Monitoring your money efficiently includes designing a fee schedule, monitoring claims, defining reasons for a denied claim, and identifying incorrectly paid claims
After reading my first article, “Reimbursement Part I: Contracting,” in the previous issue of Sleep Review (Vol 2, No. 3), you should have gotten enough information to understand how to negotiate a better contract and thus receive increased reimbursement. Remember, it is important to know and understand the sleep service cost structure and all the important elements that make any contract a win-win situation. Next, it is important to be able to utilize this contract with the proper billing and coding practices with the help of a Certified Professional Coder. It may be a valuable exercise to review your current contracts for sleep services, and determine if your services are profitable. If you have further questions in this area, we offer advisory services specific to contracting. Feel free to contact me at [email protected], review materials on our Web site at www.sleepcentermanagement.com, or contact us directly at (888) 556-2203.
In this article, I will focus on designing a fee schedule, claims monitoring, reasons for a denied claim, and identifying incorrectly paid claims.
Designing A Fee Schedule
One of the most commonly asked questions regarding fee percentages is which percentage a physician should use for his or her area. It is more a question of pricing philosophy than anything else. Some medical practice administrators advise their physicians and clients to charge the maximum allowable charge to the 75th or the 90th percentile, depending on the patient’s policy, if it is allowable. They say if you do not charge it, then it is lost income. Other administrators use a less aggressive reimbursement strategy. They try to place fees somewhere between the middle, the 50th percentile, and the maximum allowable charge; for example, the midpoint between the 50th and the 75th percentiles. Using this approach, you will be assured that you are not in the bottom half, yet you are below the maximum. This technique allows room for future increases and prevents an unpleasant explanations of benefits (EOB).
Depending on your pricing philosophy, we suggest reviewing your fees often. Biannual consideration is recommended by reimbursement experts and administrators. It is important to avoid sudden large fee increases. This will only create unhappy patients and managed care organizations. For price-sensitive procedures, you may want to maintain lower than normal fees. This approach will help increase referrals and pay off with increased volume. You must make a careful consideration to evaluate the fees and the procedures that are performed frequently and will produce the largest amounts of revenue for your practice. To review the fee schedule, assemble together copies of reference materials, such as your CPT and HCPCS code books, superbills with current fees, and your managed care contracts. Medicare’s RVS (relative value scale) must also be used as your fee guide.
Figure 1. Tracking sheet to determine which codes
are used more frequently.
Using all of your resource books, superbills, and explanation of benefits, you must determine which codes are used more frequently or produce the largest amounts of revenue. Construct a manual or computerized spreadsheet model, with the coding description at the left side of the spreadsheet. Add columns to collect data from each of the data sources (Figure 1, page 41). Take into consideration any information obtained from tracking the EOB since the last fee review. Adjust your fees to meet the pricing strategy goals. To determine the physician’s practice unique fee schedule, you must be commensurate with the sleep specialty, experience, and office overhead, which includes rent, salaries, utilities, insurance, malpractice insurance, equipment, and loan payments.
I would advise staying abreast of the changes in the medical marketplace by subscribing to medical management magazines and journals that feature articles on medical pricing and other health care issues. Three excellent sources of medical financial information are Medical Economics, a semimonthly magazine published by Medical Economics Publishing Inc, and American Medical News, a weekly newspaper published by the American Medical Association. The third resource for setting your fee schedule would be a physician’s fee reference. Produced annually, it is a comprehensive fee report based on geographic multipliers for your areas.
Claims Monitoring
EOBs along with the corresponding claims should be monitored at the time the payment is posted to the patient’s account. EOBs should be evaluated for three possible problems:
1. Full payment. Full payment should not be seen as a success. If the insurance carrier approves or possibly pays 100% of the fee charged, it is extremely likely that the fee is below the maximum that the insurance carrier is willing to pay. These cases should be evaluated to determine if the fee has been properly selected.
2. No payment. No payment should be viewed as a coding error problem on the part of the physician or coverage limitation on the part of the insurance carrier. These cases should be discussed with the insurance carrier in the form of a coding discussion rather than doing a fee payment discussion. Many carriers will help you code the claim so it can be paid if coverage is available under the policy. But they will not discuss why they did not pay the claim, nor will they tell you the usual, customary, or reasonable limits (UCR).
3. Reduced Payment. Reduced payment can be caused by improper coding by the coder or by a fee schedule or UCR limitations. Fee schedule or UCR limitations are usually shown on the EOB. If you suspect a coding problem, consider that this service should be coded using two or more codes rather than one. Some procedures require that supplies, drugs, or some other procedures be coded separately and payment will be made according to the value of each code. But be sure not to intentionally unbundle a procedure that should be coded as one. Watch for the helpful “Unbundling Alerts” throughout the schedule.
A major tool used in managed care for negotiations with physicians’ practices and other providers is for reduced fees in exchange for the promise of patient volume. A physician’s practice may agree to provide services at a discount with the understanding that the managed care organization would refer patients to the provider within the pool of existing patients. The physician’s practice may also accept capitated rates and elect to take financial risk to improve patient volume for practice profitability.
Reasons for a denied claim
In May 1999 the Medicare News gave a listing of several reasons for Denial of Sleep Testing Services. This list has also been adopted by many current third-party carriers. Thus, it is worthwhile at this point to review these reasons so as to get a continued feel for what may or may not be covered.
- If diagnostic testing is duplicative of previous sleep testing since previous results are still pertinent;
- PSG, MSLT, or cardiorespiratory sleep study is not covered under the following situations:
- For diagnosis of chronic insomnia;
- Preoperative evaluation of a patient undergoing laser-assisted uvulopalatopharyngoplasty without suspected OSA;
- For diagnosis of chronic lung disease (usually overnight oximetry is enough);
- In cases of typical uncomplicated parasomnias;
- In patients with epilepsy with no complaints of a sleep disorder;
- For diagnosis of restless legs syndrome;
- For diagnosis of insomnia related to depression; and
- For diagnosis of circadian rhythm disorder, shiftwork sleep disorder, delayed sleep phase syndrome, advanced sleep phase syndrome, and non-24-hour sleep wake disorder.
There are also some insurance carriers that post on their Web site what their plans cover.
Identifying Incorrect Payments
Figure 2 (page 43) provides an example of an EOB where a claim has been incorrectly paid according to the contracted rate. The example is an excellent resource for developing a sleep practice’s ancillary provider agreement for managed care organizations. These agreements are intended for the use of exclusive arrangements for sleep services. As you can see, the procedure code of this particular sleep service (95811-PSG) has one amount that has been charged (900.00, the contracted rate) and another that was allowed (596.00). You can clearly see that before posting the insurance payment to the patient’s account, the practice operations business center should perform a comparison of the EOB with the original insurance claim (here a difference of 304.00 was discovered). Otherwise, the patient would have been contacted and asked to pay the remaining balance, when in fact it was the insurance company’s responsibility to do so.
Figure 2. An example of an EOB that has been
incorrectly paid according to the contract rate.
A review must be made carefully. All services reported on the claim form should be represented on the EOB. The goal is to identify the charges that can be appealed or rebilled for payment. It is clearly noted on the HMO explanation of benefits that the $900 charge has been backed out and not allowed. Those particular types of claims must be investigated for denials. The reason for the service denial must be determined and an appeal made when appropriate. Payors’ requests for additional information also may appear on the explanation of benefits. These requests must be addressed immediately. The goal is to get paid as quickly as possible by the insurance company. Each insurer also has a time limit on claim rectification. One of the common trends is for denied services. The check posting person in the business center must look for billing errors that should be corrected.
The information containing the explanation of benefits should be posted on the computer and promptly and carefully evaluated once a week. Any errors in the posting process may cause a patient’s account balance to be incorrect. Tracking EOBs by carrier will help to monitor similar payments for similar procedures and diagnoses. After the EOB has been carefully reviewed, the insurance payment then should be posted to the patient account. The billing office must account for the difference between the charges submitted on the claim and the amount actually paid contractually. A billing office must always specifically identify on the patient’s record and a spreadsheet the type of adjustments made, whether it be Medicare, Medicaid, HMOs, or PPOs.
Contractual Adjustments
These types of adjustments are generally called contractual adjustments. A contractual adjustment is the difference between what the practice bills and what it is legally entitled to collect. It is vitally important to make sure that the contractual adjustment shown on the EOB is in accordance with the exclusive contract. It is not uncommon to see contractual discounts taken in error for payors for which the physician has not approved a previous discount agreement. Identification of contractual adjustments by payors alerts the practice as to which insurance programs are reducing charges the most. If the practice is writing off a large amount for a specific plan, the practice should investigate and assess whether it makes sense to continue with the specific insurance plan. At the same time, the practice should determine if the write-offs are reasonable and, if so, whether they can be reduced. Specifically identifying write-offs is also an excellent way to account for withholding adjustments made by managed care plans. This is where a practice hires CPARs (certified patient account representatives), who are certified in these types of fields. After the practice takes into account the contractual adjustments and other reductions, an insurance plan usually pays only a fraction of the allowed charge. Medicare, for example, pays only 80% of the allowed amount. Some indemnity plans pay 90%. The central billing office should post the amount paid by the insurance plan to the patient’s account on the computer. The balance of the account is the patient’s responsibility unless you have a specific exclusive arrangement, as in the examples of services indicated previously.
The next question is how we get the money the insurance company owes us. Let’s go back to the previous example I have shown you. Once the situation has been recognized, one of several types of letters is created explaining what was found, with copies of the contract and the EOB sent to the carrier.
It is essential that the medical practice appeals to insurance companies be handled correctly. For Medicare and Medicaid plans, the carriers in each state have a specific method for appealing insurance claims. Other insurance carriers’ appeals should be submitted in writing. Your appeal letter should state clearly and simply why the charge should be allowed and the medical necessity, if applicable. Attach documents that support your claims. A central billing office must review samples of the appeals letters to see how often and how quickly the office is being paid after your appeals are filed. If reimbursements have taken too long, the cause could be a poorly drafted appeal letter or the failure to include supporting documents. Never send an appeal letter that simply asks for a review of the denied or reduced charge. The letter must explain to the insurance company why the amount should be paid. Otherwise, the insurance carrier will assume only that the claim was filed correctly in the first place and then subsequently deny or reduce the charge.
If your letters and appeals are successful, one of several things will occur. An additional payment can be made directly to the practice. Or a second situation can occur where the money that was given incorrectly for patient Adam Apneic was taken out of that of another patient (Nancy Narcolepsy), and then a full reimbursement was performed (900.00). Or a third example would be that the carrier sends a “refund request” asking the practice to send them a check for the incorrect payment (596.00) and then a full reimbursement would be performed (900.00).
Conclusion
As you can see, designing a fee schedule, claims monitoring, identifying the reasons for a denied claim, and identifying incorrectly paid claims are essential parts of every sleep medicine practice.
Michael J. Breus, PhD, ABSM, is a senior partner at the Sleep Center Management Institute, Atlanta; (888) 556-2203; www.sleepcentermanagement.com ; [email protected].
