3 Ways to Manage Payment Decline
By Matt Slimming, PT, DPT
Reimbursement has declined relative to the cost of doing business, and you are probably really feeling that this year.
In fact, this has been going on for a few years, so you might have been experiencing it for a while now. Besides the annual threat of Medicare reductions and sequestration, payment decline has been continuous as other insurers have been changing payment policies, Medicare Advantage plans have gained popularity, and commercial Medicaid plans grown thanks to support from traditional commercial payers.
However, 2022 is going to be different. The 15 percent reduction related to the CQ modifier for PTA treatment will influence revenue in a significant way. In addition, the dramatic rise in inflation has caused a leap in staff salaries. Combined, these changes further erode the profit margin of the average clinic. Many clinics are considering closing, selling or dramatically changing their operations in order to survive.
Unfortunately, we expect this pressure on profit margins to continue.
Here’s one piece of good news to keep in mind if things are feeling bleak: most clinics that operate well and invest intelligently in the right marketing should see a significant increase in patient volume through this decade.
There are three main initiatives that every practice owner should be taking now to succeed in an environment of payment decline:
- Eliminate unnecessary costs.
- Optimize revenue from existing operations.
- Consider alternate revenue sources and practice models.
Eliminate Unnecessary Costs
Track and review your expenses every month in your income statement to identify costs that can be reduced. Check every item to determine if you really need it, if reductions can be made, or if better terms can be negotiated.
Look closely at your staffing to see if any redundancies exist. Perhaps some staff can assume more duties as software allows for easier task completion. Optimize your staffing efficiency to save on labor costs as they are the lion share of expenses in most private practices.
Optimize Revenue from Existing Operations
There are four main areas to focus on here:
1. Optimize your RCM and Billing processes
Are you documenting and tracking all errors in benefits verification, authorization, and reauthorization? These can be extremely costly, but with ongoing training for your team, they can be eliminated.
If you cannot control the processes well and optimize your revenue cycle processes internally, you can choose to outsource these tasks instead.
Is your billing department fighting for every unpaid line item? Insurance companies are notorious for not paying (through denial or adjustment) individual CPT codes when there doesn’t appear to be any justification for these actions. If these line items are not addressed, that could easily subtract your entire profit for that visit.
Are you utilizing every available resource for patient balances to be paid? Ensure best practices when it comes to collecting the total balance from patients.
2. Optimize the percentage of referred patients that start care
There is so much variation between clinics in this metric. The clinics that perform best are the ones that track this data, hold individuals accountable for adhering to policies, and provide training to increase converted patient percentages as much as possible.
3. Optimize revenue per case
Determine what your revenue per case is currently, what it was last year, and what you could do to (ethically and legally) increase that. For example, are your therapists looking at the whole patient to see in what other ways your practice could help them?
4. Optimize revenue per visit
There are a number of factors that can help with this. Optimal use of PTAs is crucial. Given the new PTA reduction in reimbursement, you may want to minimize the time that they are spending with Medicare patients, for example. Correct use of CPT codes is also important. Most PTs treat in a way that allows use of diverse codes, but by not coding in line with treatment, money is being left on the table. There are other issues that should also be observed, such as coding according to AMA vs CPT guidelines as appropriate.
Consider alternate revenue sources and practice models.
1. Generate more revenue per patient
Creating alternative revenue sources for each patient will improve your bottom line. Consider these options:
Selling of nutritional supplements and equipment, orthotics, etc.
Pros:
- Augments the services provided in physical therapy
- Provides opportunities for staff to earn additional bonus revenue based on sales
Cons:
- Establishing a process for collecting cash for these services
- Maintaining inventory
- Requires additional marketing
Cash-based, add-on services (e.g., personal training, fitness classes, massage, class IV laser, dry needling)
Pros:
- Easy to recommend as the direct, tangible results are related to therapy
- Offer solutions beyond traditional therapy options
Cons:
- Additional personnel and scheduling needs
- Establishing pricing consistent with the market
Providing additional therapy services (balance, speech therapy, occupational therapy, diagnostic testing)
Pros:
- Broadens your clinics scope of practice
- When these services are provided with excellence, it provides you with a differentiator in the market.
Cons:
- Difficulty in staffing or inconsistent case loads
- These are not within the “wheelhouse” that the owner or manager is familiar with. As a result, ongoing excellence and profitability may be difficult to achieve.
2. Attract patients that provide us with greater revenue
Employer-based care. This is a broad area that includes disciplines such as prevention programs as well as capitated care models. It can be very lucrative for a clinic that invests time and effort in becoming a local leader in this area.
Pros:
- Avoiding insurance allows for clearer analysis of income and increasing payment rates over time.
- There is a significant barrier to entry, and so once a clinic is established (via expertise, ease, and reliability), it is relatively easy to maintain market share.
- Consistent revenue stream
Cons:
- Requires presence of local industry
- Requires significant time and effort initially to build and market these programs successfully.
Attorney-based care (expert witness, litigation care, etc)
Pros:
- Attorneys are usually fairly easy to work with.
- Reimbursement is significantly higher.
Cons:
- It may take extensive organization (including contracting with other healthcare services) to be successful.
- Delays in payment are expected.
- Some accounts may not be collectable.
- Too many patients of this type may sully the reputation of a successful clinic.
Cash or out-of-network model. This can work well if a clinic provides an in-demand service that is not being provided by other clinics (e.g., pelvic health) or if the clinic is in an underserved area.
Pros:
- Allows a clinician to be paid at their self-determined rate for providing a service that they are passionate about.
- Reduced outstanding receivables
Cons:
- It is becoming increasingly uncommon to be paid out of network as more providers are available to provide these services in-network.
- This creates uncertainty and difficulty making business projections.
With all of that information in hand, what can you do today to increase your profit margin? First, determine which item you will focus on this week—will you eliminate unnecessary costs, optimize revenue from existing operations, or consider alternate revenue sources and practice models? Once you’ve made that decision and when you are ready, determine if you are able to manage the necessary changes or require assistance from a professional. Your practice and profit margins will be better for it.
Matt Slimming, PT, DPT, is a PPS member and owns STAR Physical Therapy, STAR Management Company (a PT Billing and RCM Company) and STAR Fitness Center. He can be reached at matt@starptclinics.com.