PT Practice Do-Over

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July 2004

By Matthew Blecke, MBA, David Borgman, MS, PT, ATC, MBA, and Ronda Winans, MS, PT, MBA

Business Process Reengineering (BPR) is no longer a term used only in manufacturing. It is defined as the fundamental and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.¹ In a country with the highest health insurance costs, the lowest proportion of insured people, as well as the highest administrative costs of any other Western nation, we cannot ignore the essential benefits of a concept that had its origin in manufacturing.

Though the concept of reengineering is most commonly associated with large manufacturers, there are salient similarities that cross industry type. These similarities include that, in both industries, several jobs are combined into one, workers make decisions, the steps in the process are performed in a natural order, processes have multiple versions, work is performed where it makes the most sense, and checks and controls are reduced.

The concept of BPR is not completely new to health care. Health systems have used the basic idea of reengineering in the development of critical pathways for various diagnoses. These pathways describe specific goals and events that are expected before, during, and after a procedure, including patient discharge from the hospital. Massachusetts General Hospital began such a process in the early 1990s. By 1994, it was ready to standardize the CABG (coronary artery bypass graft) procedure in an effort to improve the quality of the outcomes of this surgery with the secondary benefit of reducing both costs and length of stay for these patients.

Reengineering the patient flow process at the Western Sydney Area Health Service resulted in a 10% gain in productivity. Other benefits include enhanced customer service and improved cash flow and bad debt recovery.² The US Military Health Services and the Mayo Clinic Scottsdale have also utilized BPR to achieve similar results.³

The expectation is much the same in physical therapy practice. Insurance companies and the public are expecting higher quality outcomes in the face of declining reimbursement and rising costs of the delivery of care. An analysis of these issues relative to our physical therapy clinic follows.

BACKGROUND
Outpatient rehabilitation registration is wrought with redundant steps, leading to inaccuracy and inconsistent data collection. Delayed insurance verification results in poor customer service and increased patient financial responsibility. This, combined with slow manual data entry, causes a negative impact on the billing/revenue cycle.

First, look at external customer needs. For these needs, you will have to reduce documentation to a minimum (eliminate redundancy), and assure insurance verification prior to initiating any expense (before first visit). For internal customer needs, you will have to: reduce billing cycle (time from customer’s initial call to final bill), decrease accounts receivable days, reduce number of claim denials by reimbursement agency, minimize the number of handoffs and billing errors, and reduce documentation compliance issues.

For the purpose of this research, we evaluated these needs and then took the following steps: we created a cross-functional process map of the current process, documented times for the current process (see Table 1), redesigned the process to meet customer needs and project objectives, and identified projected improvements (time, steps, etc).

THE EXISTING PROCESS
In the existing process, first, a patient calls the clinic to schedule the first appointment. Preliminary insurance information is collected and the appointment scheduled. At the first appointment, the patient must complete five other forms (duplicate information is requested on these forms). Forms are copied, and one copy is placed in the patient chart and another set aside for data entry. Ideally, the patient’s insurance benefits are verified by the first visit, and when coverage is verified, the receptionist makes a note in the patient’s chart. When coverage is denied or limited in some way, the patient is notified (this may occur after they have completed a number of treatments). The therapist evaluates the patient and completes charting, and a daily billing sheet is completed to reflect the daily charges and given to the receptionist. A quality check is completed (cross-check of daily billing sheet and the schedule for correct billing), and after the patient’s demographic information has been registered in the computer, the charges can be entered into the system.

Then, the billing office bills the reimbursement agency. Ideally, the agency issues payment directly to the billing office. Payment is processed and the account is adjusted, and any balance is billed to the patient. In situations where the reimbursement is made to the patients (for out of network providers), the reimbursement agency issues payment to the patient and the patient is responsible for paying the provider. If the claim is denied, the billing office researches the reason and then provides any additional information necessary to get the claim paid, and the bill is resubmitted. When the denial is the result of noncovered treatment, or there is lack of documented medical necessity, the process ends and the balance must be written off.

EVALUATION OF EXISTING PROCESS
Several of the issues identified include the following:

The patient must provide duplicate information over the phone and on several handwritten registration forms. This information must later be copied and manually keyed into the computer system.
Verification of insurance occurs far too late and not at any specific point in the process. This can leave many patients disgruntled after receiving treatments several times that were not covered.
The process for posting charges to a patient’s account currently takes 14 to 30 days from the date of this patient’s initial visit.
The process has somewhere between 120 and 150 days of accounts receivable built in.
Insurance companies often do not process the right units/charges, requiring a minimum of a 5-minute phone call to make the correction followed by another 14 to 30 days to issue a check.

REENGINEERED ORDER FULFILLMENT
Evaluation of the existing process and associated problems led to the identification of the ideal process from the external customer or patient’s perspective. Only three steps truly added value to the customer: scheduling of an appointment, evaluation and treatment during visit, and payment of bill.

In the ideal reengineered process, the patient schedules their first appointment using one of two methods: calls clinic directly or schedules online. When the patient uses the Web process, they have the option to complete the additional forms prior to their arrival in the clinic. In the event the patient calls the clinic, the receptionist enters the patient information directly into the computer. In either case, adequate information is collected to allow insurance verification. The reimbursement agency’s information system interfaces with the office system and insurance coverage is verified via EDI (electronic data interchange). The patient is notified of their coverage upon arrival for their first visit or before that visit if coverage is denied or limited in any way. Upon arrival to the clinic, registration is either completed or verified for accuracy through a touch screen monitor. Then, the therapist evaluates the patient and documents treatment, identifies charges, and updates the plan of care on the PDA (personal data assistant) and the record is downloaded. Any patient co-pays are paid upon leaving and noted in the computer. The billing system electronically processes the bill, and the reimbursement agency sends payment electronically. Any patient balance remaining is forwarded to the patient electronically where possible.

SUMMARY OF EXPECTED IMPROVEMENTS
This proposed reengineered process results in several dramatic improvements. A generic rule for reducing time is to eliminate steps that do not add value to the customer. In doing so, we have reduced the number of handoffs and subsequently reduced an accounts receivable process that was taking between 120 and 150 days, to one that can take as little as 14 to 30 days. With regard to the process that we have direct control over, we were successful in reducing the time from initial patient contact to point of posting charges to that patient’s account from between 14 and 30 days, to 1 day. Though this is not yet a one-to-one relationship to the actual value added steps totaling only 31 minutes and 50 seconds, it is much closer (see Table 1).

Initial phone contact	Time to do paperwork at initial visit	Time to copy forms	Chart review	Time it takes to key data into computer	Time to verify insurance	Time it takes to schedule
190 sec	900 sec	7 sec	24 sec	420 sec	276.6 sec	99.71 sec
Total Value Added Time in Process: 31 min. 50 sec.
Table 1. Time study of reengineered billing input and registration process.

Combining work tasks would also result in a reduction in the office work force while maintaining an extremely high quality. Financially, this means at least a $23,000 to $26,000 reduction in salaried expenses per year. With regard to the billing cycle alone, introduction of the proposed IT (information technology) system could result in a potential savings of $32,096 in the first year (see Table 2).

Current Manual Claims Processing	Proposed IT Systems Processing
$6,000/month for contract services + $180/month for support help for billing	$1,200 initial investment to start $300/month subscription covering up to 600 claims $37,440 annual salary for billing personnel Electronic Medicare (%5 or current patient load) billing is free to start $50/month for 200-400 claims/month
$152/month for postage	$0.23/claim transaction fee
Annual Total: $75,984	Annual Total: $43,888
Table 2. Cost savings in electronic billing.

The proposed IT will also have the kind of configurations that will safeguard or prevent documentation deficiencies that are resulting in unprocessed claims. Unprocessed Bureau of Worker’s Comp-ensation and Medicare claims alone total $65,000, not to mention the 200 other claims left open due to lack of appropriate documentation.

In regard to financial performance, this reengineered process demonstrates a quantum leap in improvement, with a conservative estimation of approximately $120,000 in savings in the first year of implementation alone. This does not include any potential increase in revenue that could result from increased patient volumes with word of mouth spread from satisfied clients.

THE REALITY
Though we recognize that many small clinics and, for that matter, large health systems do not have the capital for extensive IT budgets, a number of process changes can be done inexpensively in order to achieve similar results.

Because insurance reimbursement for the provision of physical therapy services will continue to decline, our only option to achieve continued quality outcomes coupled with necessary financial success is to drive the costs of care down. It will require application of concepts originally used in manufacturing, thinking out of the box, and a collision between the world of health care and the world of business. We compete in a global marketplace based on qualities like access, responsiveness, service, quality, and, of course, cost. So does Chrysler with General Motors. Isn’t it time we learn some of the concepts that have brought these automotive companies success and apply them to our industry?

Matthew Blecke, MBA, is engineering manager with the Dana Corporation, Toledo, Ohio; David Borgman, MS, PT, ATC, MBA, is director of outpatient therapy services for ProMedica Health System; and Ronda Winans, MS, PT, MBA, is coordinator of Sports Care Rehabilita-tion, a member of ProMedica Health System, Toledo, Ohio. This project was completed through the University of Toledo’s Executive MBA program.

REFERENCES

Hammer D, Champy J. Reengineering the Corporation. New York: Harper Collins Publishers Inc; 2001.
Khandelwal VK, Lynch T. Reengineering of the patient flow process at the Western Sydney Area Health Service. Proceedings of the 32nd Annual Hawaii International Conference on System Sciences. IEEE;1999.
Gentry J. Process over function: preparing for reengineering in health care. Available at: www.prosci.com. Accessed June 9, 2004.

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July 2004