Practice Management Alert

Question: Would you explain how to use payer-mix statistics in practice analysis? How will it help me?

Kansas Subscriber

Answer: Payer mix allows you to gauge expectations of future revenue. "Monthly, the payer mix doesn't matter all that much, but over time it becomes a critical element in budgeting," says Betty Osborn, a contributor to Medical Office Billing Discussion, serviced by The Coding Institute.

Let's say you're deciding whether to take on a new contractual payer that requires more work handling patients than your other contractual payers. The new payer requires referrals, as opposed to Medicare. You can judge whether it's worth taking on this new payer based on the payer reimbursement and your patient population. Suppose your payer statistics indicate that Medicare covers 45 percent of your practice and paid 35 percent of billed charges on average last year, but decreased its payment level this year by 5 percent.

With these payer statistics, you could figure out how Medicare changes will affect your bottom line. Calculate your payer mix based on pay class Medicare, Blue Cross and Blue Shield, Medicaid, Commercial, No Fault, Work Comp, Self Pay, etc. (Your system may also allow you to differentiate between managed care and indemnity payers).

Then calculate your collection rate according to pay class. Monitor your charges by pay class and then apply the collection rate when you need to estimate future collections.

You Be the Expert and Reader Questions were answered by Catherine Brink, CMM, CPC, president of Healthcare Resource Management Inc. in Spring Lake, N.J.; and Betty Osborn, a contributor to Medical Office Billing Discussion, serviced by The Coding Institute. $ $ $