Chronic Care Management: How Physicians Can Increase Practice Revenue without Seeing More Patients

Dr. Seth Flam
Dr. Seth Flam

Guest post by Dr. Seth Flam, board certified in Family Practice and co-founder and CEO of HealthFusion.

CMS has some good re-imbursement news for primary care physicians for 2015: It has announced a new chronic care management program starting January 1 that will allow providers to bill for providing care management for patients with chronic conditions.

In other words, primary care providers can get paid for care they likely already provide.

With this new program, chronic care management can provide a good source of revenue for a practice, if designed, managed and billed correctly. Since a provider can bill $42.60 per patient per month, with a reasonable number of patients with chronic conditions in the practice, a provider can easily see revenue of more than $50,000 per year.

Annually: $511.20 per year per patient X 100 patients = $51,120 per year

(Assumes the provider bills for each patient 12 months out of the year)

But—there are very specific things providers need to know about the program, and particular requirements they need to follow in order to get paid. Here is a preview of some of the requirements:

  1. Identify chronic care patients who qualify.
  2. Eligible patients include those with two or more chronic conditions expected to last at least 12 months, or until death, that place the individual at significant risk of death, acute exacerbation/decompensation, or functional decline.
  3. Only one provider can bill for the chronic care management code for a patient in a 30-day period.
  4. The billing provider must have a signed agreement with the patient allowing them to bill for these services and detailing cancellation rights, co-payments and types of services.
  5. Among other things, the provider needs to supply 20 minutes or more of chronic care management services per patient per 30 day billing period.
  6. The provider will need to create a patient-centered care plan document compatible with the patient’s choices and values.
  7. The provider must provide either a written or electronic copy of the care plan to the patient.
  8. The provider will need to manage care transitions between and among health care providers and settings.
  9. Bill in accordance with CMS requirements using CPT code 99490, making sure the practice’s EHR software provides the information needed to manage and bill for this program.
  10. Begin the process of establishing practice processes and gathering patient agreements soon, although the program doesn’t go into effect until 2015.

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Analyst Firm IDC Reveals Insights and Healthcare Predictions for 2015

m4s0n501

The International Data Corporation (IDC) Health Insights, as it reported on its webinar, “IDC FutureScape: Worldwide Healthcare 2015 Predictions,” highlights  the healthcare predictions for 2015 based on the IDC FutureScape report, which provided organizations with insight and perspective on long-term industry trends along with new themes that may be on the horizon.

As healthcare costs rise, operational inefficiency will become critical at 25 percent of hospitals resulting in the development of a data-driven digital hospital strategy requiring budget in 2016.

Also, the following are several more predictions based on the firm’s insights and research:

  1. By 2015, 50 percent of healthcare organizations will have experienced one to five cyber attacks in the last 12 months with one out of three attacks deemed successful requiring healthcare organizations to invest in a multi-prong security strategy to avoid disruptions to normal operations and incurring fines and notification costs.
  2. Driven by the increased pressure to improve quality and manage costs, 15 percent of hospitals will create a comprehensive patient profile by 2016 that will allow them to deliver personalized treatment plans.
  3. By 2020, 80 percent of healthcare data will pass through the cloud at some point in its lifetime, as providers seek to leverage cloud based technologies and infrastructure for data collection, aggregation, analytics and decision-making.
  4. As a result of an increased focus on improving the consumer experience, 65 percent of consumer transactions with healthcare organizations will be mobile by 2018, thus requiring healthcare organizations to develop omni-channel strategies to provide a consistent experience across the Web, mobile and telephonic channels.
  5. To control spiraling healthcare costs related to managing patients with chronic conditions, 70 percent of healthcare organizations worldwide will invest in consumer-facing mobile applications, wearables, remote health monitoring and virtual care by 2018, which will create more demand for big data and analytics capability to support population health management initiatives.
  6. Building on continuing technology innovation and the increasing use of knowledge-based workflows and actionable analytics, more than 50 percent of big data issues will be reduced to routine operational IT by 2018, reducing the need for specialized IT resources to support big data.
  7. With increased dependence on external partners for outsourced services, more than 50 percent of health and life science buyers will demand substantial risk sharing by 2018 to ensure that service providers recognize their growing role in the process and delivering added revenues to high performers at the expense of satisfactory or lesser performers.
  8. As a result of increased pressures to deliver better outcomes of care more efficiently, payers implement newer reimbursement models for 35 percent of their payments to providers in NA and EU within the next 36 months resulting in related investments in quality measurement, payment and billing systems.
  9. By 2020, 42 percent of all healthcare data created in the Digital Universe will be unprotected but need to be protected, as use of data and analytics continues to proliferate and more stakeholders are involved in delivery of care.

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From Checklist to Culture: How to Protect Sensitive Data with Comprehensive Information Risk Management Practices

Bob Chaput

Bob Chaput, MA, CISSP, HCISPP, CRISC, CIPP/US, CEO and founder, Clearwater Compliance.

HIPAA-HITECH regulations have never been more strictly enforced, yet reported breaches continue to pile up in record numbers and data has never felt so unsafe. So, what gives? For one, it’s no secret to those who are paying attention that healthcare is the next cyber security battleground. We have entered an unprecedented era where cyber attacks are becoming more frequent and more sophisticated with every passing day. Medical ID theft is on the rise, and it seems hackers have healthcare squarely in their sights.

Of course, cyber threats are only part of the equation. Healthcare organizations are even more vulnerable to insider breaches caused by the actions of their employees (both intentionally and unintentionally).

The simple truth is that information risks are growing faster than most organizations can adequately respond to them. And while most organizations are completing their compliance checklists, few have embraced a comprehensive approach to information risk management. A shift in terminology, philosophy and approach are all needed. And fast.

In response to a changing healthcare landscape; a stark increase in the threats posed to maintaining the confidentiality, integrity, and availability of healthcare information; and a shift in focus by the Office for Civil Rights (OCR) and other regulatory bodies from compliance to risk management, healthcare organizations need to fortify their capabilities around safeguarding sensitive data across their entire enterprise.

This includes ensuring you are aware of all information assets used to create, receive, maintain or transmit all sensitive data across your organization; the vulnerabilities of those assets; the various threat agents and the controls you currently have in place to safeguard those information assets from exploitation of those vulnerabilities by those threats.

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Must-Have Strategies, Tools and Mindsets for Efficient Healthcare Labor Management

Jenny Korth
Jenny Korth

Guest post by Jenny Korth, CMPE, director of Project Management and Support, Avantas.

As more patients are entering the healthcare system and organizations will need to be equipped with the right processes to ensure that care is delivered by the right person at the right time to prepare for this patient influx. Effective resource management in healthcare is trickier than in a lot of 24/7/365 industries. What makes it so is that there is not one specific blueprint to managing each hospital, or even each unit within a hospital.

Fluctuating volumes in addition to geographic location, patient and staff demographics, and differences in culture, both of the area and in the organization all play factors in making resource management in healthcare far from cut and dry. This being said, there are strategies that can be universally applied to all types of healthcare organizations (single-site hospitals, academic medical centers, multi-hospital metropolitan systems, large regional systems, and systems with extensive clinics operations) to ensure they have the staff they need to care for their patients, and are able to do so in a cost effective manner.

Key to the strategies I’ll outline below is the customization needed to meet an organization’s specific needs.

Proper Staff Size

This is the basic idea of having the right number, types and layers of staff to meet patient demand. It starts with a right-sized core staff. The “right size” will vary from unit to unit, but essentially it is the number that keeps staff working to their FTE without the need for excessive overtime, floating, or cancellations.

Relative to types and layers of staff, this is where contingency staffing sources (e.g., float pools) come into play. Depending on the size of the organization it could have as many as seven different types of contingency layering to fill in when staff are not available to take an assignment or when volume spikes. These layers can include an enterprise float pool, site-based scheduled float pool, site-based PRN pool, unit-based PRN Pool, core staff in extra shifts and overtime (although this should be used sparingly), agency, and travelers. While agency and travel staff can sometimes have a negative connotation, the fact is that by maintaining relationships with the highest quality staffing organizations in your city, you will experience reduced costs, improved coordination of resources, and, with the proper contractual stipulations, prevention of agency recruitment of your core staff members.

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PwC’s Health Research Institute Issues Report: Next Few Years Will be Crucial for Health Systems

PwC’s Health Research Institute (HRI) releases a new report, Healthcare delivery of the future: How digital technology can bridge the gap of time and distance between clinicians and consumers. The report reveals a shift in attitudes among clinicians, suggesting an increased openness toward using digital technology, and offers detailed recommendations for how healthcare companies, clinicians, and new entrants can harness developing technologies to benefit patients and the industry.

“Digitally-enabled care is no longer nice-to-have, it’s fundamental for delivering high quality care,” said Daniel Garrett, health information technology practice leader, PwC US.  “Just as the banking and retail sectors today use data and technology to improve efficiency, raise quality, and expand services, healthcare must either do the same or lose patients to their competitors who do so.”

As part of its research, HRI surveyed 1,000 industry leaders, physicians, nurse practitioners and physician’s assistants, including members of the board of the eHealth Initiative, finding that caregivers and consumers share similar views on how digital technology can:

  • Put diagnostic testing of basic conditions into the hands of patients:  About 42 percent of physicians are comfortable relying on at-home test results to prescribe medication.
  • Increase patient-clinician interaction:  Half of physicians said that e-visits could replace more than 10 percent of in-office patient visits, and nearly as many consumers indicated they would communicate with caregivers online.
  • Promote self-management of chronic disease using health apps: 28 percent of consumers said they have a healthcare, wellness, or medical app on their mobile device, up from 16 percent last year.  Roughly two-thirds of physicians said they would prescribe an app to help patients manage chronic diseases such as diabetes.
  • Help caregivers work more as a team: Nearly half of consumers and 79 percent of physicians believe using mobile devices can help clinicians better coordinate care.

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Health IT Startup: Optimized Care Network

Brian Slusser, CEO, Optimized Care Network
Brian Slusser, CEO, Optimized Care Network

The Optimized Care Network (OCN) is a provider of digital healthcare that merges high tech with high touch. OCN’s technology enables medical providers to digitally connect with patients in a life-like manner that is changing the delivery of medicine via non-traditional sites of care. Their highly equipped digital exam room, which includes a specially trained, registered nurse, is the 21st century model for digital healthcare with a personal touch.

Elevator Pitch

OCN’s digitally personalized technology makes it easier than ever for patients to connect with the most qualified medical expert anywhere in the world.

Founder’s story

Brian Slusser is the CEO of Optimized Care Network. He brings decades of healthcare industry experience and successful entrepreneurship into this new venture.

Imagine every world-class specialist available in one office. That’s what Slusser did when he began formulating the concept of OCN. He realized he could assemble a digital healthcare platform that focused on delivering convenient and affordable patient care without geographic boundaries. No longer does a patient have to drive for hours or wait weeks for an appointment with a specialist. They simply make an appointment online and go to their local CareSpace.

Marketing/promotion strategy

OCN actively engages in healthcare discussions with other thought-leaders and innovators in the industry. For instance, OCN recently participated in TEDMED’s the Hive in Washington, D.C. and Slusser served on a featured panel at athenahealth’s More Disruption Please Conference. Opportunities like this give OCN the chance to share our CareSpace services with other forward-thinking entrepreneurs and companies who are also focused on improving the state of health care. We employ brand journalism and social media tactics to help expand our reach to providers and patients. Participation in community events that bring together providers and potential patients is also part of the strategy. Open houses will be held to allow patients to see the CareSpace for themselves before a medical need arises. This will provide a level of familiarity and comfort when they do need to see an OCN provider.

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Ramped Up HIPAA Enforcement: A Government Myth or Reality?

Jay Hodes
Jay Hodes

Guest post by Jay Hodes, president, Colington Consulting.

A little more than a year ago the former Director of the Office for Civil Rights (OCR) at the U.S. Department of Health and Human Services (HHS), Leon Rodriquez, referred to covered entities that did not realize they have business associate relationships in place. He went on to say that some business associates did not know that they were actually business associates. Rodriquez stressed it was both the responsibility of the covered entity and the business associate to understand this relationship does exist.

Regarding ramped up HIPAA enforcement and compliance, Rodriquez indicated future audits will be narrower in scope and include more organizations than ever before. Covered entities and their business associates also will be audited under the new permanent program, and audits will focus on vulnerabilities that could change year to year as new issues arise.  This appeared to be the start of an intended awareness program and fair warning.

With Rodriquez’s departure to Homeland Security in June, it seemed like the task of continuing the drum beat message of ramped up HIPAA enforcement fell to Linda Sanches.

Sanches is OCR’s senior health information privacy advisor. In that position, she oversees the HIPAA security and breach notifications audit program and may know a thing or two about the direction OCR wants to take with future audits. Sanches recently spoke at the Health Information and Management Systems Society (HIMSS) Privacy and Security Forum. However, she did not provide any striking revelations or critical insights about these new audits, just more of what the industry seems to know already, that these audits are coming.

Much like Rodriquez did in the past, Sanches spoke more in generalities than specifics. She indicated OCR was looking at a broader view of the entire healthcare industry as possible criteria for selection of who would be targeted for an audit. Using the National Provider Identifier (NPI) database is a method being considered to select entities like hospitals, practices and dental providers for audits.

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What I Learned at PointClickCare Summit 2014

Mike Wessinger

I recently had the opportunity to attend PointClickCare’s annual user summit held in Orlando. Though the senior care market is not one I’ve spent a great deal of time covering, senior and long-term care are deeply interesting to me. There are several reasons for this interest: Seniors are becoming the largest population segment in the US and that has serious ramifications ranging from politics to economics, and because I’m interested in alternative care models. And, in some way, senior care effects all of us.

There are a number of differences between senior care and ambulatory or in patient, but the technology needs are still overwhelming and great. Senior care facilities across the US face tight budgets, extremely high levels of employee turnover and technology challenges, but the care they provide is still important, as is how the information they collect on behalf of their patients is similar to other sectors.

According to Mike Wessinger, CEO and co-founder, “PointClickCare’s goal is to enrich the lives of care providers through technology that will help them better care for their residents in ways that are effective and efficient.”

Dave Wessinger

PointClickCare’s primary reason for being is to deliver electronic health record and practice management solutions, but the company has an eye on mobile delivery, where both Mike and brother David Wessingner, CTO and co-founder, feel the future of health IT lies.

Mobile is king for its ability to deliver health data quickly and where needed, as well as to alleviate stress and confusion of overwhelmed healthcare employees.

Hospitals, too, are overwhelmed. Data flowing in from various systems often goes unnoticed or unpackaged, a particular troubling problem for the senior population. When there’s a patient transferring in from a senior home to a hospital for emergency care, a health record of some kind may accompany them. A fully loaded paper chart may only be shuffled through and details lost.

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AMA Calls for Penalties to be Removed from the Meaningful Use Program

In a new policy approved at the American Medical Association’s (AMA) Interim Meeting, physicians continued to call for penalties to be halted in the meaningful use program. Physicians feel that full interoperability, which is not widely available today, is necessary to achieve the goals of electronic health records (EHRs) — to facilitate coordination, increase efficiency and help improve the quality of care.

The new policy comes on the heels of the recent release of new attestation numbers showing only 2 percent of physicians have demonstrated Stage 2 meaningful use. In response to the new figure, the AMA joined with other healthcare leaders to urge policymakers to take immediate action to fix the meaningful use program by adding more flexibility and shortening the reporting period to help physicians avoid penalties.

“The AMA has been calling for policymakers to refocus the meaningful use program on interoperability for quite some time,” said AMA president-elect Steven J. Stack, M.D. “The whole point of the meaningful use incentive program was to allow for the secure exchange of information across settings and providers and right now that type of sharing and coordination is not happening on a wide scale for reasons outside physicians’ control. Physicians want to improve the quality of care and usable, interoperable electronic health records are a pathway to achieving that goal.”

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The Unlikelihood of Permanent SGR Reform During the Lame-Duck Session

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

“Hope springs eternal” is a phrase from Alexander Pope’s An Essay on Man: Epistle I, written in 1733. For some reason, right now hope is in full bloom in Washington, D.C. for physician groups, such as the American Medical Association and the Medical Group Management Association, which are pushing for passage of a permanent repeal of the sustainable growth rate (SGR), also known as a “doc fix,” prior to the congressional recess that will start in mid-December.

The points that are being made by physician groups are not new. There is the spectre of a 21.2 percent reduction in Medicare physician fees effective April 1, 2015, when the current doc fix expires, and nobody wants such a drastic reimbursement rate cut to occur. Also, because of moderating healthcare costs, the most recent Congressional Budget Office estimate of the cost of holding payment rates through 2024 at current levels is “only” $131 billion, near the low end of the CBO’s historical range. And last, earlier this year, a number of permanent SGR reform bills enjoyed bipartisan and bicameral support.

In spite of all these valid points, the case for fixing the SGR this calendar year, as opposed the first quarter of 2015, does not seem compelling or possible, due to both political and fiscal realities.

Politically, as the name implies, lame-duck congressional sessions are not known for legislative productivity. Chip Kahn, CEO of the Federation of American Hospitals, commented, “I believe that the lame-duck session is going to be limited to measures that are either emergencies like Ebola or must do’s to keep the government open.” Similarly, Tom Scully, former CMS administrator under President George W. Bush, opined in Modern Healthcare that there is “1 in 10 million” chance of a permanent SGR repeal passing during the lame-duck session.

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Complications May Be to Blame for Some EHR Miscommunications, Perhaps Even in the Dallas Ebola Case

John Backhouse
John Backhouse

Guest post by John Backhouse, executive director of the Omni Program, Information Builders.

Patient data resides in many systems and in multiple locations, which requires adept coordination and collaboration to deliver quality healthcare. However, sometimes pertinent data slips through the cracks – as demonstrated at Texas Health Presbyterian Hospital in Dallas.

Dr. Daniel Vargi of Texas Health Resources explained the breakdown in EHR miscommunication in a recent CNN interview: “While we had all of the elements of information that were critical to understand a potential diagnosis of Ebola, the way we built them into our clinical process – not only the process of gathering the information but then communicating the information between caregivers – was not as front-of-mind as it should have been.”

This gap in information sharing needs to be bridged, especially to mitigate risk when dealing with significant diseases such as Ebola. It is critical that healthcare systems obtain a 360-degree view of patients, and achieve EHR interoperability.

Providers wrestle with EHR technology to enter patient information that is often never reconciled with patient history or existing data on countless other data sources including ancillary services, and other healthcare organization’s electronic medical record (EMR) system.

The HITECH Act (2009) initiated governmental incentives and penalties designed to nudge healthcare to adopt certified EHR technology for better patient outcomes. As of 2013, 59 percent of acute care hospitals (non-federal) have adopted at least a basic EHR system with clinician noted.

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Dell Insights Show How Midsize Orgs Are Adopting Security, Cloud, Mobility and Big Data Solutions

Dell unveils findings from its first Global Technology Adoption Index (GTAI), uncovering how organizations truly using security, cloud, mobility and big data to drive success. The market research surveyed more than 2,000 global organizations and found that security is the biggest concern in adopting cloud, mobility and big data. Furthermore, while 97 percent of organizations surveyed use or plan to use cloud and nearly half have implemented a mobility strategy, big data adoption is trailing as approximately 60 percent of organizations surveyed do not know how to gain its insights.

“We know that security, cloud, mobility and big data are the top IT priorities in all industries, but we need a deeper understanding of the practical realities of how companies are using these technologies today and what, if anything, is preventing them from unleashing their full potential,” said Karen Quintos, chief marketing officer, Dell. “This research cuts through the hype and provides a clearer roadmap for how Dell can enable our customers to thrive.”

“Despite mounting security risks and increased reliance on the Internet and technology to run their businesses, many small and midsize organizations are underprepared to deal with today’s security threats, let alone those of the future,” said Laurie McCabe, partner, SMB Group. “These companies know that disruptive technologies like cloud, mobility and big data can drive innovation and create competitive advantage. But it’s often difficult for them to take a strategic approach and overcome security concerns in order to fully harness the potential.”

Security Concerns Are Creating Big Barriers
The Dell GTAI found that IT decision-makers still consider security the biggest barrier for expanding mobility technologies (44 percent), using cloud computing (52 percent) and leveraging big data (35 percent). While security concerns are holding organizations back from further investing in major technologies, a lack of readily available security information is similarly preventing organizations from being prepared during a security breach. Only 30 percent of respondents said they have the right information available to make risk-based decisions, and only one in four organizations surveyed actually has a plan in place for all types of security breaches.

The security barrier becomes even more serious as the C-suite becomes less engaged. Only 28 percent of organizations polled have a C-suite mindset that is fully engaged with security initiatives. However, in organizations where executive leadership is involved in security, confidence is markedly increased. Among organizations that are very confident in their security, 84 percent of senior leaders are fully or somewhat engaged, compared to only 43 percent of senior leaders at organizations who are not confident in their security.

Other significant Dell GTAI security findings include:

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CHIME and HIMSS Force ONC to Face a Poor Perception of Itself

CHIME and HIMSS are in the news again, and this time you’ve got to love that they are — for sticking up for what they, as organizations, believe in. Their flexing of a little muscle is for telling ONC that its leadership and its current efforts just are not good enough; referring to the announcement that Dr. Karen DeSalvo, current national coordinator for health information technology, is splitting here duties between ONC and HHA, where she’s battling Ebola.

CHIME, especially, is known for its bravado, one of the reasons I find it such an intriguing organization to watch. Its messages are always loud and clear, and unadulterated; just what we need in an overly PC public where “the folks” are supposed to take what’s given to them.

CHIME and HIMSS’ letter is more about the overall leadership changes taking place at ONC and the organizations’ apparent difficulty keeping leadership in place; DeSalvo has led the organization for less than a year. “We are concerned with leadership transitions currently occurring within the Office of the National Coordinator for Health Information Technology (ONC); changes which could have a detrimental effect on ONC’s role in HHS’ charge to positively transform our nation’s health system,” CHIME and HIMSS’ letter to ONC states.

“Health IT is a dynamic field; to successfully address the needs of patients, providers and developers, ONC’s leadership team must be in place over the next two years. Such constancy will pay huge dividends in navigating all the changes that must occur for positive transformation.”

CHIME and HIMSS point out the obvious in their missive: That ONC faces a public that perceives its leadership as not wanting to be at the organization, much in the same vein as what’s going on at the White House amid reports that a disengaged Obama is counting down his last days as President.

As ONC’s leadership publically takes a willy-nilly approach, CHIME, HIMSS and others are done looking on wondering what’s up and are starting to demand some action. A half-hearted approach to leadership is not going to work, not now, not after so many of its programs that ONC lobbied for and put in place while practices and health systems looked on wondering how to deal with the swarm of new mandates and regulations.

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Why Is Everyone Outsourcing Medical Billing, and Even If they Are, Why Should I?

Alex Tate
Alex Tate

Guest post by Alex Tate.

Being a diehard Kennedy fan, this is what I’d normally quote to someone purchasing the latest commodity, or acquiring the latest service that everyone is flocking to stores to get – Conformity is the jailer of freedom and the enemy of growth. However, outsourcing medical billing is a different ballgame altogether.  

I’m often confronted by worried physicians who are already overwhelmed by a recent deployment of an electronic health record (EHR) system at their practice when they hear that the clinic next door is outsourcing medical billing. With an expression that could easily pass off as ICD-9 code number 564.0 (a person suffering from constipation), the hesitantly ask me this: “Why is everyone outsourcing medical billing; and even if they are, why should I?”

In response to all those people and all the physicians out there having similar questions, here’s why:

1.     It costs significantly lesser

Medical billing companies charge rates as low as three percent of your monthly collections to handle this process for you. Compare this with the costs of a dedicated medical billing department at your practice, and the difference will be significantly lower.

The salaries of the staff won’t be the only cost there, as they’ll need a room or office space to work in, desks and chairs to work on, dedicated equipment (computers, fax machines, printers), and miscellaneous expenses, such as stationary in addition to utility costs. Now when you accumulate all of this with the insurance packages of these staff personnel and the maintenance of this equipment, you’ll realize that the percentage of collections work out a lot cheaper.

2.     A large staff base

Each practice assigns a specific budget for billing according to which many small and medium sized practices are able to employ one or two billers who handle all of the practice’s billing related tasks.

More often than not, these understaffed and overworked personnel come across situations whereby they have to decide between negotiating over denied and underpaid claims, or moving on to the numerous pending cases. Given their constraints, they choose to move on, settling for lower (sometimes zero) payments on such claims.

The large staff base of a medical billing company will rid you of this problem as they’ll have different personnel to handle different processes, resulting in the maximization of reimbursements.

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The Prospect of Permanent SGR Reform in 2015

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

In the wake of the U.S. 2014 midterm election, it’s natural to turn our eyes toward the future and begin to speculate about possible legislative developments, such as a permanent repeal of the sustainable growth rate (SGR), often referred to as a “doc fix.”

The SGR is a formulaic approach intended to restrain the growth of Medicare spending on physician services. The SGR requires Medicare each year to set a total budget for spending on physician services for the following year. If actual spending exceeds that budget, the Medicare conversion factor that is applied to more than 7,400 unique covered physician and therapy services in subsequent years is to be reduced so that over time, cumulative actual spending will not exceed cumulative budgeted (targeted) spending, with April 1, 1996, as the starting point for both.

In part because of the effective lobbying efforts of physicians, Congress has temporarily suspended application of the SGR by passing legislative overrides or doc fixes 17 times from 2003 to 2014. As a result, actual spending has exceeded budget every year during these years. Because the annual fee update must be adjusted not only for the prior year’s variance between budgeted and actual spending but also for the cumulative variance since 1996, the next proposed update, effective April 1, 2015, is a reduction in Medicare physician fees of 21.2 percent.

There are three reasons to be optimistic that a permanent doc fix will be passed in 2015.

Reason for optimism #1: It’s much cheaper than before.

Since 2012, the Congressional Budget Office (CBO) has released some 15 estimates of the 10-year cost of SGR fixes, usually assuming a freeze in rates (i.e., 0 percent annual updates to the physician fee schedule). These cost estimates have ranged from a low of $116.5 billion to a high of $376.6 billion. In August 2014, the CBO estimated that holding payment rates through 2024 at current levels would raise outlays by $131 billion, a figure near the low end of the range and relatively more affordable.

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