Analyze payer mix before deciding how to change it

Practice Pointers. By Karen S. Schechter, AMNews contributor. Jan. 28, 2008.

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Question: My practice's revenues and net profits are decreasing in spite of the fact that I am seeing as many, if not more, patients than I have in the past couple of years. My office manager feels that part of this situation is due to our payer mix. As a primary care physician, my payer mix consists of a large percentage of Medicare patients, followed by managed care companies and some Medicaid. Is there anything I can do to change the payer mix?

Answer: There are steps you can take to change your payer mix. However, before doing so you must analyze your practice's payer mix from several angles, including, but not limited to, reimbursement, productivity and profitability, and the employer presence of each plan. Once you have evaluated the plans, the next step is to develop and implement a strategy that will provide the practice with the best financial picture.

The first step is to identify the practice's payer mix based on charges per payer for the past 12 to 18 months. Only look at payers that represent a total of 80% of the practice's charges.

Reimbursement analysis may be performed several ways at several different levels. Once you've identified the top payers (by charges), compare the payments from those payers, along with the percentage of the total accounts receivable they represent.

For example, say that Payer A accounts for 20%of the charges, yet only 15% of the payments. Twenty-five percent of the accounts receivable comes from Payer A. This could indicate that Payer A is a slower payer than the other non-Medicare payers. This information should lead the analyst to the next step.