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Establishing a Financial Policy

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The success of any health care facility depends on the strength of the medical office's financial policy. It is the responsibility of the business office department or patient financial services team to ensure proper business practices are followed.

Establishing a financial policy guarantees the ability of the organization to continue to provide excellent health care to your patients. The medical office staff should be presented with the financial policy during orientation and monthly education meetings to keep them informed.

There are six major categories that need to be addressed.  

1. Strategic Plan

Strategic planning is identifying goals and developing plans to achieve them
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In any medical office there are factors that can influence the success of the organization. The key is identifying those factors whether they are within your control or not, and developing a plan that will lead to the achievement of the organization's future goals.

This process of identifying the medical office goals and developing the plans to achieve those goals, is referred to as strategic planning. Every medical office need to develop a strategic plan whether for a new start-up or when re-evaluating an existing one. There are five areas of focus in the strategic planning process.

  • Perform an assessment
  • Identify a strategy
  • Plan the strategy
  • Implement the strategy
  • Monitor the results

2. Contracts

Contract negotiation is important for dealing with managed care organizations
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Contract negotiation involves developing a financial relationship with managed care organizations. Managed care organizations represent up to 50% of the net revenue of most medical offices.

Negotiating managed care contracts requires comprehensive knowledge of the contracting process. This generally includes reimbursement rates, effective and termination dates, claim filing guidelines, payment terms and other contract provisions.

Each medical office contract negotiation strategy will be unique based on various factors but these basic ideas should be kept in mind:

  • Know the market
  • Be realistic
  • Hire a consultant

3. Charge Capture

Accuracy in charge capture is necessary for accurate billing
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The importance of charge capture should be expressed to all departments. The clinical staff must be aware of their responsibility to accounts receivable by accurate documentation and charge capture.

Charge capture includes the appropriate linking of medical codes to services and procedures rendered during the patient visit. Each clinical area plays an important role in the timeliness of coding and the accuracy of billing.

4. Payment Methodology

Understanding payment methodolgy is useful for financial planning
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Understanding the different methods of payment is essential for the financial management of the medical office. Financial management includes all components of the revenue cycle including accounts receivable.

Accounts receivables, also known as patient accounts, refers to revenues generated but not yet collected. To ensure cash flow is sufficient for effective management, the medical office has the responsibility to maximize it's revenue potential.

There are four payment methods that should be considered when developing a financial management strategy.

  • Per Diem/Visit
  • Per Episode
  • Capitation
  • Fee-For-Service

5. Fraud and Abuse

Protect your medical office from fraud and abuse by following appropriate guidelines
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Legal concepts include understanding and following state and federal regulations. The area that has always been of the most concern is fraud and abuse especially with regard to Medicare, Medicaid, and other federally funded programs.

Fraud generally refers to willfully and knowingly billing medical claims in an attempt to defraud any federally funded program for money. The most common forms of fraud and abuse include billing for equipment never provided, billing for services never performed, upcoding charges to receive a higher reimbursement rate, and unbundling charges.

6. Revenue Cycle

Insurance reimbursement is dependent on how well you manage the revenue cycle
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Managing the revenue cycle efficiently is no easy task and requires your constant attention. Each phase of the Revenue Cycle - from the moment a patient is scheduled for an appointment until the time payment is received from the insurance company - is equally important to maximizing insurance reimbursements.

It is vital for the financial stability of the hospital or physician office to have a process in place for each phase of the revenue cycle. Not only will you receive payments in a timely manner but will also reduce the burden on the billing staff, keep down administrative costs, and most importantly maintain a positive rapport with your patients.

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  6. About Medical Office - How to create a financial policy for the medical office?

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