Revenue Cycle Management:

The Foundation of Physician Leadership

HFMA IdahoDecember 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 A Practice B

Charges $750,000 $2,500,000

Collections $500,000 $1,000,000

CPT codes 10,000 20,000

Visits 5,000 6,000

Five Key Metric Calculations

MetricPractice

APractice

BImpact?

DOS:DOCE (days)

2 10

Unreconciled Appointments (number)

10 20

Reject Rate 5% 10%

Denial Rate 8% 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

Green Yellow Red

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) < 3 3.0-4.0 > 4.0

AR Days < 50 50 - 60 > 60

AR% > 90 Days < 15% 15% - 25% > 25%

Client A – The Five Key MetricsPractice A Metrics Pre-GoLive Dec-08 Mar-09 Jun-09 Sep-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 $205.62

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 visits 4.26% 7.01% 0.76% 0.39%

DOS:DOCE (Days) 7.07 8.31 4.63 2.79 2.17

AR Days 42.49 54.14 53.57 52.55 50.02

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

Charges vs. Payments

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09

Charges Posted Payments Posted

Chg/CPT vs. Pmt/CPT

Chg/CPT vs. Pmt/CPT

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09

Charge / CPT Payment / CPT Linear (Payment / CPT) Linear (Charge / CPT)

Pmt/CPT vs. Pmt/RVU

Pmt/CPT vs. Pmt/RVU

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09

Payment / CPT Payment / RVU Linear (Payment / CPT) Linear (Payment / RVU)

Unreconciled Appts vs. DOS_DOCE

Unreconciled Appts vs. DOS_DOCE

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-090

1

2

3

4

5

6

7

8

9

Unreconciled Visits DOS:DOCE (Days)

Denial/Reject % vs Chg Count

Denial/Reject % vs Chg Count

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1st Pass Denial - Actionable Pre-Bill Reject Rate Charge count

Patient Information Request

Patient Information Request (PIR)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

PIR Outstanding (line items) PIR Outstanding (dollars)

OTC/Visit vs. Pass Through $

OTC/Visit vs. Pass Through $

$0

$2

$4

$6

$8

$10

$12

$14

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

OTC Avg Per Visit Pass Through (dollars)

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?

jthomas@medsynergies.com

Revenue Cycle Management:

The Foundation of Physician Leadership

HFMA IdahoDecember 3, 2009