An interview with Anthony Minge, EdD, Fitch & Associates
City and county officials, EMS agency directors and fire chiefs who struggle to balance budgets may want to analyze the efficacy of their EMS billing operations to recover additional revenue.
Anthony Minge, EdD, a partner with Fitch & Associates, has extensive experience in healthcare finance, billing and collections and says that many officials see revenue from EMS transports as a fixed number and feel a false sense of security by outsourcing billing.
For EMS leaders and municipal officials looking to maximize revenue and maintain compliance, Minge, who was formerly the business manager for Northwest MedStar in Spokane, Wash., one of the largest air medical programs in the Pacific Northwest, says it may be worthwhile to take a closer look at the billing department or contractor’s work.
Where should leaders begin when trying to evaluate their billing operations?
EMS billing is a complex animal that differs from other healthcare billing in many ways. However, whether it’s with the city or county, a private agency, a hospital-based service or another model, leaders can begin to understand their billing operations by getting answers to a few questions such as:
- Are you getting your money’s worth?
- Who’s monitoring billing and ensuring compliance—and do they understand the nuances of billing for ambulance transport?
- What’s your payor mix?
- Do you understand the difference between charges and payments?
- Do you have a healthy cash flow?
So how do leaders know if their organizations are getting their money’s worth?
You need to know some basic facts to determine if you can operate you’re billing effectively in-house or if should you outsource. If you’re doing your billing in-house, how much is that costing you? Are your processes effective and appropriately streamlined? Internal management of the revenue cycle allows full control of every facet of the process, but you have to hire a team and make sure someone has time to manage it; you have to provide initial and ongoing training, salaries and benefits. How much does that cost? Marginal reimbursement rates can make this expense prohibitive.
You should determine the actual cost of doing this inhouse and compare it to total collected revenue. If you need to hire one more person to keep up with the volume of patients, the rate of return on the claims paid may not support doing so. Evaluation and understanding of the whole process is vital to ensure it is as efficient as possible.
Professional billing companies have the benefit of economies of scale, meaning they are able to spread these team costs over multiple clients. Agreements with these outside firms typically include turning over a percentage of the net collections. Sometimes the percentage fee may be more than what it was costing the agency to do the job internally, but the return on investment is much higher.
A multitude of pros and cons must be weighed to determine what is right for your agency. You may be wiling to give up some control over the process, but you also reduce your level of personnel oversight. Ultimately, the ambulance service is still responsible for compliance. It is important to understand that even if it’s less costly to outsource, you can’t assume the contractor is effectively monitoring compliance; and if they are submitting fraudulent claims, you could be on the hook just as much as they are. If outsourcing, you should review the firm’s internal compliance plan and understand how its leaders monitor and address errors.
What do leaders need to know about compliance?
Whether you’re contracting with a billing agency or keeping your billing in-house, you need to know who’s monitoring for billing errors. Even minor errors can be extremely costly. It’s not if you’re going to be audited—it’s when. We’ve seen it over the last several years — big cities that have had well-publicized instances of improper billing.
In Dallas, for example, the city paid $2.47 million in federal and state fines after a whistleblower reported that all transports were being billed as ALS, though some calls were BLS. Recurrent quality review of the billing process is a must. This can be accomplished internally by implementing a routine process to thoroughly examine a sample of randomly selected claims. To add validity to your compliance efforts, however, it is recommended that a professional review by a third party be done at regular intervals. There’s no agency that’s too big or too small; are you ready for an investigator to show up at your door?
Why is it important that leaders understand their payor mix?
Imagine a town: You have an over-65 group eligible for Medicare. You have children and people who are disabled, some of whom are eligible for Medicaid benefits. You have an underemployed or unemployed population, with no insurance. And then you have those who are commercially insured.
Understanding who these people are and what percentage of your transport volume they make up is important because Medicare, Medicaid, commercial insurance and even the uninsured reimburse for your services at different levels. Medicare and Medicaid, for example, allow for payment based on fee schedules that are set by the federal and state governments. Commercial insurance plans are more apt to process claims at their “usual and customary” rates, although these are rarely published. Third-party liability and workman’s compensation insurance will often have benefit limits. A firm knowledge of the payor mix will help the agency understand and predict cash flow.
It’s a delicate balance to be sensitive to your demographics in setting rates and knowing how much you’ll potentially collect — you really have to keep your fingers on the pulse of it. You have to understand your payor mix to know what you’re billing and what you’re really going to collect and to appropriately set your rates. It is far less common than in the past for ambulance agencies to be able to “live” off of what they collect for billed services. But in many cases reimbursement rates have not kept up with increasing costs. And just because you charge more, it does not guarantee that you will be reimbursed more.
This is critically important for the agency and city to understand, as there may be a need for subsidies to support the program. Tax payers are sensitive to paying additional amounts for services that they feel their insurance is (or should be) covering. Being able to intelligently explain the delta between what is billed and what is paid can be difficult if you do not have a firm understanding of the cost of service and the payor mix responsible for reimbursement.
Why is the difference between charges and payments so important?
Just because you raised your rates and generated a substantial increase in the total amount billed doesn’t mean you’ll actually see a change in what you collect. Consider this before you raise rates, which could potentially have a negative impact on community relations and also make your collection rates appear lower without improving the bottom line. For example, Medicare allowable rates are set by the federal government and only change once per year. Medicaid is similar in that they are set by the state, however, they increase reimbursement on a much less frequent basis.
Although these rates are published, commercial insurance companies do not provide the same advantage. This is basically because plans vary from company to company and individual to individual. Ensuring that your rates are high enough to capture the most allowed by your Medicare and Medicaid carriers is simply a process of doing a little research. Knowing what commercial insurance payors are going to pay is not an exact science and the agency must keep a close watch on payments, as well as denials, to understand the commercial payments and ensure the billing department or agency is doing the most thorough job possible of processing, and appealing if need be, the claims submitted for service.
How do leaders measure if their organizations have a healthy cash flow?
A good place to start is by monitoring your days sales outstanding (DSO), a measure of the average number of days it takes from the time your crew transports a patient to when the money is in the door. Sometimes it can take 30, 60, 90 days until your agency gets paid. This can really impact the service because it means you don’t have a healthy cash flow. Understanding your payor mix will be very important here.
Medicare, for example, will process an accurately billed claim in 14 days from the date of electronic submittal. They are, in fact, one of the fastest in the industry to process claims. Your primary Medicare payor bucket should not have large balances aged out.
An effective revenue cycle management process that accurately moves the claim through your system and out to the payor is important to keep cash coming in regularly. If you look at an accounts receivable aging report and see that you have large balances that have aged out, this could be a key indicator that something is wrong. It may not impact a large agency as much, but smaller EMS services that are running on a tight budget would have a harder time getting gas in the ambulance, ordering supplies, and paying salaries without adequate cash flow. If you’re keeping an eye on your DSO and it seems too high, use this information to begin pinpointing where the issues lie in your billing operations.