What does it cost to improve operational efficiency using technologies and outsourced services?

For some physicians, the first reaction to every new service or technology is that it’s going to “cost too much.”

And you get pitches for plenty of new services:

* Your clearinghouse vendor or your billing manager wants you to push all your claims, even the claims you can file directly at no cost, through the clearinghouse for efficiencies.
* Your practice management vendor is trying to up-sell you on a service that will handle all your patient statement/invoice production and mailing.
* You attend a meeting and hear from a colleague that they’ve automated their appointment reminder telephone calls.
* You read an article that recommends verifying insurance eligibility on all your patient visits.

The corollary to the cost-too-much argument is “Why should I pay for that when I’ve got staff that can do it?”

But have you really done the math to compare that new cost against what the task is costing you to compete in your current environment?

Let’s look at a few processes in the practice with some real numbers from medical practices I’ve visited — the guilty shall remain nameless!

Pre-visit eligibility verification

The pitch: Submit batch eligibility verification for all patient appointments through a clearinghouse to reduce denial rates.

A sampling of denials for the first quarter of 2010 for one of my clients showed a first-pass denial rate of 5.9% (the rate for better performing practices is approximately 3%, according to Medical Group Management Association data). Approximately two-thirds of those denied claims were related to eligibility issues.

The cost to manage each denial is approximately $25 per claim, which could be eliminated with an investment in batch eligibility for all scheduled appointments at a transaction cost of $0.25. Many services also offer a flat monthly rate.

At that rate, it takes only five denied claims each month to “cover” a flat rate of $125/month/provider for a full clearinghouse service package that includes unlimited claims submission in addition to eligibility verification.

Another reason for claim denials is incorrect coding. Some practices insert a prep step by a certified coder for verification of the correct ICD-9 diagnosis code. Typically practice management vendor and/or clearinghouse solutions include this edit, which automates the process, reduces manual errors, and saves your staff time.

If you needed to purchase a scrubbing tool, typical costs are around $47/month/provider (plus a set-up fee/provider of around $500), which can be recovered with only a couple of incorrectly coded claims.

Appointment reminder calls

If it seems like you have too many patients who don’t show up for their appointments, you’ve probably tried to institute a process where you have your staff call all patients to remind them of their appointment.

But, have you followed up on how this task is getting done?

All too often when I’m in a practice, I see a last minute scramble by the staff to race through those calls at 4:30 in the afternoon. They leave rushed messages on answering machines and in voice mail without really confirming with the patient.

And suppose they do reach the patient. If he says he can’t come in after all, it’s too late in the day to fill the slot with another patient — say, the one who called in around 2:00 that had to be scheduled for day after tomorrow because it was your first opening.

Instead of phone calls the day before, some practices resort to just sending a letter or a reminder postcard. But there’s no confirmation from the patient that they will be at their appointment with the mail method either.

What does it cost to remind patients in the practice?

* An outgoing call that results in leaving a message will take approximately two minutes.
* Staff cost per minute including benefits is approximately $0.21/minute.
* So, the cost of a call with a message left is $0.42.
* Cost of a longer call actually connecting with the patient ranges from $0.63 to $0.82.

Simple math says that if the automated reminder transaction costs less than $0.42, it is an easy decision.

And that’s without even considering the opportunity cost of the staff time to make those reminder calls!

You can — and should — go through this same sort of exercise with any new technology or service that you’re offered.

And don’t be tempted to stick with the tried and true just because you’re used to it. As one physician I know said recently, “Paper costs money, too, but that feels like a ‘normal’ expense.”

To him and to all physicians I say “Stop ‘feeling’ and do the math!”

Rosemarie Nelson is a principal with the MGMA Health Care Consulting Group.

Originally published in MedPage Today. Visit MedPageToday.com for more practice management news.