I don't think a month goes by without Gwen Gampel, of Congressional Consultants, getting a panicked caller relaying that an intermediary somewhere in this great land of ours is refusing to grant a provider number. Because many billing service contracts contain verbiage stating that reimbursement for services is obtained by charging a percent of collections.

To date this isn't illegal except in the state of New York for Medicaid patients.

So the questions becomes, "Will charging a percent of collections become illegal?" My "guesstimate" is that it will eventually go by the wayside, like indemnity insurance. The reason being that many government agencies like Healthcare Financing Management Administration (HFMA) and the Office of the Inspector General (OIG) feel that charging a percent of collections could lead to the temptation to overbill, upcode etc., for the purposes of receiving a larger management fee.

You may be asking yourself what are the alternatives? Well with any change you have two alternatives. Look at it from the perspective of doom and gloom or look at it as a great opportunity.

It reminds me of the story of the two shoe salespersons who are assigned a territory in the jungles of South America. The first one calls back to the main office and says, "I'm coming home. No one wears shoes in this jungle." The second one calls the office and says, "GREAT NEWS, no one in this jungle owns shoes yet!"

Let's look at some alternatives to charging a percent of collections.

· Flat fee per case, per visit or for each CPT code.
ADVANTAGE: Protected from declining reimbursements.
DISADVANTAGE: May no longer get $15 to $20 dollars for an anesthesia or surgery case.

· Flat monthly fee based on projected volume.
ADVANTAGE: Consistent revenue stream.
DISADVANTAGE: May not protected if practice has an upswing.

· Ala Carte pricing. Charge separately for everything, CPT codes, phone calls, insurance forms, patient statements, monthly reports.
ADVANTAGE: If priced properly no "loss leader" clients.
DISADVANATAGE: Could be an accounting nightmare.

You may have even thought of additional alternatives to percent of collection billing in addition to those listed above. If you have please contact me so I can share with our membership in a future article.

The main reason I do not feel that, if we are prohibited from charging a percent of collection, we will go out of business is because of what I have observed as I've reviewed many billing companies over the last 10 years.

Below is my top 5 list of why it isn't disastrous:

1. Most firms don't have logical pricing policies. They have charged what the market would bear. This has lead to almost every company having some extremely profitable clients and some real dogs.
2. Reimbursement will continue to decline and so will your profits because the marketplace isn't ready for us to raise our percentages. Did you ever hear a client say, "If I'm making less your going to make less."
3. In many firms reporting isn't sophisticated enough to monitor major shifts in payer class. When you signed the contract years ago Commercial indemnity may have represented 30 percent of their practice now it may be 3 percent.
4. If you're charging a percent of Net Collections you're losing money every time you do a refund.
5. It's easier to sell a price increase of 25 cents per CPT code, etc. than upping a fee by 1 percentage point. Believe me I've tried both.

Pricing contracts in the future may require some, "Thinking outside the box." However, it may not be as painful as you may think. I say, "Bring on the flat fees."

Remember this monthly feature will address topics of interest to you. I really appreciate your input and suggestions. Please send your questions or ideas on topics that you would like addressed, to: Dave Jakielo, Seminars, Training and Consulting, 86 Hall Avenue, Pittsburgh PA 15205-3214. Phone and Fax number 412-921-0976. Email = dave@davidjakielo.com - http://www.davidjakielo.com - HAPPY TURKEY DAY!