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Medical Billing Allowables: Why Charge More Than You Expect To Collect?

There are many items that are confusing in the world of medical billing. One of the most confusing areas for individuals that are new to the business side of medicine is the idea of medical billing allowables. There are not many businesses where a bill is sent out for much more than one would expect to collect. In most business if you bill $100 then you expect to collect $100. In the business of medicine a bill for $100 is often sent out with the expectation that only $50, $30 or even less will be collected. Why?

This is primarily done for four reasons:

  1. Simplicity. Not all payers pay the same amount for a medical procedure. If a practice tried to bill each insurer and each patient exactly what they expected to collect it would become an all consuming task to maintain the multiple fee schedules. The practice could easily end up with more than 25 fee schedules. In addition, all of the fee schedules would need on-going updating since many plans change the amount they will pay annually (and they change their fee schedules at different times throughout the year).
  2. Revenue Enhancement. Medical practices will often see patients with insurance plans for which the provider is out of network. Some of these plans pay a percentage of billed charges. So, you do not want to set fees too low because for the plans that pay a percentage of billed charges the practice would leave money on the table that they could be collecting.
  3. Comparability. If a practice continually changes it fee schedules (see point 1 above) then comparing charge volumes across months and years becomes less meaningful. For example, does the fact that charges are up 10% this June versus last mean more patients are being seen or that the fee schedule has changed? There are other measures that are easily decoupled from charge volume, such as patient encounters, but charge volume is the fastest and easiest metric for most billing software and departments to produce.
  4. Compliance. It is illegal for a medical practice that accepts Medicare to charge any other entity a lower fee than they charge Medicare. They can always give discounts, but the fee charged must not be lower. By charging all plans and individuals the same amount, the risk of unintentionally running afoul of this rule is eliminated.

Now that you understand why fees are set higher than expected collections it is time to explore other elements of allowables:

  • How are fee levels determined (or at least what is the best practice for determining fee levels)?
  • How do allowables impact the reports and explanation of benefits that are seen daily?
  • How can you use your understanding of allowables to better understand the meaning of your AR numbers?
  • How can you use your understanding of allowables to better predict practice cash flow and expected collections?

The harder the conflict, the more glorious the triumph

During the American Revolutionary War, Thomas Paine presented his case for independence from England in a pamphlet titled Common Sense.  He also wrote a series of essays collectively titled The Crisis.  Many of us are familiar with the opening sentence of the initial essay of December 23, 1776: “These are the times that try men’s souls.”  With these words he began his ongoing support for an independent and self-governing America through the war’s many crises.  General George Washington found the essay so inspiring he ordered it read to the troops at Valley Forge.

Paine emphasized: “The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman.  Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph.  What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value.  Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as FREEDOM should not be highly rated.  Britain, with an army to enforce her tyranny, has declared that she has a right (not only to TAX) but ‘to BIND us in ALL CASES WHATSOEVER’ and if being bound in that manner, is not slavery, then is there not such a thing as slavery upon earth.  Even the expression is impious; for so unlimited a power can belong only to God.”

We observed and celebrated Independence Day this year in the midst of another series of crises.  These current economic, cultural, moral and political crises may be miniscule compared to those in 1776, but they can be truly deemed crises.  Experienced individually and collectively, they are present on various levels throughout the world.  Thus, it came as no surprise when my recent column titled “Don’t give in, don’t give out, don’t give up” drew numerous e-mails and comments.

One respondent told me, “This could not have come at a better and more opportune time.  I have been discouraged by a number of things: some health-related issues, some age-related issues, some family-related issues and some dream-related issues.”  A company CEO wrote, “I have had employees making some positive comments about your column today.”  An entertainer said, “We all currently need such inspiration and encouragement.”

Readers especially commented on my wife Jean’s words (and the column title): “Don’t give in, don’t give out, don’t give up.”  And comments came heavily regarding the column’s final paragraph: “Players, coaches, teachers, students, employers, employees, spouses, parents, children… everyone needs to encourage and to be encouraged. Have you ever failed at anything? I have. Have you ever gotten down on yourself? I have. Have you ever needed encouragement? I have. Have you ever been encouraged by someone? I have. Have you ever been an encourager? I have. As (LSU baseball player) Jared Mitchell said, ‘It’s everybody pulling together…’ and never giving up.”

No, the individual and group crises we are experiencing today can’t compare to those of Thomas Paine’s day, nor can my words of encouragement and challenge make any mark whatsoever on the Richter scale in comparison to Paine’s words.  The truth of the matter, however, is that we must never lose sight of the vital necessity of individual and group persistence.  Sometimes it’s a huge challenge to maintain the philosophy I emphasize in my Winning Thoughts book: “Often, the main difference between an obstacle and an opportunity is the attitude with which we face it.  Are you pinned-in on your own one-yard line – or – do you have a great opportunity to go 99 yards for a touchdown!”  It is a challenge.  But we can do it.  Together.

2012 Cardiology Coding & Billing Changes Posted on, Feb 27, 2012 @ 12:42 PM

Many significant coding and billing changes have been introduced in 2012 for cardiologists, particularly electrophysiologists (EPs). The Associated Medical Billing has created a 30 minute training video to bring cardiologists and cardiology practice staff members up to speed on the key 2012 Cardiology Coding and Billing Changes they need to understand to insure they have no compliance, billing or collection issues as a result of these new rules.