Inside Secrets For Maximizing Reimbursement

By David Edward Marcinko, MBA, CMP, and Hope Rachel Hetico, RN, MHA, CMP

When one speaks of maximizing medical practice reimbursement, most physicians immediately think of the National Correct Coding Initiative (NCCI) or coding-oriented consultants. However, bolstering reimbursement involves more than just using the newest Current Procedural Terminology® (CPT) codes, parsing old codes or even becoming a CPT coding expert.

It is the entire economic compliance ecosystem that surrounds the office cash flow and revenue recognition cycle. This cycle is defined as the process that serves patients, accounts for receivables and collects those receivables from a third-party payer.

In this context, our preferred term at the Institute of Medical Business Advisors, Inc., is Revenue Cycle Economic Compliance™. When this is codified and implemented as a transferable business process, it is more economically sound in the aggregate than any isolated reimbursement event.

Furthermore, we have found that in an era of declining reimbursements and the increasing threat of Medicare and other carrier audits, one potential solution to the financial conundrum may be an internal control system program that helps identify and correct issues before outside agencies get involved. Fortunately, a Revenue Cycle Economic Compliance Program (RCECP) does not have to be complex. It can actually be functional and proactive for one’s practice.

Can A Revenue Cycle Economic Compliance Program Benefit Your Practice?
We have been using our proprietary form of the Revenue Cycle Economic Compliance Program for the last several years. Its purpose is to decrease workflow and maximize medical practice profit (not necessarily revenue) by about 10 to 15 percent.

While results from implementing this process are not predictable, our clients often are delighted to learn this internal office process also streamlines and integrates many insurance and governmental regulations with reimbursement guidelines. While it may or may not involve all the Centers for Medicare and Medicaid Services (CMS) and other managed care services contracting, accreditation, LEP standards or federal requirements of HIPAA, CLIA, EPA, DOT, ERISA or OSHA, etc., it is a reasoned and transferable system and not just a CPT coding “tips and pearls” initiative.

Indeed, having a RCECP can be beneficial as doctors currently are working harder, making much less money and are facing more potential legal sanctions than ever before.

In the not so distant past, doctors were seen as infallible and beyond reproach. With the current complexity of the healthcare delivery system, as well as fiscal mandates with the Deficit Reduction Act (DRA 2005), the business and administrative functions of medicine have increased confusion and highlighted questionable behaviors.

For example, most medical practices report revenues upon tendering the service. Yet many medical practices adopt the cash (not accrual) basis for revenue recognition. This creates an increased recordkeeping burden for tax preparation purposes as cash accounting is generally converted to the accrual basis for loans, lease applications or other purposes.

Of course, the most dramatic examples have appeared on the revenue recognition and reimbursement side of medicine as both patients and payers have called for more accountability. For providers, the days of seeing a patient and getting paid at the time of service are gone because payment is often dependent on another party. Depending on reimbursement arrangements — discounted fee for service, Medicare, capitated reimbursement and/or other fixed or risk-sharing contracting arrangements, etc. — the emphasis is now shifting focus to both the overutilization and underutilization of medical care.

Seeing Beyond The Bottom-Line Benefits
Although the decision to develop and implement a RCECP is an important financial call, there are additional benefits beyond positive bottom line contributions. These benefits may include:

• improvements in the quality of patient care;
• an additional resource for information about reimbursement issues;
• prevention or identification of improper conduct with systems for evaluation and correction;
• training of employees and/or contracted services to recognize fraud and abuse;
• demonstration of a commitment to honesty and appropriate practice conduct; and
• decreased exposure to civil penalties, sanctions, plan exclusion or other actions, etc.

As part of an RCECP, one must include a code of ethics and conduct principles, mission and vision statements, and an employee handbook. Other key priorities include but are not limited to a Correct Coding Initiative protocol, a protocol for addressing economic compliance issues and continuing evaluation audits to monitor results.

How To Implement A RCEC Program
As with any initiative, a number of different glitches can occur after one has launched a RCECP. In order to reduce the potential for these problems, it is important to map out each step within the process. (See “A Step-By-Step Guide To Implementation Of A RCECP.”) The steps can be subject to a number of variables depending on a number of different factors, including staff competency, time, outside vendors, information management, management decisions in general or regulatory requirements.

According to Jon Hultman, DPM, MBA, and other business process flow writers, any one of these “critical path points” could lapse and cause the entire mechanical, electronic or human resources process to break down. When there are variations, the end results can be economically detrimental as one can see with the following examples.

Example One: Handling A Neurotic, Controlling Doctor
One practice we reviewed had the doctor open every explanation of benefits (EOB) or insurance envelope that came into the office. The doctor would then turn the mail over to the payment posting person, who would enter claims into the system. Sometimes the clerk who entered the claims would become busy with other duties and would not be able to enter claims for several days. This proved to be an inefficient method of managing the billing process for the practice.

A possible solution was to have one person in the front office open the mail. This person would organize the contents based on who needs to deal with the information (such as claims, refusals or requests) and then distribute them accordingly. This problem would not likely have occurred in the first place had a RCECP been in place.

Example Two: Ensuring Accurate Billing And Reimbursement
Another practice inefficiently and retroactively used medical record and claim audits to help identify incorrect coding and large overpayments that were subsequently returned to the insurance carrier to avoid penalties. This included gradually increasing the level of Diagnosis-Related Group (DRG) billing in order to obtain higher levels of reimbursement (a concept also known as upcoding or “DRG creep”). A proactive RCECP might have ensured that revenues were based on initial proper DRG coding.

On the other hand, apprehension about potential audits and repayments should not cause providers to get too conservative in their coding. Using a RCECP does not mean that a podiatry practice should reduce the number of procedures that physicians perform, down-code or minimize referrals because of potential issues with anti-trust and/or financial repercussions. It merely means adhering to the rules and documenting that adherence. Although it may be a mandate to change the administrative practice of podiatry, it is not a mandate to change the way a doctor treats patients.

Example Three: How To Un-Bundle Medical Services
Another factor is the unbundling of medical services as correct CPT coding includes various services as part of the reimbursement and one should not bill these separately unless otherwise indicated. One surgeon, who performed a Dupuytren’s medial arch release, should not have billed separately for the skin incision, plantar fascial release, flexor repositioning of tendons, skin closure and manufacturing of the post-procedure splint.

Accordingly, most small medical practices should have a number of checks and balances in place to control/reduce economic variation. A RCECP creates a much more accurate billing and reimbursement system, which can highlight areas for improvement.

Moreover, concerns about lost payments, possible embezzlement or legal disputes decrease as internal systems exist to help detect abuse and make the coding more simplified and accurate.

Understanding The Costs Of Instituting A RCECP
An average podiatry practice grossing $250,000 to $300,000 in annual revenues could spend anywhere from $5,000 to $15,000, depending on the practice’s location, condition and resources, for an initial professional consultation for RCECP development. Assuming 10 percent profit augmentation as a result, it may be money well spent. Paradoxically, one may see reduced staffing costs due to new efficiencies a practice may recognize with RCECP.

For those who prefer to improve internal practice processes themselves, a quarterly print subscription service, such as Healthcare Organizations (Financial Management Strategies), is a good place to start the compliance journey and keep abreast of current developments.

A Closer Look At The Radar Screen For Medical Practice Audits
According to compliance specialist Pati Trites, PhD, CMP (Hon), and our own experience, the following items are increasingly being noted on the radar screen of medical practice audits today.

Medical provider numbers. It is important to use the correct provider identification number for each claim that you submit for payment. Claims for services that have been performed by a provider who does not have a current provider identification number should follow the established rules for each of the third-party payers. This may include holding some claims until the provider number is received. Although this slows the cash flow for the practice, it reduces the risk of submitting false claims and the subsequent penalties may outweigh the inconvenience.

For example, a locum tenens physician is one who is filling in for another physician and is an independent contractor (non-employee) of the organization. He or she may provide these temporary services for up to 60 consecutive days. One would bill the claim for service(s) by using the provider number of the absent physician with the HCPCS modifier, “-Q6.”

Documentation and medical records. Evaluation and management services make up approximately 50 to 60 percent or more of all services performed by podiatrists. The nature and the amount of work vary by the type of service, the place of service and the patient’s condition or status. It is important that the provider’s documentation reflects this information for both good patient care and for compliance with the documentation guidelines.

Accordingly, medical records should include:

• the date of visit, history, physical examination findings and prior diagnostic tests;
• assessment, clinical impression or diagnosis;
• plan for care;
• date of visit; and
• legible identity of the provider.

The rationale for diagnostic and other ancillary services should be easily inferred. Past and present diagnoses should be accessible to the treating and/or consulting physician. One should also identify the appropriate health risk factors.

Proper billing of CPT and diagnosis codes. After completing the documentation of a service for a patient, the next step is to “code” the procedure and the diagnosis. These codes are updated annually and each healthcare organization should make sure it is using current codes. Diagnosis codes become effective on Oct. 1 of each year and there is no longer a three-month grace period to begin using these codes.

It is also important to make sure the use of these codes is not contingent upon whether one will receive payment for the service but should reflect the service(s) and the reason for the service(s) provided. In addition, providers must select the correct procedure codes and ensure that the associated documentation required for each level of service is in the patient’s medical record.

There are also rules associated with selecting the correct diagnosis code. The key issue in determining whether a provider can be paid for his or her services is to show there was a medically justifiable reason for performing the procedure or service. One can primarily establish this by looking at the CPT or procedure code that was billed in relation to the ICD-9 or DRG code that was given as the reason for the medical encounter, procedure or hospitalization. If one can show medical necessity, the likelihood is that the bill will be paid. The basic requirement is that the diagnosis must justify the procedure. If one follows the rules listed below, there is a much better chance that the claim(s) will be paid.

• Code all diagnoses to the ultimate specificity.
• Use additional code(s) and code any underlying diseases when necessary.
• Code conditions encountered during the service to fully describe the patient visit.
• Be sure to choose appropriate principal diagnoses and all secondary codes correctly.
• Avoid using .8 and .9 “catch-all” codes.

Advance beneficiary notices (ABNs). These notices are statements a physician or staff gives to patients to read and sign whenever one feels the item or service may not be paid by Medicare or Medicaid. This may occur when the provider can perform a limited number of services (such as toenail debridement, DME dispensation, etc.) in a specific time frame. One can also use it when a patient insists on a specific treatment or test even when the doctor believes the service is unwarranted or unnecessary, but understands that failing to provide the service may put him or her at risk under professional liability standards.

When the patient has signed an ABN, it removes the risk of non-payment from the provider. Remember that you cannot give ABNs to every patient or for all procedures or services. There must be a reasonable expectation that payment will be denied because there is a lack of medical necessity (for billing or payment). To access complete instructions for the use of ABNs and copies of the specific form that one must use for Medicare patients, go to

Certificate of medical necessity (CMN). A CMN is necessary to authorize durable medical equipment (DME), home health services and other services. These certificates have specific requirements, depending on the services requested. According to the Medicare regulations, improper certification of medical necessity may subject a physician to significant criminal, civil and administrative penalties. Even if a physician does not receive any financial or other benefit from providers or suppliers for signing incomplete or erroneous CMNs, he or she may be liable for making false or misleading certifications.

Podiatrists must make sure they have completed the entire CMN before signing the certificate. The signature implies that the information is complete and accurate to the best of the provider’s knowledge. The CMN must have an actual signature and date as stamps are not acceptable.

In Conclusion
The process of economic compliance to maximize medical practice reimbursement is an ongoing challenge. The government and third party payers expect that any doctor billing for services will know the rules and providers cannot claim ignorance as a defense. The expectation is that you follow the rules constantly. Billing and reimbursement rules and regulations vary according to payer type, geographic region and place of service. Each provider should have a thorough understanding of the specific rules that apply to the organization. This begins with an understanding of each of the contracts or provider agreements that the organization or provider has signed. Since Medicare is one of the principal payers and promulgator of rules, a RCECP may help a practice focus on these requirements.

The first step in economic compliance and maximizing medical practice reimbursement is to know what laws apply to your specialty. The next step is formulating a transferable written policy to ensure your workforce understands how to comply and what their individual responsibilities are. An effective and comprehensive way to accomplish this is through the development and implementation of an office RCECP.

In addition, this commitment will provide a leadership model for all members of the practice members to emulate. A podiatry practice that embraces compliance as “normal and expected” behavior will experience a safer, more efficient, and more profitable and economically valuable business entity.

For further reading, check out the archives at


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3. Hetico HR. Selecting Advisors Wisely. In, Marcinko, DE (Editor): Financial Planning for Physicians and Advisors. Jones and Bartlett Publishers, Sudbury, MA, 2006.
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