As reimbursements shrink, home care companies across the size
and revenue spectrum told us they are working on business processes
to improve efficiency and increase profitability. A general
“regrouping” is how one provider put it. But based on
the results of HomeCare's 2006 Reimbursement Survey, most
have a long way to go.
More than 60 percent of the companies participating in this
year's survey said they don't calculate days sales outstanding
according to product category or payer. Though claim denials
average 12 percent, only 37 percent of respondents appeal all of
them. A quarter said they are not using HME-specific software for
even the most basic tasks.
Without such practices, how can providers know where their most
profitable business lies? How can they improve processes if they
don't know there's a problem? How can they become more efficient if
they're not using the tools to do so? All questions posed by HME
consultants and reimbursement specialists who reviewed the survey
results.
What's more, these experts say, drilling down to find those
internal stats will be vital not just for companies to remain
competitive — but to remain in business.
“Companies that don't focus on maximizing reimbursement
will have little chance of making a profit,” says Miriam
Lieber of Lieber Consulting, Sherman Oaks, Calif. “In light
of the demands and constraints placed on HME companies by the
government and other payers, they have to work smarter and harder
just to maintain status quo.”
Wallace Weeks agrees. “To keep ahead of the reimbursement
cuts that the Medicare Modernization Act mandates, companies are
going to have to be more efficient not only in billing and
collections but in every aspect of their business,” says
Weeks of Melbourne, Fla.-based Weeks Group.
“The environment has been forgiving enough in the past
that providers could focus on helping people and not give much
attention to managing the business. We no longer have that
forgiving environment.”
In fact, according to Lieber, Weeks and others, there is room
for improvement in virtually all areas of providers' reimbursement
practices, particularly among small home care companies.
Using Technology
With reimbursement at the core of most home care businesses, 80
percent of HME execs indicated they handle these functions
internally with their own full-time employees.
Three-quarters of the survey group said they rely on
HME-specific software to help, especially with accounts receivable.
The results also show larger companies use HME software more often
for more tasks. Almost half (49 percent) of those with revenues of
$3 million or more said they use industry software to generate
financial and management reports that can keep them on top of their
businesses and aid in decision-making.
Technology is also one way some providers said they hope to
increase the effectiveness of reimbursement functions. Here, too,
larger companies' intentions best those of the survey group as a
whole. Twenty-five percent of those companies reported they plan to
change to different software that will increase productivity, and
13 percent said they plan to invest in a document imaging system.
(“Shut those filing rooms,” advises Weeks.)
Smaller companies, on the other hand, indicated they will be
more likely to reduce their billing/reimbursement staff and hope
the remaining employees can pick up the slack.
The bad news is that more than half (53 percent) of respondents
overall either did not answer or said they were “not
sure” exactly what they would do to increase the productivity
of their reimbursement operations.
“I can only conclude that [these] respondents have their
heads buried in the sand waiting for the return of the early 1990s
and Medicare fee schedule increases,” says Bently Goodwin,
CEO of RemitData, Memphis, Tenn.
“There are huge productivity and efficiency gains that
must be made in HME reimbursement departments, but [many] of
the survey respondents don't realize it or think they need to put a
plan in place to address it.”
Tracking Denials and Appeals
It's “painfully obvious” that there's plenty of room
for improvement, Goodwin continues, when considering denial rates.
Across all categories and payers, the survey group said denials
average 12 percent for the claims they submit. But Goodwin —
whose firm examines actual Medicare claims adjudication data
— says for that payer, the industry average hovers around 20
percent.
And, according to the survey, only 37 percent of providers
appeal all of their denials, even though, on average, they said 62
percent of their appeals are successful.
“The appeals process is sometimes lengthy and arduous.
Nonetheless, it is imperative that you submit reconsiderations and
appeals to maximize reimbursement,” according to Lieber.
“Why would you want to leave money on the table, especially
when it is yours and the federal government has it?”
She also stresses the importance of continued training to make
sure claims are clean. In past surveys, “question about
medical necessity” has been the top reason for claim denials.
It still ranks right up there at No. 3. But this year, respondents
listed the top two reasons their claims are denied as
“inaccurate/missing information” and
“inaccurate/missing code or modifier.”
With claims requirements/forms changing, making sure that
employees keep up becomes increasingly important. “Employees
must be taught how they are going to handle CMN changes since they
are an integral part of any HME process,” Lieber notes.
Additionally, she says, “encourage your staff to share the
changes with referral sources so they will begin to familiarize
themselves with what they will do differently beginning in
October” when a raft of changes is set to kick in.
“If you have a denial problem, you can't just throw it at
your staff and say, ‘Fix it.’ You have to stay on top
of this yourself and make sure you are tracking the performance of
your employees,” adds Sarah Hanna of ECS Billing &
Consulting, Tiffin, Ohio.
“How many reviews are they doing a week? How many
resubmits are they sending? How many CMNs are they developing, and
how long is it taking to get CMNs and physician orders back? Does
your staff have a process in place to follow up with the
doctors?”
Maintaining strong reimbursement protocols is key, Hanna says.
Setting up processes that work and then tracking them is a
“management start,” she explains, “and then
management has to have the buy-in from their employees” to
make sure those processes stay intact and performance doesn't
falter.
Calculating DSO
Hanna also believes that while many providers might think
they know what their company's individual numbers are for any
performance measures, in reality, most haven't done the math to
find out for sure.
“People are so caught up in the day-to-day running of the
company that they haven't taken the time to analyze their business
because it requires extra time,” she says. “In the
short term, doing this is a real pain, but in the long term, the
gain you get from knowing your business more intimately can help
you make processes more efficient and get you out of your rut and
moving forward.”
Take DSO, for example. The overall average for companies
participating in the survey is 54 days. But Hanna points out she
doesn't think most HMEs calculate DSO correctly and may be looking
only at the date the claim is submitted. “They should be
looking at the date of service to the date of payment,” she
says.
“Are they counting all those ‘holding’ days
they're waiting for medical documentation or prior
authorization?” Hanna asks? If not, then that can bring DSO
down to what providers might consider an acceptable level but that,
in actuality, is artificially low.
“You have to get a handle on that money just sitting there
waiting for something to be done,” she says.
Another red flag: Among the survey group, only 14 percent of
companies said they calculate separate DSO averages by product or
service, and only 21 percent said they calculate DSO by payer. If
denials also are not tracked by product/service or payer, say the
experts, providers truly may not realize where their problems
— or profits — lie.
Building Profitability
“Companies should know these things, but they
don't,” says Weeks. He adds that among small providers and
“even among big companies with fairly sophisticated
management teams, most could not tell you with any real definition
who their top 10 payers are and which HCPCS codes are giving them
the greatest revenue.”
That means, he says, “they don't know which are the
product-payer combinations that are really driving their
profitability.”
Such knowledge will be essential for companies in the next few
years, Weeks contends, and he worries that “many companies
are so afraid of what's coming they're like deer in the headlights,
and they're not being as active as they need to be in making
changes and becoming more efficient.
“If companies have shrinking profit margins and don't find
ways to improve their efficiencies, two things will happen: One is
they will struggle with cash flow if they can't accelerate their
turnover in A/R. The second thing is that profitability will
decline by amounts equal to reimbursement cuts if they don't find
more efficient ways to do things, and that will make it even more
challenging for them to be competitive.”
If competitive bidding and other provisions of the MMA remain
intact, Weeks predicts a loss of 4,000 providers by 2010.
“That doesn't necessarily mean they will close their
doors,” he notes. “They might wind up getting into
exercise equipment sales or home modification … but they
won't be billing Medicare for it — or anybody.”
Respondent Profile
| Less than $1 million | 35.6% |
| $1.0 to $2.99 million | 28.0% |
| $3.0 to $9.9 million | 15.3% |
| $10.0 to $24.9 million | 3.8% |
| $25 million or more | 10.3% |
| No Answer | 7.0% |
| 10 or fewer | 46.0% |
| 11 - 19 | 19.2% |
| 20 - 49 | 14.9% |
| 50 - 99 | 6.5% |
| 100 or more | 13.4% |
What the Experts Say
“There are huge productivity and efficiency gains that
must be made in HME reimbursement departments, but [many] of
the survey respondents don't realize it or think they need to put a
plan in place to address it.”
— Bently Goodwin, RemitData
“Many companies are so afraid of what's coming they're
like deer in the headlights, and they're not being as active as
they need to be in making changes and becoming more
efficient.”
— Wallace Weeks, Weeks Group
“In the long term, the gain you get from knowing your
business more intimately can help you make processes more efficient
and get you out of your rut and moving forward.”
— Sarah Hanna, ECS Billling & Consulting
“Why would you want to leave money on the table,
especially when it is yours and the federal government has
it?”
— Miriam Lieber, Lieber Consulting
Reimbursement Practices
| Under 25 | 11.1% |
| 25 to 99 | 6.5% |
| 100 to 299 | 13.0% |
| 300 to 999 | 14.6% |
| 1,000 to 2,499 | 5.7% |
| 2,500 or more | 10.0% |
| No Answer | 39.1% |
| Patient name, address, phone | 96.2% |
| Physician name | 92.3% |
| Type of equipment needed | 91.6% |
| Insurance information | 90.8% |
| Diagnosis | 84.7% |
| Whether patient has medical documentation (prescription) | 81.6% |
| Patient weight and height | 72.0% |
| Additional contact person | 70.5% |
| Whether patient already has same or similar equipment | 68.2% |
| Length of need | 55.2% |
| Interest in other products | 24.1% |
| Physical/occupational therapist | 21.1% |
| Less than 10 minutes | 23.0% |
| 10 to 19 minutes | 40.6% |
| 20 to 29 minutes | 13.4% |
| 30 minutes or more | 14.2% |
| No Answer | 8.8% |
About This Survey: Data were collected Feb. 14 through
Mar. 27, 2006. Methodology conforms to all accepted research
methods, practices and procedures. Percentages are based on
responses from 261 companies. Not all respondents answered every
question, and some totals may add to more than 100 percent due to
multiple responses.
Survey Fast Stats
Medicare accounts for the largest portion of respondents'
revenue at an average 41 percent overall, and increases as company
size decreases.
Eighty (80) percent of the companies surveyed report that all
reimbursement-related tasks are handled by internal staff.
The number of accounts HME companies typically handle varies
greatly, from fewer than 25 accounts (11 percent) to more than
2,500 accounts (10 percent). The midpoint for this year's survey
group is 280, and the average number of accounts handled is
1,588.
On average, 39 percent of billing departments break out claims
by payer, while 26 percent break out claims alphabetically.
Twenty-four (24) percent said they don't separate claims.
Providers were split on whether they designate internal staff
claims “specialists” for specific product categories
(46 percent do vs. 50 percent don't) or different types of payers
(45 percent do vs. 50 percent don't).
Sixty-four (64) percent indicated their employees spend less
than 20 minutes for order intake. On average, the process takes 16
minutes for survey respondents.
Forty-nine (49) percent of respondents collect co-pay/private
pay from customers up front; 36 percent do not.
An average 12 percent of responding providers' claims are
denied.
HME companies appeal an average 72 percent of denials and, on
average, 62 percent of their appeals are successful. Thirty-seven
(37) percent of companies appeal all denials.
The largest percentage of providers (51 percent) said claims are
denied because of inaccurate/missing information, an
inaccurate/missing code or modifier (48 percent) or questions about
medical necessity (47 percent).
The average days sales outstanding (DSO) for this year's survey
group is 54 days, with a majority (54 percent) reporting under 60
days. Only one in five providers calculates DSO by product/service
or payer. The practice of calculating detailed averages increases
with company size.
Respondents said they use HME-specific software most frequently
for accounts receivable (58 percent) and order intake (39 percent).
A quarter said they do not use HME software.
Denials and Appeals
| 2% or less | 10.0% |
| 3% to 5% | 19.5% |
| 6% to 10% | 25.3% |
| 11% to 20% | 18.8% |
| More than 20% | 8.4% |
| No Answer | 18.0% |
| Mean: 12% of claims are denied |
|
| 10% or less | 18.0% |
| 11% to 49% | 3.8% |
| 50% to 99% | 19.9% |
| 100% | 37.2% |
| No Answer | 21.1% |
| Mean: 72% of denials are appealed |
|
| Inaccurate/missing information | 51.0% |
| Inaccurate/missing code or modifier | 47.5% |
| Question about medical necessity | 47.1% |
| Same or similar equipment | 41.0% |
| Duplicate claim | 37.2% |
| Product or service not covered | 34.1% |
| Inadequate documentation | 31.4% |
| Wrong payer | 24.5% |
| Third-party payer error | 15.7% |
| Service or equipment not prescribed/Rx not current | 11.5% |
| 10% or less | 13.4% |
| 11% to 49% | 17.2% |
| 50% to 99% | 37.5% |
| 100% | 5.7% |
| No Answer | 26.2% |
| Mean: 62% of appeals are successful |
|
| Product/Service | Mean Rating |
|---|---|
| Aids to daily living | 2.6 |
| Beds & support surfaces | 2.4 |
| Diabetes supplies | 2.4 |
| Incontinence products | 2.5 |
| Infusion therapy | 2.3 |
| Mobility/seating & positioning | 2.8 |
| Prosthetics/orthotics | 2.4 |
| Rehabilitation products/services | 2.7 |
| Respiratory products/services | 2.6 |
| *Reflects data only from respondents who offer these products/services. |
|
| Payer | Mean Rating |
|---|---|
| Medicare | 2.8 |
| Managed Care | 2.7 |
| Medicaid | 2.7 |
| Private Insurers | 2.7 |
| *Reflects data only from respondents who bill to these payers. |
|
Reimbursement amounts are shrinking. What action(s) is your
company taking in response?
“Drastic reimbursement cuts are hurting a lot. Soon
there will be fewer and fewer providers … and a less healthy
group of providers to serve even more beneficiaries,” penned
one provider. “We understand that the government wants to
force small business out. [Fewer] claims equals less work for
them,” wrote another. So how are their companies handling the
government's reimbursement cuts? More than 140 individual providers
shared their thoughts on this question. Following is a
representative sample of responses in their own words.
“Advertising”
“Becoming more efficient”
“Better buying practices, less staff, increased product
mix”
“Better tracking and resubmission of old claims”
“Cash sales only”
“Change/add product line”
“Checking claims more thoroughly before submission,
increasing retail cash sales”
“Cheaper equipment”
“Considering selling business”
“Eliminating ‘bad’ business or accounts —
if they don't pay or make it a hassle to collect, I don't do
business with them”
“Increase sales, productivity, track denials”
“Increase volume“
“Lay off employees, cut back on free follow-up calls, cancel
health insurance”
“Looking for other sources of revenue”
“Lower charity cases, staff and services that have been
provided free in past”
“More cash sales”
“Not accepting assignment”
“Reduce operating costs”
“Reduce staff, see patients less frequently … hope we
can make it”
“Reducing inventory costs, streamlining operations with
technology, increasing retail”
“Reduction of staff, new software, refocus on more profitable
referral sources, reduce/switch product offerings”
“Seeking emphasis on the highest margin areas”
“Selling mostly to non-Medicare, non-Medicaid and
non-insured”
“Staff education to improve productivity”
“Stay small”
“Streamlining, new software, cutting delivery
times”
“Training staff to handle things more
efficiently”
“Up market share, up quantity”
“We just are dealing with other parts of our business more
and not encouraging more DME”
Efficiency
| Change to different software that will increase productivity |
16.1% |
| Implement document imaging solution | 10.7% |
| Reduce staff and hope remainder can pick up the slack | 8.4% |
| Implement additional software that works in conjunction with existing software to increase productivity |
8.0% |
| Hire a consultant to review reimbursement functions and make recommendations for increased productivity |
7.3% |
| Outsource reimbursement functions to a billing service | 6.1% |
| Not Sure | 16.5% |
| No Answer | 36.8% |
PWC Denials Remain ‘At Normal Levels’
In one of the most worrisome claims categories for providers
— power mobility — more than a third (36 percent) of
the survey respondents said they understand what is required for
reimbursement of power wheelchairs. But 19 percent said they are
“not sure,” 15 percent said “no” they don't
get it, and 9 percent said they are still “totally
confused” by recent changes.
Twenty-eight percent said they are having to educate physicians
about the current documentation process. (The survey was fielded
before the final rule was published April 5.)
“Something else we do not get paid for, education of
docs,” one frustrated provider wrote. “They are pretty
clueless on what's required,” confirmed another. And
according to a third, “Some docs are confused and afraid to
order power mobility equipment.”
To make sure they're covered, respondents gave a long list of
specific documents they're asking referral sources to provide to
substantiate medical necessity for power devices. Even so, said
one, “Everything under the sun is never enough.”
In spite of their worry, the majority of respondents (40
percent) said their power wheelchair denials had “remained at
normal levels” since CMS' new mobility coverage policy was
issued in May 2005.
Layoffs May Not Be The Answer You Need
As for staff, a number of respondents wrote in that they are
considering layoffs — of reimbursement and other employees
— to make ends meet.
But according to Weeks Group's Wallace Weeks, “my
recommendation is not to focus only on the right size staff but on
making continuous improvement in the productivity of the company,
including in billing and collecting.”
As a gauge, he says, if billing employees also are responsible
for collections and third-party documentation, annual collections
per employee should average about $700,000. If the employee is only
responsible for past due accounts (collections), that figure should
be approaching $1 million, “and these numbers are
improving,” he points out.
For specific reimbursement-related activities, Weeks gives these
industry cost medians:
| ▪ Process and collect a CMN | $26.49 |
| ▪ Prepare and submit a claim | $12.89 |
| ▪ Enter an order | $17.18 |
Days Sales Oustanding (DSO)
| Less than 30 days | 9.6% |
| 30 - 44 days | 21.8% |
| 45 - 59 days | 23.0% |
| 60 - 74 days | 11.5% |
| 75 - 89 days | 8.0% |
| 90 - 120 days | 5.0% |
| More than 120 days | 2.3% |
| Unsure | 5.4% |
| No Answer | 13.4% |
| Mean: 54 days | |
| Payer | Mean DSO |
|---|---|
| Managed Care | 51.9 |
| Medicaid | 51.4 |
| Medicare | 46.3 |
| Private insurers | 49.6 |
| * Means for each catagory based on data from respondents who calculate DSO averages by payer type. |
|
