Network Financial
The Intersection of Finance,
Utilization Management and
Capitated Risk Management
“Ugh. Yuck. Finance! If I wanted to do business, I would have gone to business school.
—Anonymous physician
Well, ladies and gentlemen, you volunteered for this steering committee, so let’s
get busy.
Because an IPA (Independent Practice Association), PHO (Physician Hospital
Organization), or MSO (Management Services Organization) usually takes capitated
risk, this chapter is designed more as a reference and planning tool for the nance
committee, and the utilization and quality committees. The task is to learn to under-
stand how the numbers work and how to supervise your administrators to meet the
goals and objectives of the organization. Nonphysician providers may nd many of
the reports useful as well to stimulate reports that mirror these but that are more
germane to their areas of specialization. These reports will also provide a great start
on outcomes reporting for internal management and marketing.
Let’s start with the basics. Often I nd that medical practices, especially primary
care practices that are already assuming capitated risk, do not close out their month-
end reports as they should. Therefore, forgive the elementary level of this early part
of the chapter, but I have learned the hard way to assume nothing. I also have been
made painfully aware that in the PHO setting, if the billing and nancial manage-
ment team is “borrowed” from the hospital side, often the physician and other non-
hospital billing issues are foreign to most hospital billing experts, and therefore they
nd it difcult to truly manage capitation. This last point, although unintentional,
often contributes signicantly to misalignment and disintegration of PHOs.
For these reports, I have blended my experience as a practice manager, hospi-
tal business ofce coordinator, and my HMO (Health Maintenance Organization)
reporting capability background from my stint in provider relations of a large HMO
capitated plan. These are the reports I have found most helpful. Most every one can
be achieved using Microsoft Access
or another relational database software tied to
a centralized data depository at an MSO or similar venue.
92 Physician Integration: Refocusing the Lens
• Monthly and annual aged trial balances. A network-wide report demon-
strating the accounts receivable (A/R) status in the following format:
• Patient’s last name, rst name, middle initial, responsible party
• Current balance at 0–30 days, 3160 days, 61–90 days, 91–120 days,
120150 days, and 151180 days
• Employer name, Payor ID, Subscriber ID, Group ID, Home phone, Work
• Monthly, quarterly, and annual adjustments to open balances. This is usu-
ally a report detailing all A/R adjustments made as debit adjustments.
• Monthly-quarterly insurance receivables grouped by payor. Current–30
days, 31–60 days, 61–90 days, 91–120 days, 121150 days, 151–180 days,
and 181–120 days for all fee-for-service reimbursements expected. Listed
by patient and date of service.
• Monthly and quarterly collections status report. A report showing what
has been done to collect receivables due, pended claims, suspended claims,
notations on the account, who has worked on the account, and the present
status and/or recommendations.
• Monthly, quarterly, and annual paid-to-billed ratios (discounted fee for
service claims). A report showing the present-day status of all reimburse-
ment for all payors using discounted fee-for-service methods.
• Monthly collections activities by billing specialist monthly and quarterly
suspended claims reports.
• Monthly, quarterly, and annual paid-to-billed ratioscapitation. This is a
report showing the ratio of revenue collected through capitation, copayments,
fee for service for noncovered services of an elective or cosmetic nature,
against what would have been collected using a standard conversion rate for
productivity-based reimbursement on an encounter-by-encounter-only basis.
Next, create a report that lists data for each individual capitatated providers in the
following format:
Provider Name MM/YY Health Plan Name Paid-to-Billed Ratio
Table9.1 may be of help for those of you unfamiliar with this method of monitor-
ing your A/R and revenue cycle.
• Monthly and quarterly procedure rate frequency for all primary care pro-
viders by practice and by individual physician. Analysis by physician of all
evaluation and management codes used in encounters and billings, regard-
less of reimbursement type.
• Monthly and quarterly procedure rate frequencies by special procedures by
PCP and by specialty (IM, FP, Peds). Analysis of procedural frequencies

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