Agencies could be blindsided by new staffing demands
A new dynamic is shaping up in the back offices of agencies of all sizes, where billers are seeing ballooning workloads based on increasing variation in payors, plans, and requirements.
Traditional Medicare accounts for fewer home health patients these days, and the Better Medicare Alliance, an industry advocacy organization, projects that it will account for less than half of all beneficiaries over the next few years.
Instead, patients are increasingly covered by a variety of plans that can bog down billing at verification, eligibility, and documentation checkpoints, requiring billers to devote extra time to match documentation to varying plan requirements. One payor may require documented proof of the patient’s medication compliance, for example, while others do not. Billers must sort through the requirements and check off all the pieces required for each patient so that the claim will go through.
“The end result of all the differences is a more complex billing matrix, with a more time-consuming verification process and an increased labor burden,” said Jordan Cichon, SimiTree Director of Financial Consulting.
Billing departments at home health agencies will feel the demand on their billers in 2023, Cichon said, and those in states where the Value Based Insurance Design (VBID) model is operating could be especially impacted by additional volume.
Late last month, the Centers for Medicare & Medicaid Services (CMS) released the list of Medicare Advantage (MA) plans that will participate in its Value-Based Insurance Design (VBID) Model during 2023, and model numbers are climbing. Participation is up from 2022, with the VBID Model offered in 25 states and territories next year. The VBID Hospice Component will be offered by two plans in areas of six states and territories (California, New York, Ohio, Oregon, Pennsylvania, and Puerto Rico).
Cash flow could be impacted
Cichon and other SimiTree financial consultants are concerned that agencies could be blindsided by a burgeoning billing matrix, not understanding its potential to cause delays in claims processing and hinder cash flow.
“It’s not really something most agencies are considering right now,” Cichon said. “They tend not to focus on the back-end impact, and how labor intensive it is to do this kind of work. It’s tedious work, with a lot of time-consuming calls and portals, and without the right processes in place, it can quickly become overwhelming.”
Another important factor is also contributing to the challenging new dynamic, Cichon said.
As billing tasks become more time-consuming, billers have less time to complete them. Non-Medicare payors generally offer less time than traditional Medicare for timely submission. Taking too long to process the claim results in nonpayment.
“While Medicare gives you a full year to file and get paid, most non-Medicare claims must be filed within 100 to 180 days,” Cichon said. “This is increasing the pressure on busy billers.”
With a 4.2 percent Medicare rate cut looming for home health in 2023 and agencies anticipating leaner margins, Cichon and other SimiTree consultants say agencies could quickly feel the consequences of overburdened billing departments.
Smaller agencies are particularly at risk, Cichon said, because they lack the resources to shift staff around or temporarily shore up a lag in cash flow.
“How many small agencies can afford to miss payroll because their billers are scrambling to stay on top of all the billing pieces? If they can’t make payroll twice in a row, they’re in a bad situation fast,” he said.
What agencies should do
At a minimum, the new dynamic ushers in extra training costs for most agencies, to become familiar with new payor requirements and develop new processes to ease the burden. But depending on the volume of non-Medicare patients an agency is handling, training alone may not be enough, SimiTree finance consultants caution.
Savvy agencies are recognizing the bottom-line impact of these new billing responsibilities and looking ahead to staff expansions in 2023 to accommodate the changes.
“Back-office staffing needs have been among the top considerations for 2023 budgeting,” said SimiTree Senior Manager Johnathan Dickinson, who has been guiding clients through the budgeting process this year.
Performance metrics to watch
Agencies also need to keep a close eye on key performance metrics to monitor the bottom-line impact of the changing payor matrix. These metrics will help agencies know when their billers are struggling, and action is needed.
- AR over 90 days. After 90 days, claims still showing in Accounts Receivable are at a higher risk of not being paid at all and need to be prioritized for collection. For adequate ongoing reimbursement, total AR that is 90 days or older for both Medicare and non-Medicare claims should account for less than 15 percent of your agency’s claims. Higher numbers generally indicate some of those claims won’t be paid.
- Days Sales Outstanding (DSO). To understand how well your agency’s billers are processing claims as the volume of non-Medicare plans increases, compare the length of your agency’s outstanding claims to the industry average. The industry best practice average for Medicare claims is 25 to 30 days, and for non-Medicare claims, 55 to 60 days.
Want to see more metrics?
Additional performance metrics are explored and explained in detail in Revenue Cycle Management KPIs and Best Practice Metrics, a free webinar presented by Cichon and SimiTree VP of Revenue Cycle Management Lynn Labarta. The webinar may be viewed on demand and at no charge on the SimiTree web site. Visit our webinar page and click on the Outsourcing archive to select the webinar.
Is it time to outsource?
When agencies struggle with overburdened billers and tighter timeframes for claims submission, outsourcing to a knowledgeable and reputable firm such as SimiTree offers the answer. But smaller agencies often shy away from the expense.
Cichon offers a simple measure for making the right decision.
“Bad debt can be the deciding consideration,” Cichon said. “Your bad debt write-off should be less than 2 percent of your agency’s annual net revenue. That’s the standard for best practices.
“Reducing bad debt increases cash flow. If your bad debt is greater than 2 percent of your net revenue, think about the additional cashflow you are going to see from outsourcing,” Cichon said. “And, if your bad debt is currently 4 percent or more of your total net revenue, outsourcing starts to pay for itself.”
If you’re considering outsourcing, the revenue cycle experts at SimiTree are available to answer all your questions. Use the form below to reach out to us today. And take a look at these additional posts from SimiTree:
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