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Claiming Their Due

Philip Betbeze, for HealthLeaders magazine, January 15, 2008
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Many providers struggle to bill for services amid a maze of contractual allowances, but sophisticated software is helping some hospitals and physician groups better manage the time value of money.

When a glass company sends panes to a dealer, it also sends a bill. The retailer pays that bill, or it doesn't get any more glass to sell. Now imagine that glass manufacturer has contracts with thousands of retailers who order thousands of different products--wholesale prices for which are each negotiated individually. Some contracts require the retailer to pay for enhancements like etching, coloring, and even the transportation of such items, and others put the end customer on the hook for framing and cutting.

Now you're put in charge of billing each customer for such services and goods. Say the bill is wrong, or the retailer or end customer decides he's no longer going to pay for cutting the glass--it's in the contract that he can make these changes, after all. So the bills get sent back and forth for weeks or months until they're finally settled.

Now you have a window into how difficult it is to bill for healthcare services based on dozens of contractual allowances--just like hospitals and physician offices.

Through the looking glass

Scott Barlow, chief executive officer of the Central Utah Clinic, has such problems. A 96-physician multispecialty clinic with 23 offices in Orem, Provo and several other Utah areas, CUC is struggling with claims editing, the practice by which providers and payers check healthcare bills for upcoding, bundling and unbundling of codes and duplicate entries. Barlow has seen a deterioration in revenue from the practice's service lines because of a lack of a clear standard on how claims should be paid and interpreted in certain cases.

"The payers have had discretion and frankly have been quite arbitrary in deciding something is no longer payable, even though for years you have been paid for it and are still incurring cost to run that service," he says. For example, he says, providers traditionally have been paid for a blood draw on a patient as well as for the lab work they processed and ran. "One of the larger payers decided the blood draw was inclusive of the lab they paid you, so without raising our lab rates, they simply said we're not going to pay your blood draw rate any longer."

Not only does such editing cause problems in the bill's total amount, but it delays payment--sometimes for weeks. The blood draw example represents only three dollars per draw, "but when you multiply it over hundreds of thousands over the course of a year, it's substantial."

"Part of the problem is they often don't even disclose them to us. So what happened yesterday no longer happens, and the only notification we have for it is we send in a claim, payment comes back and something's missing. As we follow up on it, they give us a definition they've instituted in their system."

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