Blue Print for Success Session 1, Overview June, 2015

Leadership Mr. Steve Selbst, CEO Ms. Susan Charkin, President Manages Healthcents Operations including contract negotiations Successfully negotiated 4,000+ payer contracts Invented Revolution Softwaretm and designed the product Designed and delivered “Blue Print for Success Payer Contracting Class” 30 years as a Software and Business Executive in the Software Business at IBM BS Degree in Business Admin, Arizona State University, Summa Cum Laude, and invited to apply for a Fulbright Scholarship Ms. Susan Charkin, President The Nationwide Expert in Payer Contracting and Strategy, well known President of Healthcents since 1994 20+ years of Senior Contracting Positions for payers and providers (Healthnet, BCBS, Aetna, University of California, San Francisco, Maxicare and others) Trustee of Natividad Hospital- largest public hospital in central California, a teaching hospital affiliated with UCSF. Leading Author and National Speaker on Managed Care (Boston University, George Washington University, American Ambulance Association, Specialty Capitation, Beckers ASC EMS Insider and others) Expert in ACO’s, put together key roadmap for AUA, interviewed Dr. Elliott Fisher, Brookings Institute, Blue Cross of CA and an early IPA implementer Undergraduate Degree in Education (UVM) and MPH Degree (USF). Ms. Regina Vasquez, VP of Account Management Leads all of our day to day client and contract management Led the development of a major Skilled Nursing Facility Network for a Large Payer in California Leader in a local economic development commission and in two large non-profit organizations Very skilled negotiator, analyst and project manager, proven track record with references, has made 15%-25% ROI for all of our clients, large and small

Company Nationwide Corporation formed in 1994 Core Businesses, three major products / services: Services: Managed Care Contracting: Enabling medical providers and companies to obtain more profitable contracts with health insurance companies (HMO, PPO, ACO and Workers Compensation), General Healthcare Consulting Both analytics and complete soup to nuts end to end negotiations Healthcare consulting, webinars, regulations updates etc. Education: Managed Care Contracting Training and Education for providers and insurers (AUA, Alere, AAOE, ASCA and more…) Products and Software Solutions: RevolutionSoftware web service On Demand, Cloud and Intranet Based Business Model 50 Active clients, 1000’s served, Business Partnership for “Blue Print for Success” with the AUA, Alere Inc. and TUMG Reference accounts, many published at our web site: http://healthcents.com/customer-references/

Typical Practice Revenues 5% 40% 55%

Session 1 Objectives (Contracting Process Overview)   History of Managed Care Is contracting worth the effort, why? Critical Success Factors: Analysis (Quadrant Analysis, Value Based Contracting, Data Analytics) Winning Solutions for maximizing payer contracts Payer Contracting Process Understanding and matching provider’s and payer’s objectives Handling potential “Landmines” , including what to do when a payer will not negotiate Contract Language “Cover Your Contracts” How to sell your practice to payers and to employer groups Wrap up, Q and A and Quiz

Session 2 Objectives (Data Analytics) Perform a benchmarking analysis of payer fee schedules using RevolutionSoftware™ to set fee schedule proposals Identify and define patterns in reimbursement to use in an overall negotiation strategy Analyze and benchmark billed charges against an established minimum percentage of Medicare reimbursement to avoid being paid less than any contract rate and to maximize your cash based business Compare any two of your payer fee schedules on a “normalized code” and volume base to benchmark against each other. Learn and use a practical technique for comparing claims’ payments to contracted rates and assess whether or not you are being “under reimbursed” Objectively assess in network versus out of network reimbursement

Session 3 Objectives (SWOT and Contracts Negotiations process) Perform a SWOT analysis of your practice to identify strengths, weaknesses, opportunities and threats to your practice in your market with each payer Apply findings of SWOT and prepare persuasive payer proposal letter that highlights their strengths and opportunities to bring added value to the payer network Conduct contract negotiations How to handle various payer responses Learn how to handle payer objections and shut downs Handle escalations and other options

Session 4 Objectives (Language, ACO’s, Capitation, 10 Best Practices) Finish contracts’ negotiations process Language Review Monitor Claims and remember to renegotiate (Best Practice 10) ACOs and Capitation Bringing it all together with the 10 Best Practices, review of How to evaluate a managed care fee proposal Preparing a SWOT analysis to identify opportunities and threats to a practice’s reimbursements Conducting a managed care proposal reimbursement analysis used for benchmarking, pattern identification and business modeling Evaluate in-network vs. out-of-network options and maximize your billed charges to uniform, customary & reasonable (UCR) levels. Techniques for negotiating “win- win” agreements with managed care companies Simple technique for monitoring claims payments and comparing to your contracted rates to insure that you are not underpaid

Session 1, “Overview” Agenda:   History of Managed Care Is contracting worth the effort? Critical Success Factors: Analysis (Quadrant Analysis, Value Based Contracting, Data Analytics) Winning Solutions for maximizing payer contracts Payer Contracting Process Understanding and matching provider’s and payer’s objectives Handling potential “Landmines” , including what to do when a payer will not negotiate Contract Language “Cover Your Contracts” How to sell your practice to payers and to employer groups

Your one stop shop for all class materials For your convenience, we have established a class web page: www.healthcents.com/blueprint2015 that contains links to: Questions and Answers from class participants Pre-requisite viewing and reading materials Homework assignments and instructions Charts presented in class The class web page content will be updated at least one business day before each session to give you time to review materials and to do your homework and preparation work. Overall Objective – Lay a solid foundation for Managed Care Basics to enable your practice to make more revenue Welcome!

History of Managed Care & Third Party Payers 1970s – First serious look at healthcare reform: Nixon Administration introduced HMOs HMO act of 1973 Main informant was Dr. Paul Ellwood $375 million in federal funds Preempted state laws banning prepaid plans FFS (Fee for Service) had to be changed to achieve positive reform. 1980s – Current: Continued growth in managed care plans as way to control cost to employers/consumers. States using managed care models to control cost of Medicaid. Trend continues to be increased enrollment in managed care plans.

Is contracting worth the effort? Pros: Cons: Potential to increase volume and therefore increase overall revenue Administratively higher patient satisfaction Administratively potentially fewer claims appeal issues and less direct collection from patients Access to more lines of payer’s business and covered lives Lower reimbursements than out of network – no ability to balance bill Assumes low patient attrition, and low volume loss Maintenance fee schedule adjustments Potentially restrictions on covered services depending on patient’s plan Multi-year contracts with no opt out if unsatisfied with outcome

Before you negotiate, do your homework! Critical Success Factors AnalySis SolUtions ProCess ObjeCtives Avoid PotEntial Landmines ContractS’ Language (CYC) Sales Before you negotiate, do your homework!

Analysis Quadrant Analysis, how much do you ask for? Value Based Contracting Where does your practice revenue come from? FFS Rate by CPT x Encounters = Revenue Bundled Payment Episode Treatment Groups Self-performed ancillary services Capitation The 20/80 Rule Identify the top 20 percent of codes that drive 80 percent of your practice’s revenue. Use the same codes for each payer fee schedule for comparative purposes

Healthcents Quadrant Payer Analysis Pay High Pay Low Conservative 15%-25% Ultra-Conservative 5%-15% Ultra Aggressive 35%-45%+ Aggressive 25%-35% Open to Negotiate Not open to negotiate

Value Based Contracting Example Efficiency (2% if >70 points) Qualitative Active E-Prescriber: 25 pts Quantitative (1% if >70 points) Follows Best Practices Guidelines 50 pts In network referrals only >2.5: 75 pts 2.25 - 2.49: 60 pts 2.0 - 2.24: 45 pts Patient Satisfaction 3 stars: 25 pts 2 stars: 20 pts Generic Drug Utilization >90%: 75 pts 88 - 89%: 60 pts 86 - 87%: 45 pts Preferred Drug Utilization >90%: 25 pts. 88 - 89%: 20 pts 86 - 87%: 15 pts

What Is a Capitation-Based Payment? Capitation- a payment method for health care services. Capitation based payment is when the physician, hospital, or other health care provider is paid a contracted rate for each member assigned, referred to as "per-member-per-month" rate, regardless of the number or nature of services provided. The contractual rates are usually adjusted for age, gender, illness, and regional differences. More to come in sessions 3 and 4…

Analysis – Benchmarking Before & After

Analysis- Reimbursement Summary

When the payer will not negotiate

Analysis – Are your billed charges high enough? Source: RevolutionSW.com™

Analysis– Are you getting paid correctly? Source: RevolutionSW.com ™

Question? If we have two CPT codes, 27130 which is paid @80% of Medicare, including patient co-payment, by the payer, at $1600/service and code 99213 which is paid @90% of Medicare, including patient co-payment, by the payer, at $60/service and 27130 is performed 100 times a year and 99213 is performed 1000 times a year and I can get a 20% increase on one or the other, but not both codes, which code should I accept the increase on to increase my revenue the most? Code 99213 Code 27130

Saleable Solutions– Payers have problems you can solve Practice size and revenue, recent merger Consult legal counsel about ramifications Financial- Do you have enough $$/patients to justify a contract? In office vs. facility based procedures Geographic- Are you the only game in town? How close is the nearest Physician Practice that practice same specialties? Demographics- Does your practice include large employer groups in the area? Unique Quality/Services- What are you doing that no one else is doing?

Saleable Solutions – Payers have problems (Continued) Logistics- Where do you hold privileges? Are you currently out of network and turning away patients? Economics- What cost efficiencies does your group offer? Electronic Health Records Generic Drugs E-prescribing In-network referrals to ancillary services Collaboration with PCP groups ASC utilization Quality- patient satisfaction survey, PQRI participation

Contracts Negotiations Process Data Analysis Proposal Letter Make Initial Contact with Payer Analyze Counter Negotiate until agreement is reached Escalate to Sr. Level Manager Consider Out of Network Option Monitor Claims Re-Negotiate Phase 1: Prepare Phase 2: Negotiate Phase 2: Continue to Negotiate Phase 3: Monitor / Re-negotiate Negotiations Completed

Objectives Performance based Contracting Office Based Procedures Payer Maximize revenue and profit Minimize fees paid Market competitive Cost Efficiency Quality Increased capacity for new lines of business and revenue streams Provider Optimize reimbursement Enhanced reimbursement for high-cost, specialized services Increase capacity for new lines of business and revenue streams Performance based Contracting Office Based Procedures Reduction of length of hospital stay Preventative care Leverage market position (Provider)

Avoid Potential Landmines There are things that payers would rather you do not know or discover: Statewide fee schedules – several payers are moving to statewide or locally regional fee schedules that pay uniform fees to all providers. Consider the following to combat that policy: PPO Only Office Based Surgical Procedures Carve outs Performance Based Contracts In-house, ancillary services Make sure you can get reimbursed for all of the services you provide. Some payers are sole sourcing lab/path to large chain vendors. Even so, there are usually some services that will still be reimbursed in the office setting.

Trends and Directions Medicare moving to efficiency based quality of care metrics, less fee for service, over time See http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2014-Press-releases-items/2014-12-01.html Expect payers to follow Number of ACOs and population of beneficiaries is increasing About 15%-17% of US population is participating in ACO IPAs and Hospital Systems moving in this direction Efficiency metrics key to reimbursement on direct PPO and HMO agreements, often 5% today FFS and Efficiency metrics, together determine reimbursements Higher deductibles leads to the need for better patient collections Telemedicine is here to stay and gaining traction with payers Code 99490: http://elizabethwoodcock.com/newsletter/2015/02/04/chronic-care-management-its-time-to-bill/ M and A acceleration “E-everything”, technology dependent

Trends and Directions- Metrics moving to Efficiency Based Limiting/reducing referrals to other providers who are non-par (this includes facilities and ancillary providers, e.g., labs and radiology services) Increasing percentage of prescriptions that are generics vs. brand names, when a generic is available Data baseline is payer’s data Some contracts have a “reconciliation period” after which the provider has an opportunity to compare their utilization data with the payer’s and dispute negative measurement findings if the two data sets are not in agreement.

Trends and Directions- Value Based Structure Shifting of higher percentages of reimbursement tied to incentives and value based vs. FFS Credentialing: In state presence often required by payer(s) In state presence means a full service, licensed, Medicare certified, accredited location in the state where the provider wants to get an agreement. This has become an issue for smaller DMEs and Credentialing not leading to a contract 100% of the time. Why? To be recognized in payer systems when non-par claims go through.   Still, "bundled payment" contracts are rare.  One of our clients was working on an episodic reimbursement scenario with a payer that included the practice and the ASC limited to total joint replacements and included the 30 days before and 90 days after the joint replacement surgery This may not have closed since the risk balance could not be agreed to  Other changes- number of cores Medicare will pay for on a biopsy Used to be 12, now it's less

Trends and Directions- Value Based Structure Depending on baseline there may or may not be a first year increase. Increases are usually based on making an improvement of an agreed amount in each category. No penalty, that we have seen on commercial payer agreements, if benchmarks are not met.  The provider does not get their increase for that year. In most cases the total increase (2.5% - 3.0%) is split among categories, for example: Meeting targets on non-par referrals Meeting targets on generic drug prescription rates This works for most providers because it is not an “all or nothing” deal.

Potential Landmines Benchmark your payer agreements against each other. Identify service categories where you can optimize your fee schedule through negotiation of specific service groups (E&M, Surgical Urinary, etc.) Don’t take the first “no” you hear. Payer organizations are usually several layers deep. The front line negotiator may not have ultimate decision making authority and it is worth requesting a meeting with senior management if you are not getting anywhere with the initial representative.

When the payer will not negotiate The decision to go out of network: How much does that payer account for in the practice’s total book of business? Will the payer write checks to the patient rather than the practice? How many of your patients will you lose if you have to collect directly from the patient rather than billing the payer? How much additional administrative cost will you incur on pre-authorizations and collections? How much of an increase would you need to make it worth your while to stay?

Contracts’ Language CYC (Cover Your Contracts) We recommend having all agreements reviewed by legal counsel. Hereare a few terms to watch for: Term, Termination w/o Cause & Termination for Breach General / Fee schedule Amendment - you want minimal notification requirements for termination that are untethered to the anniversary date of your agreement, or annual. Timely filing– make sure you have enough time to process secondary insurance claims. Timely payment– make sure that you receive payment within 30 days of receipt of a clean claim. “Lesser of Billed Charges” Language. Make sure your chargemaster is set high enough to avoid this. Notification requirements – make sure the payer has to provide sufficient notification for changes, administrative amendments to the contract, including fee schedule maintenance changes. Retrospective review Language: make sure that there is a reasonable time, <90 days, if possible, for retrospective claims reviews for the payer to collect from you.

“CYC” continued… Silent PPO’s No “favored nation” language (i.e., you get a decrease if your best contract is lower than this payer’s overall contracted rate Check rates across product lines and map the product lines to your patients Multiple PPOs, HMO, Medicare Advantage etc. Carved out codes Calibration to current year Medicare %, watch out! Excluded services Multiple procedures and bundling

Sales Accountable Care: If you have significantly robust IT capacity and/or are active in a virtual network of coordinated care providers, you may want to float the idea of participation Consult Legal Counsel before signing on

Sales Employer Groups (Who are a part of a payer’s plan): Make direct contact with the HR department to see if you can reach out to employees. Be creative, e.g., offer to contribute health news to the company newsletter/bulletin. Offer to attend / help with health fairs or workplace wellness programs / policies Employer Groups (Who are self insured, “ASOs”) Reach out to these large groups for participation

Before you negotiate, do your homework! Critical Success Factors AnalySis SolUtions ProCess ObjeCtives Avoid PotEntial Landmines ContractS’ Language (CYC) Sales Before you negotiate, do your homework!

Summary We covered how to determine which payers to negotiate with, if your practice will benefit from engaging in negotiation with the payer and tips on how to navigate the process to successfully complete a negotiation. Thank you for inviting us to be your tour guide and we wish you Succe$$.

Homework View RevolutionSoftware™ Demonstration. AND enroll to get your no charge four month license. For instructions on how to register for RevolutionSoftware and to view the demo, please visit RevolutionCentral at: www.healthcents.com/revcentral Use Password: class2015

If you have questions… RevolutionSoftware Registration and Questions™ Regina Vasquez, Sr. VP of Accounts – Healthcents, Inc. Tel: (719) 243-3845 rvasquez@healthcents.com Class Help: support@healthcents.com or 1-800-497-4970 Healthcents Inc. Headquarters: Susan Charkin, President, Steve Selbst, CEO, Healthcents, Inc. Tel: (800) 497-4970 charkin@healthcents.com or selbst@healthcents.com www.healthcents.com