Medicare 2002 Fee Schedules: Your Revenue Thermometer
January 2002
W e don’t need reminding that we’re in an economically challenging environment. When Walt Disney World (WDW) closes some of its attractions and resorts and lays off thousands of employees, we know that hard times are ahead.
You may think it strange to use an entertainment theme park as an economic thermometer. But I’ve lived in Orlando since before WDW opened, and I‘ve been able to analyze the business health of my company based on how the tourist industry is faring.
I can’t recall a time since 1971 (when WDW in Orlando first opened) when I heard of WDW closing a newly opened resort and attraction. Layoffs have occurred before, but not at this level. Everything is affected by tourist attendance (or lack of) at the Magic Kingdom. Companies that provide food, printing companies, transportation services, advertising agencies, hotels, restaurants, gas stations...you get the idea.
As we head full speed into the 2002 fiscal year, we must all be aware that the “trickle down” effects of September 11th are a reality and will affect our own medical practices. Accessing dermatology is not, for most patients, a life-or-death necessity. If times get tough, many patients will do without the visit to the dermatologist, but they’ll scrape enough together to see the cardiologist or family practitioner when the chest pain becomes alarming or signs of the flu are noticed.
Surviving the Tough Times
Although from 2001 to 2002 the Medicare conversion factor dropped from $38.2581 to $36.1992, resulting in a 5.4% across-the-board drop for all specialties, dermatologists actually saw their average fees increase by 2%. A mere 2% increase in a frail economy still spells financial stress. I doubt that most goods and services will increase by 2% or less. They’ll probably go up 7% to 10%.
Being cognizant of tough times is key to surviving them. It’s also important to maximize your chances of economic stability. Physicians, by nature, are more interested in the practice of medicine than in the machinations required to run the “business.” Many of us rely on our office managers or spouses to manage the business side of our practices. Unfortunately, our managers and spouses usually either lack the business acumen or if they do possess the necessary skills to run a successful business, they’re too encumbered by other tasks and job responsibilities to do the job right.
Three steps to Enhancing Practice Income
Regardless of the size of your practice, you should focus on the following three steps if you want to optimize your financial success for the coming year.
1. Analyze and revise your fee schedules. The operative word here is schedules (plural) not schedule (singular). Most practices have one badly designed, outdated, politically incorrect fee schedule. Here are some guidelines that you should know and follow:
Medicare should always be your lowest fee schedule. Federal law protects the Medicare patient from discrimination. The law states that you can’t charge a Medicare patient more for a medical service than you routinely charge any other non-Medicare patient. You should consider these important issues in this case:
• The law addresses what you charge — not what you get reimbursed. Therefore, if you charge Medicare patients $65 for CPT code 11100, then you must charge all your other non-Medicare patients at least $65. If you charge your local HMO $65 for the biopsy (CPT code 11100), but it only allows and pays $42.50, it’s not a problem as long as you charge the HMO $65.
• What does routine mean? Your office has a policy stating that patients who do not have insurance or who pay cash get a 30% discount. Using the biopsy example, if, based on the 30% discount, you charge $45.00 to all patients who pay cash or who have no insurance, it’s a violation of your Medicare contract.
Determine how many fee schedules should you have. You should at least have two schedules: One for your regular practice fees and the other for Medicare. For some practices having multiple fee schedules is too much of a hassle. With the sophistication of most medical billing software, it’s possible to have 99 to 999 fee schedules in your computer. The hard part is figuring out the fee schedules for the various contracted carriers. Most managed care plans don’t follow Medicare’s great system of sending out new fee schedules each November. Getting a fee schedule from most of these contracted plans is like trying to find the home (or should I say cave) address of Osama Bin Laden.
So how do you establish multiple fee schedules? First, set your main fee schedule. Next, set your Medicare fee schedule. Then set your second fee schedule based on a percentage above the Medicare fee allowables. Increase your fees appropriately depending on your practice location, at least once per year. When deciding how much to increase your fees by, keep in mind supply and demand in your area, location and competition. Some practices increase 20% to 30% above Medicare fees while others go 100% to 150% above Medicare fees.
Next, decide on how many additional fee schedules you want to use. The easiest way to determine this is to count up the largest plans in your practice area. Let’s say that Blue Cross/Blue Shield, United HealthCare and Nationwide represent 35%, 22% and 12% of the income in your practice, respectively. Start by developing fee schedules for those plans. Because it may be almost impossible to get allowables for all of the CPT codes in your computer from the managed care plans, you may limit your additional fee schedules to the providers that receive the top 20 or 30 CPT codes you most often use.
Contact a representative from each of the major plans and give him or her a list of the 20 or 30 CPT codes for which you want allowables. You might find this easier than asking for their entire fee schedule. If that doesn’t work, then you can gather the data by looking at explanation of medical benefits (EOMBs) from each of the major carriers you’ve received within the last 90 days. Make a list of the CPT codes for which you want allowables, then review the EOMBs and find the allowables for each of the top CPT codes. It’s important to note that if the charge on the EOMB is allowed 100% by the carrier, then this could be an indication that you’re undercharging. If this is the case, then it’s recommended that you increase the fee for that CPT code by at least 50%. Track the increase against future EOMBs. If the allowable increases, then you can ascertain the real allowable after several consistent payments are received for that CPT code. Revise the fee for that CPT code in the computer based on this new data.
2. Drop your lowest, worst paying contracted plan. Every practice has at least one or two contracts with plans that are just plain lousy. They won’t recognize modifiers and they bundle, fail to pay properly when units are billed, reduce “add on” codes (such as 17003 and 11101) by 50% even though they’re exempt from the multiple surgery reduction rule and require endless appeals to get paid when multiple services are provided on the same date of service. To add insult to all that injury, they pay lower than most of your other contracted plans. Isn’t it time to drop that plan?
But I Can’t Afford to Drop That Plan
Some physicians get squeamish when they think about dropping a plan. However, once you crunch the numbers, the figures speak for themselves. Look at it this way. What’s your overhead? Most physicians have overheads between 50% and 75%. Let’s assume that you have an efficient practice and your overhead is 55%. Based on the statistics of the UHC plan (see chart above), you’re losing money. You’re getting paid $0.54 on the dollar and your overhead is $0.55. It’s actually costing you to see the patients in this plan. So why should you stay in a plan that’s costing you money and taking away from the profit of the other plans?
Experience has shown that most practices that drop their lowest plan each year end up quickly replacing those patients with patients who have better paying plans. In almost all cases, the practice makes more money in the ensuing year.
Should You Try Negotiating?
If dropping the lowest plan isn’t an option for you and your practice, you could consider negotiating with the managed care plan. Some physicians are still under the impression that you can’t negotiate with managed care plans. You either accept what they offer or you get out. While that was true throughout the late 80’s and early 90’s, it isn’t anymore. Many areas are underserved with providers and the managed care plans are struggling to provide the scope of services they’re contracted to provide.
What should you ask for? Negotiating is all about getting what you really need. Let’s use the UHC carrier in the example from the chart above. Before you send them the termination letter, consider setting up an appointment with a decision maker at the plan. Many times the decision maker isn’t the physician representative. Try to set up a meeting with your practice administrator, your physician and the medical director of the plan. The higher up you go, the better your chances of negotiating successfully.
Make a list of demands and support them with examples and statistics. Changing three or four items in your contract may change the entire financial picture.
Negotiating the fee schedule. Assume that the UHC carrier had an awful fee schedule. Perhaps they pay 60% of the Medicare fee schedule. You could, as part of your negotiations, ask for them to pay 100% of Medicare. If they won’t consider that option, perhaps they’d consider paying your top 15 most commonly billed services at the Medicare rate.
Changing payment policies. Perhaps the carrier won’t pay for an E/M service on the same date of service as a surgical service. Or maybe they don’t recognize the –25 modifier resulting in your staff constantly having to send in time-consuming appeals. You could try negotiating so that they’d pay for all evaluations and management (E/M) visits as well as surgical services for the same dates of service. Additionally, you may ask for a contact person who’s responsible for reviewing your denials to ensure that they get reviewed and paid in a timely fashion.
Verifying coverage policies. Perhaps they aren’t covering repairs with excisions. You could negotiate for a change in some of their coverage policies resulting in better payment for services rendered.
Remember, it’s always better to ask for more than you want. If you have to meet them half way, you can compromise by “giving in” to some of their demands. The end result is that you end up getting the three or four things you wanted in the first place.
3. Charge for what you do. A great hedge on a recessive economy is to take advantage of the great business you have. By taking advantage I don’t mean abusing the system, but rather optimizing your business potential.
One of the most amazing observations I’ve made over the almost 3 decades I‘ve spent in dermatology is the fact that most dermatologists don’t charge for what they do. A lot of these physicians undercode for their E/M visits, provide cosmetic, medically unnecessary services for free or they don’t charge for the number of Actinic Keratoses that they treat. Let’s take a closer look into these problems.
Undercoding E/M visits. We can all agree that the system for documenting our office visits, consultations and inpatient services is ridiculous. The system is so convoluted, confusing and complex that many of us have just given up and decided to charge the lowest level of care hoping to avoid any audits, while others frequently don’t charge for any E/M service on the same day they do a procedure. Get familiar with the documentation requirements for all of the levels of care and then code your visits appropriately.
Free cosmetic services. It’s not uncommon for a dermatologist to snip that skin tag for free or put some liquid nitrogen on several asymptomatic seborrheic keratoses. Even if you don’t want to charge a lot, you can charge a small amount and increase your bottom line. Most patients don’t mind paying $10 or $20 to get rid of a few unsightly lesions. They get a big break and you take in some cash for little work. It’s a win-win situation.
Not charging for the number of Actinic Keratoses. A good deal of dermatologitsts have a magic number of lesions that they always bill for even though they frequently treat a significantly larger number. The effects of undercharging for AKs are profound. Assume that you undercharge five patients each day and all five patients have three lesions each. That’s 15 lesions that you don’t bill for each day. Assume the average payment of $15 for each lesion. Assume you see patients 4.5 days per week, 48 weeks per year. Your loss is $48,600! Need I say more?
Make the Best of Things
This year is destined to be a challenging year for all of us as we face war, threats of terrorism, changes in the way we live our lives and financial uncertainty. We each need to take more control of our business to assure that we can continue to serve our patients with quality medical care while securing our personal economic stability. Consider the information I’ve provided in this article and you’ll be on your way to increasing your fees and in turn, your income.
W e don’t need reminding that we’re in an economically challenging environment. When Walt Disney World (WDW) closes some of its attractions and resorts and lays off thousands of employees, we know that hard times are ahead.
You may think it strange to use an entertainment theme park as an economic thermometer. But I’ve lived in Orlando since before WDW opened, and I‘ve been able to analyze the business health of my company based on how the tourist industry is faring.
I can’t recall a time since 1971 (when WDW in Orlando first opened) when I heard of WDW closing a newly opened resort and attraction. Layoffs have occurred before, but not at this level. Everything is affected by tourist attendance (or lack of) at the Magic Kingdom. Companies that provide food, printing companies, transportation services, advertising agencies, hotels, restaurants, gas stations...you get the idea.
As we head full speed into the 2002 fiscal year, we must all be aware that the “trickle down” effects of September 11th are a reality and will affect our own medical practices. Accessing dermatology is not, for most patients, a life-or-death necessity. If times get tough, many patients will do without the visit to the dermatologist, but they’ll scrape enough together to see the cardiologist or family practitioner when the chest pain becomes alarming or signs of the flu are noticed.
Surviving the Tough Times
Although from 2001 to 2002 the Medicare conversion factor dropped from $38.2581 to $36.1992, resulting in a 5.4% across-the-board drop for all specialties, dermatologists actually saw their average fees increase by 2%. A mere 2% increase in a frail economy still spells financial stress. I doubt that most goods and services will increase by 2% or less. They’ll probably go up 7% to 10%.
Being cognizant of tough times is key to surviving them. It’s also important to maximize your chances of economic stability. Physicians, by nature, are more interested in the practice of medicine than in the machinations required to run the “business.” Many of us rely on our office managers or spouses to manage the business side of our practices. Unfortunately, our managers and spouses usually either lack the business acumen or if they do possess the necessary skills to run a successful business, they’re too encumbered by other tasks and job responsibilities to do the job right.
Three steps to Enhancing Practice Income
Regardless of the size of your practice, you should focus on the following three steps if you want to optimize your financial success for the coming year.
1. Analyze and revise your fee schedules. The operative word here is schedules (plural) not schedule (singular). Most practices have one badly designed, outdated, politically incorrect fee schedule. Here are some guidelines that you should know and follow:
Medicare should always be your lowest fee schedule. Federal law protects the Medicare patient from discrimination. The law states that you can’t charge a Medicare patient more for a medical service than you routinely charge any other non-Medicare patient. You should consider these important issues in this case:
• The law addresses what you charge — not what you get reimbursed. Therefore, if you charge Medicare patients $65 for CPT code 11100, then you must charge all your other non-Medicare patients at least $65. If you charge your local HMO $65 for the biopsy (CPT code 11100), but it only allows and pays $42.50, it’s not a problem as long as you charge the HMO $65.
• What does routine mean? Your office has a policy stating that patients who do not have insurance or who pay cash get a 30% discount. Using the biopsy example, if, based on the 30% discount, you charge $45.00 to all patients who pay cash or who have no insurance, it’s a violation of your Medicare contract.
Determine how many fee schedules should you have. You should at least have two schedules: One for your regular practice fees and the other for Medicare. For some practices having multiple fee schedules is too much of a hassle. With the sophistication of most medical billing software, it’s possible to have 99 to 999 fee schedules in your computer. The hard part is figuring out the fee schedules for the various contracted carriers. Most managed care plans don’t follow Medicare’s great system of sending out new fee schedules each November. Getting a fee schedule from most of these contracted plans is like trying to find the home (or should I say cave) address of Osama Bin Laden.
So how do you establish multiple fee schedules? First, set your main fee schedule. Next, set your Medicare fee schedule. Then set your second fee schedule based on a percentage above the Medicare fee allowables. Increase your fees appropriately depending on your practice location, at least once per year. When deciding how much to increase your fees by, keep in mind supply and demand in your area, location and competition. Some practices increase 20% to 30% above Medicare fees while others go 100% to 150% above Medicare fees.
Next, decide on how many additional fee schedules you want to use. The easiest way to determine this is to count up the largest plans in your practice area. Let’s say that Blue Cross/Blue Shield, United HealthCare and Nationwide represent 35%, 22% and 12% of the income in your practice, respectively. Start by developing fee schedules for those plans. Because it may be almost impossible to get allowables for all of the CPT codes in your computer from the managed care plans, you may limit your additional fee schedules to the providers that receive the top 20 or 30 CPT codes you most often use.
Contact a representative from each of the major plans and give him or her a list of the 20 or 30 CPT codes for which you want allowables. You might find this easier than asking for their entire fee schedule. If that doesn’t work, then you can gather the data by looking at explanation of medical benefits (EOMBs) from each of the major carriers you’ve received within the last 90 days. Make a list of the CPT codes for which you want allowables, then review the EOMBs and find the allowables for each of the top CPT codes. It’s important to note that if the charge on the EOMB is allowed 100% by the carrier, then this could be an indication that you’re undercharging. If this is the case, then it’s recommended that you increase the fee for that CPT code by at least 50%. Track the increase against future EOMBs. If the allowable increases, then you can ascertain the real allowable after several consistent payments are received for that CPT code. Revise the fee for that CPT code in the computer based on this new data.
2. Drop your lowest, worst paying contracted plan. Every practice has at least one or two contracts with plans that are just plain lousy. They won’t recognize modifiers and they bundle, fail to pay properly when units are billed, reduce “add on” codes (such as 17003 and 11101) by 50% even though they’re exempt from the multiple surgery reduction rule and require endless appeals to get paid when multiple services are provided on the same date of service. To add insult to all that injury, they pay lower than most of your other contracted plans. Isn’t it time to drop that plan?
But I Can’t Afford to Drop That Plan
Some physicians get squeamish when they think about dropping a plan. However, once you crunch the numbers, the figures speak for themselves. Look at it this way. What’s your overhead? Most physicians have overheads between 50% and 75%. Let’s assume that you have an efficient practice and your overhead is 55%. Based on the statistics of the UHC plan (see chart above), you’re losing money. You’re getting paid $0.54 on the dollar and your overhead is $0.55. It’s actually costing you to see the patients in this plan. So why should you stay in a plan that’s costing you money and taking away from the profit of the other plans?
Experience has shown that most practices that drop their lowest plan each year end up quickly replacing those patients with patients who have better paying plans. In almost all cases, the practice makes more money in the ensuing year.
Should You Try Negotiating?
If dropping the lowest plan isn’t an option for you and your practice, you could consider negotiating with the managed care plan. Some physicians are still under the impression that you can’t negotiate with managed care plans. You either accept what they offer or you get out. While that was true throughout the late 80’s and early 90’s, it isn’t anymore. Many areas are underserved with providers and the managed care plans are struggling to provide the scope of services they’re contracted to provide.
What should you ask for? Negotiating is all about getting what you really need. Let’s use the UHC carrier in the example from the chart above. Before you send them the termination letter, consider setting up an appointment with a decision maker at the plan. Many times the decision maker isn’t the physician representative. Try to set up a meeting with your practice administrator, your physician and the medical director of the plan. The higher up you go, the better your chances of negotiating successfully.
Make a list of demands and support them with examples and statistics. Changing three or four items in your contract may change the entire financial picture.
Negotiating the fee schedule. Assume that the UHC carrier had an awful fee schedule. Perhaps they pay 60% of the Medicare fee schedule. You could, as part of your negotiations, ask for them to pay 100% of Medicare. If they won’t consider that option, perhaps they’d consider paying your top 15 most commonly billed services at the Medicare rate.
Changing payment policies. Perhaps the carrier won’t pay for an E/M service on the same date of service as a surgical service. Or maybe they don’t recognize the –25 modifier resulting in your staff constantly having to send in time-consuming appeals. You could try negotiating so that they’d pay for all evaluations and management (E/M) visits as well as surgical services for the same dates of service. Additionally, you may ask for a contact person who’s responsible for reviewing your denials to ensure that they get reviewed and paid in a timely fashion.
Verifying coverage policies. Perhaps they aren’t covering repairs with excisions. You could negotiate for a change in some of their coverage policies resulting in better payment for services rendered.
Remember, it’s always better to ask for more than you want. If you have to meet them half way, you can compromise by “giving in” to some of their demands. The end result is that you end up getting the three or four things you wanted in the first place.
3. Charge for what you do. A great hedge on a recessive economy is to take advantage of the great business you have. By taking advantage I don’t mean abusing the system, but rather optimizing your business potential.
One of the most amazing observations I’ve made over the almost 3 decades I‘ve spent in dermatology is the fact that most dermatologists don’t charge for what they do. A lot of these physicians undercode for their E/M visits, provide cosmetic, medically unnecessary services for free or they don’t charge for the number of Actinic Keratoses that they treat. Let’s take a closer look into these problems.
Undercoding E/M visits. We can all agree that the system for documenting our office visits, consultations and inpatient services is ridiculous. The system is so convoluted, confusing and complex that many of us have just given up and decided to charge the lowest level of care hoping to avoid any audits, while others frequently don’t charge for any E/M service on the same day they do a procedure. Get familiar with the documentation requirements for all of the levels of care and then code your visits appropriately.
Free cosmetic services. It’s not uncommon for a dermatologist to snip that skin tag for free or put some liquid nitrogen on several asymptomatic seborrheic keratoses. Even if you don’t want to charge a lot, you can charge a small amount and increase your bottom line. Most patients don’t mind paying $10 or $20 to get rid of a few unsightly lesions. They get a big break and you take in some cash for little work. It’s a win-win situation.
Not charging for the number of Actinic Keratoses. A good deal of dermatologitsts have a magic number of lesions that they always bill for even though they frequently treat a significantly larger number. The effects of undercharging for AKs are profound. Assume that you undercharge five patients each day and all five patients have three lesions each. That’s 15 lesions that you don’t bill for each day. Assume the average payment of $15 for each lesion. Assume you see patients 4.5 days per week, 48 weeks per year. Your loss is $48,600! Need I say more?
Make the Best of Things
This year is destined to be a challenging year for all of us as we face war, threats of terrorism, changes in the way we live our lives and financial uncertainty. We each need to take more control of our business to assure that we can continue to serve our patients with quality medical care while securing our personal economic stability. Consider the information I’ve provided in this article and you’ll be on your way to increasing your fees and in turn, your income.
W e don’t need reminding that we’re in an economically challenging environment. When Walt Disney World (WDW) closes some of its attractions and resorts and lays off thousands of employees, we know that hard times are ahead.
You may think it strange to use an entertainment theme park as an economic thermometer. But I’ve lived in Orlando since before WDW opened, and I‘ve been able to analyze the business health of my company based on how the tourist industry is faring.
I can’t recall a time since 1971 (when WDW in Orlando first opened) when I heard of WDW closing a newly opened resort and attraction. Layoffs have occurred before, but not at this level. Everything is affected by tourist attendance (or lack of) at the Magic Kingdom. Companies that provide food, printing companies, transportation services, advertising agencies, hotels, restaurants, gas stations...you get the idea.
As we head full speed into the 2002 fiscal year, we must all be aware that the “trickle down” effects of September 11th are a reality and will affect our own medical practices. Accessing dermatology is not, for most patients, a life-or-death necessity. If times get tough, many patients will do without the visit to the dermatologist, but they’ll scrape enough together to see the cardiologist or family practitioner when the chest pain becomes alarming or signs of the flu are noticed.
Surviving the Tough Times
Although from 2001 to 2002 the Medicare conversion factor dropped from $38.2581 to $36.1992, resulting in a 5.4% across-the-board drop for all specialties, dermatologists actually saw their average fees increase by 2%. A mere 2% increase in a frail economy still spells financial stress. I doubt that most goods and services will increase by 2% or less. They’ll probably go up 7% to 10%.
Being cognizant of tough times is key to surviving them. It’s also important to maximize your chances of economic stability. Physicians, by nature, are more interested in the practice of medicine than in the machinations required to run the “business.” Many of us rely on our office managers or spouses to manage the business side of our practices. Unfortunately, our managers and spouses usually either lack the business acumen or if they do possess the necessary skills to run a successful business, they’re too encumbered by other tasks and job responsibilities to do the job right.
Three steps to Enhancing Practice Income
Regardless of the size of your practice, you should focus on the following three steps if you want to optimize your financial success for the coming year.
1. Analyze and revise your fee schedules. The operative word here is schedules (plural) not schedule (singular). Most practices have one badly designed, outdated, politically incorrect fee schedule. Here are some guidelines that you should know and follow:
Medicare should always be your lowest fee schedule. Federal law protects the Medicare patient from discrimination. The law states that you can’t charge a Medicare patient more for a medical service than you routinely charge any other non-Medicare patient. You should consider these important issues in this case:
• The law addresses what you charge — not what you get reimbursed. Therefore, if you charge Medicare patients $65 for CPT code 11100, then you must charge all your other non-Medicare patients at least $65. If you charge your local HMO $65 for the biopsy (CPT code 11100), but it only allows and pays $42.50, it’s not a problem as long as you charge the HMO $65.
• What does routine mean? Your office has a policy stating that patients who do not have insurance or who pay cash get a 30% discount. Using the biopsy example, if, based on the 30% discount, you charge $45.00 to all patients who pay cash or who have no insurance, it’s a violation of your Medicare contract.
Determine how many fee schedules should you have. You should at least have two schedules: One for your regular practice fees and the other for Medicare. For some practices having multiple fee schedules is too much of a hassle. With the sophistication of most medical billing software, it’s possible to have 99 to 999 fee schedules in your computer. The hard part is figuring out the fee schedules for the various contracted carriers. Most managed care plans don’t follow Medicare’s great system of sending out new fee schedules each November. Getting a fee schedule from most of these contracted plans is like trying to find the home (or should I say cave) address of Osama Bin Laden.
So how do you establish multiple fee schedules? First, set your main fee schedule. Next, set your Medicare fee schedule. Then set your second fee schedule based on a percentage above the Medicare fee allowables. Increase your fees appropriately depending on your practice location, at least once per year. When deciding how much to increase your fees by, keep in mind supply and demand in your area, location and competition. Some practices increase 20% to 30% above Medicare fees while others go 100% to 150% above Medicare fees.
Next, decide on how many additional fee schedules you want to use. The easiest way to determine this is to count up the largest plans in your practice area. Let’s say that Blue Cross/Blue Shield, United HealthCare and Nationwide represent 35%, 22% and 12% of the income in your practice, respectively. Start by developing fee schedules for those plans. Because it may be almost impossible to get allowables for all of the CPT codes in your computer from the managed care plans, you may limit your additional fee schedules to the providers that receive the top 20 or 30 CPT codes you most often use.
Contact a representative from each of the major plans and give him or her a list of the 20 or 30 CPT codes for which you want allowables. You might find this easier than asking for their entire fee schedule. If that doesn’t work, then you can gather the data by looking at explanation of medical benefits (EOMBs) from each of the major carriers you’ve received within the last 90 days. Make a list of the CPT codes for which you want allowables, then review the EOMBs and find the allowables for each of the top CPT codes. It’s important to note that if the charge on the EOMB is allowed 100% by the carrier, then this could be an indication that you’re undercharging. If this is the case, then it’s recommended that you increase the fee for that CPT code by at least 50%. Track the increase against future EOMBs. If the allowable increases, then you can ascertain the real allowable after several consistent payments are received for that CPT code. Revise the fee for that CPT code in the computer based on this new data.
2. Drop your lowest, worst paying contracted plan. Every practice has at least one or two contracts with plans that are just plain lousy. They won’t recognize modifiers and they bundle, fail to pay properly when units are billed, reduce “add on” codes (such as 17003 and 11101) by 50% even though they’re exempt from the multiple surgery reduction rule and require endless appeals to get paid when multiple services are provided on the same date of service. To add insult to all that injury, they pay lower than most of your other contracted plans. Isn’t it time to drop that plan?
But I Can’t Afford to Drop That Plan
Some physicians get squeamish when they think about dropping a plan. However, once you crunch the numbers, the figures speak for themselves. Look at it this way. What’s your overhead? Most physicians have overheads between 50% and 75%. Let’s assume that you have an efficient practice and your overhead is 55%. Based on the statistics of the UHC plan (see chart above), you’re losing money. You’re getting paid $0.54 on the dollar and your overhead is $0.55. It’s actually costing you to see the patients in this plan. So why should you stay in a plan that’s costing you money and taking away from the profit of the other plans?
Experience has shown that most practices that drop their lowest plan each year end up quickly replacing those patients with patients who have better paying plans. In almost all cases, the practice makes more money in the ensuing year.
Should You Try Negotiating?
If dropping the lowest plan isn’t an option for you and your practice, you could consider negotiating with the managed care plan. Some physicians are still under the impression that you can’t negotiate with managed care plans. You either accept what they offer or you get out. While that was true throughout the late 80’s and early 90’s, it isn’t anymore. Many areas are underserved with providers and the managed care plans are struggling to provide the scope of services they’re contracted to provide.
What should you ask for? Negotiating is all about getting what you really need. Let’s use the UHC carrier in the example from the chart above. Before you send them the termination letter, consider setting up an appointment with a decision maker at the plan. Many times the decision maker isn’t the physician representative. Try to set up a meeting with your practice administrator, your physician and the medical director of the plan. The higher up you go, the better your chances of negotiating successfully.
Make a list of demands and support them with examples and statistics. Changing three or four items in your contract may change the entire financial picture.
Negotiating the fee schedule. Assume that the UHC carrier had an awful fee schedule. Perhaps they pay 60% of the Medicare fee schedule. You could, as part of your negotiations, ask for them to pay 100% of Medicare. If they won’t consider that option, perhaps they’d consider paying your top 15 most commonly billed services at the Medicare rate.
Changing payment policies. Perhaps the carrier won’t pay for an E/M service on the same date of service as a surgical service. Or maybe they don’t recognize the –25 modifier resulting in your staff constantly having to send in time-consuming appeals. You could try negotiating so that they’d pay for all evaluations and management (E/M) visits as well as surgical services for the same dates of service. Additionally, you may ask for a contact person who’s responsible for reviewing your denials to ensure that they get reviewed and paid in a timely fashion.
Verifying coverage policies. Perhaps they aren’t covering repairs with excisions. You could negotiate for a change in some of their coverage policies resulting in better payment for services rendered.
Remember, it’s always better to ask for more than you want. If you have to meet them half way, you can compromise by “giving in” to some of their demands. The end result is that you end up getting the three or four things you wanted in the first place.
3. Charge for what you do. A great hedge on a recessive economy is to take advantage of the great business you have. By taking advantage I don’t mean abusing the system, but rather optimizing your business potential.
One of the most amazing observations I’ve made over the almost 3 decades I‘ve spent in dermatology is the fact that most dermatologists don’t charge for what they do. A lot of these physicians undercode for their E/M visits, provide cosmetic, medically unnecessary services for free or they don’t charge for the number of Actinic Keratoses that they treat. Let’s take a closer look into these problems.
Undercoding E/M visits. We can all agree that the system for documenting our office visits, consultations and inpatient services is ridiculous. The system is so convoluted, confusing and complex that many of us have just given up and decided to charge the lowest level of care hoping to avoid any audits, while others frequently don’t charge for any E/M service on the same day they do a procedure. Get familiar with the documentation requirements for all of the levels of care and then code your visits appropriately.
Free cosmetic services. It’s not uncommon for a dermatologist to snip that skin tag for free or put some liquid nitrogen on several asymptomatic seborrheic keratoses. Even if you don’t want to charge a lot, you can charge a small amount and increase your bottom line. Most patients don’t mind paying $10 or $20 to get rid of a few unsightly lesions. They get a big break and you take in some cash for little work. It’s a win-win situation.
Not charging for the number of Actinic Keratoses. A good deal of dermatologitsts have a magic number of lesions that they always bill for even though they frequently treat a significantly larger number. The effects of undercharging for AKs are profound. Assume that you undercharge five patients each day and all five patients have three lesions each. That’s 15 lesions that you don’t bill for each day. Assume the average payment of $15 for each lesion. Assume you see patients 4.5 days per week, 48 weeks per year. Your loss is $48,600! Need I say more?
Make the Best of Things
This year is destined to be a challenging year for all of us as we face war, threats of terrorism, changes in the way we live our lives and financial uncertainty. We each need to take more control of our business to assure that we can continue to serve our patients with quality medical care while securing our personal economic stability. Consider the information I’ve provided in this article and you’ll be on your way to increasing your fees and in turn, your income.
Current Issue
October 2024
Volume 32
Issue 7
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