#201 You Are Half of Your Billing Company's Performance

A practice doing seven figures a month switches billing companies, and eighteen months later the denial rate is higher than the day they signed. Nobody lied. Both sides just walked in with a different picture of what good looked like. In this episode we run Alex Hormozi's value equation across a billing partnership, one variable at a time, and name exactly what each side owes the other. 

Dream Outcome. A practice owner hears "we will improve your collections" and pictures denials dropping from 12 percent to 5, AR days under 35, and her team off the payer portals on Friday afternoons. The billing company is picturing a 3 to 5 point net collection improvement over twelve months. Both are honest. Neither is the same outcome. The fix is a written, numeric definition of success before the contract is signed. 

Perceived Likelihood. The billing partner builds this with evidence: before-and-after denial rates in your specialty, AR trending over twelve months, retention data. The practice builds it with an honest read on its own history. A practice that says "our front desk eligibility rate has been inconsistent and we are ready to fix that" is a fundamentally different partner than one expecting the problem to be solved without any practice-side change. 

Time Delay. Month one is almost entirely old AR, because new claims will not generate cash for 30 to 45 days. That is not a performance problem, it is how billing cash flow works. But if nobody said it before the relationship started, month one feels like nothing is happening. The ramp has to be mapped out loud, before the contract, not defended at the 60-day mark. 

Effort and Sacrifice. Chart closure inside 24 to 48 hours. Eligibility verified before the visit. Patient balance expectations set at scheduling. A billing company can recover denials, but it cannot recover a claim that was never submitted because the chart was never signed. And on the other side: complete ownership of denial follow-up, a report a physician can read, and problems raised before they compound. 

THE SHARED VALUE EQUATION 

Dream Outcome. Practice: defines it specifically and measurably upfront. Billing partner: maps a realistic written path to it before the contract is signed. 

Perceived Likelihood. Practice: consistent operational inputs, charts closed, front desk disciplined, patient balances engaged. Billing partner: track record, transparent reporting, accountability on their own performance. 

Time Delay. Practice: patience through the 90 to 180 day ramp and commitment to the agreed timeline. Billing partner: weekly visibility, a clear map of the transition, no black boxes. 

Effort and Sacrifice. Practice: willingness to change what needs changing on their side of the operating model. Billing partner: making their side of the change as easy as possible and owning it completely. 

THREE ACTIONS THIS WEEK 

1. Write down three to five specific, measurable targets that would tell you the relationship is working. Denial rate. AR days. Net collection rate. Chart closure rate. Clean claim rate. 

2. Ask any prospective partner for before-and-after data from three practices in your specialty at a similar volume, and ask to speak with them directly. 

3. Get the month one, month two, month three ramp in writing before the relationship starts, and reference it at every monthly review. 

EPISODE BREAKDOWN 

The switch that made things worse | The value equation and why every variable has two sides | Dream Outcome | Perceived Likelihood | Time Delay and the honest ramp | Effort and Sacrifice | Three things to do this week 

Resources block 

1. FREE: EMR / PM Evaluation Framework, https://eligibility.natrevmd.com/emp/pm-evaluation-framework 

2. FREE: Practice Revenue Leak Scorecard, https://eligibility.natrevmd.com/nrm-revenue-scorecard-v3 

3. Everything else we have built, in one place: https://natrevmd.com/trusted-resources/ 

4. Referenced in this episode: $100M Offers by Alex Hormozi 

5. Part 2 of this series, EP201 The Shared Operating Model: https://natrevmd.com/podcast/ 

Transcript

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Imagine being a seven-figure a month practice, and you select a billing vendor, you have high hopes, and you're excited for a new relationship and fresh start, and months go by and your metrics start looking worse, you're spending more time in RCM than ever before, and at the end of the day, you've still got two plus years and a contracted agreement that now you can't get out of. Welcome to Nat RevMD, a podcast where we share tips on optimizing medical billing and improving practice efficiency so you can have the business of your dreams. I'm your host, Dr. Heather Signarelli, founder of Nat RevMD. Let's get started. Today I want to talk about the ways to strategize evaluating a vendor and also being able to define what good truly looks like in your practice so you have a dream outcome. Now, you guys know I love listening to Alex Hermozi. I think if you're in a position where you're growing a business, his material is really great. His wife Layla is really great on the people and culture side of things. So huge fan of both of them. But one of the frameworks that he provides to his audience is for evaluating any offer, whether that's an offer for a billing vendor or whether that's an offer for a consultant or for marketing. So on one side of the equation is the dream outcome. So this is growth of your practice, improved revenue, growth of profit. And on the other side is the perceived likelihood of achieving it. So what's the likelihood it's you're actually gonna be able to get that dream outcome, the time delay. So how long is it gonna take? And then the effort and sacrifice required to get there. So today we're gonna talk about how you apply that to evaluating a new vendor really in any space. You're so focused on just getting the new vendor relationship there that you don't spend the time really defining what you need and what you want, and then communicating that to the vendor so that everybody's on the same page of roles and responsibility, who's doing what, and how long it's gonna take to get there and the expectation around what that dream outcome really looks like for everybody and defining that. And the good news about most medical practice operations is you can define and measure almost anything. So if you're looking for a new marketing vendor, you can define how many new patients you're seeing, or how many leads you're getting, or how many times somebody visits a website or responds to an ad or joins a webinar, right? You can define a dream outcome. And in a medical practice that's looking for a new billing company, it's the same situation. You can define what good looks like. Maybe that's less time that you're spending in the RCM process. Obviously, it's a revenue. Then it's about your accounts receivable metrics, your denial metrics. All of those things tie into your dream outcome. So today we're gonna step through different areas within the claims process and the things that I want you guys to think about in terms of what does good look like for your practice? And have you communicated that to your billing vendor? If you're going through an RFP right now, really spending the time to write down what good looks like. All right, so first we're gonna talk about dream outcome and we're gonna define what good looks like so that you can clearly describe this to any vendor that you're working with. So for the billing, it's important for you to really understand why are you changing vendors? And is it that collections are low? Is it billing metrics that are low? Is it that the vendor wasn't wasn't providing you the level of service that you needed? Was it that their experience wasn't right or that they weren't as responsive as you need? And then it's about working through what does that dream outcome for your practice look like? So some of the things that we've seen as we take on practices is yes, everybody wants more collections. And I think everybody can agree. Do you want better AR metrics? Do you want reduced denials? But how you get there differs. When it comes to eligibility and expectations around a vendor, defining who is doing that, who's responsible for doing that, and who's responsible for chasing down eligibility that fails. Having that expectation and understanding that is an expectation of yours is important for you to communicate so that the right resources are put in front of the claims process to make sure that those things are identified and structured. Our team typically helps train those individuals. Then once you've defined, okay, that's what good looks like with eligibility, we're working through options A, B, and C, right? So the option A is you completely outsource that. Option B is that you have some shared accountability with training and policies and working with the office staff off option C is the billing team really just alerts the practice if there's eligibility denials, but then has a really hands-off approach. You just want to make sure you know what you want and communicating that to the vendor so that then they can have the right level of staffing and the right level of quote for that. I think there's nothing worse than getting into a vendor relationship and saying, well, I want all these things now, but that wasn't discussed as part of the RFP, because then that can get you in a situation where there is no win-win, right? Everybody's losing. You're not getting what you need and they're not able to provide you what they what you need. And nobody likes feeling that way. So again, goal here today is for you just to understand, okay, what does good look like for my practice and what am I willing to pay for it? So the other thing to think through is the claim scrubbing and denial workflows. So coding for practices is a very specific skill set. Traditional billers that are sending out claims and submitting claims are not always coders. And when you submit a claim, obviously there's managing the rejection. So rejections can be subscriber ID or it can be a mismatch between the CPT and the ICD 10 code. And most billers can help manage that easily without being a coder. Now, taking that one step further, if you need to go and read the note, so read the clinical note in order to change an ICD 10 code or read the note and change a CPT code, that in my opinion, really does require a CPC, a certified coder. And I think having the expectation around who's responsible for coding rejections or coding denials needs to be clearly outlined ahead of time. And again, if we're thinking about our dream outcome, you've got to decide from a practice perspective, can I manage getting those back to the physician so that they can recode those? If the answer is yes, then you don't need a coder. If the answer is no, or I have a lot of those, or I actually just don't know how to code them, or I've got a lot of surgeries, right? We do a lot of coding for surgical cases where the physicians don't want to have to code any of them at all. And that's fine, but that's a different level of service, right? That's a CPC who's sitting there reading the notes and coding it from scratch. And that is a very specific skill set that is required. We have some practices we do that for all of their ENMs and all of their surgeries. And we have other practices that really were completely hands-off and we're asking the practice for all coding changes. So really discussing ahead of time the expectations around rejections and coding denials and who's going to be changing those. For practices where we are not involved in that, we have an issue tracker, we're providing those denials. Again, I'm a big fan of accountability. If things are just sent via email or sent through a phone call, things can get lost in follow-up. And then you'll see that those claims continue to build up with no true accountability for resolution. So a thing you can always ask your biller is how do we work out a process by which we can manage rejections and denials specifically around eligibility and coding, so that you can think through, okay, can my office help manage those or do I want to be completely hands-off with those? There's no right or wrong answer, but the skill set and the time in order to manage each of those things is different. And again, you want to be very clear on what your expectations are so that during an RFP situation, everybody's coming to the table with the right level of resources. So, really, really important to help layer these things out as you think through these things. And we were recently having a conversation with a potential client going through all of this because they had been burned previously. And we get that. And I truly believe that there are companies out there who don't know how to provide different levels of service. So you just want to make sure you are clearly defining what you want. You want to make sure that the other company has the ability to do that. So we talked about eligibility, we talked about coding and rejection. Obviously, accounts receivable. You want to make sure they have the skill set to follow up on claims, asking questions like how often do you touch the claim? Are you just statusing the claim and then punting it back to the practice? So, like the Athena model does that quite frequently. A lot of really large offshore BPO companies will do that. So you've got to make sure if you are using a team that does use offshores, you really want to make sure that they are not just statusing claims, that they're truly working the claim to resolution, which is really important. And again, that that goal is really having them touch the claim every 21 to 30 days and then asking the company, okay, what happens if you've got a complex denial that's now hit not one follow-up, but now a second follow-up with no resolution. Who does that get escalated to? And important for you to have a plan around that because that's another thing where I see billing, billing companies fail. Practices will come to us, they'll have this huge amount of AR, and it will be because they are just statusing the AR. Nobody knows how to really deal with the accounts receivable or the claim that's complex, and they don't have a true escalation pathway, and they don't have a manager who's in the account all the time in order to help manage those complex denials. So that's really important for practices to have an understanding of how a billing company works when it comes to managing complex denials or accounts receivable. The other piece to think through is patient AR. So, really important for you to understand what is that dream outcome that you have desired for patient AR? You know, for us, we're providing practices scripts, we're providing practices, a policy and procedure of how we manage patient AR. But then we've got to all come to an understanding of what does that patient statement process look like? Are we, you know, can you set up texts and email? Uh, can you, and is the expectation to send out paper claims through the clearinghouse? And then what happens if patients aren't paying those bills, you know, 90, 120 days out? Somebody, in my opinion, needs to be making the phone call to those patients to say, hey, remember us, you have a bill, we need to collect payment. And that's typically a pre-collection situation and then turning them over to collection agency. So who is handling each one of those steps? Most RCM companies will send out patient statements, evaluate those. If you're using a third-party vendor like Frisia or another vendor that helps support the patient AR process, are there cues or customer service needs that result because of that? If so, who's responsible for managing that? How do those patient payments get back into the EMR? Are they integrated? Are they not integrated? If they're not integrated, who's actually patient posting the payment? So all of these things become really important. We have many of our practices use Frisia or other types of third-party patient payment situations vendors. And we are in charge of making sure that those are accurately posted into the practice management software and that those are managed. For most of our practices, we are working with them to manage development of the policy and procedure, development of the expectations around when and if they get sent to collections, and then working with them on those reports on a monthly basis. So that's another really important thing to work through. So we talked about eligibility, we talked about coding rejections and denials, we talked about accounts receivable, making sure that those are addressed. And then last is really around patient DR. One other area that I think is really important for you to get an understanding of in terms of defining what that dream outcome looks like is the frequency at which you want to meet with your team, the frequency at which you want to see metrics with regards to your practice, and then how detailed those metrics need to be. And then does your practice management software even have the ability to do the metrics that you want? All of that needs to be really clearly defined and discussed ahead of time, just so everybody's on the exact same page of what you need and what you hope. In general, I would say that if you and your team are digging into the denials, you're having to follow up on them, you're tracking down, you know, issues around patient payments, and you have no support from your billing vendor, that may not be the right fit. But again, you have to be able to define where you believe that you have the capabilities to have your team involved versus where do you have the expectation that the billing team needs to be the owner of that. And with anything, right? We talked about the RACI model several weeks ago around who's truly responsible, who's truly accountable, who's involved, and then who's um who's informed and then who's consulted. And so when you think about the different tasks within a vendor relationship, you want to sort through in your mind who's responsible, who's accountable, who's involved, and then who's consulting with each of these different tasks. And hopefully our podcasts help because I think it's important for you to understand enough in order to be able to hire the right person. Now, you may be listening to this and you're already an expert when it comes to the claims process because you've had to be involved. And then you've got to figure out okay, what parts of the puzzle am I going to be involved in versus what are my expectations of the billing vendor? And have I communicated that so that everybody is providing the right level of resources and the right level of expertise? Because you may be speaking to a vendor who doesn't have that capability of doing all of the things you need. So then it's critical for you to understand, here are all the things I need. Can you do this at this price? And if not, what is the price? And then meet in the middle. Of course, the math has to math for both companies, both yourself as well as the billing company that's providing services. Really critical then to think through the other parts of the equation, right? So the perceived likelihood of achievement. Have they done this before? Who have they done this before with? How big are they compared to the size of your own company? What about subspecialties? What about practice management software? What about their background in regards to managing the claims process that have that they've done before, that they can show you that they've done before to help make sure that you, that your expectations will be met. So that's really important. The other piece of the puzzle is how quickly can we all get there to that dream outcome together? And this is going to depend on where you're starting. And that dream outcome may be something that takes four months. It may take six months. A lot of questions I often get is how long can it take to get the old accounts receivable managed and dealt with? As you guys know, typically we do old accounts receivable on an hourly basis because we don't know what we're getting into. When you're taking over from an old billing company, you don't know if they manage the claim appropriately, appropriately or not. And so if they did not manage the account appropriately, then the claim may not be able to be paid, but you won't be able to know that until you get in there and pull the EOBs, see what the denial is, et cetera. So if you are expecting, I want my accounts receivable into a range of benchmark, meaning you want that AR over 90 days, less than 15 or 20% on the insurance side, and you want that done in 90 days, then everybody has to agree to the FT FTE amount. So the amount of employees that are going to sit and work those claims. Accounts receivable is probably one of the most commonly underestimated bandwidth that it takes. And so you really want to make sure, okay, we're expecting them to touch this many claims a day, and we're expecting this to take three months. And you could even spend that first, you know, two weeks pulling reports, getting an understanding of how much is over timely filing and writing that off and having that be a separate project, a write-off project. And then you fully focus on the claims that are going to be payable and you rank those from highest dollar to lowest dollar and you just start hammering those out. Then it's something that you could discuss during your weekly meetings. Okay, how is accounts receivable going? How many claims have we touched? What progress have we made? But everybody has to come to the same agreement on how much work that's going to take. Most companies, I would say, may be willing to do this. So the last thing to talk about then is the amount of effort it's going to take. And this is really about the effort on both your side and their side in order to get this to that dream outcome. And really important for you to understand, okay, what do I need to do? What is my role during the transition versus what is their role in the transition? And how do we make sure we're both aligned on the time it's going to take to work through an EMR or PM software transition, to do the EDI enrollments, to pull the accounts receivable reports, to contact patients about their patient AR. Everybody has to come to an agreement of, okay, we're going to hire an additional person, we're going to get the policies and procedures up to date, we're going to get the metric boards set up, and we are going to then have a weekly cadence where it's a report out of what's going on so that you can drive towards that dream outcome. Again, everything that we're doing and talking about today is getting you to that dream outcome, but you have to think through what is the definition of that? What is the likelihood that this company is going to be able to do that? Have they done this before? Can they talk about it? Can they show proof of this? The time it's going to take and then the effort on everybody's part to get it done. So I hope this helps for you guys. Again, we were having a conversation with a vendor about this earlier this week. And going through this exercise is so important. And so I think the more clearly defined you are when it comes to your dream outcome, the more likely you are going to get it. And the more likely you're going to be able to spot a vendor that has the ability to do that themselves. So hopefully this helped. One of the resources we have down below is all about your EMR and PM software transition. So this is a really good document. If you are thinking about an EMR or PM software, what does good look like? How do you evaluate vendors in this space? And so check that out in the show notes. You can download it. And hopefully that's helpful for folks as you guys build and run your practices. Have a great rest of your week, and we'll talk soon.