You have apples and you have oranges, which is fine if you’re making a fruit salad. But if you’re trying to determine the relative payout performance of one health insurance company over another, you need all the fruit on the plate to look the same. Because in the chiropractic billing game, even the slightest variance can translate into significant accounts receivable. And to see how this comparative analysis is done, one can look at the indexing models on Wall Street.
The most popular indexing technique on Wall Street is rule-based, where pre-defined rules select instruments for inclusion in an index based on the values of those instruments’ specific parameters at the time of calculation. The advantage of rule-based indexing is that the stake is dynamically determined at the time of calculation, reflecting the dynamic nature of the entire market. Today’s top 10 list may not include the same names next week, because some names may drop out or be added to the list. The specific performance of a financial instrument in the index is recalculated each time the index itself is calculated, reflecting the dynamic nature of the performance relative to the market itself. If an instrument performs well in a strong market, the index takes this into account, as most participants do well as well. The same goes for the downside: if a financial instrument performs poorly in a falling market, the index makes it clear that this is not due to an inherent weakness in the company itself, but rather that the performance is reflected in the context. of the entire market environment. in which that value is listed.
Most of the big sell-side brokerage firms calculate several indices on a daily basis. For example, Lehman Brothers publishes its famous fixed income index using a rules-based computer process that includes basic characteristics (eg transaction volume) and advanced risk parameters (eg duration and convexity). By comparing the performance of a trader’s investment portfolio to that of an entire index, it can be immediately determined whether the trader has succeeded or is failing relative to the entire market.
A similar indexing approach also promises to redefine the Payer-Provider perspective in health care. A payment may be considered for inclusion in the index calculation if the total volume processed in the last month exceeded a certain amount (for example, $100 million). Participation in the index would be driven by multiple criteria, beginning with a required minimum threshold of claims filed and including Billing Performance Index (BPI), percentage of accounts receivable beyond 120 days . Contributors’ participation in the index is defined dynamically at the time of calculation and not through a static list of specific contributors. Therefore, any specific payer may or may not be included in the index for a given month, depending on the performance of that payer.
For example, in June 2007, Billing Precision’s chiropractic billing performance index stood at 14.8, almost 3% above the national average of 17.7% (in other words, the average of the ten payers with better performance of Billing Precision has 14.8% of accounts receivable beyond 120 days). , which is 3% better than the national average). BPI is a key billing performance characteristic as it is an indicator of claims that are never paid. Obviously, the lower the ratio, the better the billing performance, but this statistic is only really meaningful when considered in context with the relative performance of other payers.
So if you’re eager to find a solution to aging receivables, take the lead from Wall Street and consider using the power of rules-based indexing to separate the players from the imposters. Then grab a plate of fruit salad and relax, because with this level of data at your disposal, you’ll be able to tell the bad apples from the good oranges at a glance.