For most service provider organizations, reimbursement remains largely fee-for-service (FFS). And, to make the numbers work in a FFS environment, organizations need good process management to maximize productivity and good financial optimization processes. Last week, at the 2014 OPEN MINDS Performance Management Institute, there was a great session on the latter, Best Practices In Financial Optimization: A Provider Checklist For Maximizing Revenue premium members, presented by Credible Behavioral Health Chief Executive Officer Matthew Dorman, and Credible’s Director of Financial Services, Joanie Clement.
What struck me about the presentation was not just the need for specialized processes – tailored to specific payers – but also the rigor needed in operationalizing those processes, week after week, to assure that your organization gets paid for everything that it does. Speaking to the challenge of financial optimization, Mr. Dorman presented three key strategies.
Price or rate optimization – Simply put, this is making sure that your rate is high enough to make the basic “quantity times price” equation work for you (see A Revenue Cycle Management Primer all members and When Do Organizations Say No To Low Rates? all members)?
Capacity management – Capacity management is the process of maximizing the “output” of services you can potentially deliver with your current staff and facilities. This exercise determines the minimum amount of capacity for a service that your organization can deliver at the prevailing market rate and still have an acceptable margin (see Answering The Capacity Question In Your Market all members and Tactical Planning With “Supply & Demand” all members).
“Smart aging” collections – Instead of the traditional conceptualization of collections (e.g. 30, 60, 90 days), organizations need to reframe their mentality to “Do it, Bill it, Collect it.” Time should be invested in understanding the payment cycles of payers and adjusting your collections processes to their payment cycles (see Tips for Improving Collections all members and Improving Your Back Office Collections: Steps For Better A/R Practices premium members).
Ms. Clement expanded on these strategies with two pieces of operational advice:
Employee knowledge and skills – It takes an experienced clinical and billing team to run an effective collections operation. Revenue maximization is a specialized skill set – and you get what you pay for.
Pre-billing practices – Maximizing collections depends on effective operations before billing occurs. Ensure clients have insurance, that your organization has the right payer contracts, and that you meet the “authorization” requirements for each consumer service you deliver. The billing department can only do so much (see Trickling Cash Flow all members and Are Late Payments the Rule? all members).
If you follow these practices, Ms. Clement said that your organization should be collecting for 95% of every service you deliver (see Underleveraged? Working Assets As A Capital Strategy all members).
And, during the session, Mr. Dorman made an impromptu challenge to the audience. Any service provider organization that can use this template to put together a financial optimization plan, implement the plan for six months, and show improvement in that six-month period, will get a $1,000 donation to the charity of their choice. For more on the Credible Financial Optimization Challenge, contact us at email@example.com.
My take away from the session was that to make the numbers work in the current environment, clinical productivity is essential but, in and of itself, not enough. Without an experienced team and rigorous operations management, you won’t get paid for what you do.