Everybody knows an agency's life span comes down to its budget. Simply put, if revenues don't balance with expenditures, the agency won't make it. What may be less easily understood is that balancing a budget is not just a simple accounting issue - it has less to do with numbers than with plans and priorities.

BUDGETING: Your One-Year Plan The first step in the budgeting process "is to identify the things you want to accomplish," says Erik Gaull, PhD, adjunct assistant professor of Strategic Planning in the Department of EMS Medicine at The George Washington University in Washington, DC. The former director of Operational Improvement in the DC mayor's office, Gaull had the thankless task of cutting $52 million from that city's budget. Managers who could identify their agency's most important priorities fared much better when facing the budget-cutting knife, he says. "Figure out what's really important to your agency and lay it out, then you can begin to come up with a budget that addresses the specific goals and objectives you're trying to achieve."

J.R. Henry, CEO of J.R. Henry Consulting Inc. and a paramedic for over 25 years - 20 of those as executive director of Ross/West View Emergency Medical Services Authority in Pittsburgh, PA - adds that even a small service that does not have a long-term strategy can use the budgeting process to construct a one-year plan, identifying goals and objectives you'll need to know whether you're going to purchase new equipment or maintain what you have.

"Asking questions like how many staff members you need; if you have the right station locations, the right equipment; what condition the vehicles are in," he says, "makes budget time more than just a chore or a ritual you have to go through. It's an opportunity to evaluate your entire system - what's working and what isn't - and to do the kind of short-term planning that is paramount to the success of any organization."

Goals and objectives are best identified through what Henry calls "a bottom-up approach" where you have open dialogue, rather than sending an edict down from on high. He suggests setting up an employee budget committee to solicit a "wish list" from field staff, who will submit ideas on everything from patient-care equipment to cardiac monitors and capnography.

"Of course, you have to tell folks upfront that they can't be unrealistic in their expectations, but it certainly pays off in the long run to involve all facets of the organization in the budget-planning process," Henry says. "Employees can come up with great ideas on how to save money, how to improve the process and so on."

Gaull says to be sure to include your constituents in this process as well. "Ask the public what their priorities are." Cutting the budget, that is, streamlining expenditures, can be a simple matter of finding out what services are important enough to pay for and which they can go without or at least wait another year for. Find which programs are the "sacred cows," he says. And which aren't. "The answers may surprise you."

REVENUE

When we think about making a budget, too often we think only about expenditures. But how you make money is an important aspect of your goals and objectives. Maggie Adams, a graduate of the Wharton School of Business and managing consultant at PWW Consulting, Inc., the sister organization of the EMS law firm Page, Wolfberg & Wirth, plainly says, "When you budget, you need to focus as much on revenue as expenses, to make sure that you project what you really anticipate will come in."

The obvious place to look for revenue is from billing. Adams notes that EMS agencies are usually effective in getting a bill out the door; however, collecting on the debt has not been the industry's strong suit. "That's partially because of their long history of service to the community," she says. "But, they need to remember, without money, they can't operate and continue to be there for their communities."

You should be sending frequent routine statements to patients - at 16 days, 30 days, 45 and 60, rather than only once a month, she says. Once the patient calls, you can make payment arrangements.

However, the first step in billing comes long before the bill is sent out. A "good bill is a compliant bill," she says. And that starts with how well your patient care report can be translated into billing codes.

Coding and Compliance

The accuracy and detail in a standard patient care report can determine whether your patient's insurance gets billed properly and whether you are ultimately paid. This document is the first line of communication between the initial call and the payer. Henry explains: "When the field crews submit their PCRs - if they're documented properly - the billing staff or billing company interprets that data, codes it and then submits it to Medicare, Medicaid or other insurance companies."

"This is critical to patient care, too: It helps the people involved in the circle of patient care," says Adams. "But it also impacts how the billing's done. The billing environment is highly regulated and the better the documentation on the trip report, the better document the billing department will have. They have to ensure that what's documented meets the standards of medical necessity. You need a compliant document in order to create a compliant bill."

Ambulance companies can find keeping up with these regulations daunting. Ongoing training and even a periodic coding and compliance audit will help budget managers create compliant documentation forms to prevent underbilling. Henry says he recently found $200,000 worth of mileage that hadn't been billed. "I have conducted coding and compliance audits for hundreds of ambulance companies across the country, and almost every time I find unbilled revenue," he says.

Accounts Receivable: Collections and Collection Agencies

You must follow up on unpaid claims as part of your budget management routine. Yet, Adams says, it's often overlooked. She recommends that services without staff dedicated to collections set aside time late each week - after the hectic early days - to follow up on all unpaid bills.

In addition to late payments from patients, there are often problems with Medicare, Medicaid and commercial payers. Claims might need to be resubmitted for any number of reasons: They may have been denied for insufficient information or just gotten lost, Adams says. Every insurer works differently and each state has its own "prompt pay provision," which says how quickly insurers must pay. Generally speaking, third-party payer claims can be followed up on after 30-60 days.

"Don't wait for them to get back to you. The older a claim is, the harder it is to straighten out and get paid," says Adams.

Everyone should be followed up on eventually, but to get the most use of your time, pursue those insurers that have the bulk of your claims first. Whether it's Medicare, Blue Cross or Kaiser-Permanente, go after the insurers that have the most claims with your service, she says.

How smoothly this goes depends on how much time you've put into developing a relationship with the payer company, how well you understand what they allow, and how good your original documentation is. Often the claim just needs more information - here's where your trip documentation comes in.

For those patients who are ignoring your efforts, there are a few different routes to collection, including contracting with a collections agency, which usually works on a contingency basis, with the collector getting a percentage or fee per account. Adams offers assurances that strict regulations hold collection agencies to professional standards, but recommends using companies with experience in medical debt - they get a better return and know how to handle patients. "They remember that people are patients - nobody asks to get sick or hurt," she says.

There is a growing trend toward another kind of collector, as well, says Henry. This vendor will buy your accounts receivable outright, though at a discount. In this scenario, you might only recoup $1,000 on $100,000 of outstanding debt, but that might be better than zero.

"There are pros and cons to it," he says, "but if this is money you've kissed good-bye, and you're still looking for that elusive 5% in cuts or revenues, this is one place to get it. " A third alternative is to take your unpaid debt to small claims court, depending on the size of the claim.

Marketing and Public Relations

Competing dollars and rising costs have made marketing and PR essential strategies to increasing revenues for public and private services alike. "Ambulance companies need to take a hard look at their marketing efforts," says Henry. "Most need to do a better job selling EMS to the public."

Starting with the visibility issue, "What We Do for You," and expanding to promote the cost of readiness, marketing has to be in your mind when you communicate with stakeholders. Solicit their priorities while promoting your services, and strengthen resources on both sides.

Gaull uses the example of DC Mayor Tony Williams's Citizens' Summits, which occur annually. These are town hall forums where discussions are held and the issues rated electronically. It's a way to promote the importance of EMS, explain the price of emergency healthcare and get a clear commitment from the community all at once. You might find out that citizens are okay with a 10-minute response time, he suggests, once they understand how much a five-minute response costs. "Citizens make trade-offs all the time about spending money. Talk with them about what services they want and what taxes they'll pay to get them," he says.

Subscription/Membership Services

Finally, there are programs where individuals can pre-pay for potential emergency or non-emergency medical transport. These so-called "assurance programs" are not allowed in every state, depending on state insurance regulations. "But where permitted, subscription and membership programs are an untapped resource of revenue, providing supplemental income, says H"enry.

TOOLS & PITFALLS

As far as managing your operations and your personnel in a financially smart way, ambulance billing software is the simple solution - if you use the reporting features. In addition to accounting software, which most companies use for their general bookkeeping, ambulance billing software tracks all aspects of your operation involved in billing. It will generate reports on your crews, your vehicles, the types of calls you're running, what your volumes are, what your rates of return are, etc., helping you manage your operations from a financial perspective. If you farm your billing out, be sure these reports are provided to you. They will help you make informed decisions about your goals and objectives.

Thanks to J.R. Henry and Maggie Adams for help with this article. For more, please visit emsconsult.org or e-mail madams@pwwconsult.com.