Whether employed or independent, anesthesia groups need to closely monitor key performance indicators (KPIs) to make sure their organizations remain financially healthy.

“Anesthesia groups should be hyper-vigilant these days when it comes to monitoring their claims and cash flow,” said Jackie Velilla, executive director, anesthesia client management for McKesson Business Performance Services (McKesson). “Tracking KPIs is important not only to cope with reductions in reimbursements and higher operating costs, but also to make sure that payers are consistently meeting their contractual obligations and paying what they owe.”

Velilla outlined three KPIs that all anesthesia practices should monitor:

  • Days in AR: The number of days between when a bill is sent and when payment is made is the “pulse” of the practice. On the submission side, it is important that claims go out at regular intervals to support smooth and predictable cash flow. Some practices have developed financial penalties for providers who are late turning in their anesthesia record or charge documents.

    “If you wait and submit everything at once, then that’s what your collections will reflect,” she said. “When cash flow fluctuates dramatically from month to month, it can be difficult to meet payroll and pay the bills.”

    Along with monitoring aggregate Days in AR, Velilla said it is valuable to track Days in AR by payer. This metric will quickly reveal whether late payments from one payer are skewing overall Days in AR. Because individual payers are contractually obligated to pay within a specified time-frame, Velilla said groups can either request interest on late claims or use the issue for leverage during contract renegotiations.
  • Net Collections Percentages: This metric reflects how much of the group’s unit rates are being collected. For example, a group’s listed unit rate for anesthesia charges may be $100, but the negotiated discount for a given carrier is $40. Therefore, the practice should break down Net Collections Percentages into payer-by-payer buckets to confirm that they’re receiving the appropriate discounted rate.

    “You may be receiving just $38 per unit, or you may be receiving three units’ payment for four units,” Velilla said. “You just don’t know until you look. Too many practices never check, and payers make mistakes.” 

    Velilla said it is likewise important to understand how much of the unit rate the payer is responsible for and how much comes from the patient’s deductible, since some contracts specify that a percentage is the patient’s responsibility. High patient portions that have gone unpaid may explain why the net collections percentage is lower than anticipated.

    Like delayed payments, underpayments should be immediately brought to the attention of the payer and carefully documented so the issue can be addressed during contract re-negotiations.
  • Percent of AR over 120 Days: Also known as bad debt, this KPI reflects long-past-due patient co-pays and deductibles. “We’ve seen bad debt spike with the rise in consumer-driven health plans,” Velilla said. Groups should therefore establish policies to determine when to send statements to collection agencies.

    “I’ve seen some clients send it to collections at 120 days, others at 90 days and I have seen others extend the terms to try to keep from having to send it out,” she said. “Sending patients to collections also impacts your bottom line as collection agencies typically charge 25-to-35% of what they collect. Plus it can put a black mark on the patient’s credit record and has the potential to create PR nightmares for the practice.”

    To help reduce the likelihood of having to send a patient account off to a collection agency, patient statements should go out in a timely fashion. That means making sure demographic information is correct, and making sure that providers are submitting their documentation in a timely manner. Long delays can produce unhappy patients, which, in turn, can result in an unhappy provider partner.

    “Knowledge is Power,” Velilla said. “In today's environment, it is imperative that groups not only arm themselves with data but also convert the data into knowledge to continually monitor the health of the practice.”
McKesson

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McKesson Business Performance Services offers services and consulting to help hospitals, health systems, and physician practices improve business performance, boost margins and transition successfully to value-based care.