The Effect Of PPACA On The Revenue Cycle

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Many providers are wondering what effect PPACA will have on their practice revenue. For those who don’t have time to read and digest the 1,000 + pages of bureaucratic rhetoric, some of the basic elements are set forth below.

Expect Lower & Slower Insurance Reimbursements:

The first thing to understand about PPACA is that reimbursement rates and payment timing will now be under government control. The entire Health Care industry will be under the supervision of the U.S. Secretary of Health and Human Services (HHS).

One of the tasks given to HHS is to mandate equalization and standardization of the rates charged for all medical procedures. To put this in context, imagine a world where, regardless of insurance carrier, every procedure performed would be priced by government employees. Providers who have had to deal with Medicare and Medicaid claim reimbursement rates, understand this nightmare.

The reimbursement rates a practice has structured its pricing and revenue expectations around are subject to immediate and even retroactive changes. PPACA is expected to lower insurance revenue receipts by an average of 10 to 25%.

Expect an Increase in Patient A/R:

The second thing to expect from PPACA is an average increase in patient A/R of 27.5% This is significant because most practices do not have an effective and/or efficient way to deal with the recovery of patient A/R. Nationally, the realization of patient balances is the weakest link in the medical revenue cycle. This is primarily due to lack of resources, expertise, and technology.

When the prototype program for ObamaCare, Romney Care, was introduced in MA several years ago, the subsequent increase in patient A/R (30% on average) effectively broke the revenue cycle for most medical providers. This was due to a significant number of patients choosing to “opt out” of coverage and instead pay the fine and move to a self-pay status.

For the first time, the recoveries of the patient responsibility portion of the A/R became a priority focus. The lack of industry available solutions became blatantly apparent. In looking at options, many providers found that (a) most early out and collection agency “pre-collect” and collection programs were unacceptable to practices focused on maintaining a patient-friendly community image, and (b) in-house patient collections proved to be very costly, difficult to effectively implement, and did not yield the desired results.

Because PPACA is changing the way medical providers make revenue in the new regulatory environment, the use of 21st Century Revenue Cycle solutions will become a necessity for sustained profitability.

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