Picture an ASC with the following financial performance characteristics:

• Expenses covered routinely
• Employees receive occasional raises
• Periodic new investments made
• Owners receive consistent distributions

Looks pretty good, right? But looks can be deceiving. And in this case, a focus on the bottom line and what it's allowing the ASC to do may mask what the ASC could be doing. Suboptimal revenue cycle performance prevents an ASC from achieving stronger financial results. Strong results enable everything from higher distributions to investments in staff that help with satisfaction and retention to purchases of capital equipment that improve quality of care and support growth efforts.

How can an ASC perform well enough to achieve the financial performance qualities listed above and yet still come up well short of the performance it could achieve? The answer is by overlooking key elements of the revenue cycle. Problems affecting the ASC revenue cycle tend to become better concealed as a surgery center grows and moves in-network with more of its payers.

When an ASC's case volume and percentage of in-network cases increase, the center is going to have a high percentage of claims that pay based on claims submissions. If an ASC has processes in place to successfully complete clean claims submission for a large percentage of its cases, this can generate a constant cash flow — and potentially enough revenue to maintain operations. In other words, it can give the appearance of a healthy business.

While an effective clean claims submission process is essential to ASC revenue cycle management success, it's far from the only process that should be contributing to the bottom line. Here are three other processes that can make a significant impact on your surgery center's revenue cycle performance.

1. Understand and Properly Load Contracts

Payer contracts can be overly complicated. This is largely by design. When a contract is complex and difficult to follow, it's more likely that you will miss key details that can make the difference between whether you're paid and if you're paid correctly. Every day, ASCs are leaving money on the table, because they miss opportunities to bill for supplies, implants, and biologics, or they miss rules about groupers, carve outs, case caps, and more. It is essential that your billing team understands what is payable, how much you should be paid for each of your procedures, and what is necessary for you to get paid appropriately.

Consider the following common scenario: An ASC performs a procedure and is contractually owed $5,000 by the payer. Payment arrives and it's for $4,750. Assuming there's no secondary insurance and no payments made by the payer to the patient's deductible and/or coinsurance, what happened to that $250? The unfortunate reality is that payers tend to underpay. In this underpayment scenario, the ASC has two choices: ignore the payment discrepancy and write off the $250 or hold the payer accountable for paying correctly to their contracts. While the former is easier, the latter is essential, not only to getting paid what is properly owed but helping reduce the likelihood of such an error occurring again. This may take a lot of work, but it's the only way to get paid what you are contractually owed.

Here's another scenario: A payer's contract states that the ASC will be paid following a specific grouper rule, but if a carve-out code is included in the case, it negates the grouper rule and moves the ASC into the carve-out rule and brings with it a case cap. This "lesser of" contractual language is commonplace, and not all billing systems can handle the multiple rule changes that can come into play. Proper understanding of a contract and its rules will help ensure the necessary manual billing adjustments are made when staff enter and calculate charges.

In addition to understanding your contracts, loading them correctly — and keeping them current — is critical. We've witnessed the importance of properly loading current contracts with the suspension of Medicare sequestration due to the pandemic. As was discussed here, ASCs that loaded contracts that still included the sequestration essentially lost 2% of their reimbursement on those payments. Develop a process that will ensure payer contracts are loaded and updated when necessary.

2. Appeals

When an ASC's management team believes their center is performing well financially, one of the first revenue cycle processes often put off or even stopped is the submission of appeals. Why? Successful appeals require extra work — and sometimes a fair amount of it. And it's undoubtedly easier to write off balances and skip the appeals process.

But there are problems with that approach and mentality. First, appeals may occur even with the strongest of clean claims submission processes. Payers are constantly trying to work the system and find ways to delay payments and not reimburse for procedures at all. Erroneous initial denials are commonplace. Depending upon the type of specialty, up to 60% of claims can receive an initial denial.

Second, a strong appeals process can help an ASC achieve a high collection rate — one that should approach 100%. Let's say a clean claims submission process yields a 75% collection rate that translates into $750,000 in revenue for a quarter. Even a moderately successful appeals process could bring that up to 98%. That would translate to $920,000 in additional annual revenue.

If your ASC lacks an appeals process, or you don't believe your existing process is particularly strong, consider taking these steps:

• Closely review your contracts to determine each payer's appeals process since carriers have different requirements (e.g., reconsideration, online, specific forms).
• Pay attention to all correspondence received from payers, flagging any that state a claim has been denied. Note: Never ignore or delay opening correspondence from payers.
• Immediately review the denial to identify what the payer claims as its reason(s). Denials should be worked daily. If necessary, call the insurance company for clarification on what exactly is needed and why.
• Determine what you need to do to submit an appeal. This may be as simple as providing proof that the procedure is covered by the payer (e.g., authorization form, verbiage from your contract). If the payer is requesting medical records, you will need to submit those records together with an appeal. This is the requirement for most large payers, especially higher dollar cases.
• Following the specific payer's process, submit the appeal with the required medical records, copy of authorization (if applicable), verbiage from the contract, and a copy of any implant invoices with the specific implant highlighted. Medical records may include the operative note, history and physical, and radiology images and reports. A letter of medical necessity from the surgeon may also be helpful under certain circumstances. Some payers only permit a single appeal, so take all necessary steps to submit the most complete appeal possible.
• Continue the appeals process until you're paid or you determine an appeal is not possible due to an error made by your ASC (e.g., failure to acquire prior authorization).
• Be persistent in following up to confirm the appeal was received and in process.
• To avoid denials for authorizations, make sure your billing team is communicating when there is a change from the scheduled/authorized CPT to the final code issued. Some payers will update an authorization and issue a retro authorization while others will require that the authorization be handled during the appeals process.

3. Patient collections

This is a subject that's received considerable attention in recent years as patient financial responsibility increased. And yet it's an area that still causes significant trouble in two ways.

The first way that is most often discussed: failure to collect in full from patients. When ASCs are unable to collect all that is owed by a patient, that patient's account typically ends up in collections. In a best-case scenario, a collections agency will recover 30%-40% of the balances transferred to them. Another way of looking at it: at least 70% of patient balances is typically lost when accounts go to collections. As the number of accounts grows, money lost increases fast.

The second way that does not receive enough attention is when ASCs collect too much from patients. It's not unusual to see ASCs with a few hundred thousand dollars in patient credit balances. This is problematic for a few reasons. The law requires that this money be returned to patients. An ASC could find itself in legal hot water if it appears that there was no intention of returning the money. If the ASC finds itself under an audit with its lending company, the auditor will likely question the high credit balance because of its effect on net revenue.

Furthermore, accrued patient balances can wreak havoc on a balance sheet. If an ASC is forced to clean up significant credit balances accrued over a lengthy period, it will eat into profits. This is a scenario where the bottom line is painting a much rosier picture than reality. Finally, there's the risk of harming patient satisfaction by not following through with timely refunds.

Fortunately, there are a few steps ASCs can take to strengthen patient collections and reduce the likelihood of these scenarios:

• Use a patient financial responsibility estimator tool. Some software includes this functionality, often paired with an insurance verification module. There are also standalone solutions.
• Vet the solution before you begin to rely upon it. Analyze whether the solution accurately estimates patient responsibility. While estimator solutions, as their name implies, provide an estimate, a good solution will get you close to what patients will owe. Once you've selected a solution, use it judiciously.
• Verify patient insurance information 1-2 weeks out from surgery. Reconfirm within two days of the procedure to determine if there are any changes/updates to avoid collecting too much or too little.
• When you speak with patients about their financial responsibility, inform them that you are working off an estimate. Being transparent will help avoid confusion and frustration if patients receive a bill or refund check after their procedure.
• For patients who say they cannot cover the entire portion of what they are estimated to owe, arrange a payment plan prior to surgery. It becomes significantly more difficult to collect from patients following a procedure. It's best practice to set up an auto-payment plan via credit card or ACH.
• Regularly review patient accounts, issuing refunds on a timely basis. Strive to issue refunds within 30 days from adjudication.

Identifying Problems with a Revenue Cycle Assessment

If this information has you questioning your ASC's revenue cycle performance, you have already taken the first step toward correcting course. Being complacent with revenue cycle management performance and processes can increase the likelihood of deficiencies developing and then going undetected.

One of the most effective ways to identify problems and opportunities for improvement is to undergo revenue cycle assessments annually or more frequently if your revenue cycle experiences a significant change (e.g., new specialty, staff turnover, new payer). A revenue cycle assessment takes a deep dive past an ASC's bottom line and into revenue cycle metrics and processes to find issues negatively affecting cash flow. To schedule a complimentary revenue cycle assessment for your ASC or learn more about Surgical Notes’ revenue cycle management service, SNBilling, complete the form here.