Let’s start by walking through each of the seven elements of a compliance program and list just some of the benefits:
Element 1 – Written Standards of Conduct / Policies and Procedures: How we present ourselves to our patients and how we handle their affairs can have a significant impact on how they feel about our practice. If patients are dissatisfied or angry, or feel their concerns are not addressed, it’s likely they won’t refer their friends. And with today’s web-connected culture, dissatisfied patients reach far more people than just their friends when they post their experiences. How can this impact the bottom line? Let’s assume that patient dissatisfaction results in 10 new patients that aren’t referred to your practice. And each of those patients will have two visits during the year. If we use the middle level E/M code for both the new and established patient visit, this would amount to over $1,600 per year.
Another key area where policies and procedures can be helpful is in managing the practice’s denials. In some cases, practices expect denials to be able to bill secondary payers. But denials are more often a sign that something was not correct on the claim. This could range from inaccurate patient demographic information to incorrect coding on the claim. Some studies show wide variances in denial rates based upon specialty. For example, one study shows dermatologists having the lowest denial rate at 5.5 percent, while OB/GYNs experience a 22.4 percent denial rate.[1] If we assume an average denial rate of 10 percent and cut this in half, the amounts can add up quickly. For example, a practice submits $100,000 in claims each month. A 10 percent denial rate equals $10,000/month. If this amount can be cut in half, to $5,000/month, this equals $60,000 in additional revenues per year.
Element 2 – Designation of a Compliance Officer/Compliance Committee: Individuals in this position can be seen as a troubleshooter for your practice. The compliance officer is responsible for making sure needed policies and procedures are in place and making sure all the parts of your program are working smoothly. By overseeing the compliance activities in your practice, the compliance officer can help you detect areas where operations are not as efficient as they could be. By helping develop improved policies and procedures and streamlining processes, it won’t take staff as long to do what they currently do. This will allow you to either use staff in other, more critical roles, or be able to reduce staff costs. If we take the second approach and estimate that improved operational efficiencies can reduce staff costs by 0.5 FTEs for an individual making $10/hour ($20,800/year), that’s a savings of at least $10,400, not including benefits.
Element 3 – Open Lines of Communication: This element of a compliance program is designed to promote open communications of potential compliance concerns in the practice. Employees like to work for ethical practices and feel like they’re being heard. Sharing information, an ability to quickly react/adapt to changes, and a positive employment atmosphere leads to employee satisfaction. Employee dissatisfaction can create a negative atmosphere in the office and often leads to turnover, which is another large expense to practices. The Bureau of Labor Statistics states the average turnover rate in health care during July 2010 was at 2.5 percent.[2] Another study shows the costs associated with turnovers to be between 25 and 250 percent of the employee’s annual salary.[3] If we use an average of 100 percent of an employee’s salary, again at $10/hour or $20,800 per year, and the office has 10 total employees and 2.5 employees leave the practice during the year, the cost to the practice to replace these individuals is approximately $52,000.
Element 4 – Training & Education: So how do you help people be better and more efficient at what they do? The obvious answer is training. Training can range from very formal, structured programs such as classroom based training or attending seminars to informal mechanisms such as staff meetings, postings on bulletin boards, or distributing important materials such as Medicare updates. And when people are more efficient in their jobs, the benefits include decreased claim denials and reduced employee turnover.
Element 5 – Auditing & Monitoring: This element of a compliance program can be a practice’s best friend. There are times when a physician spends a lot of time with a patient providing medically necessary services but doesn’t clearly document all that is done. Or claims may be sent to electronic clearing houses and are not monitored to be sure all claims are received and any rejections are processed. The most recent Comprehensive Error Rate Testing (CERT) report published in November 2009 by CMS indicates there were $1.1 billion in underpayments across all providers. For providers billing Medicare carriers, this amounts to .2 percent of all claims submitted or $100,000,000. If your practice submits $100,000 in payable claims each month and we apply the 0.2 percent underpayment amount, this is another $2,400/year in revenues for your practice.
Element 6 – Enforcing Disciplinary Actions Through Well-Publicized Guidelines: Enforcing disciplinary actions for non-compliance may not seem to be to be an area where revenues can be obtained. In fact, in some cases, it could result in an expense if an employee must be terminated. But what about losses due to employee embezzlement? One CPA firm cites health care entities that are the target of employee embezzlement may have losses up to $106,000 in a single year.[4] Prompt disciplinary actions, along with effective auditing and monitoring can help prevent these losses.
Element 7 – Responding to Detected Offenses and Taking Appropriate Corrective Actions: Once you identify a potential problem, the obvious answer is to fix it! Each of the elements listed above provides thoughts and ideas on what you can do to not only promote compliance, but also increase revenues by capturing money you may not even be aware you’re spending. Taking corrective actions in a timely manner can stop the bleed and return money to the practice that it deserves.
While we’ve not estimated possible revenues and savings for each element, and the number listed here is no guarantee of the amounts your practice will save, we have identified the potential for over $125,000 so far just by taking a few simple steps. So the next time you think of compliance as a glass that is half empty, think instead of how compliance can actually benefit your practice and have your glass half full. Not only can you mitigate the risk of investigations or adverse findings, but it can actually improve your practice’s bottom line. Consider what you need to do to improve patient quality of care, patient satisfaction, more efficient processes and happy employees. Then reap the benefits, rather than dreading the burden.
Learn more about AAPC Physician Services.
The information provided should be utilized for educational purposes only. Please consult with your billing and coding expert. Facilities are ultimately responsible for verifying the reporting policies of individual commercial and MAC/FI carriers prior to claim submissions.
[1] “Denial Benchmarks; Physicians Practice; your practice your way”; http://www.physicianspractice.com/display/article/1462168/1625096
[2] Bureau of Labor Statistics; “Job Openings and Labor Turnover Summary”; http://www.bls.gov/news.release/jolts.nr0.htm
[3] Allen, Scott “The high cost of employee turnover”; http://www.openforum.com/idea-hub/topics/money/article/the-high-cost-of-employee-turnover-scott-allen
[4] Defino, Theresa “Bonding your billing staff; it’s better to be safe than sorry”; http://www.physicianspractice.com/display/article/1462168/1586295
