Physicians and practices are in a constant struggle to understand whether or not their medical billing is truly working. Making this determination can be difficult because reliable medical billing benchmarks that can be applied are difficult to find. That is why theoretical yield is a great solution to use. The theoretical yield formula simply involves determining the amount that you should collect for every dollar that is billed if the medical billing system is working the way that it should.
Nonetheless, understanding the yield concept is the key to using medical billing benchmarks to assess billing performance. From a medical billing standpoint, the yield is the amount of the claim that should result in a payment as opposed to the contractual adjustment. Simply put, a $100 claim with a 50% yield should result in $50 in payments with the rest of the contractual adjustment being written off.
Basically, there are many areas in the world of medical billing and medical coding that are confusing. One of those most confusing areas is medical billing allowable. There are not many types of businesses where a bill is sent out for more than what the business would expect to collect. When a bill is sent out for $100, then a business expects to collect $100. In the medical business, a bill is sent out for $100 and the expectation is that $50 or even less will be collected. There are reasons for this:
• Enhancing revenue – Medical practices have a tendency to see individuals with insurance plans that limit coverage because the provider may be out of the network. Some of these plans pay a percentage of the charges that are billed. So you may not want to set fees too low because the plan may pay a percentage of the billed charges. The practice could very easily end up with money on the table that they could collect.
• Simplicity – Not all payers are going to pay the same amount for medical procedures. If a practice tried to bill the insurer and patient what they expected to collect, the task of collecting the money would become a very time consuming one. It would also be very time consuming to maintain several fee schedules. A single practice can easily end up with over 20 fee schedules. Furthermore, all of the fee schedules would need to be updated frequently.
• Comparability – If a practice continuously changes fee schedules, the comparison of charge volumes over time becomes less meaningful. For instance, the fact that charges are up 15% in June versus last June may not be able to be determined as more patients being seen or simply a fee schedule change.
• Compliance – A practice can’t charge any entity a lower fee than what is charged to Medicare because it is illegal. They can give discounts, but the fee charged must not be any lower. By charging all plans and individuals the same amount of money, the risk of unintentionally charging a lower fee is averted.
Now that you see why your medical billing consultants are going to tell you why your fees need to be set higher than expected collections, there are other elements of allowable. They are how fee levels are determined, how allowable impact reports and benefit explanations on a daily basis, how allowable can increase the understanding of the meaning of AR numbers, and how allowable can better predict the cash flow of the practice. This is where the theoretical yield formula comes in and it is something that your medical billing consultants can help you with. It is actually rather straightforward.
At the theoretical yield formula’s simplest level, you take the CPT allowable and divide the charged fee for that CPT. So if your fee for a CPT is $100 and your allowable is $50, then you have a $50 yield. The complication that can come about is due to the different payer contracts a practice may have and that the yield can vary by CPT for a specific payer. This means that there is a procedure mix to understand. In that case, you can take your top 20 CPT codes and calculate each code’s yield to then calculate a weighted average for the overall yield based on each CPT’s frequency. This is an exercise that you can complete for each payer and use as many CPT codes as you need to use to cover at least 90% of your charge volume.
Medical billing is something that requires a great deal of care and MD Pro Solutions can help you. Our medical billing consultants will help you get the most out of your billing so that you can improve practice cash flow. To learn more, call us at 508-946-1665 or fill out our contact form and someone will get back to you.