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Daily Operations and Managed Care in a Physician's Office

By: Reed Tinsley
Tel: (281) 379-5988
Email Mr. Tinsley


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After a managed care contract is signed, it is important to make sure the office handles these payors correctly, handles their patients correctly, and makes sure the office continues to operate efficiently. As managed care continues to dominate a physician's revenue stream, many practices find their offices become inefficient due mainly to all of the administrative burdens placed on it by managed care and lose revenues as a result of these inefficie ncies. After signing managed care agreements, it is important to monitor practice compliance with them. First, the office should place all of their managed care information in to notebooks for easy access so that the office can effectively monitor these relationships.

For each managed care payor, the notebook should contain:

  • A copy of the executed managed care contract;
  • Reimbursement schedule for the practice's most commonly utilized services;
  • Any of the payor's specialized forms, such as provider referral forms, and patient authorization forms.

Once this information is assembled, the practice should create a "Managed Care Reference Chart," a sample of which was published in a prior issue of the CPAHNA. To refresh your memory, the following is an example of a reference chart:


On an ongoing basis, the practice should also compare its managed care reimbursements to the agreed upon reimbursement schedule included in the managed care notebook for each payor. Payors do make mistakes reimbursing providers, often many more times than doctors realize.

Many practices find that in certai n instances, what was approved for payment is different than the reimbursement schedule. This is why it is so important to monitor managed care reimbursements. Therefore, each week take a sample of managed care EOBs (Explanation of Benefits) and compare the reimbursement to the amount shown on the reimbursement sheet in the managed care notebook. Differences should be appealed immediately. Of course many practice management systems today can be set up to monitor incorrectly payor reimbursement.

Continued Participation

A medical practice should determine whether it makes sense for the practice to continue its participation in the plan by answering the following questions; this should be done on an annual basis:

  • Is the volume of patients higher than expect ed? If yes, evaluate the potential effects on other aspects of the practice. Determine if the practice's payer mix is shifting dramatically to managed care.
  • Is the volume of patients too small to warrant continued participation in the plan?
  • Review the payo r 's reimbursements and assess the level of fee discounts. Are such discounts acceptable to the practice?
  • If applicable, is the withhold reasonable? If not, and the practice has not received any reimbursement of the withhold, take this into account when eva luating the fee discounts.
  • Assess any administrative burdens placed on the practice by the plan. Do these burdens interrupt the efficiency of the practice?
  • Is the plan adding competing physicians in the area of the practice's medical specialty? If so, asse ss the potential impact on the practice's future revenue.
  • Evaluate the profit or loss on capitated contracts, if applicable.
  • Evaluate how quickly the plan pays the claims submitted by the practice.

Now is also a good time to assess each major managed care payor of your physician practice and determine if it makes sense to either (1) Continue participation in the plan or (2) Renegotiate the contract. Now is also the time to develop a managed care strategy for your practice. As managed care grows in a partic ular area, exactly how does the practice intend to deal with it? Those that are prepared and proactive are usually the ones who are successful dealing with managed care.

Reed Tinsley, CPA, is a Houston-based CPA, Certified Valuation Analyst, and healthcare consultant. He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational and financial management, strategic planning, and growth strategies. His entire practice is concentrated in the health care industry.

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