The trend toward hospital financial support for anesthesia practices will likely continue in the coming months. However, as the economic downturn spreads to the health care industry, hospitals will scrutinize every dollar of these stipend arrangements.

How can your anesthesia group overcome a growing resistance to financial support? The answer is to strengthen your bargaining position where it will count most—by improving your group’s business performance. By getting the group’s financial house in order, your negotiating position is bolstered in three ways:

• The price tag is lower. Improving your business performance will increase your net revenue, thereby reducing the size of your request for support and creating an easier sell.
• Objections are neutralized. Improving business processes will assure hospital leaders that they are not being asked to pay for your practice’s inefficiency.
• Goodwill is demonstrated. The hospital will perceive that your group accepts responsibility for financial outcomes and intends to be an accountable partner in any support agreement.

Unfortunately, most anesthesia practices fail to shore up their business performance before they approach a hospital for financial support. Approach stipend negotiations from a position of strength by focusing on three key areas.

1. Plug Charge Leaks

Anesthesia groups routinely lose 5% or more of potential revenue simply because not all service charges end up getting billed. To find the leaks in your process for charging, perform a simple front-end audit. Select two consecutive dates and obtain complete documentation and billing information for services performed on those days. Ideally, every documented service will be reflected in a charge, and all services will be coded at the highest allowable level.

Typically, however, an audit reveals several problems, such as:

• Services provided outside the operating room (e.g., pain rounds) are not billed.
• Operating room procedures that can be billed separately (e.g., postoperative nerve blocks) are often missed.
• Factors that may permit higher coding (e.g., patient age) are frequently overlooked.

Medical direction presents a special reimbursement problem—and potential noncompliance. If physicians do not completely document their participation in cases (including room-in and room-out times), your practice cannot bill for higher reimbursement. Services billed as medical direction without proper documentation expose your practice to significant fines.

The main solution for these problems is education. Make sure physicians and nurses understand the importance of accurate and compliant documentation. Provide staff with regular training on coding requirements and opportunities. In addition, work with hospital staff to ensure that all service documentation is routinely forwarded to anesthesia billing.

2. Tighten Collections

Assuming every service charge ends up getting billed, are your bills getting paid? If your net collections ratio is between 94% and 96%, you are probably bringing in as much money as you possibly can. Most practices do not do this well. I recently worked with an anesthesia group that was collecting only 74% of contractual reimbursements.

Why do anesthesia collections fall short? There can be hundreds of reasons. To determine the causes of your collection problems, randomly select 10 or 20 claims that are more than 90 days old and find out the reasons that payments have been held up. A quick examination can uncover several issues:

• Bills are submitted without necessary authorizations or other required information.
• Denied claims are not re-billed.
• No-response claims get stuck in a permanent “holding pattern.”
• Patient portions of denied claims remain unbilled.

To correct these problems, make sure your claim-editing software is up to date. You also need to establish effective follow-up procedures on all claims, with payer or patient contact every 30 days. Develop reliable processes for correction and re-billing of claims that have been denied or rejected; also, make sure payments and denials are being accurately posted to patient invoices. In addition, make sure every payment shortfall is examined to determine why the claim was not paid at contracted rates. Records of underpayments can pile up without anyone realizing it because of, for example, glitches in payer software or lack of updates to fee schedules.

3. Clean Up Old Receivables

Cleaning up aged receivables can quickly bolster your group’s cash position, improve your accounts receivable (AR) profile and demonstrate your commitment to solid business fundamentals. The following methodical approach can often bring in $500,000 or more in a relatively short time frame:

Allocate the resources. Assign one staff member to spend two or three days a week on old AR.

Create a work plan. Start with the oldest receivables (120 days or more) and work forward. Divide the work by payer to promote efficiency.

Work the process. Your AR project staffer should investigate each claim, find out what is delaying payment and amend, appeal or re-bill as needed.

Collecting aged receivables from patients can be more challenging. I generally recommend a compromise approach: Call those patients who have old balances and offer a discount for paying within 10 days. Many will appreciate the chance to settle up for less, and you will collect some money on accounts you ultimately would have written off.

Use Business Improvements During Negotiations

Your best option is to improve net revenue before you approach the hospital for financial support. The ability to demonstrate favorable comparisons to industry benchmarks will put you on a very solid footing at the bargaining table. You will be able to say, “We are doing the best we can, and providing services to your hospital still does not pay.”

A second option is to leverage off future business improvements. Consider this route if your practice is in need of immediate support or negotiations are already under way. The key is to build improvement targets into the support agreement—i.e., create a mechanism for tying the level of support to the achievement of performance goals.

Whatever approach you take, improving your business performance will enhance your group’s efficiency and value. In the troubled economy of 2009, positioning your practice as a worthy investment will be critical to gaining financial support from hospitals.

—Lee Hedman

Ms. Hedman is vice president of Surgical Directions, LLC (www.surgical​directions.com), a physician-led surgical services consulting firm. She can be contacted by telephone at (312) 203-0345 or e-mail: lhedman@surgicaldirections.com.