Most of the individuals I know that have pursued careers in healthcare, have done so for one reason — they want to help people. With that responsibility it is inherent that patient care is a constant priority. As revenue margins continue to compress under pressure due to reimbursement cuts and the increased cost of doing business, it is more important than ever that medical practices and laboratories invest in strategic partnerships so they can continue to focus on providing quality patient care.
The world we know has changed and we need to modify expectations on how to financially manage pathology practices. It is essential to providing continued excellence in patient care, and it is essential for survival. A more substantial investment in strategic partnerships around cost accounting, improved financial management, and technology infrastructure is a keystone principle for a successful future.
Cost accounting is the act of identifying and recording all costs incurred in a business in a way that can be used to improve its management. For example, what is the cost of performing the Technical Component for a FISH specimen versus bone marrow? What are the productivity metrics associated with comprehensive processing of a GI case vs a derm case and what are the cost associated with the pathologist’s time for those reads?
Based on experiences helping pathology groups establish cost accounting policies, Al Sirmon, co-founder of Pathology Practice Advisors, stated, “in the past, most of us in pathology practice management focused our attention to the ‘top half’ of the Profit and Loss Statement (P&L), targeted at income. As reimbursement declines, the need to examine the ‘bottom half’ of the P&L, which includes cost and expenses, has become critical to financial stability. Sophisticated billing software that can track income by individual CPT code, payor, place of service, and referral source and then ‘match’ the income with its direct cost and expenses is the most effective way of not only implementing better accounting practices but managing fluctuations and trends long term. Only at this point can we make informed business decisions.”
When payors cut reimbursement, understanding the cost of services rendered can help drive the conversation in a more favorable direction. If a pathology practice can explain that allowables at 60% of current year Medicare puts them at or below the cost margin for performing a group of tests, the argument for higher reimbursement becomes more constructive than the standard response of, “but we’ve never had contracted rates this low.” Further, leveraging this data as a community of pathologists to offset the risk of nationwide fee schedule cuts is a potential game changer when it comes to managing the value payors place on pathology and laboratory services.
Partnering with an accounting or financial advisor who can provide assistance with cost accounting, budgeting, and business growth strategies may prove to be well worth the investment.
In medicine, financial management primarily revolves around Revenue Cycle Management (RCM), and the right RCM partner will help pathology practices analyze the data collected as part of the billing process. Analysis of this data can help identify:
- Which clients are most profitable based on specialty, test, and payor mix
- Anticipated reimbursement rate per test based on CPT and contract terms
- Most common CPT codes that generate the maximum revenue and referral volume
- Top payors and payor specific billing and coding requirements for reimbursement
Stronger financial discipline will also arm pathology practice leaders with the information needed to make strategic decisions around growth plans, updating business models, improving margins, and recognizing additional revenue. Leveraging the right RCM partner, whether processing claims in-house or outsourcing all or part of the billing process, allows pathology practices to reap numerous benefits:
- Increasing reimbursements/cash collection through submitting more clean claims, getting fewer denials, and improving appeal success rates
- Improving patient and physician engagement
- Adding better risk mitigation and regulatory compliance strategies and tools
- Reducing labor costs through intelligent workflow automation and configuration
- Enhancing financial visibility with machine artificial intelligence (AI)–enabled analytics and visualizations
- Delivering test/CPT code-specific business intelligence (BI) to enable data-driven decision making
- Achieving easier and more cost-effective interoperability and data exchange
- Minimizing clerical decision making and its related risk of human error
The data collected during the RCM process is essential in driving business decisions, especially when your billing is outsourced. You need to understand where the bottlenecks in workflow are occurring, the areas driving your accounts receivable, and where you are missing revenue opportunities. For example, complex case types that require a higher appeal submission rate or are subject to MUEs and other payor edits and related denials. Identifying clients that submit a higher percentage of bad demographic information provides pathology groups with valuable information that can help identify areas of opportunity for educating these provider offices, leading to reductions of days in accounts receivable, fewer denials, and increases in cash collections thanks to an increased precision in submissions and a lower instance of denials.
Further, the difficulty of working within a payor-controlled marketplace — one that is far more powerful than we’ve experienced before — means examples of receiving at or above Medicare reimbursement is seemly a thing of the past. Adding the lower payment rate with the partial or no-pay denials is not a 1+1 equation, since the results are still being reported and costs for doing the job (pick-up, supplies, processing, technical, professions components) continue to increase, pathology groups have taken arguably the biggest hit in all of healthcare over the last several years.
An intuitive RCM solution will not only keep you aware of reimbursement and financial trends but can also facilitate the ability to quickly pivot and/or implement logic to manage effectively moving forward.
According to Vicki DiFrancesco, XIFIN Chief Strategy Officer and former CEO of Pathology, Inc. “The right technology infrastructure enables pathology practices to improve value in laboratory operations and financial results. Within three months of arriving at Pathology, Inc., I identified three areas of opportunity to achieve growth and improve profitability: replace the ancient RCM system; evaluate and expand the women’s health testing menu; and accelerate growth with an expanded sales organization and proven leadership.” When assessing RCM solutions at Pathology, Inc, Vicki’s focus was on having a system that would provide her and CFO Steve Pierce with the financial visibility they had been lacking with their former system. Another critical aspect was to have the ability to automatically, and proactively, capture payor edits, such as coverage criteria, coding edits, the identification of up-front requirements are invaluable to reducing denials, and improving turnaround times on payment. The ability to run eligibility checks, perform insurance discovery and check for prior authorization reduces touchpoints and can automatically resolve related errors within minutes of the system identifying the issue. Robust system capabilities can also drive critical compliance logic that prevent potentially harmful and illegal billing activities.
Other considerations may include Laboratory Information Systems (LIS), digital pathology technologies, and clinical data management/utility platforms. Building financial discipline helps pathology practice leaders make more intelligent decisions about investments into practice infrastructure and what return should be expected as a result of those investments. For example, when is the right time to invest in a digital pathology platform? At the start of the pandemic, many laboratories were caught short without the ability for their pathologists and staff to work remotely. A lesson learned by many is that digital pathology platforms are immensely useful when facilitating remote readings when it’s deemed a necessity, or simply as a convenience to quicker turn-around-times when working consults or with remote facilities.
Sophisticated LIS systems and data management platforms not only provide a conduit for realizing the true value of digital pathology, but also allows for monitoring of patient healthcare trends and treatments in your region. As the “hub” in the diagnostic wheel, pathologists and laboratories can partner with their physician community to offer this aggregation of data to hospitals and physician networks. Imagine the value of providing a cumulative study on the benefits of administering a new NGS panel for specific cancer types by showing trends in how those test results drove more cost-effective healthcare decisions and improved patient outcomes? Now, imagine taking that same information to an insurance provider to show clinical utility and evidence of medical necessity. What if you could use that aggregation of data in appealing denials and improving propensity of payment?
Complete visibility and transparency into your business, even if it presents hard truths, will indeed facilitate longevity in your practice — so long as the information provided is utilized well. While investments into new business practices or technologies aren’t always seen as practical, the cost of delaying adoption can be far more damaging than waiting for the “right time.”
You must be a viable business in order to continue evolving, and performing, the invaluable contribution pathology practices have in healthcare. Trusted business partners, like XIFIN, can help you establish a strong infrastructure and maintain financial stability.