The Business Processes That Generate Income

There is a well-defined chain of events that transforms the patient visit and clinical care (the “product” and “services” of an ophthalmology practice) into revenues. At first glance, the chain of events that causes this transformation appears obvious. Sadly, too many practices lose income because the fundamental steps to receive earned revenues are not recognized and performed effectively.

The basic steps in ensuring that all earned revenues are received can be summarized as follows:

1. Captured Charges: Services that are provided and not captured as charges are one of the largest sources of lost income for medical practices.
2. Accurate Coding: The correct CPT code needs to be selected to accurately reflect the services provided, and the appropriate ICD-9 code(s) assigned to justify the service.
3. Accurate Billing: Captured and correctly coded charges need to be sent to the appropriate payor (an insurer or patient), along with accurate and correct patient demographic and insurance information.
4. Receivables Management: A system is needed to ensure that payments are received in the correct amount and when expected.
5. Management Reporting: Systems are needed to quantify services, identify categories of customers, calculate expected and actual income, provide information on the productivity of the practice, and monitor the performance of the business process.

Product-Line Analysis
The product-line analysis is the first of a series of reports that takes raw data from the practice’s computer system and reformats the data into meaningful management information.

Most practice management computer systems generate end-of-month report packages. Our objective here is to use the data in those standard reporting packages to provide information for both the tactical and strategic management of your practice.

The first of these reports is the product-line analysis. Virtually all practice computer systems generate a production report or new services summary. This report usually lists all or some of the following for each CPT code:

  • the number of times that each CPT code is charged
  • the dollars charged for each code
  • the aggregated RBRVS units charged for each code

The data are usually shown for both the current month and year-to-date.

The administrative staff prepares a report that adds CPT codes together into categories, such as new patients, established patients, total patient visits, office procedures, hospital procedures, optical jobs, and refractive surgeries. The report shows the monthly totals, year-to-date totals, and comparisons of the year-to-date totals from the same time period in the previous year. The report may also include RBRVS unit value totals for each category as well as comparisons to previous year totals.

The categories should reflect the types of services provided by the practice and should be reviewed by each physician each month. There are three categories in that review.

First, there is the review of high-volume services, for example, the total number, dollars charged, and total relative value units (RVUs) for office encounters (RVUs analyze how the practice is performing by comparing current patient-encounter volumes with those of earlier time periods).

Second, there is the review of charge-capture in the lower volume services, such as cataracts, lasers, and other surgeries. The physician will generally be able to accurately recollect the volume of the procedures that he or she performed during the month, and will be able to validate the charge frequencies on the product-line analysis.

Finally, there is the review of the overall volume of services as expressed in both total dollars charged and in total RBRVS units. This review allows you to measure the total service intensity and volume against earlier time periods. In addition, you can begin to make comparisons and establish ratios such as:

  • Total charges or RBRVS units per patient encounter (formula: total dollars or units divided by total patient encounters)
  • Surgical RBRVS units per encounter (formula: total surgical RBRVS units divided by total patient encounters)
  • Eyeglasses sold per patient encounter (formula: total pairs of eyeglasses divided by total patient encounter)
  • Refractive surgery cases per patient encounters (formula: total refractive cases divided by total patient encounters)

These ratios can also be compared with the same calculations for similar time periods in previous years.

These are the types of measurements that must be made to gauge the effectiveness of marketing efforts, including advertising, making changes in staff procedures and in compensation for increasing patient flow, providing noncovered services (e.g., refractions), and converting patients receiving refractions into optical sales and into refractive surgery.

Here is a sample report format:


Category Monthly Monthly Number Year to Date Number YTD Number Last Year RVUs YTD RVUs YTD RVUs Last Year
New Patients (Med-Surg) —- —- —- —- —- —-
Established Patients (Med-Surg) —- —- —- —- —- —-
Routine Eye Exams —- —- —- —- —- —-
Office Consults —- —- —- —- —- —-
Total Office E & M —- —- —- —- —- —-
Hospital Consults —- —- —- —- —- —-
ER Visits —- —- —- —- —- —-
Total Hospital E & M —- —- —- —- —- —-
Total E & M —- —- —- —- —- —-
Office Lasers —- —- —- —- —- —-
Other Office Surgeries —- —- —- —- —- —-
Total Office Surgeries —- —- —- —- —- —-
Cataracts —- —- —- —- —- —-
Other Facility Surgeries —- —- —- —- —- —-
Total Facility Surgeries —- —- —- —- —- —-
Total RVUs —- —- —- —- —- —-
Refractive Surgery (3 of eyes) —- —- —- N/A N/A N/A
Optical Jobs —- —- —- N/A N/A N/A


Pitfalls in Capturing Charges
Generally, uncaptured charges fall into three categories:

1. those that are not billed because of misunderstanding of bundled or allowable services,
2. those that are noncovered services and are legitimately charged to the patient (chiefly refraction), and
3. those that are not charged because of “holes” in the practice’s business processes.

The key requirements for complete and accurate charge-capture are
1. The form (or the labels or printed information placed on the form produced by the scheduling system) is easy to generate.
2. The form accommodates adequate information (accurate and complete patient and insurance information).
3. The form contains complete charge information (the CPT and ICD-9 codes that identify virtually all of the services provided in the setting where the form is used).
4. Information on the form is easy to find and check off.
5. Numbered forms and labels are verifiable (at the end of the day, is there a system to verify that there is a form for each patient receiving services, and that all services provided are identified on the form?).
6. All services identified on the form are accurately entered into the billing system.
7. The system is flexible and can generate charge-tickets for “work-ins” in the schedule (and that feature is easy to use).
8. For compliance purposes, physicians complete the charge ticket and the medical-record documentation at the time the patient is seen. An alternative office charge-capture system that is useful in some environments is to do away with the charge-ticket or superbill and replace it with a schedule list for each physician. As a patient is seen, the CPT and ICD-9 codes are placed on the list. At the end of the day, charges are entered from the list.
9. For auditing purposes, there are systems in place to verify charge capture, both in and out of the office. The patient list and “missing ticket” reports from the computer system are useful in the office, and comparisons between charge volumes and operating room logs and surgery schedules are useful for services provided outside the office (see below).

Capturing Copayments
In collecting copayments, the exact amount due for a variable copayment (e.g., Medicare) may be difficult to determine if the CPT codes charged are not made available to the front desk. While most managed care patients have fixed copayments, Medicare fee-for-service patients have copayments that vary with the CPT code charged. These copayments should be collected at the time of service for office visits for all patients except those Medicare beneficiaries with MediGap insurance.

Miscalculating these copayments, or not collecting them at the time of service for office visits, can cause a revenue “black hole.” A charge ticket that never makes it to the front desk makes the complexity of collecting copayments all the more difficult.

It is critical to collect fixed or variable copayments at the time of service. Fixed copayments should be collected before the patient is seen by the physician, and variable copayments (Medicare) should be collected after the patient is seen but before he or she leaves the office.

These copayments are generally less than $30, and the cost of generating and sending a patient statement makes collecting these small amounts uneconomical.

Charging for Services Performed Outside the Office
The services provided outside the office are the most likely to be lost to capture. The system is not closed (as it is in the office) and depends on the ophthalmologists reporting their services without the help of the office structure. For surgeries, a charge slip should be generated when the case is scheduled, and given to the physician to return to the billing staff after the procedure.

For services provided in the emergency department and on the hospital floor (hospital consultations), there is no good system to ensure that all services are captured. The dependence on physician reporting, with no list or other prompting, increases the likelihood for missed charges. Further, there is no way to audit the charges against any schedule or list to identify those that have been missed.

A commonly used system for capturing surgical services is to have the staff provide the ophthalmologist with a surgery list, including the patient’s name and the scheduled procedure. The surgeon checks off the patient after each procedure and adds or deletes any procedures if the surgery is not done exactly as scheduled.

No matter what systems are used to capture charges, the only way a practice knows that all services are captured as charges is through audits‹a comparison of charges in the billing system to other sources of information to verify the completeness of charge-capture. There are three types of audits:

  • The internal audit compares charge tickets to the appointment schedule. Many appointment-scheduling systems can generate a report listing the appointments that were not cancelled and for which no charges were entered into the system. The front-desk staff and the technicians should ensure that any add-on services, such as refractions and special tests or procedures that were provided, are indicated on the form.
  • The external audit verifies charge-capture of services provided outside the office, comparing submitted surgery charges to the surgery schedule and operating room log, and comparing inpatient consultations and emergency department encounters to data obtained from the hospital (census lists, emergency department logs, etc.).
  • The production report is an end-of-the-month review of the charge frequencies by CPT code for the month, with an emphasis on procedures. For example, if the administrator, surgical scheduler, and the ophthalmologist each review the number of cataracts and trabeculectomies charged for the month, they will know if there were procedures provided and not charged.

Finally, these reports can be used to measure provider productivity. The Medical Group Management Association publishes surveys that show average patient encounters, number of surgical procedures, and total RBRVS units, among other measures, for ophthalmologists in the U.S. Your practice’s data, by physician, can be used to gauge the productivity of each physician in the practice, as well as the overall productivity of the practice.

Reports described in future editions of this newsletter will translate those services into charges and collections in dollars. However, the place to begin the analysis is here, examining the number and intensity of clinical services provided to patients, and ensuring that all of those services are appropriately captured as charges.