coding department of Community Physician’s Clinic is interested in purchasing a

Question

coding department of Community Physician’s Clinic is interested in purchasing a software program that will edit claims before they are sent to the Billing Office. The license fee for the software is $60,000 per year. The software is expected to reduce the number of errors on claims and thus reduce the number of claims (denials) returned to the clinic for recoding. Currently, the department codes 47,600 provider visits per month and 500 claims are returned each month for recoding. The facility pays two FTEs in the Billing Office $14.00 per hour each plus 25 percent benefits inv to refile the returned claims. The software company promises that its software will reduce the number of returned claims by 90 percent. What is the rate of claims that are currently being returned for recoding each month? Round to two decimal places.

a) What is the rate of claims that are currently being returned for recoding each month?

b) How many claims are estimated to be returned after the installation of the software

c)If the clinic eliminate the two FTEs that handle the returned claims what savings would it realized after installation

d) what is the payback period

E) What is the return on investment

Explanation / Answer

Here Given values

Software licence cost = $60,000 ; no.of visits per month = 47,600 ; no.of claims returned each month = 500

FTE payments $14.00 per hour , plus 25% benefits inv to refile the returned claims.

Software company assures no.of returned claims by 90 percent

a) The rate of claims that are currently being returned for recoding each month = 500/47600 =0.1

b) The number of claims are estimated to be returned after th installaion of the software per month is = 500*0.1 = 50

c) The two FTEs codes 47600 visits in a month ( assume 5 day week and 8 hrs per day, the number of working days in a month is 22)

Therefore one hour per one FTE codes = 47600 / ( 2*8*22) =135.23

The savings per month is = 2*14*8* 22 =$4928 ( assuming 8 hour day, five day week, therefore 20 working days in a month)

Plus 25% of benefits inv to refile the returned claims = $4928+ 0.25( 450/135.23 )*14 =4939.65

d) Pay back period = 60000/4939.65=12.15 months

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