An important step in managing your practice’s income is understanding where your current payments are coming from. That includes understanding your payer mix and your claim rejection rates. Here are some simple guidelines to help you find out if you’re on the right track (and to readjust, if you’re not.)
Payer mix
It’s important to understand which payers make up the bulk of your payments. It is recommended that you treat your payer mix the same way you might manage your personal investment portfolio – diversify, diversify, diversify.
So, for instance, if you find out that 50% of practice revenue is coming from one payer or that two payers make up the vast majority of your payments, you might want to even out the volume. That way if something happens (i.e. reimbursement rates drop, takes longer to receive payments, etc.) you won’t have all of your eggs in one basket. Another reason to understand your payer mix is to determine which payers are most profitable for your practice.
To determine your payer mix, take your gross revenue for the past year and break it down by payer. You can use a simple spreadsheet, such as this one – provided on the www.PhysiciansPractice.com website.
Following the instructions on this spreadsheet will allow you to find out which payers contribute the most to your practice’s gross income and also which payers are the most profitable when compared to your encounters.
Claim rejection rates
Every practice receives claim rejections from payers. But did you realize that as many as 3% to 5% of annual practice revenues can be lost for this reason?* In actual terms that means that a practice with five physicians generating $500,000 annually per physician could lose up to $125,000 each year!
Find out how to identify issues with claim rejections and which payers may be the worst offenders by reading our eBrief article – Claims denial: Is your practice leaving money on the table?
Optimizing your payers
Now that you know which payers are contributing the most revenue to your practice and which ones you may have issues with, it may be time to re-organize your practice’s mix.
One strategy is to dedicate more appointment slots for certain payers during the week. This can help you shift your payer mix, but you’ll need to review your payer contracts to make sure this doesn’t cause any conflicts.
Another strategy could be to analyze your patient mix to determine which referring providers send you patients covered by your desired payers. Once you find out which physicians those are, you can reach out to them to encourage additional referrals.
Being familiar with your payer mix and claim denial rates can help you when it comes time to renegotiate your payer contracts too. Arm yourself with this information to make sure you walk away with a deal that will benefit your practice.
Ready to get started
The key to understanding your payer mix, claim denials and other practice trends is simple data analysis. You’ll need to have a practice management system that collects the necessary data elements and then a system for retrieving that information easily.
Sage software can help. Sage Intergy provides streamlined workflows to aid with data gathering and Sage Practice Analytics simplifies data retrieval with dashboards, standard reports and options for creating your own ad-hoc reports.
* Milburn, Jeffrey B., Mining for gold: Extract revenue from unprocessed claim denials. MGMA Connexion, January 2007,:38-41.
