ROI Analysis & Full Cycle Online Practice Management Software

By: T. Jones

ROI Analysis for Full Cycle Web Based Practice Management Software Solution

Executive Summary

Within this document, you will see detailed financial analysis and real world scenarios that will demonstrate the exponential cost savings that can be achieved with a full cycle practice management software.

Full Cycle Practice Management Software will:

?More efficiently utilize your schedule by using Resource Scheduling
?Set-up scheduling rules based on your practice needs (by caregiver, room, equipment, procedure)
?Maintain Caregiver Profiles
?Maintain Payer Contract Fee Schedules
?Set-up billing rules specific to your claim forms and payer contract requirements
?Automatically track your collection efforts and all follow-up
?Complete revenue reporting for financial reporting to stakeholders

Traditional Practice Management Software
Managing a practice should not include adjusting your practice rules to fit your software. The software should adjust to fit your rules. We will look at various aspects of a practice management software.

With a typical manual appointment book system, your employees invest much time in maintaining the "book". Appointment rules are not built in the appointment book. Instead, your appointments may be based on the person speaking with your patient. If you are no longer using the "book" but instead using an appointment book software system, your appointment scheduling software may not maintain all appointment rules. Both of these types of systems hinders your ability to successfully manage all employees time (appointment scheduler, caregiver, front desk personnel) and provide quality patient care.

Let's take a look at a real world scenario. Patient A phones your office to schedule a follow-up to a wound care visit. Using "book scheduling" (either manual or software) your appointment scheduler must remember the rules for this type of visit. Unfortunately, Patient A is scheduled for a 15 minute appointment, but in reality the appointment includes time not only with the caregiver but also with a wound care personnel. Patient A's appointment lasts 30 minutes. By the time Patient G is seen (assuming alphabetical patients) all appointments are 30-45 minutes behind schedule.

How much does this cost your practice? Let's assume Patient G has time constraints and was assured at time of scheduling he would be out of the office within 45 minutes. Patient G is now 45 minutes past his schedule time, and hasn't even seen the caregiver. Patient G may either leave your office (unseen) or complain loud enough in your waiting room for patients behind him to leave. If Patient G's visit charge would have been $100, that revenue has just left your door. Let alone if other patients behind him leave as well.

If this is happens in your office, it does not happen only once. So, you must multiply that number by 3, 5, 10, times as often as this scenario happens within your practice.

Result - A single patient leaving your office due improper appointment scheduling 3 times a month can cost your practice $3600 ($300 x 12 = $3600) per year. This cost is in addition to the employee labor costs involved to maintain your book schedule.

If you feel these projections are not accurate, you are probably correct. The costs are probably higher. The average charge is probably higher than $100. And, the frequency can be realistically higher than 36 lost appointments per year.

Investing in Resource Scheduling Software
With Resource Scheduling, appointment, caregiver, equipment, modality rules will be set up for your practice. The system will manage the rules, and appointment slots will be provided based on these rules. Ongoing labor costs will be minimized, as your employees are not learning the rules for each appointment type. With PiMS you will receive unlimited rules capability, ability to define preferences, block scheduling, the ability to define multiple resources for an appointment, plus much more. With Resource Scheduling, your practice can efficiently schedule appointments based upon your practice rules, and reduce its financial loses while improving patient care.

A typical Resource Scheduling software costs, for single location practice, less than $1,000 to install. With the above scenario, you should experience a return on your investment within 3 months.

Lost Appointment Costs - $300 per month (3 patients @ $100 charge per patient)

Labor Costs - Let's assume an average of 1 hour per patient @ $25 per hour (appointment scheduler, caregiver, front desk personnel)

Estimated Lost Appointment Cost Total - $375 per month

With this analysis, you can see how investing in a Resource Scheduling software will provide a quick return on investment for your practice.


Billing errors can cost your organization thousands of dollars. This section analyzes manual billing pitfalls, costs to your organization, and proven ways to recover lost revenue.

Most billing errors can be eliminated prior to the submission of your claim. Managing these errors with little labor (i.e. people) intervention increases your overall profit. Relying on simple billing/claims software and/or personnel to remember specific billing requirements will result in an increase of denials and delayed cash. Instead, invest in billing software that has the capability of building your specific billing rules into the system. The system should allow for multiple claim forms. Your users should be able to view claim forms online, and reformat the claim online if necessary. The system should have the ability to automatically submit clean claims to the Payer, without human intervention. And most importantly, the system should contain your Payer specific rules for billing.

For example, some Payers have different billing requirements for the same procedure code. Your system should have the ability to generate a claim specific to the applicable Payer.. If your system does not have the capability of managing these types of rules, you are relying on personnel to catch the requirement up front and edit the claim prior to submission. Or, the claim will be submitted to the Payer and then denied for missing information.

Let's examine the cost of both processes (manual versus system built rules). If you are relying on a manual or simple billing/claims system, your process will typically be as follows. A claim is generated and reviewed by your office staff. The Payer requirement states the specific procedure code must be submitted with a letter of medical necessity. Your office staff must remember this requirement (in addition to the other multitudes of billing requirements Payers create). The charge is $500. The claim is mailed to the Payer without the LMN. Twenty days later a denial is received from the Payer, stating the claim is not eligible for payment due to missing information. At this point, your staff will either remember what the missing information is, or more than likely contact the Payer for explanation. Your staff will then retrieve the LMN and resubmit the claim to the Payer with the LMN attached.

How does this cost your organization? Let's assume the initial charge is $500. Begin subtracting the personnel cost to review the claim up front, review the denial, contact the Payer, correct the claim, resubmit to the Payer, and then follow-up with the Payer regarding payment. On average, this would entail approximately 2 hours of personnel costs. Plus, the $500 receivable has been delayed at least thirty days, resulting in a lower margin to your organization.

Investing in billing software that allows you to build in Payer specific rules will increase your margin almost immediately.

Medical Billing Software
Investing in a Medical Billing software, will decrease your billing denials. Medical billing software should provide flexible billing cycles, the capability to build in rules for Payer specific billing requirements, flexible claim formatting, missing element tracking, online reformatting, and a multitude of other user friendly functions to assist your personnel in billing.

How will this benefit your organization? In the above example, your $500 profit is reduced by 8-10% for personnel costs. That is then reduced by another 5% due to the delay in collection of the receivable. Conservatively, your margin is reduced by 15%. Multiply that by the number of instances this is currently occurring in your practice. You can see how quickly your margin erodes, and cash flow is delayed.

The cost of a typical medical billing software is probably dependent on the size of your practice and number of concurrent users. For a small practice, the cost could be less than $2,500 to install. Taking the above example into our analysis, your return on investment would be seen very quickly.

In addition to the features mentioned above, the software should provide your organization with Revenue Management reporting, an on-line patient financial folder, automatic charge posting, and much more!


Healthcare practices that do not invest in efficient billing and collection processes may find themselves in a cash crisis without resources to meet financial obligations. Your collection practices must be communicated, and adhered to, by all individuals within your practice. From communicating the patient responsibility, collecting this responsibility at time of visit, and thorough follow through until the account is paid in full should be one of your organization goals throughout time.

Understanding where you are today, and deciding on your organization's goal for the future should be the first step in developing your collection processes. So, first calculate your current days sales outstanding (the average time it takes to collect your receivables). To do this, divide your net sales by the number of days in the period (I recommend monthly to effectively manage your cash flow). For example, if your sales for month is $75,000, divide that by 30, which equals 2500.

Next, take the above number and divide it into your accounts receivable trade balance. For example, if you have $165,000 in total receivables, divide 2500 into that number, which equals 66 days. Therefore your days sales outstanding is 66 days. Once you calculate this number, you can effectively set reasonable goals and processes for your staff.

Payer collections will probably be the vast majority of your collection efforts. Therefore, it is imperative processes are in place that dictates your organization's follow up procedures. Your practice management system is the key to successful and timely collections of your accounts receivable. Timely follow-up on outstanding claims, denied claims, claims paid incorrectly, and delayed claims is a must.

Review your Payer contracts. What are the terms of payment? Does your state have legislation that dictates payment guidelines? Build your collection processes around these guidelines. For example, if Payer A contract terms is 30 days, you should be following up with the payer on day 31. Then, you should follow-up every 10-14 days from that point, until the claim is paid in full. Let's examine how not following these types of processes can cost your practice.

Assume your payer contracts all dictate 30 days payment of a clean claim. The first step you perform is to calculate your current days sales outstanding (i.e. DSO). Once you do the calculation, you find your average DSO is 66 days. In this example, you are financing your current expenses by services you performed 66 days ago. This is not an effective means for managing cash flow and becoming profitable. And, you are allowing your payer to delay payment for services you performed.

Ensure your Payers are abiding by the contract guidelines. You must be able to access their payment style and their ability to process your claims according to your contract. Once payer payment issues are discovered, they must be presented to Management, to assist in contract negotiations and improvements. How does this impact your practice?

If your payer contract stipulates 30 day payment upon receipt of a clean claim, and paid at 80% of billed charges, your staff must be able to determine if payment was made correctly. If the payer is paying your claims at 75% and you are writing off the remaining 5%, you are losing revenue.

Patient collections are an important part of your collection process as well. From the appointment each patient must understand his financial responsibility. That responsibility must be collected at time of service. If the amount is not collected, your collection processes must include how and when to collect any remaining patient responsibility.

Investing in a practice management system that will provide the tools to analyze your current state is crucial in the streamlining of your collection efforts. Your software should accommodate the multiple payer contract payment requirements, and the processes you have developed to collect any outstanding receivable. The more you can automate, the less likelihood of delayed collections. These processes must include both payer and patient collection efforts.

Collections Software
Your collection software should allow you to manage your collection process by user-defined guidelines. The software should provide user activities, worklists, and letters to guide your staff in the collection of your receivables.

Creating automatic collection letters is a must. The letters should be as specific or generic as you wish (from small balances to a more rapid letter sequence for higher balances). Your users should have access to unlimited worklists, with multiple assignments based on your criteria. Supervisors should be able to view employees worklist any time on-line. In addition, the software should provides productivity reports to help you analyze what your collectors are doing.

Another important aspect is the software should provide account financial responsibility by both third party and patient. This eliminates staff confusion and allows the staff to follow-up more efficiently with the third party and patient.

How can investing collection save you money? In the above example, if your payer contract stipulates a 30 day payment, and your average DSO is 66, your are financing your operations out by 2 months. Investing in a software that will provide you both tools and resources to define your current state and automate your collection process will decrease your DSO.

For a small practice, the cost could be less than $2,500 to install. Taking the above example into our analysis, your return on investment would be seen very quickly. Investing in PiMS Medical Collectoins will be paramount in increasing cash flow.

Revenue Reporting

In addition to scheduling, billing, and collections, your software must provide you the tools to accurately analyze your financial picture. These tools should be in the format of reports. These reports must have meaning to your organization. Understanding where your practice is today, and how you can improve will provide Management the necessary information to make important strategic decisions.

The software must provide a thorough selection of real time reports that will assist in you accurate financial analysis of your practice. With PiMS reporting, you will be able to view aging reports (by financial party), revenue reports, productivity reports, plus many more. These reports are real-time, online, and retrievable at your discretion.

Performing routine financial analysis will quickly provide to you not only the items mentioned above, but will also quickly provide you the return on investment you have seen.

In summary, investing in a full cycle practice management system will quickly provide effective processes, streamlining of the A/R process, decreasing labor costs, and most importantly increasing employee productivity and your organization's profitability.


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