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Healthcare facilities often elect to contract with a third party for the provision of billing and collection services due to various operational and financial reasons. The following are generally considered typical billing and collection services:
- Contract analysis & review (limited support);
- Maintaining payor fee schedules;
- Provide & maintain billing information;
- Charge entry;
- Claims follow-up;
- Claims denial analysis & reporting;
- Maintain billing and financial information;
- Payment posting;
- Monthly financial/operational reporting;
- Submit claims; and
- Verify claims per fee schedule.
From a business perspective, understanding standard services and appropriate fees is fundamental. It is also imperative to have fair market value documentation in arrangements where a healthcare facility and billing and collection services provider are in a position to generate referrals. Challenges include: understanding typical billing and collection services in the market and the relative comparability between the services and the subject arrangement, appropriately utilizing market fee data for similar services, and in some instances assessing the cost of providing the services, along with a market-based return.
VMG Health has insight into the latest trends and compensation structures based on extensive experience in valuing billing and collection arrangements. As a result, VMG can rapidly assist in confirming if a billing and collection arrangement is consistent with fair market value.
Documentation illustrating that a billing and collections arrangement is set at fair market value represents best practice for compliance purposes. Based on regulatory guidance, compensation should be derived based on a sound methodology reflecting the terms of the arrangement and relevant value drivers. Five key value drivers that should be considered when analyzing a billing and collection arrangement include: 1) net revenue of the facility 2) expertise of the administrative services provider 3) breadth of services provided 4) cost structure and the efficiency of the billing and collection provider and 5) whether services are being provided by physicians versus non-physicians. VMG has a keen understanding of these value drivers, and a myriad of other valuation drivers associated with billing and collection arrangements.