The Mystery of the Missing Collections

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How well do you really know your payors? A recent analysis for one practice turned up some very interesting revelations with operational ramifications for the provider, but this was possible only because the provider had access to the entire fee schedule of the insurance company.

The larger insurance companies use variations of the RBRVS, applying their own conversion factors. For this reason, radiology providers would be wise to secure a complete schedule of their contracted fees. Only then can providers manage the complex relationships between their imaging-center costs and the revenues that they must receive to cover them.

Prudent owners should know their fixed and variable costs by modality—information useful in determining whether the fees proposed by an insurance company adequately compensate them. They also have to consider the evolving dynamics of the current marketplace, in which insurance companies promise a certain fee level and then shift increasing amounts of the obligation to the patient, in the form of copayments and deductibles.

Reason for Evaluation

A radiology practice, owner of an imaging center, did not find the payment trends for a major payor to be acceptable. It had performed some testing (on a limited sample of exams) that had provided few answers, and it was unwilling to spend a large amount on a detailed audit. The use of database-extraction techniques gave the practice the answers that it sought.

The project involved the extraction of billing-system files accounting for 2,466 exams and containing 28 fields of data. This was performed in mid-February 2011. Two additional fields were added to facilitate the evaluation. The first was the negotiated fee schedule of the primary payor being evaluated, provided in an electronic spreadsheet, in order by CPT® code.

The second added field contained one of 11 numeric flags assigned to exam families for which technical-component payment is discounted if two or more exams in the same family are performed during the same patient visit. This discounting policy was based on a CMS regulation, but other major payors also instituted it. The discounting did not apply when the multiple exams performed during a single visit were in different families. This regulation was changed (effective January 1, 2011) to merge the 11 families into one, making providers unable to avoid discounting for multiple exams, even when the exams are from different families.

Account Resolution

In Table 1, six hypothetical patients underwent the same exam; all were apparently covered by the same insurer, with different benefit programs. The radiology charge was $100; the agreed-upon fee was $49.50. Therefore, the radiologist was obligated to write off $50.50 as a contract adjustment. Patient A had a high-end plan (slowly disappearing), in which the insurer paid the entire amount due. Patient B had a 20% copayment, but also had a secondary insurance plan that covered this. Patient C was obligated to pay the 20% and called the billing office to pay the amount by credit card; the practice paid the credit-card fee.

Table 1. Mathematics of Account Resolution

Patient D, who had an annual deductible that had not been met, owed the entire bill. Only part of the fee was received, and the balance was eventually sent to a collection agency. Patient E was referred to the office by a physician who did not comply with the insurer’s rule for preauthorization. The patient was not asked to return at a later date (the front office knew that it needed an authorization number). The amount due was lost as a compliance credit.

Patient F formerly had insurance coverage, but was uninsured at the time of service. He had been to the office before, and the front desk did not verify coverage. The claim was rejected; the patient made a partial payment, and the rest was written off as a courtesy.

Four Universe Subsets

A perfect universe is one containing only two credits: cash and contract adjustment. The marketplace is moving in a different direction, however, where other types of noncash credits apply: courtesy, credit-card fees, and adjustments for bad debt and compliance failures. This unweighted sample implies perfect resolution at 49.5% (which is not that far from reality, in this case), but other market factors drag down the final number.

A review of the imaging center’s accounts receivable revealed that the 2,466 exams could be organized into 22 different payment scenarios (Table