Developing a Business Plan to Increase Third Party Reimbursement June 28, 2003 Presented by: Michael R. Taylor Precision Resources, Inc. A business plan is a practical tool that’s used to estimate investments and potential returns associated with any new initiative.

Business Plan Purpose Estimate potential revenue from third party billing and collections Identify operational changes necessary to increase revenue from third party payers Document steps and resources needed to implement billing and collections functions We wanted to give you a tool to: Estimate potential from third party billing and collections Identify operational changes necessary to increase revenue from third party payers Document steps and resources needed to implement billing and collections functions So, we developed this business plan format which includes a spreadsheet financial model. The financial model is prepared in Microsoft Excel, can be downloaded from the program website (www.3rdpartyreimbursement.com) and should be easily adaptable to the specific operating characteristics of your program. We also invented a hypothetical health care program to demonstrate how the model functions. We’ll call it the “Happy Center for Primary Care”.

Program Profile: First Step to Plan Completion Developing a program profile is the first step to complete your business plan The program profile documents pertinent program operating characteristics that the financial model uses to calculate potential third party reimbursement

Sample Program Profile: Happy Center for Primary Care Grantee type: School-Based Health Center Services offered: Primary care EPSDT Behavioral health services STD/HIV screening Family planning Annual patient volume = 1,000 To illustrate, we’ve developed a Program Profile for the Happy Center for Primary Care. “Review profile elements with participants”.

Sample Program Profile: Happy Center for Primary Care Annual billable visits = 2,500 Patient income distribution: <100% FPL = 40% 100 – 125% FPL = 30% 126 – 150% FPL = 10% 151 – 175% FPL = 10% 176 – 200% FPL = 10% Patient employment rate = 60%

Sample Program Profile: Happy Center for Primary Care Patient age distribution: 0 - 4 years old = 5% 5 – 10 years old = 38% 11 – 13 years old = 26% 14 - 18 years old = 26% >18 years old = 5% Patient gender distribution: Male = 40% Female = 60%

Sample Program Profile: Happy Center for Primary Care Patient distribution by payer: Medicaid FFS = 30% or 300 patients Medicaid managed care = 15% or 150 patients S-CHIP = 20% or 200 patients Commercial FFS = 10% or 100 patients Commercial managed care = 10% or 100 patients Self pay = 15% or 150 patients

Sample Program Profile: Happy Center for Primary Care Visit distribution by payer: Medicaid FFS = 30% or 750 visits Medicaid Managed Care = 15% or 375 visits S-CHIP = 30% or 750 visits Commercial FFS = 5% or 125 visits Commercial Managed Care = 5% or 125 visits Self pay = 15% or 375 visits

Sample Program Profile: Happy Center for Primary Care Staffing levels (FTEs): Billable providers Other clinical staff Payer contact information & program service eligibility Medicaid Medicaid Managed Care: Majestic Care S-CHIP: GLH Commercial: Green Cross

Sample Program Profile: Happy Center for Primary Care Third party payment rates by CPT code: CPT CODE MEDICAID RATES PRIVATE RATES 99203 $63.47 $83.04 99212 $21.20 $35.40 99213 $31.09 $49.72 99215 $82.82 $114.58 Managed Care (pmpm) $12.00

Sample Program Profile: Happy Center for Primary Care Missed Revenue: Clinical staff who are not regarded as billable providers by health plans Additional costs: Itemization of costs to implement billing and collections functions

Now It’s Your Turn Develop a program profile for your program Accuracy is not important - guess if you need to The point is to familiarize you with the process and the tool so that you can use it later A blank profile template is included in your binders Take 20 minutes to complete the template Now that you understand the information needed to complete a program profile, we want you to complete one for your program. It doesn’t have to be accurate since we know you don’t have the information you need on hand so guess if you need to. The point here is for you to get comfortable with the process and the tool so that you can use it when you get home. We’ll give you 15 minutes or so to complete the blank profile template that’s included in the back pocket of your binder. Then, we’ll proceed.

Populate Financial Model: Second Step to Plan Completion Use the information in your completed program profile to populate the designated fields in the financial model The second step to completing the plan is to populate the financial model with information from the program profile. The fields or cells in the financial model where information from the program profile should be input are highlighted. We’ve done this so that you know which fields require input and which fields are calculated based on that input.

Review Populated Model: Third Step to Plan Completion Populated financial model for Happy Center for Primary Care Turn to Tab 43 in your Participant’s Guide. This is a print out of the financial model which has a total of 16 pages. Let’s review each page so that you gain an understanding of the content of the model, the information flow and why the program profile is critical to its completion.

Business Plan: Page 1 Page 1 of the model contains all input fields which again are highlighted. As with all input fields in the model, source information is the completed program profile, in this case for the Happy Center for Primary Care. You can see that we’ve already input required information regarding the Center’s total annual patients, number of annual billable visits, patient income distribution, employment, percentages for patients and patient visits by payer, program services and staffing levels.

Business Plan: Page 2 Page 2 contains input fields that call for specific information about local third-party payers (e.g., plan name and contact information, plan type, whether your program in an enrolled provider, whether your program is an eligible provider, the types of providers who are billable according to plan guidelines and the number of program patients who are enrolled with each plan).

Business Plan: Page 3-1 Page 3 contains input fields related to payment rates for each payer by CPT code. This page also contains input fields for FFS visits by CPT code for each third-party payer. The codes listed here are the most prevalent types of visits for Happy Center patients. The bottom of this page has input fields for per member per month capitation payments for each third-party payer.

Business Plan: Page 3-2 Page 3 contains input fields related to payment rates for each payer by CPT code. This page also contains input fields for FFS visits by CPT code for each third-party payer. The codes listed here are the most prevalent types of visits for Happy Center patients. The bottom of this page has input fields for per member per month capitation payments for each third-party payer.

Business Plan: Page 3-3 Page 3 contains input fields related to payment rates for each payer by CPT code. This page also contains input fields for FFS visits by CPT code for each third-party payer. The codes listed here are the most prevalent types of visits for Happy Center patients. The bottom of this page has input fields for per member per month capitation payments for each third-party payer.

Business Plan: Page 4 Page 4 calculates missed revenue. Missed revenue exists here because third-party payers don’t recognize all Happy Center providers as billable providers so there are input fields for provider titles and the percentage of billable visits that are seen by these non-billable providers for each third party payer. This is where you might want to rethink current staffing patterns. Percent of Total Visits = percentage of total organizational visits (from Page 1) seen by the CSW (in this case, it is 10% of 22,500 or 2,250) # of Total Visits = Percent of Total Visits x # of Total Organizational Visits from Page 1 Percent This Payer = percentage of total visits for this payer from Page 1 Number of Non-billable Visits = Percent This Payer x # of Total Visits Payment/Visit = Estimated payment per visit for this provider under this payer Estimated Missed Revenue = Payment Per Visit x # of Non-billable Visits

Business Plan: Page 5 Page 5 provides fields to estimate additional costs associated with implementing billing and collections functions. In the case of the Happy Center, those costs include: Staffing - salaries to hire a certified coding specialist and a billing clerk (i.e., $42,000); MIS - The cost to acquire hardware and coding and practice management software applications (i.e., $36,000); and Administrative - expenses associated with the development of procedures manuals and training for staff.

Business Plan: Page 6 Page 6 is a summary page that has no input fields. It tallies gross revenue for third-party billing and collections and then deducts missed revenue, in this case for visits seen by non-billable providers, and for the cost associated with implementing billing and collections functions.

Business Plan: Page 7 The final step to plan completion requires you to define implementation tasks in as much detail as possible including the assignment of tasks and with completion timeframes. Remember that ongoing communication and follow-up are key to timely and satisfactory implementation. Pages 7 and 8 provide ample space to develop a detailed implementations plan. The format also anticipates a variety of implementation tasks including contacting plans to enroll program providers, MIS reconfigurations, administrative planning functions, information about covered services, payment rates and enrollees of health plans not previously anticipated.

Business Plan: Page 8 The format encourages assigning implementation tasks to specified individuals with set completion targets.