How much revenue is outdated fee schedules costing you this year?
WHETHER YOU ARE JUST STARTING OUT OR HAVE BEEN IN PRACTICE FOR 30 YEARS, there is a lot of confusion when it comes to setting your fees. Many chiropractors’ fee schedules are outdated and haven’t been reviewed or updated in the last 5-7 years — if ever.
As a result, practices continue losing much-needed revenue. Small changes over time can have a huge impact on your bottom line. Did you know that an increase of only $5 per visit can add an extra month’s worth of revenue in a single year? What could that 13th month of revenue do for you and your practice?
Part of the confusion comes from the different amounts paid to the practice, from different payers, for each service provided. If payers will only pay you a specified amount for each service, regardless of your fee schedule, what difference does it make? The answer is, “more than you think.”
“This is what pays your bills,” says Susan Childs, a practice management consultant with Evolution Healthcare, based in Rougemont, N.C. “Any other business does this every year, looks at their costs and what they need to charge. It’s just that we get so bogged down with chaotic stuff every day.”
Even if you end up discounting from your fee schedule in nearly all cases, you should know what your breaking points are, when a discount means you don’t make a profit, and where it would mean you lose money, practice management consultants say.
Cost of doing business
According to a national survey a few years back, overhead in a typical chiropractic practice averaged 50%. I would be surprised if that average hasn’t increased in light of increased costs and lower reimbursement models.
Your goal is to break down your costs and your margin into units of work — cost per visit. To calculate your average cost of providing an office visit and the percentage of overhead, use the simple calculator at chirohealthusa.com/overhead. This calculator will give you a baseline for the minimum you need to collect at each visit to stay in business.
Know the market value
It is essential that you understand the market value of the services you provide in your practice. Unfortunately, due to anti-trust laws, this isn’t as easy as calling a clinic down the street and asking what they charge, but there are resources available to gather this information without breaking any laws.
Utilizing a consultant to gather this information is not only a huge time-saver, but can also assist you with setting your new fees. If this option is a little out of your price range, you can take the time to do the research yourself. But keep in mind that any time not spent on patient care costs your business money. Many providers find that they lose $300-$600 an hour in revenue when their time is focused on paperwork and not patients.
There are websites, such as fairhealthconsumer.org, where you can look up each service in your office by ZIP code to get an average of what all providers in your area charge. There are some limitations with these websites as they limit the number of codes you can look up each week, but if you have the time to do it yourself, it’s a great option.
Know your allowables
Know, at minimum, what Medicare allowables are. If you’re charging less than what Medicare allows, you may develop a false sense of prosperity since you’re collecting 100% of what you’re billing commercial payers, many of whose allowables are higher than Medicare’s.
If you are charging less than the allowable, it is a clear indicator of where you have been losing money. Many consultants recommend that UCR fees should be set higher than allowable amounts to avoid losing money. Additionally, provider contracts and allowable amounts change. These numbers and contracts should be evaluated on a regular basis to ensure that the practice is no longer participating in networks that don’t make sense financially. It is important that you also pull, and review, published PI and WC fee schedules for your area on an annual basis.
Even if you do not treat a lot of PI or WC patients, these fee schedules tend to have the highest allowable amounts. Most providers are not even charging these amounts, just as many associations are fighting to keep these amounts from being lowered.
Fee Schedule Analysis Example:
Cost of doing business: $27.27 per visit
|Description||UCR Fee||Market Rate||Medicare||Workers Comp|
If, like many providers, you realize your fee schedule needs to be updated, here are a few things to keep in mind:
- Make small changes over time. In the example above, you see huge differences in what you are charging versus what you could be charging. Increase the amounts incrementally over time until your fees are where they need to be. This often happens when practices haven’t evaluated or updated their fees for many years.
- If you have a practice with contracted providers in which you act as separate entities, but share office space and staff, it makes good business sense to have a uniform fee schedule across all providers. This is especially important if there are times when you each fill in for one another and occasionally treat the same patients.
- Avoid offering inappropriate discounts for self-pay patients, patients with little or no chiropractic coverage, and patients with high deductibles and co-pays. The OIG issued an opinion for a hospital that a 5%-15% time-of-service discount was reasonable for patients who pay at the time of service. This opinion provides broad guidance for the entire health care industry. Offering discounts over and above this amount could raise red flags that could potentially put you and your practice in hot water. Whatever prompt-pay discounts you offer, take steps to ensure that they are reasonable and defensible.
- If you have concerns about having affordable options for your self-pay patients and patients with limited benefits, consider using a Discount Medical Plan Organization to offer contractual, legal discounts in your office.
Now that you have reviewed and updated your fee schedule, how often does it need to be re-evaluated? At least annually. Any longer than that and you could find yourself with huge gaps between what you’re charging and what you should be charging.
Each year, our costs as business owners go up, and it’s essential to our practice success that we stay on top of making sure we are not just breaking even, but running profitable practices.
“Your No. 1 responsibility is to be profitable,” says Frank Cohen, a health care consultant with MIT Solutions, based in Clearwater, Fla. “If you’re not profitable, you cannot provide quality care. If you’re not willing to do what it takes to make money, you’re going to go out of business, and the community is going to suffer as a result.”
I couldn’t agree more.
RAY FOXWORTH, DC, FICC, MCS-P, is president of ChiroHealthUSA and a certified medical compliance specialist. He maintains his practice on NewSouth Professional Campus in Flowood, Miss., home to a large multidisciplinary spine center, with services ranging from chiropractic to neurosurgery. He can be contacted through chirohealthusa.com.