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Risk Assessment of Medical Practice Billing Companies

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Office of Inspector General

trites

[By Pati Trites MPA, CHBC with Staff Reporters]

The Office of Inspector General [OIG] believes a medical billing company’s written policies and procedures, its educational program and its audit and investigation plans should take into consideration the particular statutes, rules and program instructions that apply to each function or department of the billing company.

Co-ordination Needed

Consequently, coordination between these functions is needed, with an emphasis on areas of special concern that have been identified by the OIG through its investigative and audit functions.

Furthermore, the OIG recommends that billing companies conduct a comprehensive self-administered risk analysis or contract for an independent risk analysis by experienced health care consulting professionals. This risk analysis should identify and rank the various compliance and business risks the company may experience in its daily operations.

Risk Analysis

Once completed, the risk analysis should serve as the basis for the written policies the billing company should develop. The OIG provides the following specific list of particular risk areas that should be addressed by billing companies. It should be noted that this list is not all-encompassing and the risk analysis completed as a result of the company’s audit may provide a more individualized roadmap. Nonetheless, this list is a compilation of several years of OIG audits, investigations and evaluations and should provide a solid starting point for a company’s initial effort.

Problem List

Among the risk areas the OIG has identified as particularly problematic are:

  • Billing for items or services not actually documented;
  • Unbundling;
  • Upcoding, such as, for example, “DRG creep;
  • Inappropriate balance billing;
  • Inadequate resolution of overpayments;
  • Lack of integrity in computer systems;
  • Computer software programs that encourage billing personnel to enter data in fields indicating services were rendered though not actually performed or documented;
  • Failure to maintain the confidentiality of information/records;
  • Knowing misuse of provider identification numbers, which results in improper billing;
  • Outpatient services rendered in connection with inpatient stays;
  • Duplicate billing in an attempt to gain duplicate payment;
  • Billing for discharge in lieu of transfer;
  • Failure to properly use modifiers;
  • Billing company incentives that violate the anti-kickback statute or other similar Federal or State statute or regulation;
  • Joint ventures;
  • Routine waiver of copayments and billing third-party insurance only; and
  • Discounts and professional courtesy.

Additional Risk Areas

The physician-executive should understand that a billing company’s prior history of noncompliance with applicable statutes, regulations and Federal health care program requirements may indicate additional types of risk areas where the billing company may be vulnerable and may require necessary policy measures to prevent avoidable recurrence.

Additional risk areas should be assessed by billing companies as well as incorporated into the written policies and procedures and training elements developed as part of their compliance programs.

Assessment 

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Billing companies that do not code bills should implement policies that require notification to the provider who is coding to implement and follow compliance safeguards with respect to documentation of services rendered.

Moreover, the OIG recommends that billing companies who do not code for their provider clients incorporate in their contractual agreements the provider’s acknowledgment and agreement to address the above coding compliance safeguards.

Conclusion

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Financial Ratio Liquidity Analysis for Medical Accounts Receivable

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Understanding Vital Balance Sheet and Income Statement Components

By Dr. David Edward Marcinko; MBA, CMP™

By Dr. Gary L. Bode; MSA, CPA, CMP™ [Hon]

Dr. Gary L. Bode CPA MSAFinancial ratios are derived from components of the balance sheet and income statement. These short and long-term financial ratio values are “benchmarked” to values obtained in medical practice management surveys that become industry standards. Often they become de facto economic indicators of entity viability, and should be monitored by all financial executives regularly.

Defining Terms

One of the most useful liquidity ratiosrelated to ARs is the current ratio. It is mathematically defined as: current assets/current liabilities. The current ratio is important since it measures short-term solvency, or the daily bill-paying ability of a medical practice, clinic  or hospital; etc.  Current assets include cash on hand (COH), and cash in checking accounts, money market accounts, money market deposit accounts, US Treasury bills, inventory, pre-paid expenses, and the percentage of ARs that can be reasonably expected to be collected. Current liabilitiesare notes payable within one year. This ratio should be at least 1, or preferably in the range of about 1.2 to 1.8 for medical practices.

Other Ratios

The quick ratiois similar to the current ratio. However, unlike the current ratio, the quick ratio does not include money tied up in inventory, since rapid conversion to cash might not be possible in an economic emergency. A reasonable quick ratio would be 1.0 – 1.3 for a hospital, since this ratio is a more stringent indicator of liquidity than the current ratio.

Assessment

A point of emphasis in the case of both the current ratio and the quick ratio is that higher is not necessarily better. Higher ratios denote a greater capacity to pay bills as they come due, but they also indicate that the entity has more cash tied up in assets that have a relatively low rate of earnings. Hence, there is an optimum range for both ratios: they should be neither too low nor too high.

Conclusion

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The Need to Protect Accounts Receivable [ARs]

Understanding Liability and Stewardship Issues

By Dr. David Edward Marcinko; MBA, CMP™

By Dr. Gary L. Bode; MSA, CPA, CMP™

HOFMSAll hospitals, clinics, healthcare entities and doctors are aware that accounts receivable (ARs) represent money that is owed to them, usually by a patient, insurance company, health maintenance organization (HMO), Medicare, Medicaid, or other third party payer. In the reimbursement climate that exists today, it is not unusual for ARs to represent 75% of a hospital’s investments in current assets. ARs are a major source of cash flow, and cash flow is the life-blood of any healthcare entity. It pays bills, meets office payroll, and satisfies operational obligations.

Medical ARS are Different

A feature of ARs in healthcare organizations that differentiates them from ARs in other types of business is that they are often settled for less than the billed amounts. These allowances include four categories that are used to restate ARs to realizable expected values:

  • professional or courtesy allowances;
  • charity (pro bono care) allowances;
  • doubtful account allowances; and
  • HMO and managed care organization (MCO) contractual and prospective payment allowances.

AR Stewardship Issues

Good stewardship of assets requires that one must be concerned not only with significant economic losses due to professional conduct (professional malpractice liability concerns, and issues raised by the Equal Employment Opportunity Commission (EEOC), Office of Civil Rights (OCR), Occupational Safety and Health Administration (OSHA), and so on); but that of physician partner(s) and even the financial failure of contracted private insurers, payers, MCOs, HMOs, etc. ARs are often the biggest asset to protect against creditors or adverse legal judgments. It is not unusual to have ARs in the range of a hundred thousand dollars for a group practice or medical clinic; and in the millions of dollars for a hospital. Yet, since they can easily be attached, ARs are known as exposed assets to creditors.

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Assessment

A judgment creditor pursuing a doctor for a claim may pursue the assets of the clinic, and ARs and cash are the most vulnerable assets. ARs are as good as cash to a creditor, who usually has to do no more than seize them and wait a few months to collect them. If a creditor seizes ARs, the clinic or health entity may be hard pressed to pay its bills as they become due. One must therefore be vigilant to protect AR assets from lawsuit creditors.

More: www.CertifiedMedicalPlanner.org

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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