Revenue Cycle Management: The Foundation of Physician Leadership HFMA Idaho December 3, 2009

Agenda Objectives of the course Definitions Warning Signs of RCM Problems Five Key Metrics Analysis and Case Study Best Practices Questions

Objectives Develop a new language around RCM processes Discuss and calculate new revolutionary RCM metrics Create discomfort in your current RCM process

Key Question #1? How do you manage a Physician? Be available at all times Provide a 2 inch thick monthly report Avoid controversial issues Change the compensation model at least annually You cannot manage a physician You must lead the physician relationship

Why RCM is the Foundation of a Physician Relationship? Increase pressure on fee schedules Massive expected change in the healthcare payment system Increase technology cost and complexity Increase practice operating cost Clinical quality, physician growth, referral management are additional heightened pressure to stay in business Unknown, non-traditional competition

Definitions Define RCM: The technologies, processes, policies and people involved from the creation of a healthcare transaction until the balance due on the transaction equals zero. What is a CPT denial? Every zero dollar payment per CPT code received on an EOB. What is a CPT reject? A CPT code that cannot be processed by the clearinghouse or payer for payment decision. What is CPT code? Every unique economic event within a healthcare transaction. Who is responsible for the RCM process? All parties involved in creating and resolving a healthcare transaction.

Life of a CPT Code

RCM Trouble Signs – Beware! “Coding is the issue” “The worst payer is…” “Duplicate denials” “Lets’ auto rebill” “We are understaffed” “We are working accounts” “Lets work highest to lowest dollar amounts first!” Let’s add another A/R queue to our 145 queues!” “We need to change practice management systems” “Project” “Lets drop these claims to paper and meet with our insurance rep” “TWIP”, Temp Help, OT “Lets rebill insurance from patient pay” “Just call the billing department” “Mildred will do it”

Key Question #2 What data does your billing department create? None, all data should be created at the time of service or by the physician/coder. Bill departments can only respond to data.

Traditional RCM Metrics The collection ratio brothers Net Gross A/R days outstanding Cash collections Overhead ratio Collections per case A/R by payer Annual Referral Report

Problems with Traditional RCM Metrics Historical view Not operational focused Subject to variation in fee schedules, payer mix, and procedure mix Not predictive Inability to compare across practice and specialties

New Revolutionary RCM Metrics The Five Key Metrics (Phase I) 0 - forever CPT/RVU analysis (Phase II) 6 months - forever Collections per CPT code Over the collections per Adjusted CPT (Medicaid, post op, workers’ comp) A/R days outstanding by CPT code Allowable per CPT code Primary Insurance payment as % of the Allowable CPT worked per A/R FTE Referring physician analysis (number of CPT codes, charge per CPT code and payment per CPT code)

The Five Key Metrics – New Paradigm Thomas Hierarchy of Needs™

Practice Analysis Practice APractice B Charges $750,000$2,500,000 Collections $500,000$1,000,000 CPT codes 10,00020,000 Visits 5,0006,000

Five Key Metric Calculations Metric Practice A Practice B Impact? DOS:DOCE (days) 210 Unreconciled Appointments (number) 1020 Reject Rate5%10% Denial Rate8%10% Pass Through Rate 5%12%

Case Study – Client A Large specialty group, multiple locations New practice management system purchased and implemented to solve problems High turnover in billing department staff Physician compensation has a productivity requirement High overtime and temporary help New physicians added to group

Green, Yellow, Red RCM Metrics GreenYellowRed Pass Through % < 5%5-8%> 8% 1st Pass Denial - Actionable < 10%10-15%> 15% Pre-Bill Reject Rate < 5%5-10%> 10% Unreconciled Visits < 1%1-2%> 2% DOS:DOCE (Days) < > 4.0 AR Days < > 60 AR% > 90 Days < 15%15% - 25%> 25%

Client A – The Five Key Metrics Practice A Metrics Pre-GoLiveDec-08Mar-09Jun-09Sep-09 Charges Posted $15,487,371$5,645,221$6,269,649$6,001,565$5,850,831 Payments Posted $2,928,120$2,104,823$2,475,231$2,293,061$2,004,332 Charge / CPT $175.18$166.65$177.98$202.49$ Payment / CPT $33.12$62.13$70.27$77.37$70.44 Payment / RVU ?$37.07$37.63$37.04$33.28 OTC Posting (dollars) $89,814$110,073$118,767$126,421 OTC Avg Per Visit $7.86$10.10$11.35 Pass Through (dollars) $493,018$221,268$223,695 Pass Through % 7.19%7.99%3.68%3.89% 1st Pass Denial - Actionable 7.20%10.00%9.93%8.68% Pre-Bill Reject Rate 7.70%8.86%7.35%9.75% Unreconciled Visits 308 visits4.26%7.01%0.76%0.39% DOS:DOCE (Days) AR Days AR% > 90 Days 3.35%18.40%29.00%36.85%32.00% A/R Outstanding (dollars) $7,730,818$9,550,847$11,015,012$10,535,705$9,587,076 Credit Balance (dollars) ($89,031)($263,747)($323,403)($336,979)($419,714) PIR Outstanding (line items) 10,288 9,226 5,348 1,290 PIR Outstanding (dollars) $2,511,036$2,327,344$1,233,459$297,264

Charges vs. Payments

Chg/CPT vs. Pmt/CPT

Pmt/CPT vs. Pmt/RVU

Unreconciled Appts vs. DOS_DOCE

Denial/Reject % vs Chg Count

Patient Information Request

OTC/Visit vs. Pass Through $

Best Practices Recognize the warning signs of RCM problems Convert dollar analysis to unit analysis Perform a CBO assessment to determine the starting point The Key Metrics Impact Implement The Five Key Metrics across the entire organization Move denials out to the practice staff by ranking physicians and offices on The Five Key Metrics Provide a metric driven, quarterly incentive plan on The Five Key Metrics for all practice staff Provide a consistent and transparent monthly reporting book focused upon The Five Key Metrics Focus CBO effort on current denials Analyze and move A/R greater than 90 days to a special group focused upon calling and getting a true denial rate Measure CBO productivity on first pass and second pass denials per FTE

Summary A physician relationship cannot be managed; it must be led. RCM is the foundation of the physician relationship. RCM must be accountable, consistent, transparent, predictive and operational in addition to financial. The future of healthcare payments will not allow increased cost of collection to continue despite increased complexity and technology requirements. Historical RCM metrics miss the mark today; new RCM metrics are available to account for the Life of the Claim based upon unitized analytics

Questions?

Revenue Cycle Management: The Foundation of Physician Leadership HFMA Idaho December 3, 2009