Unlocking Physical Therapy Billing Efficiencies - Breakthrough

Unlocking Physical Therapy Billing Efficiencies

Unlocking Billing Efficiencies

Struggling with maximizing physical therapy billing efficiencies and revenue cycles? Explore the potential of effective Revenue Cycle Management to transform your healthcare practice’s financial strategies. #revenuecyclemanagement #PTBilling

Many physical therapy practices make the mistake of tracking what they bill, rather than what they actually collect. It’s essential that you capture the actual amount of money that comes back to you. What’s more, you also need to consider the complex process of revenue cycle management and how much time it takes you to collect this dollar amount. 

Assessing billing efficiency and the overall growth of your business requires a lot more than simply adding up the number of consultations you get through every month. In fact, many private physical therapy practices are neglecting one of the most critical revenue loss areas. 

But you can significantly turn your practice’s revenue around by addressing physical therapy billing inefficiencies and rethinking your payer mix. This extensive guide will put you back on track to success.

A Quick Recap: Revenue Cycle Management

Revenue cycle management entails all administrative and clinical functions that contribute to managing claims processing and generating both payments and revenue. It includes insurance eligibility verification, follow up on payments, claims submissions, and all the tasks in between.

Traditionally, revenue cycle management involves both front- and back-end components. The front end includes patient-facing tasks such as appointment scheduling, eligibility and authorization, patient registration, and upfront payment collections. Back-end functions include claims management, medical billing, reimbursement, and final payment collections.

In addition, there are structural and operational elements to consider. Structural elements affecting your revenue cycle management processes include the practice model, payer mix, and the systems you use. Operational elements include accurate documentation, coding, and patient registration and authorization procedures.

The Significance of Revenue Cycle Complexity

The design and interplay between the revenue cycle structural and operational elements determines your revenue cycle complexity. As private physical therapy practices start to feel the pinch of reimbursement cuts, inflation, and increased operational costs, their first response is often to cut costs and work harder.

Physical therapy practices often cut marketing costs first. This is a poor strategy and counterintuitive to getting more (higher-paying) patients in the door. Another common (and equally counterintuitive) reaction is to fill up schedules with as many patient visits as possible, often to the level of employee burnout. If these patients are low payers, you’ll be working significantly harder with no results. In fact, these extra sessions may be draining rather than increasing revenue. 

Let’s dig into the underlying problem with this strategy. Numerous variables determine the complexity of turning potential revenue and claims into actual cash—i.e., how easy or difficult it is to get paid. These factors include: 

  • The efficiency of your practice operations
  • Billing efficiency
  • The various types of claims 
  • Payer regulations
  • Submission complexities 

The Relationship Between Revenue and Time

You may be calculating revenue per 60-minute patient visit at $80. The patient session may take one hour, but billing processes, back-and-forth communications with the payer, and claim resubmission might take another hour. So, you can essentially cut your predicted revenue per session in half. Earning $80 from one 60-minute session has now taken two hours of work.

We recently spoke with Bob Kowalick, a physical therapist and CEO of Revenue Cycle Solutions, LLC. Based on data collected from hundreds of clinics over eight years, Revenue Cycle Solutions found that revenue cycle complexity can inflate billing process time by 10 times or more. In a practical sense, this means that a 30-minute patient visit could essentially end up being 300 minutes’ worth of work. 

To maximize the value of your practice, you must control all the revenue cycle variables in a way that prevents billing time demand from outweighing billing time supply. If that condition is created, a turning point has occurred.

Revenue per Visit Ceiling and Maximizing Potential Revenue

Another variable and determining factor in your revenue potential is your payer mix. Your payer mix determines how much you get paid and how hard it is to get paid. 

If 70% of your income comes from a problematic or complex payer, it dramatically affects your time to complete billing and claims. The more time it takes you to process each claim, the less you’re earning per visit.

Your revenue per visit (RPV) ceiling is the maximum potential earning value per visit. This figure depends on structural variables such as your payer mix, what you code, and your time allocation. Your revenue cycle objective (RCO) should be to get 100% of this figure. In addition, you want to execute revenue cycle management to convert this revenue potential into cash as quickly as possible.

Your success lies in finding the sweet spot between the number of visits and the revenue per visit (including billing time). Controlling revenue cycle complexity is one of the most effective ways to keep your revenue as high as possible.

If you maximize high-payer visits and minimize your revenue cycle complexity with efficient and streamlined claims processing, you increase the gross value per patient. By getting paid more often and faster, you essentially earn higher revenue for working fewer hours.

Understanding ADO Score and Revenue Cycle Efficiency

The average days outstanding (ADO) score measures the average number of days it takes for a physical therapy practice to collect payments from insurance companies or patients. It’s a key indicator of the efficiency of revenue cycle management in a practice. 

  • A lower ADO score indicates a more efficient revenue cycle. 
  • A higher score indicates potential issues with billing and collections.

Your payer mix can impact your ADO. However, Revenue Cycle Solutions’ ongoing data evaluation of hundreds of practices indicates that 68% of problems come from inside the practice. This means that there’s significant scope to decrease ADO by improving revenue cycle efficiency within the practice. This will help increase your cash flow, reduce outstanding accounts receivable, and improve overall financial performance.

Time Inflators and Their Impact on Revenue

Operational time inflators (OTI) are omissions and errors across all your physical therapy practice functions that affect billing and ADO. Since they’re avoidable, managing and minimizing time inflators are your biggest opportunity to reduce revenue cycle complexity.

For your revenue cycle objectives to be met (maximizing RPV and minimizing ADO), the following conditions must exist:

  • Operational time inflators are quantified, managed, and reduced.
  • The time required for billing processes is less than the billing time supply.
  • Your revenue cycle practices are focused on effectiveness and efficiency.
  • Your revenue cycle team collaborates around shared objectives.

Once you’ve consistently eliminated operational time inflators, you’re well on your way to managing a physical therapy practice that’s highly effective and valuable.

Data clarity around operational time inflators greatly facilitates achieving your revenue cycle objectives. Data collected by Revenue Cycle Solutions indicates that, on average, 28% of all physical therapy practice visits have a claim affected by a time inflator issue. Some practices display OTI issues across 100% of their claims, while others have managed to keep this as low as 6%. 

Assessing your revenue cycle management efficiency can help you identify areas to keep OTIs in your practice as low as possible.

The Relationship Between Revenue and Margin

Physical therapy practices rely on a delicate balance between revenue and margin to ensure their financial stability. By understanding the relationship between these two factors, you can make informed decisions that lead to profitability and growth.



 indicates the total income generated by your practice, 


 represents the difference between your revenue and expenses. It’s the profit percentage that your practice retains after deducting all costs associated with providing services. A healthy margin allows you to invest in new equipment, staff development, and business expansion.

Time inflators extend across an entire physical therapy practice, from administrative functions and software systems to payers, scheduling, and clinical operations. Physical therapy practices with operational time inflator rates under 10% are generally stable and scalable, as long as their revenue per visit aligns with the cost per visit. But practices with operational time inflator rates at or above 50% will struggle to function as a viable business.

Note that your operational time inflator issues don’t only directly affect your cash flow. They also impact your biller’s time demand, resulting in another unnecessary revenue drain. To increase your margin—and, as a result, your profits—you need to minimize operational time inflators. This will reduce the time drain in your practice operations and cut billing expenses from external (third-party) billing services.

Opportunities To Improve Revenue Cycle Management: The Role of Data

There are numerous ways to improve revenue cycle management. These may include everything from scheduling more patients and communicating regularly to streamlining documentation and upgrading software. Although billing is only one aspect of revenue cycle management, improving this one feature holds significant potential for decreasing revenue cycle complexities.

Using data will help you uncover and understand revenue trends and patterns. You can then identify opportunities for improvement and optimize your billing processes to reduce revenue risks. 

Obtaining this data is quick and easy. Every time your billing team encounters a time inflator in the billing process, they record this incident in a predefined list of time inflators. This way, you can quickly identify which issues are coming up regularly and where you need to adjust and improve your process. In addition, data analysis can uncover potential areas of revenue leakage, such as undercoding or missed billable services.

Common Revenue Cycle Management Billing Issues

Before we get into resources for streamlining your data acquisition, let’s look at common billing issues that could lead to bottlenecks, inefficiencies, and increased ADO scores. It’s essential that your entire team is educated about the critical nature of these issues and the knock-on effect they cause in revenue loss.

Human Error

Data entry errors by front desk staff, such as a misspelled name, incorrect date of birth, or an “O” instead of an “0,” may seem small, but they’re enough to get a claim rejected. Staff need to double-check every entry and confirm the spelling of names with patients if they’re unsure.

Eligibility Checks and Prior Authorization

While front-office staff may verify eligibility on a first-time visit, it’s critical to confirm data and eligibility on subsequent visits as well. Payers are increasingly requesting confirmation of reimbursements prior to patient visits. So, front-office staff can avoid claim denials by completing prior authorization requirements on their end.

Therapists Aren’t Assigning ICD-10 Codes

Accurate claim processing is dependent on ICD-10 codes assigned to medical bills. These codes specify the diagnosis and conditions for healthcare services, allowing for correct reimbursement. The therapist is responsible for assessing the patient and assigning the right code. Failure to do so may result in the claim being denied.

Inefficient Documentation

Claims also get denied without thorough documentation. In the worst-case scenario, your practice may be subject to fines or required to pay money back. 

Getting your therapists to provide complete, detailed, and accurate documentation consistently can be challenging. However, it’s critical to reinforce the importance of this with training and implement therapy software to ensure compliance.

Physician Referrals

While physician referrals aren’t always necessary, checking the requirements and conditions with the insurance provider is essential. Sometimes, claims are rejected due to a lack of physician referrals. In the case of continued treatment, the physical therapist must have the suggested patient care plan approved and signed off on by a licensed physician.

Erroneous Coding and Omitted Modifiers

Coding errors are another easily avoidable cause of rejected claims. If these errors become repetitive, they can lead to a health insurance audit.

Another important consideration is knowing when to use the KX modifier. To be reimbursed for services provided to a Medicare patient after they’ve reached the annual therapy cap, therapists must add the modifier to their claims. It’s a simple but often forgotten step.

Upfront Collections

With increased high-deductible health plans, patients are liable for many healthcare costs. Settling copayments and deductibles at your front desk at the time of the appointment can significantly alleviate revenue cycle complexity.

You can improve point-of-service payments by allowing patients to pay with a credit card and providing financial estimates before appointments.

Outdated Codes and Regulations

Back-end office staff perform charge captures by converting physical therapy services and time into billable charges. This process is often complicated by changing payer regulations and coding guidelines. Codes are updated annually, if not more often. 

Because outdated codes can lead to claim rejection, your team needs to stay updated. To ensure the correct use of codes and modifiers—and remain on top of insurance regulations—your team should regularly review updates from the American Medical Association (AMA) and insurance providers.

Regular training for anyone involved in the coding and billing process is highly beneficial to minimize errors. It also ensures everyone is on the same page.

The Data Project and Business Intelligence

In an effort to simplify revenue cycle management and quantify time inflators for practices, Revenue Cycle Solutions built a platform where their third-party billing team records every time inflator that comes up during the processing of physical therapy claims. The team services hundreds of practices and has captured more than 1 million submissions and counting.

This business intelligence initiative for the physical therapy industry enables Revenue Cycle Solutions to analyze internal practice-generated problems on their clients’ behalf. This analysis serves as a pinpoint indicator of where the practice can improve its processes for an incremental revenue boost.

In addition, the data project offers insights into payer-generated problems and system inefficiencies within the industry.

Case Study

Let’s look at a case study to better understand the impact this can have on your revenue.

Revenue Cycle Solutions has been working with one of its clients for four years. Initially, the physical therapy practice operated at 2,200 patient visits monthly and at a rate of $85 per visit. When it came to billing, the practice saw an incidence or problem rate of 30%. One out of every three claims required additional time and resources due to avoidable inefficiencies.

Despite difficulties in the market, the practice saw significant growth over the next four years by applying data-driven strategies as advised by their billing partner. Today, the practice operates at 5,000 visits monthly, at a rate of $102 per visit. What’s more, their billing or claim incident rate has dropped to only 5%. This improvement in billing efficiency has lowered the practice’s cost of billing by an incredible 40%.

These changes alone have led to a revenue increase of almost $1 million over a 12-month period.

Because it doesn’t cost you more to make these adjustments, your added revenue is 100% profit. You’re essentially performing all the same tasks, just in a more efficient way. In fact, with improved efficiency and lower problem rates, performing the same business functions will cost you less.

Implementing Data-Driven Strategies

Revenue Cycle Solutions invites you to participate in this business intelligence project. By getting your billing team to capture time inflator data in a simple two-click process, you can gain insights into your own practice’s billing inefficiencies. Even better, you’ll contribute to the hub of data collection in this nationwide study. 

To learn more about accessing the data entry system or about billing services for practice improvement, you can contact Robert Kowalick at [email protected].

Unlocking Physical Therapy Billing Efficiencies: Key Takeaways

Revenue cycle management is a practice-wide foundational pillar that centers around creating and maintaining a balance between billing time demand and time supply. To do this, you need to understand and quantify revenue cycle complexities’ structural and operational elements.

The revenue cycle objective is to achieve maximum revenue potential per visit. In addition, you want to convert this potential revenue into cash as quickly (and cost-effectively) as possible.

What’s more, every function in your practice can create risks that prevent you from achieving revenue cycle objectives. Focus first on improving operational time inflators since they’re low-hanging fruit for improving cash flow and lowering cost. Practices with more than 10% of visits affected by time inflators need more effective operational controls.

By leveraging data analytics, physical therapy clinics can identify trends, optimize reimbursement rates, and pinpoint areas for operational improvement.

More Innovative Strategies for Physical Therapy Growth

Effective physical therapy revenue cycle management requires innovative adjustments to continuously shifting regulations and an uncertain economic landscape.

Shifts in authorization, higher deductibles, and a lack of transparency across systems are all challenges that practices face in collecting payments. But by better structuring your revenue cycle processes and payment methodologies, your physical therapy practice can grow and thrive despite these difficulties. 

Not only can you improve ADO scores and reduce claim rejections, but you can also increase patient visits and enhance the visitor experience.

For more strategies to maximize payment speed and boost your bottom line, follow Breakthrough’s Grow Your Practice podcast. Or learn more about our Profitability Under Pressure Program.

Profitability Under Pressure

Get Started

Join hundreds of
practices accelerating
their growth with