurse practitioners and clinical nurse specialists when billed directly with their Medicare billing number or National Provider Identifier, once it becomes effective. Additionally, carriers will pay a hospital for these services when payment has been reassigned to the hospital. However, the hospital must bill for reassigned services under the NP’s and CNS’s Medicare billing number or NPI. For physician assistants’ professional services furnished in the hospital, Medicare will pay the employer of the physician assistant if the service is billed under the PA’s Medicare billing number or NPI.

Carriers will search and reopen claims submitted by NPs, CNSs, or employers of PAs that have been denied since Jan. 1, 2006, because claims listed a hospital setting as place of service. For employers whose claims were denied, carriers will search and reopen claims for dates of service on or after Jan. 1,1998.

Q I am a new laboratory manager looking for information on how to determine my cost per test within our laboratory. Any information that you could provide would be appreciated.

A It is all about the numbers. The more accurate your numbers, the more accurate your cost analysis. Getting to “good” numbers is not always easy. From where do you pull numbers? The laboratory information system, if you are fortunate enough to have one, or the billing system, or both. I say use both, and reconcile them to make sure you are billing for all you can. There are two costs you should obtain: cost per reportable test and cost per billable test. Both are important for managers to know. This means you must accurately count the number of tests performed in a specific time period, such as a year or six months. For an accurate reportable test volume, counts should include patient samples, proficiency tests, controls (including control verifications), calibrators, and a percentage of repeats. For billable tests only, count those tests that were actually reimbursed. Once you have accurate test volumes, add up the costs to run that volume of tests, include direct costs such as reagents and consumables, and indirect costs such as regulatory fees, proficiency testing fees, and overhead. Do not forget to appropriately assign costs for equipment, equipment maintenance, and personnel. A tricky cost factor is overhead; talk to your office manager or administrator to determine what is appropriate for your testing scenario. (Professional associations are also good resources for information on cost analysis.) Add up all your costs and divide by the appropriate volumes for cost per reportable test and cost per billable test. Sound simple? Finding all the costs by going through contracts and invoices is a time-consuming process, although it is a great time to reconcile invoices with contracts to ensure you are not paying more than your contracts state.

Medical product identification records are often inaccurate, resulting in a wide array of inefficiencies in the healthcare components of the federal government, as well as in the medical and surgical supply chains. A diversity of protocols, with no universal standard, contributes to confusion and increased costs in all parts of the healthcare supply chain.

Every day, the overall healthcare supply chain wastes 24-30 percent of supply administration time correcting data errors, according to a Sterling Commerce white paper, titled “Data Synchronization: What is Bad Data Costing Your Company?” The study estimated that each erroneous transaction costs $60-$80 to correct. About 60 percent of all invoices generated have errors; each invoice error costs $40 to $400 to reconcile. Altogether, erroneous and conflicting data increase supply costs by 3 to 5 percent. The aggregate healthcare supply chain effect is billions of dollars lost each year because of supply chain information disconnects.

For the Defense Supply Center Philadelphia’s (DSCP’s) customers, lack of data congruence may result in receiving the wrong healthcare item, the wrong quantity or an inferior item at a higher price. Additionally, on the chance a product supplier and a Department of Defense (DoD) healthcare facility refer to the same item with different nomenclatures or different item numbers, unnecessary ordering might occur. These problems, at least in part, each have their origin in inaccurate or otherwise difficult-to-manage data.

The healthcare industry, one of the largest industries in the U.S., has yet to fully address the consequences of unsynchronized data as a whole. Extending standard data throughout the healthcare supply chain is an unmet objective where accomplishment would reduce the negative outcomes arising in its absence. The need for such capability couldn’t be more evident. Media stories range from negative reports of healthcare costs and errors to positive White House initiatives that are seeking and investing in electronic solutions to problems that cost Americans billions of dollars and thousands of lives.

Searching for the source of truth

The DoD Medical Data Synchronization Program Manager, DSCP’s Kathleen Garvin, together with other federal and industry partners, have worked for more than three years to synchronize DoD’s medical/ surgical data with participating medical industry manufacturers and distributors. This collaborative effort required creation of a set of “universal data standards” that formed the basis for electronic information sharing, transactions and movement of synchronized data from manufacturers to end-users. Also known as ‘data sync,’ it is a tool that brings consistency of quality product information using manufacturers as the ’source of truth’ to all components in the supply chain–from cataloging through purchasing and billing.

Data sync employs standard transaction-related elements, including product identifier, manufacturers’ name and packaging levels. It is followed by the accurate and timely distribution of these data throughout the systems used by all supply chain components. Data sync also entails sharing a consolidated product data utility, a system that synchronizes, certifies and distributes consistent and accurate quality product identifiers and data throughout the supply chain.

Garvin outlined Doffs main objectives in this data synchronization effort as to improve responsiveness in contingency and wartime operations, to improve supply chain efficiencies in peacetime operations and to reduce the cost of healthcare delivery.

DoD’s primary goal in all its data sync efforts is to improve support to war fighters in contingency operations. The ultimate goal is to transition to an industry-sponsored healthcare product data utility (PDU). Transitioning DoD’s pilot PDU to an industry PDU will ensure quality medical/surgical product data exists throughout the entire healthcare supply chain.

DoD has already expended several million dollars to develop a product data utility proof of principle for the healthcare industry. Twenty-two manufacturers as well as two major medical/surgical distributors are participating.

Recently, DoD and its trading partners have expanded the pilot to test the Global Data Synchronization Network (GDSN) concept through 1SYNC. This is the same provider that Wal-Mart, as well as the grocery, electrical and other retail industries, hard goods, etc., use. Participation in pilot phase 2 has grown to include a distributor, a group purchasing organization (GPO), a hospital and a software company.

Data standards organizations are also involved in promoting DoD’s goal to synchronize data and transition to an industry PDU. The Coalition for Healthcare Standards (CHeS) is the most significant player in promoting the DoD’s data synchronization efforts and the DoD pilot PDU to the healthcare industry. CHeS was one of the first organizations to join DoD, almost four years ago, to study the feasibility of creating a healthcare PDU. It also sponsored and formed the PDU Organizing Committee, composed of DoD and healthcare industry supply chain leaders, to transition DoD’s pilot PDU effort into an industry PDU.