accretive health - revenue cycle management - medical billing services

DECEMBER 3, 2012

Accretive Health Revenue Cycle Management

Driving Growth Through Measured Results


Certain statements contained in this presentation may be considered forward-looking as

defined by the Private Securities Litigation Reform Act of 1995. In particular, any statements

made about Accretive Health’s expectations for future financial and operational performance,

expected growth, new services, profitability or business outlook are forward-looking

statements. Investors are cautioned not to place undue reliance on such forward-looking

statements. There is no assurance that the matters contained in such statements will occur

since these statements involve various risks and uncertainties that could cause actual

results to differ materially from those expressed in such forward-looking statements. These

risks and uncertainties include those listed under the heading Risk Factors in the company’s

Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, which is available

on the SEC’s website as well as in the investor relations portion of Accretive Health’s website

at www.accretivehealth.com. The forward-looking statements made in this presentation are

based on the company’s beliefs and expectations as of December 3, 2012 only and should

not be relied upon as representing the company’s views as of any subsequent date. While the

company may elect to update these forward-looking statements at some point in the future,

Accretive Health specifically disclaims any obligation to do so, even if its views change.

Safe Harbor

2


Use of Non-GAAP Financial Measures

*Reconciliations of non-GAAP measures to their most directly comparable GAAP measures are presented, where possible in the Appendix, as well as in the

Company’s financial press releases and related Form 8-K filings with the Securities and Exchange Commission. This information can be accessed for free in

the Investor Relations section of the Company’s website at www.accretivehealth.com

We believe adjusted EBITDA is useful to stockholders in evaluating our

operating performance for the following reasons:

• these and similar non-GAAP measures are widely used by investors to

measure a company’s operating performance without regard to items that

can vary substantially from company to company depending upon financing

and accounting methods, book values of assets, capital structures and the

methods by which assets were acquired;

• securities analysts often use adjusted EBITDA and similar non-GAAP

measures as supplemental measures to evaluate the overall operating

performance of companies; and

• by comparing our adjusted EBITDA in different historical periods, our

stockholders can evaluate our operating results without the additional

variations of interest income (expense), income tax expense (benefit),

depreciation and amortization expense and share-based compensation

expense.

We understand that, although measures similar to adjusted EBITDA are

frequently used by investors and securities analysts in their evaluation of

companies, these measures have limitations as analytical tools, and you

should not consider it in isolation or as a substitute for analysis of our

results of operations as reported under GAAP. To properly and prudently

evaluate our business, we encourage you to review the GAAP financial

statements included elsewhere in our regulatory filings, including the

Preliminary Prospectus, Form 8-K, and Form 10-K, and not to rely on any

single financial measure to evaluate our business.

In order to provide stockholders with greater insight and to

allow for better understanding of how our management and

board of directors analyze our financial performance and

make operational decisions, we supplement our condensed

consolidated financial statements presented on a GAAP

basis with the adjusted EBITDA and adjusted net income

measures *.

Adjusted EBITDA measure has limitations, as noted below,

and should not be considered in isolation or in substitute for

analysis of our results as reported under GAAP.

Our management uses adjusted EBITDA:

• as a measure of operating performance, because it does not

include the impact of items that we do not consider indicative

of our core operating performance;

• for planning purposes, including the preparation of our

annual operating budget;

• to allocate resources to enhance the financial performance

of our business;

• to evaluate the effectiveness of our business strategies; and

• in communications with our board of directors and investors

concerning our financial performance.

3


ACCRETIVE HEALTH OVERVIEW


• Our primary goal is to help our healthcare clients strengthen their financial

stability and deliver better care to the communities they serve

• We use technology to drive best practices and best outcomes

• We work collaboratively with clients to create solutions to existing challenges

• We promote an entrepreneurial culture to encourage innovation and

continuously upgrade our functionality with a focus on value creation

Our Guiding Principles

5


Founded in 2003, headquartered in Chicago

Win – Win Proposition with our Client Partners

• We are paid based on our results; no upfront costs for Quality or Revenue Cycle Services

• We have partnered with some of the most well-respected health systems in the U.S.

We Drive Measured Results for our Partners

• Since inception we have delivered $1.5 billion in cash benefits to clients

Innovation and Operational Excellence is at the Core of What We Do

• Success of our RCM offering is driven by applying technology and innovative process

improvements to drive measurable results

• Seeded Physician Advisory Services in 2009, now a $60 million run-rate business

• Developed unique offerings to improve care quality at lower costs – Intra-Stay Quality and

Population Health Management Infrastructure

Accretive Health Snapshot

6

Driving Growth Through Measured Results 7

Three Distinct Offerings

Proven end-to-end solution that lowers collection costs and

reduces yield leakage

Utilize physician-driven best practices to

improve care quality at a lower cost

Compliance services that maintain detailed audit trails for claims

Physician Advisory Services

Quality and Care Coordination

Revenue Cycle Management


Revenue Cycle Management

• Large market opportunity, low current penetration

• Proven end-to-end solution with a win-win proposition

• Margin expansion by driving further efficiency and reducing reimbursement leakage

Quality and Care Coordination

• Population Health Management is developing as the next frontier of healthcare

• Lack of provider infrastructure for population health management

• Intra-Stay Quality has broad appeal and could create beachhead into new hospitals

Physician Advisory Services

• Increasing frequency of audits

• Opportunity for continued market share gains

• Expansion into compliance and workflow advisory services

Multiple Growth Drivers in Each Business

8


Providers are Getting Squeezed

• Capital constraints

• Significant variance in provision and quality of care

• Declining

reimbursement

• Rising bad debt

• Rising costs

from medical innovation

• Value-based payment models

• Medicaid expansion/State budget constraints

• Insurance exchanges

• ICD-10

• RAC Audits

• Patient satisfaction scores

• Higher out-of-pocket costs

• Aging population

• Personalized medicine

Patients

Compliance

Health

Reform

Economic

Insufficient

Resources


Market Size

% to AH Revenue

Revenue Opportunity

Sources: CMS National Healthcare Expenditures, September 2011 and Definitive Healthcare

RCM market scope includes net patient revenue at all hospitals based on CMS 2014 projected expenditures

Quality market scope includes all hospital and physician expenditures

PAS market scope includes all hospitals with >$250 million in net patient revenue

10

Market Opportunity

$50 Billion

$100 Billion

$850 Million

0.12% 6.25% 5.0%

$1.0 Trillion $1.6 Trillion $ 710 billion

PAS Quality RCM


Revenue Cycle and Quality Require No Upfront Investment from Clients

• Accretive Health is compensated based on Measured Value delivered to clients

Our End-to-End Solution Delivers Superior Results by Combining People,

Process and Technology

• People: Well-trained professionals who work directly with the client

• Process: Market-leading best practices to allow seamless workflow at all stages of the

revenue collection process

• Technology: Comprehensive tools to measure and improve efficiency for clinical and financial

outcomes

Value Proposition

11


Pay for measured results

Unparalleled form of collaboration

End-to-end scope

AH makes significant investment of resources

Pay for results not input

12

A Differentiated Offering

We create operating partnerships that result in distinctly

different outcomes than other models

NOT

a consulting firm

Accretive Health

Operating Partnership

NOT

a software provider

NOT

an outsourcing model

http://www.aurorahealthcare.org/


SaaS /

Technology- Supported RCM

Consulting

IT Outsourcing /

Non-HC BPO

Payor Follow-Up

Patient Advocacy

Patient Share

Lost Charges

Compliance

4-6% (Measured)

Value Proposition

(% revenue lift)

Est. 0.5-1% (Not Measured)

Est. 0.5-1% (Measured)

Est. 0.5-1.5% (Not Measured)

Note: Based on Accretive Health’s estimates

13

End-to-End RCM Solution Provides Competitive Advantages


Partnering with Innovative Leaders

http://www.beaumont.edu/

http://www.borgess.com/default.aspx


REVENUE CYCLE MANAGEMENT


Market Drivers for RCM Solutions

• Declining

reimbursement

• Increasing

patient

responsibility

• Poor collection

rates

• ICD-10

• Health

Reform

• Old-generation

financial systems

still in use

• Fragmented

solutions

• No upfront

investment

with Accretive

Health

We compete with numerous vendors who approach the

market with incomplete solutions

Financial Pressures

Increasing Complexity

Obsolete Technology

Investment Risk


Collection Yield: Uncovering Hidden Leakage

Less: Payor write-offs

Less: Bad debt Less: Hidden leakage

Cash collected

Opacity in the revenue cycle process hides leakage

$435

Less: Accurate contractual adjustments

Less: Hidden leakage disguised as contractual adjustments

- 500

- 35

Typical hospital

calculation

Calculation after

AH analysis

$1,000 $1,000 Gross charges

- 500

0

Gross charges less contractuals (collectable cash) $465 $500

-5

-25 0

$435

Yield (cash collected/collectable cash): = 94% $435

$465 = 87% $435

$500

We uncover hidden leakage to derive a real picture of collection yield

-5

-25 -35

Areas for AH

to drive improvement


12-month period

All contracts

All patient visits and charge information

Best Possible Revenue

18

How do we Uncover Hidden Leakage?

AHtoContract Tool

Our proprietary AHtoContract tool is vital in calculating Best Possible revenue


Understanding Leakage: Illustrative Example

88.2%

7.7%

4.1%

2.3% 30% Insured patient responsibility

5% 0.2% Uninsured

87.0% Overall Collection Rate:

84.5% 95.8% Payors

Yield % of Total

Revenue Mix

4.1% x 5.0% = 0.2%

7.7% x 30% = 2.3%

88.2% x 95.8% = 84.5%

In an industry where operating margins average ~2%,

13% revenue leakage is significant

100%

75%

50%

25%

0% Payor reimbursement

Insured patients residual responsibility

Uninsured patients

Note: Based on Accretive Health’s estimates


Payor yield: 2%

Insured

patient yield: 1%

Patient self-pay

conversion: 1%

Increase to

“Best Possible”: 1%

• Pre-registration

• Automated insurance verification

• Automated plan code correction

• Prior authorizations

• Continuous denials review/fix

• Automated denial resolution

• Automated underpayment trolling

• Proper contractualization of receivables

• Specialized physicians to appeal denials

• Real-time patient responsibility estimation

• Simplified billing statements

• Prior balance visibility

• Patient education

• Alternate sources of coverage

• Expeditious charity care application

• Manage secondary coverage as backup

• Identification of missing or unbilled charges

• Pricing initiatives

• Post-coding, pre-bill quality review

We retain a portion of the revenue lift as our Incentive Fee

20

RCM Win-Win Proposition I: Improved Revenue Lift

5%

0%

1%

2%

3%

4%


Middle

Transcription

Coding

Case coordination

Records storage

Clinical documentation

Release of information

Medical records

Charge capture

Back-End

Billing

Claim follow–up

Cash posting

Pre-collect

Underpayments

Denial management

Contract compliance

Front-End

Scheduling

Pre–registration

Registration

Eligibility

Insurance verification

Pre–authorization

Financial counseling

Admitting

We help our clients reduce costs through:

What services are included?

21

Reducing Collection Costs: Methodology

• Process efficiency – eliminate

redundant effort

• Technology-driven productivity improvements – automation

• Vendor cost management

• Demand-driven staffing and scheduling

• Use of Shared Service Centers to drive economies of scale


Cost Baseline: Hospitals spend about 4.0-4.5% of NPR on their collection effort

• This baseline serves as the initial basis of our Base Fee

15-30% expense

reduction after engaging with AH

Cost Baseline

22

RCM Win-Win Proposition II: Reducing Collection Costs

Reducing collection costs:

• Accretive Health aims to reduce cost to collect by 15-20%, or 20-30% if services are migrated to Shared

Service Centers

• Cost savings are shared with clients, providing a mutual incentive

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

$0

$20

$40

$60

$80

$100

$120


We operate 10 Shared Service Centers domestically and offshore

89% of revenue cycle management customers utilize at least one shared

service; 55% of customers utilize at least three shared services

Shared services deliver enhanced benefits – more cost savings than

processing on-site

Services delivered via Shared Service Centers:

• Financial Clearance

• Customer Service

• Pre-collect

• Medicaid Eligibility

• Patient Financial Services

• Underpayments

• Transcription

• Coding

Shared Service Centers

23


MIDDLE FRONT BACK Patient

Information

(input)

Cash

Collected

(output)

Competitors with

limited scope

Accretive Health Oversight

Superior results through complete oversight of the revenue cycle

• Fragmented solutions are sub-optimal, with no complete view of data

• Competitors with limited scope can only deliver limited value

• Root cause analysis shows significant problems are caused by poor inputs

• Garbage in…garbage out!

• Effective revenue cycle must capture all inputs and outputs at the front, middle

and back end

Why Our End-to-End Solution is Better

24


Accretive Health technology integrates with client patient accounting,

scheduling, and electronic health record systems

• Existing patient accounting system remains

“System of Truth”

• Industry-standard protocols (HL7, EDI, etc)

• Seamless interfacing, NOT a system conversion

• Experienced implementation teams

• No local hardware or software installation

• Hosted in world-class SAS-70 compliant data center

Our Technology is a Critical Piece of our Offering

25


Our technology…

Detects accounts that have financial risk

Streamlines the Execution of resolving the risk

Measures the efficiency and effectiveness of our process and outcomes

Technology Model

26


AHtoAnalytics™

Operational reporting and analytics with drill-through to account level detail

Yield-Based Follow Up™

Follow up for un-billed and billed claims with payors

AHtoCharge™

Charge integrity and compliance

AHtoAccess™

Patient pre-registration and registration, insurance eligibility checking

AHtoContract™

Best payment calculation, contract modeling, insurance payer follow up

AHtoAnalytics™




AHtoCharge™


AHtoAccess™


AHtoContract™


27

Core Revenue Cycle Technology

Proprietary & Confidential

AHtoAnalytics™




AHtoCharge™


AHtoAccess™


AHtoContract™


AHtoAnalytics™


Yield-Based Follow-Up™

Follow-up for un-billed and billed claims with payors

AHtoCharge™


AHtoAccess™


AHtoContract™

Best Possible calculation, contract modeling, insurance payer follow up


Potential Sources of Leakage Throughout End-to-End Process Actual Leakage

Realized

Hidden Leakage in

• Contractuals

(Underpayments,

misclassified denials)

Uncompensated Care

• Bad debt

• Charity care

• Denial write-offs

Hidden Leakage Due to

• Missing charges

• Documentation and

coding errors

28

Eliminating Leakage Drives Returns

FRONT-END

• Incomplete patient data

• Incomplete insurance

verification

• Incorrect payor code

• Failure to obtain

pre-authorization

• Incorrect residual

estimate

• Failure to discuss patient

share/ prior balance

• Failure to find

secondary insurance

• Coordination of benefits

• Insufficient follow up

with payer/patient

• Failure to appeal

denial

• Billing errors

• Discharge not final

billed (DNFB)

• Cash posting errors

• Failure to bill

secondary

• Delays in timely filing

• Third-party take

backs

• Insufficient or

incomplete

documentation

• Coding errors

• Missed charges

Registration and Financial Clearance

MIDDLE BACK-END

Health Information Management

Billing and Follow-up


AHtoCharge

Metrics Manual Internal Audit* AHtoCharge

Total Registered Visits 1,000,000 1,000,000

Reviewed Accounts 1,000 1,000,000

% Reviewed 0.1% 100%

Worked Accounts 1,000 30,000

Reconciled Revenue Leakage (# of accounts) 100 8,000

Gross $'s Reconciled $50,000 $4,000,000

*Based on Accretive Health’s estimates


Lifecycle of a Claim

Thorough analysis of claims

Balance (BAL) Compare to:

Charges

Payments

Patient Payments

Insurance Payments

Adjustments

Exp Reimbursement

Aug.15,2012 – Nov 13, 2012 BAL $0 CHR $9423.75 PMT $4642.01 ADJ $4781.74 REI $4642.01

8000.00

6000.00

4000.00

2000.00

0

Aug 20 Aug 27 Sep Sep 20 Sep 17 Sep 24 Oct Oct 8 Oct 15 Oct 22 Oct 29 Nov

L

S

R

P

E

L L

R

C

A U

U

T B 2 8 C

Y

Z 8 Y 2 8 $ B 2 8 $ $

Pre-Registration 8/15/2012 Insurance

plan info added

Insurance

Payment 10/11/2012 Insurance

payment

Admitted 8/18/2012

Discharged 8/22/2012

Patient Payment 11/7/2012

Contractual

Allowance 11/7/2012 Insurance

adjustment


Workflow Management

• Grouping of accounts into risk levels

• Campaigns focused on specific claim types

Advanced Prioritization Algorithms

• Customizable business rules engine utilizing 30+

variables for each account

• Insights from predictive models based on analysis of

historical data

Prioritized claims for each follow-up representative

31

Yield-Based Follow-up

Initial Prioritization based on factors including:

• Payor type and plan code

• Current insurance balance

• Expected reimbursement

• Denial type (if any)

• Days from discharge

• Days before filing appeals deadline

• Most recent activity on the account

• Recommended follow-up date

The Yield-Based Follow-up Tool utilizes proprietary algorithms and business

logic to assign accounts to appropriate risk categories.


• Technology is integrated into all key steps in the revenue cycle process

• Industry knowledge, reporting, and analytics capabilities are integrated into

management of the operations

• Embedded management teams are integral to execution of revenue

cycle processes

• Utilization of Shared Service Centers delivers additional cost savings

• Operational excellence and a focus on continuous improvement, combined

with consistent financial results, generates loyalty

Factors that Contribute to Long-Term Client Partnerships

32

http://www.aurorahealthcare.org/

accretive health - revenue cycle management - medical billing services

Documents

financial statements

forwardlooking statements

operating results

similar nongaap measures

operational performance

performance of companies

comparable gaap measures

adjusted ebitda areannual