Some financial waste is easy to detect while other waste requires a bit of investigation. With the rush to treat patients and an overburdened staff, financial waste can often be overlooked or unaddressed. From insurance eligibility checks to sound collection strategies, practices struggle to collect what they are owed. High deductible health plans and rising healthcare costs cause many practices to struggle to do more with less money. Taking a closer look at how your practice responds to waste is extremely important because the longer these areas are neglected the more likely the money is lost forever.
How to identify medical practice financial waste?
Financial waste can occur in many different areas of your practice. Some areas of waste are more obvious than others like unnecessary spending or over ordering. Other areas are more difficult to manage such as poor collection processes or lagging technology. It’s important to understand what can be remediated internally and what may be better managed by external experts. Every practice should take a look at operations from the perspective of efficiency to identify what might be out of sync or losing money. A recent article published by Physician’s Practice highlighted a few areas to target to help reduce financial waste:
- Supplies: Many practices tend to over order supplies due to the lack of inventory controls. It’s easier to be safe than sorry when noticing that supplies run low, so over ordering is a common event. This leads to significant dollars being tied up in supplies that are sitting on a shelf. Excessive inventory costs also lead to expired supplies and then disposing of them, including out-of-date medications.
- Maintaining expensive equipment: Maintenance contracts should be reviewed annually. Taking the time to understand what your service entails and the associated costs provides an opportunity to ask for an adjustment or time to shop the competition. Being proactive ensures you have the right services at the best price for your practice.
- Organizing the staff: Underutilizing people’s abilities is a form of waste that is not always obvious to detect. Failure to make full use of employees’ knowledge, skills and abilities leads to job complacency and ineffectiveness when employees are not engaged or supported. The most basic example is using highly trained professionals to perform tasks that could be performed by someone with less training. Take an inventory assessment of your staff’s skills, training, proficiencies and interests in order to best utilize their skills to the benefit of the practice and your patients.
- Monitor billing & coding performance: Financial waste in this area can come in many forms from staff who aren’t adequately trained to delays from overworked employees at a practice itself. As the complexity of medical billing continues to grow, it requires adequately trained professionals to maximize the process and protect the practice from loss. Outsourcing your billing is one way to eliminate this source of waste, often resulting in faster reimbursement and increased revenue. Revenue cycle management companies focus exclusively on obtaining the highest rates of reimbursement possible in all cases.
- Inefficient claims processing is believed to be the second largest area of wasteful expenditure. Doctors spend a lot of time and money trying to get paid by insurers. According to a recent article by MGMA, the average cost to rework a claim is $25. In order to assure proper payment, claims must be scrubbed for errors and edits so that clean claims are sent the first time, resulting in faster payment and fewer denials. If your practice is not achieving a 96% clean claims rate, you are contributing to delayed payments, lagging A/R and lost revenue.
- Poor patient collections process is a significant contributor to financial waste. Every practice should be making it as easy as possible for patients to pay. More and more providers are adopting a patient portal to offer online bill pay, credit card on file systems to offer a shorter turnaround time on bill payment and capture small balances, as well as payment plans. Payment methods that promote price transparency such as Patient Cost Estimator help to eliminate the uncertainty of patient payments and help practices to collect what they are owed. If you don’t make it easy for your patients and your staff, you will continue to let money walk out of the door.
Financial benchmarking is a proven solution used to target financial waste and drive performance by identifying lost revenue gaps and opportunities to improve. Inaccurate coding, the net cost of billing and collections, uncollected payments and lagging A/R can roll up into a significant financial loss. Every practice should consider a financial analysis to identify the financial leaks. Regardless of your practice size and revenue potential, small financial leaks eventual lead to big cash flow issues. If your practice has not taken a closer look at the areas mentioned above, now is the time to reward your practice and protect your medical practice financials.