Shouldn’t Supply Chain and Revenue Cycle Get Together? Presenters: Rex Fieck, Supply Chain Strategies, Nick Gaich & Associates Douglas Goldfarb, Regional VP, DLG Consulting This is the Title slide Please do not alter the Track Name

FACULTY DISCLOSURE The faculty reported the following financial relationships or relationships to products or devices they or their spouse/life partner have with commercial interests related to the content of this CE activity: Rex Fieck -- None Douglas Goldfarb -- None This slide is for internal use. Please do not alter.

LEARNING OBJECTIVES Identify the administrative challenges in integrating supply chain and revenue cycle operations. List the technology changes needed to accomplish this merging of functions. Specify how merging supply chain management and revenue cycle management advances cost-to-charge transparency and increases accuracy in terms of managing reimbursement costs. This slide is for internal use. Please do not alter.

The principle aim of getting the supply chain and the revenue cycle together To align and synchronize the supply chain item master and revenue Cycle charge description master in order to enhance operational effectiveness and maximize revenue capture.

The principle aim supports margin performance Optimization Synchronization Alignment Supply Chain/Revenue Cycle Operating Expense Labor Supply Overhead Operating Revenue Contracting Charge Capture Collections Acquisition Reimbursement

Effects of the supply chain and revenue management not in synch Guarding against “single minded” silo based strategies Expense Reductions Revenue MGT Impact High Return Opportunity Uncoordinated efforts lend itself to unknown down stream consequences……High potential for the organization to be operating at cross purposes.. Optimizing organizational performance in both Economic Sustainability and Service Quality is severely jeopardized Jeopardizes the organizations ability to fully leverage the inherent strengths, capabilities and resources

Qualifying the opportunity to work as a team Advantages Exposures Optimize reimbursement Decreased and inaccurate reimbursements Mitigate compliance risk by creating greater transparency and increased flow of information Hindered contract negotiations and decreased contract compliance Create competitive market advantages Decreased transparency Improve operating margins Difficulties in monitoring supply revenue and usage Successful fact-based negotiations with both suppliers and payors Inability to cross-check utilization of supplies Accurate and defensible representations of supplies being accurately represented in the CDM Inability to properly audit and adjust systems to capture cost-to-charge data visibility Inaccurate billing Excessive use of labor * “Experience shows the annual value of adopting a margin management approach could help providers to reduce supply costs up to 10 percent, enhance net revenues by 2 percent, and generate an equivalent of a 1 percent to 5 percent improvement in their operating margins.” Source: Health Sector Supply Chain Research Consortium at Arizona State University (HSRC-ASU)

7 Reasons to Partner Supply Chain & Revenue Cycle Increased and accurate reimbursements Strengthened contract negotiations and enhanced contract compliance Improved transparency Streamlined cross-check utilization of supplies and ease of monitoring supply revenue Capturing cost-to-charge data visibility will be smoother Billing will be more accurate Labor will be wisely utilized and not wasted Source: Health Sector Supply Chain Research Consortium at Arizona State University (HSRC-ASU)

Strategies for Linking Revenue Cycle and Supply Chain Linking Information Systems For provider organizations to successfully manage margins, it is necessary for information to flow seamlessly and accurately across the various business and clinical functions so that all required staffs have access to complete information. To facilitate the necessary flow of clinical and financial information, provider organizations should link and continuously validate their item description master and charge master to ensure accurate charge capture, inclusive billing, and uniform exchange of information Strategic Contracting Improved supply accountability also will facilitate more strategic managed care contracting. With a greater understanding of supply costs and receivables, hospitals are able to negotiate better managed care contract terms and ensure that their most expensive chargeable supplies are fully covered by payers. Source: HFMA Article, Derek Patterson- Health Affairs : * US Hospitals Are Still Using Charge master Markups To Maximize Revenues Ge Bai1,* and Gerard F. Anderson2

Strategies for Linking Revenue Cycle and Supply Chain Tactical Pricing and Charge Capture Implement a system of upkeep designed to ensure the linkage is supported by the most current and accurate cost-data available, identifying supplies used in a targeted procedure and tracking them from the point of purchase through patient billing will paint a clear picture of what is working in terms of cost recoupment and what is not Securing the Bottom Line Linking supply chain systems with revenue cycle management and focusing greater attention on margin management, providers stand to substantially improve their overall revenue integrity and prevent significant revenue leakage. * “one-unit increase in the charge-to-cost ratio (charge master price divided by Medicare-allowable cost) was associated with $64 higher patient care revenue per adjusted discharge”. Source: HFMA Article, Derek Patterson- Health Affairs : * US Hospitals Are Still Using Charge master Markups To Maximize Revenues Ge Bai1,* and Gerard F. Anderson2

Common themes that delay success Not implementing a Best Practice approach to charge capture Monitor and Maintain “Best Practice “Methodologies Failure to define and manage an organization-wide policy Design a defensible organizational wide strategy Not assigning roles and responsibilities Define, assign and hold accountable Lack of adherence to new charge policies and procedures Establish accountable enforcement strategies Item Master-Charge Master duplication Ongoing review and cleanse monitoring process Disparate departmental pricing amongst like charges Item-CM synchronization Consistency in applying item and services cost structures

Challenges Maintaining accuracy and completeness of chargeable items Charge descriptions uniformity Adherence to Policy and Procedures Synchronization between master data bases Resource constraints Technology limitation Interdepartmental communication Standardization of processes (system wide) Data master maintenance

Consequences & Exposures Financial Exposure Siloed Response Lack of Governance & Policy Misrepresentation of Billing Variation in Practice/Compliance

Real Actions for Results Shouldn’t Supply Chain and Revenue Cycle Get Together?

Real Actions for Results Shouldn’t Supply Chain and Revenue Cycle Get Together?

Real Actions for Results Shouldn’t Supply Chain and Revenue Cycle Get Together?

Results Shouldn’t Supply Chain and Revenue Cycle Get Together? Yes

“Desired State” Accuracy of items charged Acquisition Cost correct per contract in Item Master CDM price is accurate based on utilization of matrix Accuracy of items charged

Transforming the Supply Chain and Revenue Cycle Process Review, Refine, Enforce Margin Management Policy and Procedures (strengthen alignment and synchronization) Policy for margin management should include the strategic sourcing processes and include all elements that involve revenue capture Must be a single procedure that creates standard work for processes Requires active daily management to ensure compliance Annual review of policy and update as required to ensure relevance

Transforming the Supply Chain and Revenue Cycle Process Establish clear roles and responsibilities that ensure revenue integrity with respect to: Strategic Contracting Data base accuracy Charge Master methodology adherence Charge capture optimization

Transforming the Supply Chain and Revenue Cycle Process Management and Staff Ongoing education (Connecting people to process) Standard work Active daily management principles Annual review Policy Process Data base Responsibilities Audits

Transforming the Supply Chain and Revenue Cycle Process Establish self-audit process that includes operational performance metrics with clearly defined goals (precision monitoring): Daily huddles Quarterly audit review, Administrative & Clinical Determine defects and establish any course corrections with accountability as required Item Master/CDM Integration Strategic Contracting Strategic Pricing and Charge Capture Use of Technology Relevant metrics utilized

“Desired State” Accuracy of items charged Acquisition Price correct per contract in Item Master CDM price is accurate based on utilization of matrix Accuracy of items charged

Q&A Slide