“As a result of the increasingly complex nature of managing physician enterprises, more and more of our health system clients are seeking assistance as they integrate with or acquire cardiology practices,” said David Zito, Managing Director of Navigant Healthcare. “Paragon’s expertise and reputation in this area will be a timely addition to our existing cardiovascular and orthopedic practice management solutions.”

Paragon Health (www.paragonhlth.com) provides a comprehensive range of cardiovascular man-agement and consulting services, and is a national leader in cardiovascular program strategy, assessment and development. Paragon professionals have an average of more than 20 years of direct management and executive experience assisting physicians and hospitals nationwide.

“Joining Navigant’s nationally recognized Healthcare practice will expand and strengthen service offerings to our provider clients,” commented Jim Palazzo, Founder and President of Paragon Health. “We are excited about the potential opportunities as we grow and develop our combined practice management services.”

Navigant Healthcare (www.navigant.com/healthcare) assists health systems, physician practice groups and payers in designing, developing and implementing solutions that create high-performing healthcare organizations. Our experienced healthcare team of more than 500 healthcare consultants helps organizations with strategic advisory, operational improvement, and outsourcing and technology solutions. Specific services include revenue cycle management, supply chain improvement, facilities planning, physician-hospital alignment, care innovation and clinical documentation improvement.

No additional transaction details were released.

About Navigant

Navigant (NYSE: NCI) is a specialized, global expert services firm dedicated to assisting clients in creating and protecting value in the face of critical business risks and opportunities. Through senior level engagement with clients, Navigant professionals combine technical expertise in Disputes and Investigations, Economics, Financial Advisory and Management Consulting, with business pragmatism in the highly regulated Construction, Energy, Financial Services and Healthcare industries to support clients in addressing their most critical business needs. More information about Navigant can be found at www.navigant.com.

Many forces are driving the trend in hospital acquisition of physician groups, from the need to strengthen physician-hospital alignment to new payment systems that will cut fees and lower reimbursement. But simply acquiring a physician practice doesn’t guarantee financial success for hospitals. Achieving financial objectives requires effective management of the practice-based behaviors, processes, and tools that affect the revenue stream. But hospitals and health systems face several challenges in managing the revenue cycle performance of the physician groups they acquire. To begin with, hospitals and physician practices are separate entities with goals, practices, and standards that are often very different from each other. The challenges that result from such differences—such as differences in culture, policies, tools, and processes—can be alternately clear cut and hard to grasp. Without a solid understanding of what makes each entity “tick,” achieving the financial targets a hospital sets for a physician practice can be an exercise in futility. Improving the bottom line of hospital-acquired physician practices requires an understanding of these challenges and a plan to overcome them. Following are five strategies for enhancing revenue cycle performance of physician practices.

Effectively Assimilate the Practice into the Overall Organization

The Challenge

Hospitals and physician practices operate in entirely different ways. In a hospital, for instance, decisions are made via committees and layers of authority, while in a physician practice, one or two key physician leaders may be calling the shots. Such differences can create an environment that is not conducive to setting—let alone meeting—goals. It is critical that hospital leaders invest time and effort into bridging this cultural gap and bringing the practice into the organization’s fold.

Action Steps

Create an action-oriented culture through which an evidence-based improvement plan can be implemented. To promote accountability for such a plan within the practice, hospitals should establish a shared understanding with the physicians of the hospital’s goals. Hospital leaders such as the CFO, COO, and clinical affairs director should work closely with key physician practice leaders and the practice administrator to explain the hospital’s overall game plan—not just what the plan is for that particular specialty, but where financial resources are to be invested throughout the hospital and how quality and staffing will be improved. If physicians understand the hospital’s strategic plan, they can better understand its financial decisions and be mindful of hospital interests in internal decision making.

Set clear practice performance expectations and establish organization wide agreement on how to best assess the practice’s performance in meeting those expectations. Examples of performance metrics include collection rate, days in accounts receivable, and payer mix. Realistic physician performance targets (such as for volume, procedures, and revenue) should be set based on current levels and industry norms, rather than solely on hospital goals. Physicians won’t buy into unrealistic goals.

Develop and distribute a comprehensive reporting package to allow for ongoing comparison of performance outcomes against internal and external benchmarks. The practice administrator should be responsible for generating such reports and distributing them routinely to the hospital team, physicians, and revenue cycle staff to generate ideas for improvement from all levels.

Create revenue cycle teams to lead improvement by specialty. Team members should include the clinical department director for the hospital, a hospital finance manager, and the physician group practice administrator. The team should hold regular team meetings, led by the practice administrator, to track revenue cycle strengths and weaknesses within each specialty and identify issues that need to be addressed. Periodically, the teams should involve lower-level revenue cycle staff from both the hospital and physician practice to foster cultural alignment on the front lines, where processes and tools are used and implemented.

Standardize Revenue Cycle Processes, Policies, and Tools

The Challenge

Implementing plans for revenue cycle improvement within a physician practice requires a melding of resources between the hospital and the group practice for the plans to be effective. A practice’s use of processes, policies, and tools that differ from those used by the hospital can hinder the practice’s financial performance.

Standardize chargemasters to create efficiencies and avoid complications on the front and back ends of the revenue cycle. With input from physicians, who receive the brunt of patient complaints about charges, the revenue cycle team should ensure that hospitals and physician practices are charging the same amount for the same service, to avoid the appearance of misalignment.

Consider the provider-based issues associated with standardizing the chargemaster among both entities. Weigh the pros and cons of whether to charge services as hospital- or practice-based. In cardiology, for example, charges for ancillary services, such as echocardiograms and ultrasounds, are typically twice as high in a hospital setting as in a physician practice setting. And in a hospital setting, the patient receives two bills—one from the hospital and one from the physician who reviews the results—which can lead to confusion and anger over greater out-of-pocket costs. The patient may direct his or her anger toward the physician or even leave the practice altogether. Such negative ramifications should be considered when deciding how to charge for services.

Adopt a common charity policy and create an automated patient eligibility system for the policy. Because they often are personally familiar with patients, physicians are likely to write off charges in hardship cases. Yet this practice may run counter to the hospital’s charity care policy. The hospital business office should develop the policy, but should include physicians in the decision making to ensure compliance. Physicians should be made to understand their role in following—not interpreting—the policy.

Enhance Physician/Patient Scheduling Policies and Procedures

The Challenge

Physician scheduling can have a major impact on a physician group’s productivity. If the hospital has more physicians on staff than the patient count requires, the number of office visits by patients will be reduced, unnecessarily limiting the growth of the practice. Likewise, poor patient scheduling procedures can unnecessarily reduce the number of patients seen in physician offices, which will reduce the number of ancillary services ordered—and ultimately reduce the number of procedures performed at the hospital.

Action Steps

Review physician and patient scheduling options that can directly affect hospital and practice revenue. Hospital administrators, such as the vice president of clinical affairs and clinical department director, should work with physician practice leaders to consider various schedule-related questions, including the following:

• How many physicians need to be in the hospital at any given time?
• Who will make rounds? (All physicians, or just one physician who will see all patients?)
• Who will handle discharges?
• Who is going to be on call?
• Will each physician see only his patients, or will he see his colleagues’ patients as well?
• Will every physician be available for referrals?
• Will referrals be seen on the same day as the request was made?

Many decisions will be based on the practice’s compensation system, whether it be a shared revenue structure or one in which each physician is compensated according to what he or she bills. If physicians share revenue, for example, it may not matter who should specifically make hospital rounds.

Avoid taking a top-down approach when developing scheduling policies. The hospital should gauge physician preferences, and then determine what options are appropriate. The importance of making the scheduling process as efficient as possible to accommodate new patients, who generate more ancillary services than established patients, should be underscored.

Audit Physician Documentation and Compare Hospital Versus Practice Charges

The Challenge

Physician documentation directly affects the bottom line, yet is heavily prone to misinterpretation of rules and error. For example, documentation involves recording not only the type of services provided by the physician, but also the level of service provided. If a physician codes for a service one level lower than the level the documentation actually supports, the payment will be about 50 percent less than it would have been had the level of service been coded correctly. Another common problem is that hospital procedures for which the practice has billed patients may not accurately reflect the total number of procedures performed by physicians in the hospital.

Action Steps

Monitor the codes being billed by each physician and the supporting documentation to ensure compliance and uncover revenue charge capture opportunities. Even the smallest change in coding can have a major financial impact. For example, a level-five office visit requires a physical examination of eight organs. If the physician’s documentation reports an exam of only seven organs, the level of service would drop from a level five to a level three, reducing the potential for payment by more than 50 percent. In turn, continual undercoding by a single physician can mean a loss of thousands of dollars in revenue. Internal anecdotal reports suggest, for example, that cardiologists may be losing as much as $45,000 a year individually due to undercoding. And the Centers for Medicare & Medicaid Services (CMS) estimates that undercoding costs practices $1 billion in fees annually (Improper Medicare FFS Payments Report, CMS, November 2009, www.cms.gov).

Periodically compare the number of hospital-based procedures billed by the practice with the number billed by the hospital. Discrepancies are common because physicians often inaccurately report to the practice’s billing department the number of procedures they performed during weekend and night shifts. Not only do physicians often inadequately track the services they provide, but also coders may find physicians’ handwritten logs difficult to decipher, adding further to an inaccurate count of procedures performed. For example, the practice’s billing system may record 50 cardiac catheterizations performed during one month, while the hospital’s system may record 54. Physician charges for those additional four tests would not be captured, resulting in lost revenue.

Conduct audits using an outside firm initially, then bring the function in-house once the hospital has gained the appropriate level of expertise. Practice administrators should regularly share the results of an audit with physicians. If a physician’s error rate exceeds an established internal or external norm, a revenue cycle staffer with expertise in the physician’s specialty should meet with the physician to explain the CMS rules and the financial impact of improper coding. The frequency of audits should increase for that physician until his or her error rate decreases.

Improve Procedures for Responding to Denials

The Challenge

Many physician practices routinely write off bills that are denied by a payer, often because the practice has neither a clear understanding of payer rules nor a dedicated resource to handle payment issues. With appropriate effort, however, many of these denials can be easily appealed and overturned.

Action Steps

Track denials to determine what’s being denied and why. The organization should maintain a separate log for each denial received that includes information related to the patient, payer, bill amount, and reason for the denial. Tracking the total amount of denials can help in determining the amount of resources that should be devoted to reducing and preventing denials. If a practice has $10,000 worth of denials annually, it doesn’t make sense to invest $40,000 to reduce that amount. The potential savings should be able to justify the expense.

Dedicate a role within the practice to working on denials. If the dollar amount is substantial, the role should be full-time. An internal staff member, most likely a coder, who has a comprehensive understanding of payer rules and the appropriate negotiation skills, should be assigned to work with the payer on overturning denials. If someone with these skills is not available internally, the organization also could consider engaging an outside firm to handle denials for the practice or recruiting a person with these skills.

Determine the appropriate remedy for avoiding future denials. If the practice is successful in winning appeals, the payer will most likely deny fewer bills. If, however, a denial is caused by a physician error—such as failing to sign a document—the physician should be educated on proper coding/documentation. The employee charged with monitoring denials should either give a presentation at a medical staff meeting on this topic, work one-on-one with physicians who are the source of particular denials, or both.

Shared Understanding Is Critical

Overall, the goal in managing the revenue cycle performance of a physician practice should be to avoid creating an “us versus them” mentality. The key—and the crucial element for success within each of these five strategies—is gaining that often-elusive physician buy-in, which can be accomplished by investing time in sharing organization wide objectives with physicians and understanding their priorities. If physicians have a solid understanding of the hospital’s or health system’s goals, they are more likely to accept policies, processes, and tools that are directed toward reaching those goals. Essentially, each side should understand what makes the other side “tick.” The practice should understand how a hospital achieves financial success, while hospital leaders should understand what makes a practice successful. Achieving this shared understanding requires a solid hospital practice alignment that continuously underscores what’s important for both sides and dedicates time and resources to achieving bottom-line targets that will benefit both parties—and the entire organization.

Thomas Freeman is a vice president, Paragon Health, Southlake, Texas (tfreeman@paragonhlth.com).

Stan Stephen is a senior consultant, Paragon Health, Southlake, Texas (sstephen@paragonhlth.com).

Before finalizing any deal to acquire a physician practice, the strategic, financial, operational, legal, and regulatory ramifications must be adequately addressed. P. Anthony Long, Senior Vice President, and William Cherry, Vice President, Paragon Health, offer the following tips for ensuring a successful—and sustainable—acquisition.

1. Evaluate Existing Capital and Prioritize opportunities

Most hospitals only have a certain number of dollars to contribute to practice acquisition, so a preliminary estimate of the revenue potential from any acquisition, based on the practice’s size and specialty, should be developed. The next step is to determine if the organization actually has the dollars to complete the acquisition; otherwise, no deal will make sense.

2. Understand the Practice’s Financial Solvency

Review revenue streams and expenses to project where the practice is headed financially and where there may be room for improvement or opportunities for growth. Questions to consider include:

• What is the main source of revenue: Office-based services, diagnostic testing, or procedures?
• Where is reimbursement for each revenue stream headed? For example, reimbursement for ancillary cardiology services has declined significantly in recent years. Understanding such trends will help produce a financial trajectory of the practice.
• What’s the outlook for major expenses, such as physician and staff compensation, space, equipment, and supplies? Are there plans to add staff or move into a bigger space, either of which would add to costs?
• Are there opportunities to reduce costs or manage expenses more aggressively?

3. Review Regulatory Changes

Acquisitions that do not take into account regulatory laws, such as the Stark Law and anti-kickback statutes, can leave healthcare organizations vulnerable to violations. Structuring a shared compensation model, for instance, is much more difficult when a practice is directly employed by a hospital as compared with a practice that is set up as a separate corporate entity.

4. Assess Impact and Resulting Opportunities

Consider four key areas:

• Financial: Project how the practice and individual physicians will fare financially, with and without the acquisition, to see where the benefits lie. Conduct a risk analysis to determine how the practice contributes to the hospital’s or system’s bottom line.
• Operational: Review processes, staffing, and assets that have the greatest potential for affecting revenue, expenses, and the overall success of the new enterprise. Scrutiny of physician billing and coding may uncover additional revenue opportunities and identify potential compliance problems. Review claims processes for accordance with industry norms. Supply costs, the procurement process, and staffing may also offer room for improvement.
• Patient/community: Consider how an acquisition might negatively impact patients. For example, moving ancillary services to the hospital setting may enhance revenues, but could increase out-of-pocket costs for patients, leading them to seek care at other practices.
• Healthcare Reform: New payment and care delivery models offer opportunities to create efficiencies and provide better care. Build an understanding of the changes, benefits, and disadvantages under any new care or reimbursement model.

5. Do the Homework

The bottom line in any acquisition is completing the analyses first. Some hospitals and health systems want to proceed directly to the last stage—negotiating the terms of purchase—without evaluating the nuances that will determine how successful a new enterprise will be. Skipping the due diligence can result in numerous pitfalls that may prove fatal. Understanding why a practice is seeking to be acquired and whether or not the acquisition makes strategic and financial sense will help guide a hospital or health system to a better decision and, ultimately, a better enterprise.

Published in the Hospital-Physician Integration issue of Healthcare Strategy Alert. www.healthcarestrategy.com

In Jan. 2010, St. Luke’s Hospital in Cedar Rapids, Iowa, acquired the practice Cardiologists LC. In March 2010, however, the executive administrator of CLC left. To ensure integration efforts between the hospital and practice did not stall, Paragon Health was called in to provide an interim manager for CLC. Tom Johnston, vice president of Paragon, and Todd Langager, MD, an electrophysiologist and senior physician in CLC, explain how integration was achieved and why gaining efficiency should not be the only consideration when two organizations partner.

Culture

Mr. Johnston says the biggest challenge in hospital-physician integration is aligning the cultures. “Getting [physicians] to understand what the other’s culture is and how they could fit into that, and how each of them could work closely together within those cultures, is the most difficult [part],” he says. Even with St. Luke’s, which CLC had worked with for years, the physicians and hospital did not fully understand the other’s perspective or culture, Mr. Johnston says.

For example, CLC, like most physician practices, used a cash-based accounting system. In contrast, St. Luke’s, like most hospitals, did accounting based on accrual. In an effort to increase efficiency, the hospital wanted the cardiology practice to change to accrual-based accounting. However, the physicians weren’t familiar with that system and thus were originally opposed to the idea. “The hospital originally didn’t even think about it because [the hospital has] always been on an accrual system,” Mr. Johnston says. He says the hospital needed to explain to the physicians what accrual accounting means, what it looks like and how they would transition. The hospital took the time to “crosswalk” the financials from accrual back to cash accounting. “This is one of those little tiny things that can end up becoming a big issue if the physicians don’t understand why the hospital is doing it that way,” Mr. Johnston says.

This example illustrates a theme in Paragon’s strategies to help the two groups integrate: strong communication is essential to successful integration. “Helping us understand the hospital’s perspective was the best and biggest change we’ve seen,” Dr. Langager said in a case study prepared by Paragon about the integration. “That was a crucial step in enabling us to accept some of the operational changes that were required for the integration effort to continue to evolve.”

More than Efficiency

Another example in which Paragon served as a “translator” between the physician practice and hospital was when the hospital wanted to incorporate the practice’s billing and collection office in the hospital’s office. CLC opposed this idea because their office was small, which allowed patients to get used to the office staff and have access to the physicians when explanations about the procedures and fees were needed. Once Mr. Johnston explained to hospital leaders the physicians’ reasoning for wanting to retain their office, the hospital permitted the CLC office to continue operation.

Mr. Johnston says hospitals tend to view integration strictly from an efficiency perspective and focus on eliminating duplication of services, such as billing and collections. “It can’t always be about efficiency on day one,” however, he says. To successfully integrate, the hospital and practice need to compromise on certain issues, even if the final decision does not produce efficiencies right away. In the end, CLC was able to make some changes in their billing and collection that boosted their efficiency. “We were able to integrate some of the efficiency methodologies that the hospital wanted us to adopt, so all parties were happy,” Dr. Langager said.

“Of course the hospital as well as the physician practice wants to gain efficiencies wherever they can, and they do become more efficient if the hospital manages in the correct manner,” Mr. Johnston says. “[But] it can’t be done overnight.” Instead, he suggests following a strategy he used with St. Luke’s and CLC: Bring the two groups together to communicate and align goals on what efficiencies they want to achieve; then, create a timeline for implementing changes gradually.

Heart Clinic

One product of St. Luke’s and CLC’s discussions was the dissolution of the practice’s heart failure clinic and growth of the hospital’s clinic. The cardiologists agreed to participate in the hospital’s clinic instead of rebuilding their own principally because of the added benefits to patients, according to Mr. Johnston. For example, the hospital could offer additional services, such as social services and dietary resources, that the practice did not have. “It was a little bit hard for [CLC cardiologists] to give up their clinic, but it was the right thing for integration to have one strong heart failure clinic,” Mr. Johnston says. “The physicians realized that they weren’t going to lose complete control of the patient, the hospital was doing a good job in the clinic and the patients were still going to be well taken care of.”

http://www.beckershospitalreview.com/hospital-key-specialties/successful-cardiology-integration-must-focus-beyond-gaining-efficiencies.html

Written by Sandy Dixon, CPC, Senior Consultant, Michelle Reese, CPC, Senior Consultant, Tess Turri, CPC, Senior Consultant, Paragon Health

As physician practices navigate increasingly challenging times, with reductions in reimbursement, increasing costs and a heightening regulatory environment, developing and deploying best business practices becomes increasingly difficult. With practices already running on scarce resources, training individuals to become highly specialized in key areas is challenging. The problem is a lack of appropriate expertise in an area such as coding can prove to be financially unwise. Here are five ways outsourcing rather than insourcing coding compliance and education functions can be a better fit for the overall operations of a physician practice.

1. Internal Resourcing

• Finding an experienced certified cardiology coder eager to educate and spend significant one-on-one time with physicians is difficult. In addition, employees must be self-directed and highly motivated.
• Employed coding staffs are dedicated to a single practice and rarely have the same amount of comparative experience as consultants do.
• While employed coding staff have immediate access to the necessary documentation, they are typically directed to perform audits strictly for compliance purposes only (i.e., did the documentation meet the level billed?) and are rarely “incentivized” to educate physicians or pursue missed revenue. Some practice administrators actually discourage communication between coding staff and physicians, opting for a management-level only approach.
• Employed coders must take significant time to remain current with coding rules and regulations by attending costly seminars and multiple webinars throughout the year.
• Employee turnover creates a “hole” in the compliance program until a new employee may be hired and provided extensive training.

2. Bandwidth

• Most business offices typically do not have the resources for auditing, compliance and continuing one-on-one education functions. The bulk of staff’s time is spent on such revenue cycle management tasks as obtaining authorizations, posting charges and payments and working denials.
• In order to be effective, physician education and compliance audits must be conducted on a regular basis year after year. This annual requirement pulls resources away from an already stressed billing office, taking time away from revenue cycle management, which is what revenue cycle staff do best.
• Coding departments are often understaffed and overstressed just focusing on compliance, which does not allow for an appropriate review of physician documentation.
• Consultants can dedicate more one-on-one time than in-house staff to educating physicians and focusing on issues that need the most attention

3. Expertise

• Physicians often disregard in-house coding staff’s recommendations and instruction because they do not have the same level of confidence in their own staff as they do  in external experts who dedicate their careers to coding education.
• Consultants are generally certified, credentialed and have years of experience in auditing and educating physicians and staff across multiple practices. Consultants also focus solely on the audit procedure, which enables them to provide quicker, more accurate results. Physicians tend to become more engaged with such a responsive approach.
• Because of their level of education and experience, consultants can interact with physicians on a higher level than employed coding staff, who may lack the confidence and clinical knowledge to discuss cases with a physician.
• Consultants have experience with intense, one-on-one physician education and dealing with all personality types and are, therefore, more likely to be affective at changing bad documentation habits.
• Because consultants have experience with a number of physician practices, they can share proven processes, ideas and best practices.

4. Process

• Outsourcing offers an expert, independent opinion and will improve compliance while providing third-party assistance with RAC audits and appeals.
• Outsourcing provides professional resources and education for procedure coding.  Many employed coders are not experienced or simply not comfortable coding the more difficult peripheral vascular, electrophysiology and cardiothoracic and vascular surgery cases.

5. Cost

• Outsourcing coding expertise often costs less than the labor costs of an additional FTE.
• Historically, outsourcing coding expertise has more than paid for itself, with an ROI of 300 percent or more in many cases.

Original Article Published with Becker Hospital Review

http://www.beckershospitalreview.com/racs-/-icd-9-/-icd-10/physician-coding-5-ways-outsourcing-specialty-skills-can-add-value-to-the-bottom-line.html