February 2013 Newsletter CBS. Choosing the Right Agency for You How to Improve Your Credit Score Hire a Coder or Use MARS?

Transcription

1 Insights February 2013 Newsletter CBS Choosing the Right Agency for You How to Improve Your Credit Score Hire a Coder or Use MARS? 1 February 2013

2 From The President Welcome back to our second edition of CBS Insights. Since our last edition, we have survived an election, celebrated the Christmas season, peaked over the so-called fiscal cliff, and made and broken at least one or two New Year s resolutions promises to be a most interesting and challenging year as the economy continues to sputter along and we all begin our planning and preparation for The Affordable Care Act, also soon to be known as The Law of Unintended Consequences. In this edition of CBS Insights, we are continuing our coverage of topical issues that we believe will be of interest to our healthcare customers, credit granters, and consumers. There is an excellent piece on How to Improve Your Credit Score, and some timely information on medical coding and what to look for and expect from your collection agency. We hope you enjoy it! Best Wishes to all of our stakeholders for a most prosperous 2013! Mark Mark Edwards President CBS Insights is a quarterly publication and is also available via and on our website at Contents 3 Choosing the Right Agency for You 4 How to Improve Your Credit Score 6 Hire a Coder or Use MARS? Fulton Court Paducah, KY info@credit-bureau.com 2 February 2013

3 Choosing the Right Agency for You Selecting a collection agency is not a snap decision. It includes thought, planning and research, but perhaps more importantly, it involves an intimate knowledge of your own business needs. According to Credit Bureau Systems (CBS) Director of Marketing Ed Schultz, the first step in choosing such an agency requires a thorough examination of your own business s outstanding debts and a determination on how you want those debts collected. After analyzing your own business and its needs you should research collection agencies and decide which company can best fulfill those needs, Schultz says. You should also examine whether the company has an in-depth knowledge of your market and your business. CBS, for example, has its own niche. They have an expert staff of professionals skilled with an in-depth knowledge of the industries in which they serve. We primarily provide services to healthcare agencies, Schultz says. We understand that market very, very well. We are also growing and stepping into the student loan collection business. That s a totally different market. It requires a different set of knowledge and expertise. This knowledge of the healthcare industry has cemented the relationship between CBS and clients, such as Caldwell County Hospital. Brenda Swaner, business office director for the hospital, says her facility works with CBS, in part, because communicating with the agency s personnel is easy. They have the medical knowledge we need them to have so that when we call and talk to them they understand what we re saying, she says. That means a lot. Although a collection agency should specialize within your field of business, it is also important to examine the firm s stability, looking at how long it has operated and whether or not it is financially steadfast. Investigate the agency s credentials, Schultz says. Does the agency comply with state licensing and bonding laws, where applicable? And does it belong to any relevant trade associations? It s also important for clients to be familiar with the way an agency operates. Questions to ask when selecting the right agency include: What technology does the agency have? Does the agency have the tools needed to collect your accounts? How will the agency use these tools to collect, especially if you have a large number of high balance accounts? Does the agency have sufficient insurance such as errors and omissions liability coverage? How does the agency treat its clients? Essentially, you must ensure that the agency has sufficient experience. CBS Insights 3

4 Choosing the Right Agency There are thousands of agencies out there today, Schultz says. Find one that s been around a while, one that has survived the ups and downs, one that has grown, that has expanded and that has learned throughout that process. But no matter how great the agency your business selects is, it is imperative to work with the agency you select as you would any business partner. A strong partnership delivers the desired results your business may be seeking. Provide your agency with as much information as possible so that it can collect outstanding debts quickly and efficiently. Remember, if you don t provide accurate and complete details, the agency will have difficulty recovering a large percentage of debt. As a client, you must keep your expectations of collection agencies realistic. The fact that your business couldn t collect on certain debts by itself indicates those debt collections will be tough in general. Nonetheless, with a solid partnership and enough accurate information from you, a good agency should be able to perform the job efficiently. 10 Things Your Agency Needs to Know About Your Business 1. The volume of your firm s bad debt 2. The average balance of your firm s accounts 3. Your firm s protocol for working accounts and turning them over to a third party agency 4. The length of time your firm waits before placing accounts with an agency 5. The demographic information your firm has available regarding its debtors. The agency uses this information to recover the balance of your accounts 6. The number of bad addresses your firm has on file 7. Will you permit an agency to litigate your accounts? 8. Will you permit an agency to place accounts on the consumer s credit report? 9. What collection tactics will you allow an agency to use in order to recover your firm s accounts? 10. Do you have debtors in more than one state? How to Improve Your Credit Score In the current economic climate, lending institutions have become increasingly cautious about issuing home loans to individuals with less than stellar credit. In addition, many employers are using credit reports in their hiring process as a way to ensure that they are only getting responsible employees. That s why it has become increasingly important to not only monitor your credit, but also to actively improve your credit history. So how does the average consumer go about improving their credit? 4 February 2013

5 Check Your Credit Report First and foremost, consumers should know what is on their credit report. This is important not only so the consumer knows what factors make up their credit score, but also for protection from identity theft. A good rule of thumb would be to pull a credit report 1 or 2 times per year to ensure that there are no irregularities. Start by pulling a free credit report from Dispute any items that you are unfamiliar with and close any accounts that you are no longer using. Pay Your Bills On Time It should go without saying, but the due date on your bills is not a suggestion. Your creditors expect to be paid by that date. Lenders report tardiness to the three credit bureaus once you re 30 days past due. A single late payment could affect your score by up to 100 points. Conversely, a history of timely payments will gradually increase your score over time. Set up reminders or automatic bank drafts if you have trouble remembering to send in your payment. Pay Down Your Debts Again, this seems obvious, but it s also critical. Consider what type of debt you are paying down. Paying extra on your mortgage is fine, but it s unlikely to affect your credit score. However, paying extra on your credit card can help you improve your score much faster. When paying down credit cards, it s best to review the interest rates you are being charged. Make larger payments on the cards that charge the highest interest rate and minimum payments on the rest. Use One Card If possible, keep the majority of your debt on one credit card. The FICO model penalizes you for having multiple balances, so limit the bulk of spending to one card. Try to keep your utilization rate under 50%. Also, never spend more than 10% of the total credit limit in a given month. Card issuers will report to the credit bureaus the total amount spent each month regardless of whether you pay off the entire balance or not. Don t Open Accounts If there s no need for you to open a new credit account, then it should be avoided. While there is a very short term bump in your score when you open a new account, the ultimate result will be a lower score. Further, you shouldn t open new accounts too rapidly. Remember, your score is a rating of your credit history over time, new accounts don t demonstrate your ability to responsibly manage your debt. However, if you are need of credit repair, opening new accounts and paying on them diligently may be the only way for you to rebuild your credit history. When dealing with your credit history, it is important to understand the parameters of your credit score range. Obviously, the higher your score, the better your credit. However, it is also important to have a keen understanding of the range where your credit score fits. Credit Score Ranges Credit Score Range: In the Top 50 Percent When your credit score falls into this range, it becomes difficult for lenders to offer loans at reasonable interest rates. Lenders identify individuals who fall into this category as persons who are at a higher risk of defaulting on a loan. Credit Score Range: In the Top 10 Percent If your credit score falls into this range, lenders classify you as a person who is highly likely to pay back their loans in a reasonable amount of time. You will be eligible for the highest loan amounts available to persons with your income. Credit Score Range: in the Top 20 Percent This is the range in which most individuals fall. Those who fall into this range will have no trouble receiving credit at a reasonable rate. However, you may not qualify for rates reserved for borrowers who have higher scores. Credit Score Range: In the Bottom 50 Percent If your credit score falls in the bottom 50 percent, then there is real cause for concern. You will have to take drastic steps to improving your score or you will face exorbitant rates for loans. After an allotted period of time, your rates may increase further, or you ll be tied to a loan with a balloon payment that will be too large for you to pay. If you find yourself in this category, it would be better for you to work towards increasing your credit score, rather than accepting unreasonable rates that may lead you further down a negative path. CBS Insights 5

6 Credit Score Why is your score significant? Below is a chart outlining the terms that a borrower might expect to receive based on his credit score range. The following is based on March 2007 interest rates for a $300,000, 30-year, fixed rate mortgage: 760 to 850 tier 5.780% tier 7.096% tier 6.002% tier 8.583% tier 6.286% tier 9.494% SOURCE: Hire a Coder or Use MARS? salary for a certified coder is in excess of $3,500 per month. Nobody wants to hire an average person, so $3,500 is likely too light to attract and retain a quality coder; a salary of $4,000 per month is more realistic. In this analysis, $3,750 will be used as the monthly gross salary. This simple question requires a somewhat elaborate answer known in MBA circles as a build or buy analysis. Build refers to recruiting and hiring, while buy is the option to contract or outsource the service. There are a number of factors that go into the decision-making process. The illustration is specific to surgical coding and assumes that the surgeons do their own Evaluation and Management (E & M) coding. Build Option: A Detailed Cost Analysis Salary The AAPC and Advance recent salary surveys show that the average national gross monthly Taxes and Benefits FICA stands for the Federal Insurance Contributions Act. The FICA tax consists of both Social Security and Medicare taxes and adds up to 15.3%. According to the 2008 Employee Benefits Study done by the U.S. Chamber of Commerce, FICA plus additional employer-paid tax and benefits equal 34.3% of salaries. Data released by the payroll company, ADP, states the average employer pays 38% extra on hidden costs for employee fringe benefits and taxes. We ll be conservative and use 35% of salary for taxes and benefits. 6 February 2013

7 Tangible Expenses The costs of physical space, desks, phones, computers, supplies, parking, etc. are difficult to quantify but impossible to ignore. Exam rooms are often converted into staff offices, totally removing them from revenue production and just increasing overhead. Conservatively, we estimate these tangible expenses to be $250 per month. Intangible Expenses Hire an individual to hire, test, train and supervise the coders. The expensive CPT and ICD9 books are updated annually so they must be replaced each fall. If, instead, the firm uses an electronic software-as-a-service tool (e.g. EncoderPro or CustomCoder or CodeCorrect ) they will have to pay for the pricey monthly license. They will also need Errors and Omissions (i.e. coding malpractice) insurance. The OIG s model compliance plan suggests that each coder should have an independent outside arms-length peer review, annually. That alone will cost anywhere from $500 to $1,000 per coder each year. These intangibles are estimated to cost the employing practice $250 per month. Buy Option: A Detailed Cost Analysis The MARS Solution The cost of contracting with MARS is easy to calculate. One fee covers everything. The practice needs to know the number of operating room surgeries that the physician provides in an average month (or the number of E & M encounters or other specialty services provided). Volume-Based Pricing MARS offers volume-based pricing the more cases a practice sends each month, the lower the per-case price. For a practice of 12 full-time surgeons, MARS surgical coding fee works out to be approximately $500 per doctor each month. Variable Operating Expense Fixed overhead expenses must be paid dayin-and-day-out, whether the doctors are busy working or are away on vacation. Compare this to MARS; we work on a per-case basis. MARS transforms what was a fixed overhead expense into a much-preferred variable operating expense. The fee for coding E & M services includes minor office procedures and is much less expensive than MARS fee for coding surgical operations performed in the operating room. To help with the analysis, MARS prepared the following table using the data discussed above. It can be used as a template for any of the 55 medical specialties for which they code. The Monthly Cost of Surgical Coding Alternatives Item Employed Coder MARS Monthly gross pay (1 coder) $3,750 n/a Employer-paid taxes + benefits (35% of pay) $1,312 n/a Subtotal direct costs $5,062 n/a Tangible expenses $250 n/a Intangible expenses $250 n/a Subtotal $5, $0.00 Cost per Per OR operation $ $17.00* TOTAL MONTHLY CODING COST $5, (x no. of coders needed) $ *MARS fees decline as the volume increases by increments of $1.00 per 100 cases in a month to a floor of $14 per case (reached at 401 cases or more in a month.) If you need assistance with your build-or-buy analysis, call MARS at CBS Insights 7

8