Health care collections cause swelling of bills

The politicians have it all wrong, J.R. Thomas says.

The biggest problem facing the health care industry isn’t the quality or availability of treatment, he says. The real danger to our national medical system is the soaring cost of getting the bills collected.

The chief executive of Irving-based MedSynergies Inc. sees this firsthand in handling the back office operations for more than 2,300 health care providers in 26 states.

Each year, more than $350 billion is spent needlessly as bills bounce among patients, doctors and insurers, says Mr. Thomas, citing a comprehensive study by McKinsey & Co. last year. “That’s 15 percent of total health care expenditures in this country.” Squeeze out this waste, and there’d be money to cover the 40 million Americans who are uninsured or underinsured without adding to our tax burden, he contends.

“Industrywide, the cost of collection is 20 percent of the medical benefits provided,” says Mr. Thomas. “What business do you know of that has a 20 percent cost of collection and survives? None.”

MedSynergies is in the business of “revenue-cycle management,” which means helping doctors, hospitals and other medical providers get paid faster and more accurately, Mr. Thomas says.

And what he sees defines insanity, he says. “The industry has been doing the same things for 10 years with the same lousy results.”

Typical of the horror stories he comes across:

• A $50 million multi-specialty physician group has a backlog of three months of charges that haven’t been sent to insurance companies.

• A hospital-owned physician group has more than 90 percent of its claims rejected because it doesn’t fill out forms correctly.

For every 100 bills a typical private-practice doctor sends to insurance companies, 30 are kicked back because the forms were filled out wrong, the procedures weren’t covered or the rules were so incomprehensible that the doctor’s office couldn’t follow them.

Emergency room bills often have a 40-plus percent initial rejection rate, he says.

By knowing the tricks of the collections trade, his company reduces that “failure rate” to 10 percent for private practices and 20 percent for ERs, he says.

“There are over 1,300 denial codes,” Mr. Thomas says. “We show the doctors why their claims are being denied and change their processes so that fewer are kicked back.”

Medical history

MedSynergies started out as a physicians group of ophthalmologists but evolved into its current business in 1999. Mr. Thomas forecasts revenue “a little north” of $22 million this year.

The company is owned by Dallas businessman Mort Meyerson, company managers and FTVentures, a San Francisco venture capital company. Mr. Thomas has a 4.5 percent stake.

The 43-year-old Little Rock, Ark., native took a connect-the-dots route into this business, having majored in zoology at the University of Arkansas as part of his pre-med education.

“But the lady having a baby in the emergency room turned me off of being a physician,” he says. “When you pass out and have to sit in the hallway, you can’t really be a doctor.”

After earning his MBA from the University of Texas in Austin in 1990, Mr. Thomas went to work for Texas Commerce Bank in Dallas. That’s where he arranged a deal financing EmCare Holdings Inc., which staffed emergency rooms around the country and was one of the nation’s first managed-practice companies.

Thus Mr. Thomas became an instant expert in health care financing.

“Expert is a pretty broad word,” he chuckles. “I could at least enunciate most of the words being used.”

In 1994, Mr. Thomas joined Bank One to head up its newly formed emerging health care group.

“We grew that business tremendously from about $35 million in loan commitments to more than $250 million in 20 months,” he says. “We were putting money into the consolidation of doctor groups, hospitals and in-home health care agencies.”

Two years later, he joined MedSynergies, which was a consolidated practice of 28 ophthalmologists in Dallas-Fort Worth. It expanded to 60 eye care providers in five states by 1998.

In 1999, everything hit the skids. HMOs imploded, and nobody wanted to buy stock in physician companies. As MedSynergies’ newly anointed CEO, Mr. Thomas had to figure out what to do next. Shutting down seemed the best course of action.

But Mr. Thomas discovered that his company had developed technology that helped it get paid quicker and more accurately.

MedSynergies now provides the technology to handle everything from scheduling a patient’s visit to the final payment.

Bill and bill again

Typically, a medical provider has to send out bills –to the patient, the government or the insurance company – four times to get fully paid, he says. But it often takes six or seven bills, and it’s not uncommon for it to take a dozen attempts to “zero out” the balance.

“And payment can be six months after you’ve seen the doc,” he says. “It takes us 2.8 billing cycles and about a month and a half for our doctors to get a claim paid.”

Dr. Richard Starita of Glaucoma Associates of Texas was one of the eye doctors who founded MedSynergies and is now a client.

His practice typically gets its bills paid in 10 days. “It used to be 90-plus,” says Dr. Starita. “So I spend less time in plus-90 [days], get money faster and get a bigger share of it.”

As good as such results are, Mr. Thomas isn’t satisfied. But streamlining the system would require further government intervention.

“The government is the biggest payer in the whole country, with Medicare paying 40 percent and Medicaid around 5 [percent] of all bills,” he says. “You and I are second, paying about 25 percent. Insurance companies weigh in at around 30 percent.”

David Cook, administrator of the Carle Foundation Hospital in Urbana, Ill., and a MedSynergies client, says something has to be done.

“The system right now is very difficult to navigate for everybody. I’m in the business, and sometimes I have to call our billing people and have them explain it to me,” Mr. Cook says.

His hospital hired MedSynergies in 2004 to help its 45 physicians with billing.

“We’re now approaching best-practice type of operational metrics,” Mr. Cook says.

Which means what?

“We look at whether we’re turning the physicians’ work into cash so that we can pay our rent, keep our lights on and pay our employees. We need to bill the right people the right amounts,” he says. “Our cash was not coming in, and now it is.”
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