Reed Tinsley, CPA

Fix ambiguous fair market value (FMV) calculations in your buy/sell agreement

Perhaps the most contentious area of a buy-sell agreement is the method for calculating buy out. One small misstep can lead to an overvaluation, costing the practice more money than it owes. However, if the practice undervalues the buy out, the departing partner may think he or she deserves more money, leading to an expensive and time-consuming legal battle.

Many groups still use a FMV approach, relying on lawyers and third-party appraisers to calculate the price of a buy out. Using FMV calculations gives lawyers and appraisers quite a bit of latitude to argue about what the buy-out price should be. One appraiser may value the practice significantly higher or lower than another, and this ambiguity can cause complications when a partner leaves.

Practices that opt to calculate a buyout using FMV should include language in the buy-sell agreement stipulating who can conduct the appraisals. You need to make sure that whoever does the valuation has demonstrated experience in valuations of physician practices.

In most instances I advise against using FMV in a practice that uses a productivity-based compensation formula, even if stipulations about the appraisals are included in the agreement. A FMV appraisal values the practice as a whole, overlooking the individual productivity and contributions of individual physicians. Thus, even if it isn’t time for an annual review, if you’re practice has recently revamped its compensation formula to emphasize productivity, it may be time to also revisit the buy-sell agreement.

It doesn't become A/R if you collect it at the front desk

Remember it never gets to be a receivable if you collect it at the time of service. I wonder how many physician practices realize the real true "cost" it takes to collect these often small balances? In any event, quantify the percentage of office visits where a collection at the front desk takes place. Is it acceptable? If not, try the following:

Does the patient know your collection policy? Develop a financial policy to distribute to patients when they arrive; make it available on your website, too. Hang tasteful but clear signage in the front office. Don’t beat around the bush by printing signs that say, “Our Practice Expects You to Pay Your Copayment.” Instead, be direct with signs that read, “Your Insurance Company Requires You to Pay Your Copayment.” Send the message professionally, but make it clear that you expect to receive payment at the time of service.

Train front desk staff on how to ask. There is an art to collections, and a large part is knowing how to ask for money. Instruct your staff to stop asking patients, “Would you like to pay?” Replace that request with “How would you like to pay today?” As they ask for payment, staff must make eye contact with the patient (or guarantor) and use his/her name during the conversation. Writing out the receipt while asking the question is a great tactic because it sends the message to patients that your practice expects payment.

Accept all forms of payment. Allow patients to pay by cash, debit or credit card. Personal checks could be an option, but consider using a check verification service if you encounter bad checks – those with insufficient funds. Look at the commission rates on credit card services to make sure you get the best deal possible from card merchants. Don’t hesitate to steer your patients to a particular form of payment. For example, you might get a better rate when patients use debit cards for amounts under $20, but a more favorable rate when patients use credit cards for amounts over $20. Of course, you should not hesitate to accept any form of payment, but it doesn’t hurt to request a particular type of payment depending on which is more advantageous to you. Most patients won’t care one way or another because it is you, not they, who sees the commission going to the card processing company.

Look in to pre-authorized credit cards. Pre-authorized cards allow you to accept pre-payments via credit card without encountering the hassle and danger of storing the patient’s credit card information. These systems capture and store credit card information for you to use later when the claim has been adjudicated. These systems also allow you to set up payment plans securely and seamlessly.

Determine what to ask for. If you have a contract with an insurance company, review it to determine whether you can request the payment of the coinsurance and unmet deductible at the time of service – most likely you can. Despite the well-entrenched urban myth that circulates in the medical practice industry, most insurers do allow you to collect the patient’s coinsurance and unmet deductible at the time of service. Once you’ve identified any exceptions, ask for patient for these payments at the time of service. For coinsurance and unmet deductibles, you’ll need to know what services the patient is receiving (because allowances are based on CPT® codes). Thus, you’ll need to perform this collection activity as patients check out of your practice. Some insurers offer a web-based look-up tool to locate the correct rate. There also are software vendors specializing in contract management that can deliver this information to your staff. Alternatively, develop a spreadsheet that lists your top CPT® codes and the corresponding allowances for each code by each of your major payers. Train your check-out staff to look up the codes on this spreadsheet.

Collect a deposit from the uninsured. For patients who do not carry insurance, request a minimum deposit. Set the “deposit” as your full charge, a reduced flat rate, or an average of the copayment that would be expected of your commercially insured patients. You may choose to collect different deposit amounts from new patients versus established patients (typically, deposits required of new patients are higher because there is no relationship or history with your practice), but be consistent within the categories. For patients who can’t afford to pay, offer a financial hardship policy that grants discounts based on the level of hardship. The key to making this work is to take a consistent approach to charging deposits – and have a written hardship policy that you follow consistently.

Collect that A/R balance too. Time-of-service collections include the amount owed for that particular visit – and that which is outstanding from a prior encounter. Don’t hold yourself to collecting past-due balances – ask for all balances, regardless of age. Print a statement for all patients at check out that reflects any payments they have made as well as the balance due. Giving these statements to patients at check-out is not only free (other than the cost of the paper), but it reinforces to them your expectations of getting paid. It also eliminates the excuse patients so often give to your business office: “I never received a statement.”

7 elements of an effective compliance plan

The Office of Inspector General (OIG) has recommended the following seven elements of an effective compliance plan. This applies to all healthcare entities. Although these elements are well known, how many of them are currently implemented within your physician medical practice?

- Designation of a chief compliance officer and implementation of a compliance committee;

- Implementation of compliance policies and procedures, including standards of conduct;

- Have open lines of communication;

- Conduct training and education:

- Respond to detected offenses;

- Implement internal monitoring and auditing; and

- Have enforcement and disciplinary standards.

HEAT Healthcare Toolkits Posted on OIG Website

The Healthcare Fraud Prevention and Enforcement Action Team (HEAT) and the Office of Inspector General have posted a Toolkit consisting of a series of podcast training videos on the following subjects:

• How to Use the Exclusions Database
• How to Report Fraud to the OIG
• OIG’s Self-Disclosure Protocol
• Tips for Implementing an Effective Compliance Program
• Compliance Program Basics
• Physician Self-Referral Law
• False Claims Act
• Federal Anti-Kickback Statute

For any size physician practice, you should view these training videos - compliance is a very HOT topic these days, not only on a Federal level but a State level as well.

http://oig.hhs.gov/newsroom/podcasts/index.asp

Update buy-sell agreements to sidestep conflict when physicians leave

A lot can change in a practice over the course of a few years—the group’s culture can shift, its financial standing may improve or decline, it may lose or gain physicians—and a practice may be setting itself up for financial or legal troubles if it doesn’t keep its buy-sell agreement up-to-date to reflect these changes.

Buy-sell agreements are the cornerstone of most private physician practices because they establish a process for bringing new owners onboard and outline the financial and professional obligations of each member when a physician leaves the practice. But many practices leave these crucial agreements sitting on the shelf to collect dust for years at a time, which can be a “ticking time bomb” in this rapidly changing healthcare environment.

It’s amazing how these things get executed but they don’t get looked at for years and years, and the only time they get looked at is when an event happens that forces them to do it. That’s when all the land mines start getting stepped on, and in some cases, that’s when the lawsuits start occurring. That’s why it’s important to conduct brief internal review of buy-sell agreements annually, and a more thorough audit if there’s a drastic change to the practice’s structure.

The ideal time to do this is during the practice’s annual corporate meeting when a lawyer and accountant are present. It can take as little as five minutes to make sure the stipulations of the agreement still match up with the goals and realities of the practice. You’re not necessarily going to solve it at that meeting, but it’s an easy opportunity to take five minutes to see if you need to update your agreement.

When was last time your medical practice had a HIPAA risk assessment?

As you are probably aware, the government has begun the first round of HIPAA compliance audits - these audits have included physician practices. So the million dollar question is: Is your medical practice really in HIPAA compliance? I find most are not even though they think they are.

A good first step to HIPAA compliance is to conduct an internal HIPAA risk assessment. At a minimum, a risk assessment must include these questions:

• What types of protected health information (PHI) do we possess, receive, store or transmit?

• How sensitive is this data in what it reveals about patient medical conditions, procedures, diagnoses and prescriptions? Data about sexually transmitted diseases, sexual health, pregnancies and mental health are considered especially sensitive.

• How valuable or desirable might this data be to criminals? Inclusion of social security numbers, mother's maiden names, home addresses, payment details and long-term medical history are considered sensitive because they can be used by criminals to commit financial and healthcare fraud.

• What steps and procedures are in place in our medical practice right now to protect the PHI we possess, receive, store or transmit?

• Finally, what additional steps, procedures, or technologies are necessary to bring our data protections into line with generally accepted information-technology standards or with National Institute of Standards & Technology (NIST)?

Medicare says a physician MAY bill incident to another physician’s services

This is big news! My friend and colleague David Zetter (www.zetter.com) has been in discussions with CMS in Baltimore about this issue. He recently posted the following email to the NSCHBC listserv (www.nschbc.org):

Hello Everyone-

I thought I would share some information with you that I found out today from CMS in Baltimore via a phone conversation and documented in an email. I know that this will take some of you by surprise, because it did me.

A physician MAY bill incident to another physician’s services as long as they meet the “incident to” regulations found in 42 CFR Ch IV § 410.26. This comes straight from the person’s mouth that wrote the regulations at CMS.

What makes this significant is that a new physician to a practice may see patients and bill incident to another physician’s services prior to their effective date of enrollment or reassignment with Medicare. The new physician would bill via the supervising physician’s NPI as the rendering provider. The new physician wouldn’t be identified on the claim for services at all, BUT the supervising physician WOULD be held liable for all services and SHOULD sign off on all service notes and reports for the patients seen. This would be our recommendation to our clients.

Mr. Zetter,

I wanted to respond to your questions directly. I work in the Division of Practitioner Services on incident to payment policy.

I understand your concerns. There are situations where a physician billing for another physician could be used to hide unethical practices. While it is true that we do not specifically name physicians as auxiliary personnel for the purposes of incident to, we also do not name any type of medical professional as auxiliary personnel in the definition. We also do not require that the auxiliary personnel be a lower level professional. The definition is broad enough to include physicians and many other types of health care providers and staff. We also stated in the preamble text of the CY 2002 Physician Fee Schedule final rule with comment period that, “We deliberately used the term any individual so that the physician (or other practitioner), under his or her discretion and license, may use the service of anyone ranging from another physician to a medical assistant.” While I do not think it is the typical case for incident to, it is not prohibited for a physician to directly supervise another physician and bill under the incident to provision when all the required conditions are met.

Please contact me if you have any follow up questions or concerns.

Best regards,
Erin
Centers for Medicare and Medicaid Services

Best regards,

DJZ

Are you catching reimbursement errors in your medical practice?

How does a physician practice or any health care provider really know for sure it is receiving the correct reimbursement from its managed care payors? According to an informal polling of practitioners at a recent health care conference, over 50% of the participants indicated errors have been found with regard to what the medical practice was contracted to receive as payment and what the managed care company actually paid for the service. For example, the practice was contracted to receive $44 for visit code 99213 from ABC Managed Care Company but the Explanation of Benefit (EOB) indicated only $38 was paid. Unfortunately, this type of situation seems to be occurring with increasing frequency. It affects not only physician medical practices, but all health care providers as well, including hospitals, health care facilities, and other health care service providers.

Managed care companies do make mistakes and it is up to the health care provider to catch these mistakes and file an appeal for the additional reimbursement. Catching reimbursement errors can be extremely difficult for many providers, especially smaller service providers. This includes the one to two doctor medical offices. Small practices or health care providers often do not have the time nor the personnel to pay attention to this type of activity, as important as it now is. However, your software system in place can usually catch these reimbursement errors if set up correctly.

The point here is clear - many times you are not getting reimbursed correctly - are you catching these errors????

Look for these symptoms when trying to diagnose poor practice financial performance

If your income statement's bottom line shows an unexpected poor performance, use other statement details to track down what happened. Like "classic" symptoms pointing you toward ordering specific medical tests for your patients, revenue and expense numbers serve as financial symptoms" indicating where to look for problems.

Investigate disappointing financial performance by first evaluating charges and collections using the following checklist:

When charges decrease, check for these changes first:
>> Changes in appointment scheduling
>> Dropping physician productivity
>> Referral sources change their patterns
>> Dissatisfied patients leave your practice

When collections decrease, examine these possibilities:
>> Shifting payor mix
>> Reimbursement level changes
>> Billing function/procedure changes (new billing staff, etc.)
>> Poor follow-up by collections staff

And when expenditures rise, consider these possibilities:
>> Review purchases for out-the-ordinary bills
>> Review internal spending controls
>> Staffing additions/changes
>> Increased benefit costs
>> Analyze staff size in relation to productivity

Numbers are King

Numbers are data. What any manager needs is information. In many clinical situations, the numbers are information. In business situations, most numbers are data – the value a practice manager brings to the business is applying his or her knowledge, experience and judgment to turn data into information, information that is the basis for decision making.

On a regular basis – usually monthly, but for solo practices on a quarterly basis – look at actual revenue and expenses compared to the prior year (notice I don’t make mention of comparing these to your budget; in my opinion most budgets are worthless in a medical practice). Items that are in excess when compared to the prior year are neither a cue to be upset nor a cue to stop spending. You have to ask constant questions – why is an item higher this year than last year? Why are revenues lower or stagnant this year versus last year? Many times, there are seasonal variations in both revenues and costs. Also, sometimes you might order a quantity of supplies in order to gain discounts.

You also want to look at productivity, such as: the number of patient visits (office versus hospital), how many diagnostic tests or other in-house services were provided, and the percentage of available time that is being booked for patient services. You should also look at payer mix revenue distribution, physician work RVUs, collection percentages broken down by individual payer class, and a variety of different accounts receivable agings.