WHY IS THIS A PROBLEM?
Your fees are set according to your skill and ability to help your patients, but the checks coming back from insurance companies are a fraction of the total amount you bill out. Why?
Often a healthcare practitioner will feel like there is an injustice occurring when they bill $40,000 and collect $20,000 from insurance. The fact of the matter is that the amount that remains unpaid may never have been collectible in the first place. It’s a common confusion and it can be upsetting, but with a good concept of exactly how the insurance game works, you can be a better player in that game.
IS SOMETHING WRONG?
Not necessarily. You bill $100. You get $35. It may feel wrong, but there is more to it. All insurance companies have their “allowed amounts”. This means that no matter what an office charges for a service, the insurance company has a cap on what will be paid. Allowed amounts are the maximum that they will allow to be paid to a provider for a service, including copays or co-insurance percentages paid by a patient. Your professional fees are likely much higher – and you may collect that higher fee from cash patients, or Personal Injury and Worker’s Comp cases. But with regular insurance billing, you can bill out the services you deliver at your prices, and the insurance company will pay the set amounts that they are willing to pay. You are not going to – ever – receive more than their allowed amounts on your insurance patients, and in fact, audits are common in order to confirm that insurance reporting is being done according to the rules.
While there are valid concerns about the need for insurance reform, this is simply stated here for the purpose of explaining the reasoning behind the caps. Accepting insurance can significantly increase the number of patients that are able to visit a practitioner. From the perspective of the insurance industry, the caps prevent practitioners from skyrocketing their prices, knowing that insurance companies would have to cover them. If that were to occur, the insurance industry could potentially no longer be able to cover patients. And without insurance coverage, those patients wouldn’t be able to afford to come to you for the care they need. Many practitioners feel undervalued by insurance companies, and rightly so, however if you are accepting insurance patients, this is how the game works. Understanding it well can help to make it work for you.
WHAT ABOUT BILLING ERRORS?
It is certainly true that there may be billing and coding errors clouding the issue and causing a lot of denied claims. Most of our clients have some of both occurring when we take over the billing – there is a billed amount that is higher than the allowed amounts, making it falsely appear that the collections % is lower – but there are also billing and coding errors which have gone uncorrected, causing denied claims and bringing collections down. As we go about correcting the errors and seeing that office procedures are updated to ensure that the same mistakes don’t continue to occur, we can help to significantly improve the bottom line.
SO, HOW DOES INSURANCE WORK?
Here is a simplified example:
Your fee for a chiropractic adjustment is $100.
ABZ Insurance Co. has $35 as their allowed amount for that same adjustment.
The patient has a $20 co-pay, which they pay directly to you.
You bill the insurance company, showing your fee of $100.
ABZ Insurance will send you $15.
$15 from ABZ + $20 from the patient co-pay = ABZ Insurance Company’s allowed amount of $35.
Here’s another simplified example:
You deliver four procedures to a patient in one visit. That $100 adjustment, plus adjustment in extremities, electric stimulation and massage. The total of your fees for the visit comes to $300.
The patient’s insurance company, XYZ Healthcare, has an allowed amount of $40 total per visit.
The patient has a $10 co-pay. Let’s say that your verification wasn’t completed at the time of the visit, so this did not get collected at the front desk, and you didn’t know that all those services delivered would not be reimbursed.
You send your bill for $300 to XYZ Healthecare.
XYZ factors in the co-pay that the patient owes you, and they cut you a check for $30.
It’s now up to you to bill the patient for the co-pay amount that hasn’t been collected.
$30 from XYZ, plus the $10 the patient owes = $40, XYZ Healthcare’s allowed amount per visit.
WHAT CAN YOU DO ABOUT IT?
This is where good insurance verification comes into play. To start, you can get the list of allowed amounts from each insurance company you are enrolled with so that you know what they will pay for your services. Then, contacting the insurance companies in advance of treatment to find out what your patient’s deductible, co-pay and coverage limits may be will help to ensure that your patient collections go smoothly, and that the procedures delivered will be paid for. We regularly help our client’s staff to understand and get prepared for thorough patient insurance verification, as an included part of our services. Verification is vital to the success of the billing process for all of us.
Billing vs. collections is a game of averages. The pieces include your professional fees, the insurance company’s allowed amounts, and the percentage of insured patients you see against the number of cash patients and Personal Injury or Worker’s Comp cases your office handles. Insurance enrollment puts a greater number of prospective patients within your reach – and puts your help within the reach of more people. Good billing, done right the first time as well as careful verification of benefits all contribute to a much healthier collection rate.
Kat Jordan is the Owner and President of Orion Billing Services, a professional external billing company specializing in Chiropractic, Physical Therapy and integrated practices. With over twelve years of experience in healthcare billing, Orion is well prepared to help with thorough, knowledgeable claims submission, follow-up and collection. Call (415) 851-1605 for more information. Subscribe to our mailing list here.