Are You Working for Peanuts?
Practice owners who drop their worst, least-profitable plans always see an improvement. They earn more profit with less stress. They stop feeling like monkeys.
The first step is the most difficult = crunch the numbers.
Once you have the facts, you can cancel the plans that hurt your bottom line. You can ensure your plans and patients are paying what they are supposed to pay. The numbers give you the truth.
Six Steps for Evaluating Your Plans’ Numbers
1. Create a grid or spreadsheet with eight columns. Use these headings:
- Payer Name
- Full Fee Charges
- Expected Payments
- Actual Payments
- Balance Owed
- Percentage of Full Fee Paid
- Percentage of Expected
- Payments Actually Paid
2. List each plan in the “Payer Name” column. Your billing software should provide you with the remaining details for each plan. Use the same time period for each calculation, such as six months or 12 months.
3. Next to each plan, enter “Full Fee Charges” or the total amount of service provided to the plan’s members based on your full fee schedule.
4. Add the amount promised with the expected patients’ copayments for each plan. Enter the total in the “Expected Payments” column.
5. “Actual Payments” would include the total amount paid by the plan and the patients. Note: If you split “Expected Payments” and “Actual Payments” between the patient and the plan, you can see if there is a problem with your copayment collections.
6. Based on the first three columns, you can then calculate the remaining three columns.
- “Balance Owed” should match the accounts receivable amount you have for the plan.
- “Percentage of Full Fee Paid” shows how much you are losing from your full fees.
- “Percentage of Expected Payments Actually Paid” shows the difference between the amount you are supposed to be paid, per the contract, and how much you are collecting.
You Now Can Act Smarter
“Percentage of Expected Payments Actually Paid” will show the worst plans. Drop the plans with the lowest gross collection percentage based on your full fees.
Consider dropping plans that represent less than 10% of the total production. You will not miss them.
Compare the “Balance Owed” and “Percentage of Expected Payments Actually Paid” columns. If the plan is not paying as promised, it shows the plan has problems. Drop the worst plans based on this factor.
These six steps will also show weaknesses within your office. For example, a confusion with a certain plan or an inability to collect copayments from another. Find and repair your collections department problems as your highest priority.
If a plan, which is supposed to pay a reasonable amount, is not paying as promised, and it gives your staff a lot of hassles, you need to drop it. The worst plans often cause hours of problems and usually represent a tiny portion of your practice.
For example, an ExecTech client discovered his most difficult plan only paid $26,000 per year! He and his staff had a little party when he terminated the plan’s contract.
So get out of the zoo!