Roger Thomas
Roger Thomas, MD, Newport Harbor Radiology Associates

More than a year after the DRA cuts were implemented, the imaging industry is still struggling to overcome severe profit reductions. At the Newport Beach, Calif-based Newport Harbor Radiology Associates, Roger Thomas, MD, has already felt the pinch of reduced profits. The group, which encompasses seven outpatient offices as well as supplying services to Newport Beach’s Hogue Hospital, has already scrapped plans to invest in digital mammography equipment this year, and it’s getting harder to fill staffing needs in this climate.

“The DRA cuts resulted in a 30% cut in all imaging,” Thomas said. “Obviously, it hit radiology very hard.”

Of course, where Medicare treads, private insurers are sure to follow, and many have been introducing cuts of their own that mirror the DRA measures. “Private insurers have been absolutely merciless in pushing down what they pay,” Thomas said. “So, it’s not just one component of a radiologist’s reimbursement—it now spreads beyond the government-reimbursed programs to the private programs.”

An unexpected side effect—although very slight for many imaging companies—is an impact on receivables. With new policy changes being implemented by private carriers, it is easy for more denials to creep into accounts receivable and cause delays. “You have different rules for submission of claims to different carriers,” said Barry Haberman, president of Medical Specialty Managers Inc, Orange, Calif. “And that’s what causes problems with the accounts receivable because now you are almost customizing the claim to fit the nature of the carrier, rather than having a uniform methodology.”

Knowing how to anticipate these denials and learning the idiosyncrasies of each payor are time-consuming, resource-intensive endeavors—but well worth the effort, if you ultimately receive the payment you deserve.

Claims Clashes

Since the DRA cuts, Thomas has noticed a 22% cut in reimbursements coming into two of his offices—but this does not reflect Medicare payment changes alone. Many of the same cuts have been adopted by private payors, too. For example, some are following Medicare’s lead and slashing reimbursements for imaging of contiguous body parts—a denials category known as “included in other charges.”

Thomas gives the example of scanning for Hodgkin’s disease, which requires images of the chest, abdomen, and pelvis. “What’s happened is that Medicare has introduced a payment scheme in which they pay you the full amount for the chest, they pay you 50% of your charge for the abdomen, and they pay you 25% of your charge for the pelvis,” he said. “They’re saying that if you’re doing it at the same time using the same piece of equipment, why should you receive the same amount of money for each one?”

This argument doesn’t make sense, however, when you consider the costs of imaging and how overhead works in the industry. Thomas said this system is analogous to buying two books at a local bookstore and paying only half price for the second book because you are purchasing them at the same time. Such a system would not account for the store’s overhead. “People who do a lot of CAT scans are being hit by the DRA cuts, which amount to about 30%, and then additional losses on top of that are because of the decrease in payment for the second and third body parts in a CAT scan,” Thomas said.

Roger Thomas

According to Fred Gaschen, executive vice president of Radiological Associates of Sacramento, these reductions were based on the surgical model. When a surgery involves contiguous body parts, time-consuming preoperative and postoperative services need to be performed only once, which can add up to significant savings. These same savings, however, don’t translate to an imaging facility, where setup involves little more than a patient walking through the door.

Performing imaging services for contiguous body parts—whether via ultrasound, MR, or CT—also does not minimize the equipment maintenance fees the facility will need to pay, nor does it truncate the time and resources needed for the techs to perform the imaging of each organ. “Every single time I do a CT, it doesn’t matter if I set up the patient twice or five times—I’m still doing the same amount of images that’s putting the same wear and tear on the piece of equipment,” Gaschen said. “It just doesn’t make sense.”

While Gaschen said they’ve had to accept these cuts from Medicare, he’s noticed a small surge in private payors requesting the same types of cuts. A few of these he has appealed successfully by citing the original terms of his contract. In at least one case, he has filed a lawsuit to resolve this issue. When the contracts come back up for negotiation, he won’t be surprised to find contiguous body part reductions on the agenda, but until then, he will continue to appeal those that don’t honor his current agreements. “We just go ahead and say, absolutely not, we don’t accept this,” he said.

Another setback to accounts receivable, according to Haberman, is the “no authorization” or first-line denials. Often, this results from confusion over when authorizations from referring physicians are required—information that is not always easily accessible or clear from the payors. In some cases, appealing these denials may even be more trouble than it’s worth. “In many cases, the billing agent just might write them off, rather than taking the time and effort to resubmit and appeal them,” said Haberman.

Other Payor Pitfalls

Several other factors, though small, contribute to accounts receivable delays.

  • Timely file limitation. This tends to affect hospital-based imaging facilities, particularly if a patient is discharged late, but the clock on the file-limitation period started running at the time of service. In some states, this filing limitation is illegal, but hospital-based facilities often find themselves appealing claims denied because of this.
  • Turning responsibility over to the patient. This delicate situation often requires putting the account on hold and doing a thorough investigation to find the source of the coverage problem. Determining whether the patient is indeed responsible for the amount is usually resource-intensive, resulting in significant delays.
  • Services outside of the contractual agreement. If a service either is not covered in your contract with the payor or is not defined in the patient’s policy, the claim could be denied. To be prepared, it is helpful to have patients sign a waiver saying that they will be responsible for any noncovered service (however, be careful not to contradict language in your contract saying that you won’t seek payment from your patients).
  • Diagnosis denials. Sometimes, a carrier will question the relationship between the submitted ICD-9 and CPT codes. Facilities can appeal denials by sending in documentation and citing different agencies, such as Medicare, as national standards.
  • Capitation. While this issue may be subsiding in many markets, it is still prevalent in some states, including California. If the scope of service under capitation is poorly defined in your contract, the risk of denials rises.
  • Incorrect or missing modifiers. Each carrier has specific coding requirements, which usually differ from Medicare’s as well. Staying on top of changing modifier requirements will help you avoid coding errors that could lead to delays.
  • Pending primary explanation of benefits. In some cases, carriers require supplemental documentation to process a claim. After filing a secondary claim, it is up to the imaging facility to follow up to make sure the claim is paid.
  • Patient unable to be identified as insured. This also requires investigation to find out whether the patient was indeed covered at the time of service. In some cases, the patient may have been covered by a different carrier, which requires rebilling a new company.

—A. Carlson

To combat this common denial, the best prevention is educating referring physicians about necessary authorizations—but this isn’t always as easy as it sounds. Some physicians may perceive this as creating extra work for them, and they may decide to send their imaging business to another facility that doesn’t require the extra legwork. On the other hand, if your facility doesn’t provide reminders about authorizations, some physicians will seek out a competitor that will.

The best policy is to provide educational support where you can. Even though it’s not the radiologist’s responsibility to procure preauthorizations, Thomas said they often end up doing it. “Making sure that you get authorization ahead of time is important, and that’s where the practice has to make sure that it’s got people who ask the right questions and know specifically what the insurance companies need,” he said. “You can really create goodwill when you say to the patient, ‘Your insurance requires preauthorization. We’ll get that for you, and we’ll talk to the doctor’s office.'”

The impact of these two denials categories—”no authorization” and “included in other charges”—can add up. Haberman estimates that if 14% of your accounts receivable are old claims, probably almost 3% of them are “no authorization” denials, and about 2.5% fall under the “included in other charges” category.

Prepared Prevention

Experienced imaging facilities know that they must handle each denial situation with care. “You’re put into this position of a delicate balance between your relationship with the patients, your relationship with the referring physicians, and trying to get claims resolved and be paid for what you do,” Haberman said.

The entire billing team must stay informed of contract changes, payor policy changes, and denials patterns so that they can stay ahead of the curve. This requires regular meetings, and sometimes even monthly debriefings.

Prevention, although not always feasible, is often the best policy. Knowing the language of your contract well can often help you fight unfair reductions that payors may try to implement via a company-wide policy. “If the contract itself has reimbursement language, then the insurance company can’t have a policy outside of the contract that changes a term within the contract,” Gaschen said. “That’s what some of them are trying to do, and that doesn’t hold water.”

You also have to be vigilant about mailings from payors, which may state that a change will go into effect if they do not receive an appeal from you within a set time period (usually anywhere from 30 to 60 days). “Make sure that somebody is monitoring your contract language that comes in through the mail,” Gaschen said. It is important that you respond with your written appeal within that time frame.

Another popular method is “prescrubbing” claims—anticipating the specific payor’s requirements, such as providing supplemental documentation, to avoid a denial. Prescrubbing software programs can be helpful with more predictable payors, such as Medicare, but it doesn’t quite meet the needs for facilities dealing with many local, private payors. “Generally, they tend to be generic in nature, set up for Medicare or general guidelines, and usually the scrubbing has to be carrier-specific to get into all of these details, such as which modifiers they require,” Haberman said.

Some billing departments also review their denied claims to see if they can spot any patterns to help them anticipate future denials. “If you have the same thing occurring time after time with a specific carrier, you can aggregate those claims and submit one batch document rather than sending hundreds of individual claims for fairly minor amounts of money,” Haberman said.

While there is a fairly good chance that appealing denials will not be successful, Haberman said that the conventional wisdom is to pursue them, even if it yields payment only 30% of the time. “It’s still better to have 30% than not to be paid at all,” he said.

Reevaluating your contracts is also a good way to maximize receivables. Thomas said his practice is made up of 35% Medicare claims, and the rest are private insurers. When working with smaller carriers that make up less than 5% of the business, he has found it effective to renegotiate contracts that pay less than Medicare. “You tell them that you’re no longer going to do the radiology for them because they are not paying you what you think it’s worth,” he said. “It’s amazing, in our experience, how many of them jump back. We have three of them that were at Medicare’s rate, and now they’re paying us 250% of Medicare.”

Thomas also recommends cutting out network contracts, which involve a private organization that negotiates a rate with the insurance companies for all of the radiologists that have signed on in that area. “You really don’t want people between you and the insurance company, if you don’t have to,” he said. “Networks are not necessarily in the radiologist’s best interest.”

Survival Strategies

While receivables patterns themselves have not been directly affected by the DRA, the total reduction in profits from these cuts has made it difficult for billing departments to sustain the resources they need. In some cases, imaging facilities choose to outsource their billing; in others, they reduce staff or hold off on investing in equipment. “There’s tremendous pressure to cut costs, at the same time that [billing] requires more sophistication,” Haberman said. “The only way to deal with it is more automation, and actually smarter people. It’s a huge dilemma.”

Roger Thomas

This same dilemma is felt in all aspects of practice, from reductions in staffing to indefinite deferrals on purchasing new equipment. All of this threatens the quality of the services available. “It’s had a rather devastating effect on the overall health of the field,” Thomas said.

While staffing shortages lead to longer hours for radiologists, the unexpected silver lining, according to Thomas, is an increased workflow efficiency, helped with technology such as PACS. “We have the capability of working faster and of proportioning our work more appropriately in a radiologist group,” Thomas said. “With reimbursements going like they have, we’re still able to improve our productivity and do more per person per day with electronic imaging.”

The hope is that these automated efficiencies will also be implemented in billing departments, although the technology still isn’t available to handle the individual requirements of dozens of payors. However, there are some effective strategies to mitigate billing costs. When you outsource billing, for example, the billing company earns its keep when working on claims for Medicare and private insurers, but they don’t have much work to do with fixed contracts with IPOs. “You can negotiate portions of your receipts with them, depending on how much work they have to do,” Thomas said. “If they have to do a lot, their percentage will stay up there. If they don’t have to do a lot, the percentage comes down.”

You may also want to hire your own practice management professionals and CPAs. Many outside billing companies offer these services, but Thomas has found it beneficial to have de-dicated employees in house who have only the interest of his practice in mind. “You can have a billing company do it, but it’s amazing how much you can save by having your own people do it,” he said.

For Gaschen, the key to surviving the DRA profit losses is forming a strong strategic plan that targets growth areas. For example, his company will be opening a 13,000-square-foot facility for all imaging modalities in an underserved area, in the hopes that this will generate new business.

With the volumes of imaging still on the rise, Gaschen remains optimistic about his company’s future. “The bottom line is that the numbers and volume are going to continue to increase, and the dollars per unit of service are going to decrease,” said Gaschen. “You’ve just got to figure out a way financially to make that work. With the volumes increasing, you can do it if you’ve got a good infrastructure set up and you’ve got the capacity within your system to take on new business.”

Ann H. Carlson is a contributing writer for Axis Imaging News. For more information, contact .