Uncovering Performance Improvement in the Treasure State Eric Rogers MEd.RT(R), Director Montana HFMA/MHIMA Joint Spring Conference

1 2 3 4 Industry Trends Performance Improvement Getting Started Final Thoughts

Declining Margins All hospitals experiencing financial pressure as a result of: Overall revenue growth rate declining (6.1% to 4.6% from 2016 to 2017 Declining Medicare reimbursement Meaningful Use UCC Bad Debt Seq PPS Coding Offset 340B Increased patient financial responsibility (higher health insurance deductibles and growing self-pay population) Shift from IP to OP site of service Increased ambulatory competition Expense growth (5.7% in 2017) Value-based care transformation

Medicare Margins in US Hospitals Source: MedPAC

Inpatient to Outpatient Shift

Financial Viability of Hospitals Rural Hospitals All Hospitals Between January 2010 and March 2019, 102 rural hospitals closed Hospital closures jumped 88 percent in 2018, to 15 hospitals In the first 11 weeks of 2019, there have been 5 closure announcements. Stunningly, 34 states had at least 5 rural hospitals at high risk of closure. In 31 states, at least half of the high risk hospitals were considered essential to their communities

10 States at high risk of rural hospital closures MN 21% RH:89 IA 18% RH:95 KS 29% RH:101 OK RH:58 AR 37% RH:49 MS 49% RH:64 MI 25% RH:71 KY 25% RH:65 AL 50% RH:42 GA 41% RH:63 10 States at high risk of rural hospital closures ExampleMN: 21.3% of its 89 rural hospitals are at risk of closing Source: Navigant Research

Financial Viability of Hospitals 2018

Rural Hospital Challenges Scale (Threshold FFS volumes to support operational efficiency) Hospital Service line Provider Access to capital and aging infrastructure Cost and complexity of EHR and practice management systems HVAC, CT, Lab, OR, etc. Payer mix and demographics Commercial and MS contracts and denials Physician “investment” (subsidy) Market competition, consolidation and network leakage Locums Recruitment and retention Staff Providers Leadership Transition to value-based care Most challenges can be placed in 4 “buckets”

Performance Improvement What are the signs and symptoms indicating performance improvement should be addressed? Two or more years of declining net patient revenue Recurring failure to achieve budgeted levels of performance Delayed investments in necessary capital infrastructure and clinical equipment Triggering events that impact bond ratings, covenants, or other financial commitments Loss of key provider relationships or management resources Lack of internal tools to monitor and adjust operations to match changing service demand Performance Improvement

Common Buckets of Performance Improvement Revenue Enhancement Cost Reduction Strategic Integration Clinical & Operational Efficiency Revenue Cycle Labor Modeling Provider Contracting Patient Throughput Charge Structure Supply Chain Service Portfolio Practice Management Payer Contracting Purchased Services Integration Targets Value-Based Care Reimbursement Information Technology

Revenue Enhancement Focus Areas Patient access Clinical documentation Coding and billing Charge capture Chargemaster improvement Collections Denial management Self-pay strategies IT utilization Payer contract management

Cost Savings Focus Areas Labor productivity Supply chain Purchased services Information technology Employee health and benefit plan

Strategic Integration Focus Areas Physician alignment Service portfolio Strategic services and integration Managed care contracting

Clinical and Operational Efficiency Focus Areas Utilization review Care management Physician practice management Value-Based Care ACO Bundled Payments MIPS

Getting Started

SCL Health Montana Region April , 2019 Michael Skehan, COO SCL Health Montana Region April , 2019 “How to Develop & Implement a Robust Cost Reduction Plan”

Thank You! Eric Rogers MEd RT(R) Director BKD Health Care Performance Advisory Services erogers@bkd.com