Transcript Revenue Cycle Improvement Assessment and Impact of ACA

Revenue Cycle Improvement and
Impact of ACA
February 17-18th, 2014 Winter Education Event
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
Key Revenue Cycle Management Impact Areas
Self Pay
Patient residual
post insurance –
POS collections
Uninsured
Charity Care –
Screening for
Solutions
Revenue
Capture
Payor
Yield
Cost to
Collect
Clean claims
Appropriate
staffing
Underpayments
Outsourcing v.
insourcing
Denial resolution
Vendor rate
comparisons
Charge Audit
Coding and
Documentation
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
1
Key Components of Revenue Cycle Management –
“Where Does it Happen?”
Self Pay
Uninsured
Revenue
Capture
“Front End”
“Middle”
Payor
Yield
Cost to
Collect
“Back-End”
Traditionally: Revenue cycle has been thought of in modular and
geographic silos
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
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Revenue Cycle: Comprehensive – End to End Management
Self Pay
Uninsured
“Front End”
Revenue
Capture
“Middle”
Payor
Yield
Cost to
Collect
“Back-End”
Comprehensive , focused on pre-service and time of service
 All stakeholders are identified and linked regardless of reporting
relationships and geographic location
 Consistent processes, tools, targets and tracking metrics
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
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Drilling down:
Self Pay
Uninsured
Revenue
Capture
 HFMA Pennsylvania Chapter
Payor
Yield
Cost to
Collect
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
4
Opportunity: Couple A/R Performance with Denial
Write-offs
Metric
Example Health
Example
System
Health System Historical Avg
Benchmark
Denials % of NR
1.35%
1.25%
< .75%
Net AR Days
47
51
45 - 55
Gross Days DNFB
8
6
<8
% A/R > 180 DFD
11%
12%
<12%
% A/R > 365 DFD
4%
4%
< 5%
 HFMA Pennsylvania Chapter
Payor
Calculate
opportunity
and link to
financial
statements
Critical
target and
progress
metrics
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
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Payor
Denial Opportunity: Focus on Preventable Losses
$6,750
(1.35%
of NR)
$1,350
$3M
$3,750
(.75% of
NR)
$1,013
$1,688
$750
$563
$938
$2,700
$1,500
Example Health System
Authorization
Benchmark
Timely Filing
Medical Necessity
Other
* Typical mid-size health system
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
6
Polling Question: What Best Describes Your Health System’s
Current Denial Tracking Situation?
Payor
Hidden Denials Rampant - Reporting
Virtually Non-Existent/Inaccurate
Weak Capture of Actual $ Denied but
Limited Detail Reporting
Good Capture of Actual $ Denied but
Limited Detail Reporting
Accurate Capture of Actual $ Denied and
Robust Detail Reporting
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
7
Polling Question: What Best Describes Your Health System’s
Current Denial Tracking Situation?
Hidden Denials Rampant - Reporting
Virtually Non-Existent/Inaccurate
20%
Weak Capture of Actual $ Denied but
Limited Detail Reporting
43%
Good Capture of Actual $ Denied but
Limited Detail Reporting
Accurate Capture of Actual $ Denied and
Robust Detail Reporting
 HFMA Pennsylvania Chapter
Payor
25%
12%
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Payor
Where to Focus Initially
Pre/Time of Service
Registration
• 100% Clean and Accurate Registration
• 100% Insurance Verification
• Identify and obtain auths/certs/ABNs <Root Cause>
Contract Analysis
• Payor modeling system implemented
• Automated posting of expected and then actual
reimbursement / CA
• Underpayment follow-up with loop back to managed
care and payors – LOOK FOR HIDDEN DENIALS
Metrics/Reporting
• Denial reporting at the 835 reason code level
• Goals established and tracked at both high level and
staff level
• Reporting used to establish root cause denial fix and
target setting
Workflow
• 835s incorporated into work queues
• 270/271 transaction information utilized to automate
routine follow up
• Work queues prioritized by $, timely filing, payor, etc
• Management sign-off on all denials
• Cross functional / Cross departmental denials work
team in place focused on root cause fixes
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
9
Key Components of Revenue Cycle Management (continued)
Self Pay
Uninsured
Revenue
Capture
 HFMA Pennsylvania Chapter
Payor
Yield
Cost to
Collect
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
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Uninsured
Uninsured Scorecard
Example Health
Example
System
Health System Historical Avg
Benchmark
Uncompensated Care %
of NR
18%
15%
12%
Self Pay % of GR
5%
7%
5%
Self Pay Bad Debt % of
NR
5%
6%
4%
Self Pay Screening Rate
75%
65%
95%
Self Pay Conversion
Rate
55%
50%
60%
Calculate
opportunity
and link to
financial
statements
Critical
target and
progress
metrics
Implementation of a comprehensive, automated screening
process is key to reducing Uncompensated Care
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
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Comprehensive Screening Program Improves Charity
Classification, Hidden Paying Sources and Cash Collections
20%
Financial
Counselor’s
place patients
into categories
at time of
service and
address all
steps needed to
close account
Screen All
Health System
Uninsured
(IP, OP, Phy, ED,
etc.)
 HFMA Pennsylvania Chapter
• Medicaid
• Other Paying
Solutions
15%
• Partial Charity
55%
• Charity
10%
Uninsured
• Ability to Pay
• Uncooperative
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
12
Components of Uncompensated Care: Impact of Robust Screening
Process on Uncompensated Care
Uninsured
$16M
Residual Bad Debt
– $4M actual cash yield on
residuals and true self pay
collections
Self Pay Bad Debt
– $4.8M net ($12M gross)
cash yield derived from
“found payor solutions”
for uninsured
Charity
Prompt Pay and
Uninsured Discount
Mid-Size HS
% of net
revenue
15.2%
Benchmark
12%
Increased cash from payors and patients while appropriately classifying
charity patients for community benefit impact
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
13
Focus on Screening, Financial Counseling and
Follow-up
Robust Financial Counseling Program
• Implement an automated screening tool for use on all self pay registrations
• Staff Financial Counselor to cover 80% of uninsured presentations
Refine Charity Care Policy and Process
• Implement financial counselor threshold approval policy
• Implement partial charity
Technology
• Implement robust tracking system that follows account and patient from screening to solution resolution
• Automate routine scrubbing of all self pay accounts for Caid/other payor eligibility
Leave no Solution behind
• Educate staff on all possible payor solutions
• Monitor effectiveness of any outside vendors providing follow-up
Performance Management
• Set targets for screening and followup team and incorporatedinto performance evaluation
• Staff recognition or incentives implemented
• Targets and performance tracked and shared
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
14
Key Components of Revenue Cycle Management (continued)
Self Pay
Uninsured
Revenue
Capture
 HFMA Pennsylvania Chapter
Payor
Yield
Cost to
Collect
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
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Self Pay
Self Pay – Residual/ Cash Scorecard
Example Health
Example
System
Health System Historical Avg
Benchmark
Bad Debt % of NR
8.5%
8.0%
5.5%
Residual Cash Yield
40%
30%
70%
Self Pay Cash Yield
6%
5%
7%
POS Cash as a % of NR
0.5%
0.3%
1.5%
POS Cash as a % of Total
Cash
40%
30%
40%
Calculate
opportunity and
link to financial
statements
Critical
Target and
Progress
Metrics
Improving collections at Point of Service is critical to
decreasing bad debt write-offs
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
16
Self Pay
Set Targets and Stair-step to High Performer Status
Payment Collection Composition
Current
Balance1
Residual
Bad
Debt 2
2% 58%
Benchmark Opportunity Percent Comparison
Patient
Payments3
40%
$1.1M
$1.2M
70%
65%
40%
[Hospital]
yield
Example Opportunity
Range: Mid-size Hospital
Target
yield
$1.2 – $2.3M
High
Performer
$0.2M
$0.5M
Self-pay
6%
91%
4%
4%
[Hospital]
yield
6%
Target
yield
8%
High
Performer
$0.5 – $0.7M
Potential impact:
$1.7 – 3.0M
1 typical mid-size health system
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
17
Self Pay
Don’t Forget Prior Balance Opportunity at POS
Prior balance traffic
Weekly average1, $ Millions
Prior balance potential
Annual, $ Millions
2.0
2.1
Rebills
Prior balance
▪
20% of collections
will come from
obtaining and
rebilling proper
insurance
▪
Collections will
come from a variety
of methods and will
take time to ramp
up
▪
Best Practice: 2% of
opportunity
collected / rebilled
annually
0.4
1.2
1.7
Bad debt
0.8
Avg Wk
Cash
Annual
2.0%
1 typical mid-size health system
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
18
Self Pay
Focus on Residual Collections
POS Collections
• 100% request for payment at POS
• Implement residual estimator technology
Prior Balances
• 100% prior balance ask at POS
• Implement pre-service prior balance team
Technology
• Ability to identify and calculate current and prior balances and produce statements
• Credit/debit swipes at registration or online
• Quick connection to customer service for in-depth balance questions
Discounting and Payment Plans
• Clearly defined and easily administered discount programs to incentivize patient to pay
• Automated credit/debit installment plans
Performance Management
• Collection targets established and incorporated into performance evaluation
• Staff recognition or incentives implemented
• Targets and performance tracked and shared
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
19
Key Components of Revenue Cycle Management (continued)
Self Pay
Uninsured
Revenue
Capture
 HFMA Pennsylvania Chapter
Payor
Yield
Cost to
Collect
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
20
Assess Proficiency in Revenue Capture
Revenue Capture
Strategic
Pricing
Automated
Charge Audit
Department
Charge
Reconciliation
Typical
Opportunity 1%
of NR
Documentation
and Coding
 HFMA Pennsylvania Chapter
Late Charge
Reduction
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
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Key Components of Revenue Cycle Management (continued)
Self Pay
Uninsured
Revenue
Capture
 HFMA Pennsylvania Chapter
Payor
Yield
Cost to
Collect
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
22
Cost to Collect
Focus on Key Areas to Reduce Cost to Collect
Review
Sourcing:
In vs Out
Shift
Resources
to FE
5% - 20% of
RCM Expense
Opportunity
Centralize
Functions
 HFMA Pennsylvania Chapter
Automation
and Tech
Optimization
Vendor
Review Renegotiate
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
23
Impact of the Affordable Care Act on Revenue
Cycle Management
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
24
Exchange Enrollment Will Come From Both the Uninsured and
Commercially-Insured Populations
Private
Health
Exchange
Currently
Uninsured
Commercial
(Group)
Public
Health
Exchange
Commercial
(Non-Group)
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
25
Three Major Factors to Plan For
 Increase in residuals ……Patient
Responsibility
 Increased complexity of claim submission
 Increased complexity of payment
methodologies
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
26
Tackle Increased Residuals at Point of Service:
Transition from “wholesale” to “retail” collection
mentality
Future
exchange
population may
be harder to
collect from
Complex
calculations of
patient
residuals
High level of
manual
intervention
and many more
accts
 HFMA Pennsylvania Chapter
Increased
Residual
Balances
Cost to collect
% of NR much
higher than
payor
collections
Consumer
collections take
twice as long as
payors
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
27
Polling Question:
How much of your organization’s current commercial patient
population do you expect to shift to public exchanges over the next
five years?
1. None
2. Less than 10%
3. 10% to 25%
4. 25% to 50%
5. Greater than
50%
6. Unsure
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
28
Polling Question:
How much of your organization’s current commercial patient
population do you expect to shift to public exchanges over the next
five years?
1. None
52%
2. Less than 10%
3. 10% to 25%
4. 25% to 50%
5. Greater than
50%
21%
19%
6. Unsure
5%
3%
0%
None
< 10%
 HFMA Pennsylvania Chapter
10-25%
25-50%
> 50%
Unsure
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
29
Low Early Penalties May Slow Public Exchange Enrollment
by the Uninsured
Penalty as a Percentage
of Income1
2.5%
Flat Dollar Penalty
per Person & Family2
$2,085
2.0%
$975
1.0%
$695
$285
$95
2014
2015
2016
2014
$325
2015
= Individual
2016
= Family
The penalty for not obtaining coverage will be the greater of a flat dollar amount or a
percentage of income, unless certain exemptions are met3
1) Penalty applied to income above income tax filing threshold (roughly $10K for individuals and $20K for families in 2012).
2) Flat dollar penalty is indexed to inflation after 2016.
3) Some individuals may be exempt from penalties based on religion, citizenship, income, time noninsured, access to affordable coverage, etc.
Source: Kaiser Family Foundation: The Requirement to Buy Coverage Under the Affordable Care Act. www.healthreform.kff.org.
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
30
Public Exchange Uptake Among the Uninsured Likely to Vary
Considerably by State
Public Exchange
Uptake Driver
Varies by
State?
Commentary
Penalties
Concerns regarding low early penalties; penalty
exemption prevalence will vary by market

Subsidies
Subsidies taper off markedly at higher income levels;
income mix of uninsured varies by region

Price Shock
Higher premium increases will reduce uptake by those
not eligible for subsidies

Exchange
Promotion
Concerns regarding limited enrollment assistance budget
for Federal Exchanges

Political
Support
Key enabler of Massachusetts success; political
opposition could be barrier in many states

Exchange
Readiness
Not all exchanges were equally ready for open
enrollment on October 1, 2013

Note: Other key factors include the size of the illegal immigrant population and whether a state decides to expand Medicaid.
Sources: Gold J.: “Worries Mount About Enrolling Consumers in Federally Run Insurance Exchanges.” Kaiser Health News, Apr. 7, 2013; Citigroup
Exchange conference call, Apr. 8, 2013.
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
31
Consider Collection Challenges
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
32
Collections Will Be a Challenge Due to Expected Preference for
Bronze and Silver Plans
Standardized Deductible Levels by Plan
California Health Exchange
Subsidized Cost-Sharing
Plan Tier
Unsubsidized
Silver
Silver
Bronze
Incomes Eligible (FPL)
< 150% FPL
150% - 200% FPL
200% - 250% FPL
All
All
Incomes Eligible ($)
< $17,235
$17,235 - $22,980
$22,980 - $28,725
All
All
$1,5002
$2,0002
$5,0003
Deductible
1
$0
No Deductible
1
$500
High Deductible
• Low-income enrollees are likely to choose bronze or silver plans
• Sicker enrollees may prefer the lower out-of-pocket spending of (subsidized)
silver plans
• Actual out-of-pocket expenses will depend on provider charity policies
• Providers should educate uninsured on comparative risks of plans
Note: 1) Hospital care not subject to deductible. 2) Medical deductible. 3) Deductible for medical and drugs. Income eligibility ranges are for
individuals.
Source: Covered California. Available at www.coveredca.com.
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
33
The Role of Hospitals in Establishing Coverage
CHA White Paper in Brief
• Expert guidance on improving health
coverage for the uninsured
• Implementation specifics of the ACA
• The role of hospitals for expanded coverage
• Eight proven outreach and enrollment
strategies for hospitals
• Proactive enrollment in coverage will directly impact the hospital’s
bottom line in year one – plan/ carrier choice will matter
• Hospitals will play a crucial role in education and enrollment assistance
• State, local, and federal resources may be available to hospitals
• Can leverage existing resources and best practices in place today
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
34
Summary
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
35
Key Thoughts on a Post-Reform Optimal Revenue Cycle
 Focus on Scale: Centralize, Consolidate or Outsource
 Ramp up staff, technology , processes and policies to
effectively collect pre-service or point of service
 Transition RCM resource investments to the “front”
 Invest in additional education and resources related to
uninsured financial counseling
 Eliminate Silos: Manage “Front to Back” and
incorporate/link to clinical revenue cycle functions such as
documentation , clinical denials and quality
 Institute a performance management culture – set targets
and track results
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
36
Revenue Cycle: Assessment of Comprehensive – End to End
Management
• Typical range of opportunity: 2 to 6% of net revenue
• Usually some “quick wins” but full opportunity takes significant focus
and 2-3 years to realize
• Largest opportunities tend to be “front end” related
– Improving clean/accurate registration and insurance verification %s
– Screening of uninsured patients for hidden solutions
– Point of Service (POS) collection process
– Root cause denial improvement
Identify Opportunities…. Set Targets….
Monitor Progress…. Insist on
Accountability!
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
37
Questions?
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
38
Kimberly Neese, Senior Vice President
Kimberly Neese is a Senior Vice President of Kaufman Hall, with leadership
responsibilities related to the firm’s Strategic Cost Management practice.
She assists hospitals and health systems in assessing their operational performance
and developing effective plans that target margin improvement through sustainable
cost reduction and revenue improvement. She has broad expertise in developing
and leading large-scale operational cost and revenue improvement projects,
consolidations, physician/hospital joint ventures, and other financial and
operational initiatives.
With more than 25 years of healthcare experience, Ms. Neese most recently was an executive in McKinsey and
Company’s Objective Health Division. Prior to this, she was Vice President with a national revenue cycle
healthcare group, working with large health systems nationwide. In addition, Ms. Neese has extensive provider
experience, having served as Senior Vice President and Chief Financial Officer of St. Mary's Health System, a
subsidiary of Ascension Health, the nation's largest nonprofit health system. During her tenure there, she led the
organization in developing a 10-year master facility and financial strategic plan, culminating in the opening of a
new facility. Prior to this, she had various leadership roles in the finance and strategic planning groups of St.
Mary's and other healthcare organizations. Ms. Neese received a Bachelor's of Science in Accounting from the
University of Southern Indiana.
Contact Information:
Kimberly Neese
Senior Vice President
Kaufman, Hall & Associates, Inc.
5202 Old Orchard Road, Suite N700
Skokie, IL 60077
847.441.8780, ext. 271
[email protected]
 HFMA Pennsylvania Chapter
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.
39
5202 Old Orchard Road, Suite N700, Skokie, Illinois 60077
847.441.8780 phone | 847.965.3511 fax
www.kaufmanhall.com
© 2014 Kaufman, Hall & Associates, Inc. All rights reserved.