Wednesday, May 19, 2010

What's the Right Amount of Practice Subsidy?

Why does a particular Hospice and Palliative Medicine (HPM) practice require more support than another? This is one of the most common questions I am asked. While there is no data to indicate what a "typical" subsidy may be, it is helpful to understand why the amounts vary so widely from one practice to another.

First, there isn't a uniform definition of subsidy. Some refer to subsidy as the difference between a practitioner's guaranteed salary (some will include benefits as well in this figure) and the amount of professional fee revenue generated. Others will carve out non-clinical time (such as administrative activities) from the subsidy calculation, and will treat that portion of practitioner compensation as an administrative expense. It's not unusual to see this difference in definition amount to $50,000 annually per practitioner.

Some other common reasons for the wide variance in subsidies:

Documentation, Coding, Billing, and Collecting

This is an area in which many, if not most, practices have room for improvement. One simple way to estimate how your practice is doing in these processes is to think about how you're performing on the following tasks:

Do all HPM practitioners understand the documentation requirements for each CPT code, and is their performance in selecting CPT codes audited regularly (we suggest at least yearly)?
Does the practice have a reliable method of charge capture that minimizes problems like lost charges?
Is there an established "chain of custody" of this information, from the HPM practitioner to the biller?
Is there a periodic review or audit of the biller's performance?
Does the practice monitor metrics, such as days in accounts receivable, collection rate. An audit could be as simple as reviewing ten billed encounters within the past three months for each practitioner, and identifying the status of each bill (e.g., paid, written off, or perhaps the bill has vanished or never made it into the billing system).

Payor Mix
The payor mix for most HPM practices is primarily Medicare, but in those areas with heavier penetration of Medicare Advantage plans, the contracted (negotiated) payment from the Medicare Advantage plan may be significantly different from the standard Medicare reimbursement.

Practitioner Productivity
Some hospices and hospitals have systems of care that interfere with HPM practitioner productivity. These could be such things as a poorly organized medical record, an IT system that requires logging into multiple programs to retrieve data on a single patient, or practitioners being expected to do clerical work. Every practice should think carefully about the systems and activities that might be getting in the way of efficiency.

The "right" amount of subsidy is a judgment call, and so will vary from practice to practice. A solid understanding of the factors behind the wide variances in subsidies, and an evaluation of those factors specific to your practice, will be valuable in determining your "right" amount.

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