American College of Physicians: Internal Medicine — Doctors for Adults ®

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Don't lose out: software for your managed care needs

From the June 1996 ACP Observer, copyright © 1996 by the American College of Physicians.

By Edward Doyle

When the cardiologists at The Heart Group in Evansville, Ind., analyzed their fee schedules two years ago, they received quite a surprise. By using computer software to review the payments of various health care plans, the 18-physician group discovered that it often charged considerably less than the usual and customary fees—and was losing thousands in reimbursement.

The solution was simple—by updating its fees, the practice earned an extra $90,000 the following year—but it points to the trouble many practices have setting and updating multiple fee schedules. "Before we bought the program, we had no easy way of telling how our fees stood" under the different health plans, said Brad Tillman, chief financial officer for the group. "We could be totally undercharging on one procedure and totally overcharging on the next."

Mr. Tillman discovered, however, that computer software can be a huge help in managing multiple fee schedules and even capitated contracts. One program, for example, compared the group's fees not only with those from practices across the country, but also from the Evansville area, helping it to raise its out-of-date fees—and recoup lost revenues.

More software products that help physicians cope with managed care reimbursement are appearing—from full-blown practice management programs covering all aspects of capitation to basic products that handle functions such as creating and evaluating fee schedules. Many basic programs are simply spreadsheet technology: Physicians can enter various payers' data into a spreadsheet program and compare their reimbursement rates. But these programs also typically include procedure codes and relative value units (RVUs), which allow physicians to do much more.

Exploring different scenarios

Doug Garret, a programmer with XMS Corp., producer of FeeLogic software, said that many programs allow physicians to instantly produce Medicare fee schedules by applying a conversion factor for Medicare RVUs and CPT codes for their geographic area. "Like a spreadsheet, the program recalculates the values for each CPT code," he said.

Most reimbursement software allows physicians to edit out procedures they never use—internists can delete pediatric procedure codes, for example—to create a more manageable fee schedule. And perhaps most importantly, software vendors update information such as CPT codes, sparing office staff from tracking down and incorporating the information.

Because payers use different conversion factors to pay their physicians, many billing programs allow users to create separate fee schedules for payers. Practices contracting with 10 different payers, for example, can use 10 different fee schedules so they always bill the appropriate amount. Some programs offer RVUs from other sources like McGraw-Hill for payers that don't use standard CPT codes.

Using this software, physicians can explore even more complex scenarios. Many reimbursement programs offer a "what if" feature that allows users to predict how a hypothetical fee schedule would affect revenues. Mr. Tillman, for example, said he can calculate what taking a 20% discount would do to his group's revenues not only by figuring out the difference in pay rates, but also by applying actuarial data to estimate how many covered services a patient group will use in a year. By looking at the full picture, he can predict whether the group would profit—or lose—by contracting with a payer.

Some programs also allow physicians to compare their own rates with high and low reimbursement rates for metropolitan areas. Mr. Tillman used one such program to examine his group's charges and realized that one payer's fees were below the national average. The payer disagreed, citing information from its own database, but it ultimately compromised and raised its fees slightly. "We can say that according to these many millions of claims from this database, we're right in line or below the national average," Mr. Tillman said. "Without it, we'd have nothing to back us up."

Is capitation worth it?

Computer software may be most useful in helping physicians analyze reimbursement under capitated contracts. Thunderbird Internal Medicine in Glendale, Ariz., a seven-physician practice that earns about 10% of its revenue from capitation, regularly uses software to compare capitated fees to fee-for-service payments. "We can compare the reimbursement on a capitated patient to reduced fee for service to see if we're getting reimbursed 100% of the reduced fee for service or whether we're getting 80%," said Alanna Stelzer, administrator for the group. Some programs allow users to import data from their practice management systems, making it even easier to run these comparisons.

Ms. Stelzer also uses computer technology to make sure the group's practitioners are getting paid fairly. Seven physicians and a nurse practitioner receive capitated payments for assigned groups of patients, and when colleagues cover for another the software helps ensure no one gets stuck caring for too many of the other's patients. "If everybody sees five of somebody else's patients, it's a wash," Ms. Stelzer said. "But if one physician sees 50 and the other physician sees none of anybody else's patients because he's too busy, we need to look at that from an income standpoint."

Software can help physicians forecast the financial effects of signing a capitated contract. Many reimbursement programs contain detailed utilization estimates that help predict how many office visits and procedures the average patient will need in a year. Many programs can compare the fee-for-service cost of these services to the monthly rate physicians are being offered to care for that patient—a big help in deciding whether they should accept the capitated rate or negotiate for more.

Dependable actuarial data need to be specific to the geographic area—national averages are not good enough—and the demographics should also reflect an individual practice. Internists, for example, do not want utilization data that lump all patients over age 65 into one group. Data that divide seniors into more precise groups—ages 65 to 72, 73 to 80, etc.—will help internists better predict how many services patients will use and ensure that payers are not manipulating actuarial data.

Specific utilization data can be invaluable in disputing fees. Ms. Stelzer is comparing actuarial data to real utilization data of her group—multiple diagnoses, high-intensity diagnoses—to show one payer that her capitated patients require more services than patients of family physicians in the same plan.

Ms. Stelzer said insurance company officials are listening to her claims and she is hopeful that her group may get a higher capitation rate. "It's an issue that comes up all the time," she said of her physicians' claims that their patients are sicker, "but now we've got some relatively good data we can come back with."


From capitation to "what if": a software sampler

A growing number of computer programs can help physicians deal with reimbursement issues in managed care. Products range from overall practice management systems that handle all the needs of large groups to smaller, niche systems that carry out more limited functions such as creating fee schedules. Most products contain relative value units and procedure codes from multiple sources.

  • EZ-CAP is a comprehensive practice management and claims-processing system for physicians handling capitated contracts. The product tracks HMO enrollment, referrals, utilization and payment to physicians and can administer contracts for up to one billion members. Prices for the basic system start at $46,500. Information: 800-373-2792, fax 818-598-3270.
  • Code Breaker is a niche program that locates ICD-9 and CPT codes electronically. Information: Info-X, 800-299-1091.
  • Contracts 4.0 helps analyze capitated and fee-for-service contracts. The program helps users analyze fees and capitated rates through a step-by-step process and offers "what if" buttons to explore different scenarios. Cost: $1,295. Information: Main Street Software Inc., 800-548-2256.
  • Capitation Calculator allows practices to determine and evaluate capitated contracts. The program allows physicians to choose the procedures they will provide and offers utilization rates and cost data to estimate the cost of taking on a capitated contract. The software contains data from 187 metropolitan markets and more than 38 million patient histories; utilization data are broken down into eight age categories. Prices start at $1,990 plus $500 per physician. Information: Provider Solutions Ltd., 800-723-2225.
  • FeeLogic 2.0 helps physicians create, revise and compare fee schedules. The product identifies high and low fees and offers "what if" scenarios to predict the effect of working with a payer. Price: $395. Information: XMS Corp., 800-847-1658.
  • Measured Care helps physicians determine their costs of practice and identify unprofitable managed care contracts. The product is offered as an add-on to other billing programs from the vendor Medsoft. Information and prices: 800-696-3496.
  • Medirisk offers several products to help physicians set fee schedules and negotiate capitated contracts. Physician Fee Monitor offers an extensive database including eight types of fee data, including the high and low fees in 287 markets. Medicap provides utilization data and cost information to help users create and evaluate capitation rates. Information: 800-955-5056.

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