Plugging Profit Leaks
By Alana Vaughn |
Like a slowly dripping faucet or an improperly insulated window, gaps and inefficiencies in a business allow profits to seep out over time. Even one leak—while seemingly small—can have damaging effects on a company’s financial health. Oncology practices are no different.
Drug inventory, billing and reimbursement methods, and operational efficiency are the areas of an oncology practice most likely to fall victim to these profit “leaks.” But with so many areas of the business vying for attention, sometimes it’s a simple question of where to start.
As practice administrator in Baton Rouge, La., for a decade and a half, I experienced firsthand the growing pains of a community oncology practice. During my tenure, I identified and implemented myriad incremental improvements and adjustments to help the oncologists keep their number one priority in sight: directing patients on the path to better health.
Now, as a business coach for Innovation Cancer, my role is all about helping practices realize opportunities for improved efficiencies and growth using our technology and resources and my experience managing a practice. I draw on my background to help practices across the nation uncover new ways to grow and expand while avoiding common profit leaks that financially strain the practice and its staff. Here are a few approaches I’ve picked up to plug profit leaks and optimize an oncology practice’s operations.
Overhaul drug inventory
The medications that comprise a practice’s inventory should be viewed as assets that will be converted into cash—and the sooner that happens, the better.
- Understand inventory’s financial role in the business. Drug inventory is known as the oncology practice’s financial backbone. In fact, in 2007 nearly 80 percent of oncology practice revenue came from the buying and billing of drugs.1
- Maintain a low inventory. Ordering drugs once a week may seem easier and less taxing on resources than ordering more frequently, but it’s akin to throwing money out an open window.
- Order products on demand. With the right knowledge, a one-time adjustment could translate into a six-figure savings for a small oncology practice. The money saved by ordering drugs on demand can be redirected to pay bills, reinvest in the practice or negotiate better payment terms with the distributor by paying invoices earlier.
Button up billing and collections
Improvements to revenue cycle management can substantially alter a practice’s financial picture, so long as the same level of scrutiny as managing drug inventory is applied.
- Reviewing and reconciling bills requires rigor and discipline. Billing and collections procedures and documents must be routinely mined for costly mistakes, keeping in mind that mistakes can occur on both the payer and provider sides. At a minimum, metrics to monitor include number of open claims, patient volume, conversion factor and claims being reimbursed at 100 percent.
- Use a fine-toothed comb on insurance claims. A practice might be able to implement changes that bring in more money by identifying common patterns in insurance denials.
- Are your bills ending up in patients’ trash cans? Following up on patients’ financial responsibility is another area that often does not see enough follow-through. Is the practice collecting all co-pays? What system is in place to collect the rest of a patient’s payment? Are payments being collected in a timely manner?
- Adjust the AR timeline. Reducing outstanding accounts receivable days is vital to maintaining a healthy bottom line. It is important to submit charges 24-48 hours from the date of service, as delays in claim submission mean delays in receiving payment.
With the right knowledge, a one-time adjustment could translate into six-figure savings for a small oncology practice.
Trust technology as a valuable team member
Savvy oncology practices that leverage a range of tools and information will benefit from more efficient decision-making and a healthier financial picture. Often, the biggest hurdle is trusting the technology to effectively do what was once a human task.
- Upgrade and integrate technologies. Practice management software, inventory cabinets and electronic health record (EHR) solutions can assume some of the burden of the practice’s workflow tasks. A sophisticated practice management system paired with a specialty EHR can save practice staff time and improve output.
- Instill better inventory management habits. Industry tools can help by reporting practice inventory levels, peer levels and revealing the potential savings incurred by remaining at that level or adopting best practices.
- Identify lost opportunities. Business intelligence tools and inventory cabinets can keep a practice on track and save valuable time formerly spent on manual data entry. The practice can free up funds by knowing exactly how many drugs are stocked, saving precious funds often given to a third party to perform the same task.
- Analyze and manipulate data. Utilizing financial analytics tools, a practice can pull data directly out of its practice management system to benchmark coding patterns and other areas for improvement.
- Link the practice’s software. An automated inventory system can link up with practice management (PM) software to automatically bill for each drug ordered. In addition, it is important for practices to link their EMR and PM systems. Many practices bill out of the interface between their EMR and PM and then take a feed from the inventory system to compare billing.
- Enlist tech that can mind the gaps. There are a number of other tools that can help practices find lost revenue without losing manpower. These include technology that calculates patient financial responsibility, identifies patient assistance funds or reviews treatment regimen profitability.
A sophisticated practice management system paired with a specialty EHR can save practice staff time and improve output.
Maximize all opportunities
Once the inventory and billing and collections processes are up to snuff, practices might consider looking for other areas that leak profits. With a little creativity and ingenuity, practices can learn to pinpoint and streamline problem spots to increase efficiencies, optimize operations, and maintain regulatory compliance.
- Focus on inventory consolidation. To ensure savings for the practice and its patients, practice administrators can search for less expensive equivalents of drugs purchased on a regular basis
- Search for hidden goldmines. Dedicate one staff member’s oversight to staying up to date on rebates, coupons and other discounts.
- Follow the letter of the law. Being vigilant about the latest regulatory changes to reimbursement structures can ensure a practice remains compliant and maximizes the payments available.
- Err on the safe side. Sometimes it’s not about plugging a leak but heading off a potentially costly mistake before it occurs. For example, when a practice obtains a drug from the manufacturer free of cost, it must catalogue that product as a free drug in the billing system.
Streamline internal processes
Reassessing a practice’s processes can free up valuable employee time that can be redirected to improve patient care, thereby enhancing clinical operations and possibly even increasing revenue.
- It’s 2016, paper is out. Maintaining manual and paper-based billing and inventory mechanisms is double the work and half as productive.
- Exercise smart staffing. A comprehensive view of the practice’s staffing model may reveal roles that could be automated or consolidated, but cutting staff isn’t always the answer. Where it makes sense, staff members can be trained in new roles that improve both efficiencies and the patient experience. By strategizing its staffing plan, a practice can gain efficiencies and open the revenue floodgates. For example, some practices are expanding the patient assistance program role to generate revenue for the practice and improve the patient experience.
- Involve everyone. Even physicians can get involved in improving efficiencies. Savvy practice administrators pull data from their inventory cabinets and practice management systems, and then pull their physicians in to review whole episodes of care. The practice staff can collaborate to segment patient data by diagnosis, demographic information and treatment to see where outcomes are continually improving.
Learning to diagnose and fix profit leaks doesn’t have to be an overwhelming endeavor. Start by identifying the largest profit leak in the practice and taking it one day, and one step, at a time. Through better use of technology, implementing improved processes or revamping its approach to drug inventory, a community oncology practice can successfully plug profit leaks and boost its bottom line.
1. Journal of Oncology Practice. The 2007 National Practice Benchmark. 2008. Accessed 2 August 2016. Available online at http://jop.ascopubs.org/content/4/4/178.full