strengthening revenue cycle partnerships
TRANSCRIPT
Strengthening Partnerships with Revenue Cycle Outsourcing Vendors to Improve Performance & ComplianceNicholas Fricano – President, Healthfuse
2
Over 50 Vendor Types – 1,000s of Options
3
• Many vendors• Best fit?• Time consuming
Difficult to Manage
4
Healthfuse statistics as of January 2012 – based on combination of collected data and surveys from 983 health systems
Spending More on Revenue Cycle Vendors% of Revenue Cycle Operating Budget Spent on Third-Parties
5
• 72% increase in cost to collect from 2001 to 2011
• 69% Of hospitals are partially or fully disappointed with their vendor’s performance for the price; about 50% are making a change just because of this)
• Early-out self-pay seems to be main area of concern
• Only 11% of hospitals have adopted consistent and consolidated revenue cycle vendor governance models despite 74% of vendor costs due to outsourcers and/or service providers
• Less than 40% of hospitals reported that service level agreements are in outsourcer agreements
• Less than 20% of hospitals audit vendor activity and compliance to service level agreements or hospital policies
• Average tenure of outsourcing vendor is nearly 7 years; after 3 years, performance deteriorates by 10%
State of the Industry
6
• Increased cash collections• Better and less expensive than “do-it-ourself”• Expert and knowledgeable• No “nickel and diming”• Good visibility and communication• Executive involvement• Aligned incentives
What Hospitals Expect From our RC Outsourcers
7
• Engagement• Client understanding of differentiation• Long-term partnerships• Open dialogue and feedback• Timely payment for service• Good visibility and communication• Executive involvement
What Vendors Want From our Hospital Clients
8
Leverage Analytics
Manage the Process
Measure Improvement
Create a Vested Partnership
Prioritize Vendor Management
Agenda
9
Leverage Analytics
Manage the Process
Measure Improvement
Create a Vested Partnership
Prioritize Vendor Management
Agenda
10
Presentations Do Not Prove Performance
11
We Can “Moneyball” Vendor Management?
New York Yankees$114,457,768
vs$39,733,689
Oakland Athletics
12
Deriving Quantitative Vendor Data• >1,200 Vendors• >2,000 Hospitals• Quantitative & Qualitative
• Best possible across markets• Focus is top performers• Outcome vs Pricing
13
Who are Your Partners More Like?
OR
14
RFP Quantitative Data Collection
• Historical performance for at least 2-3 like hospitals
• If self-pay, what percentage of performance is PSP, BAI, insurance discovery?
• If auto, does performance include med pay?• If bad debt, does performance include legal?• If Medicaid, does performance include SSI,
disability, insurance discovery?
ACTION IT
EM
15
10 Metrics That Drive ResultsPUAT – % of unpaid accounts touched (BM >90%)
PWA – Payment without action (with exception of statement) (Avg <25%)
ATPP – Average touch per payment (AVG - 1.5-2)
APPA – Average payments per account (AVG - 2.3)
FPY – First pass yield (AVG– 45%)
PPPC – % of payments per incoming/outbound call (AVG- 30%/70%)
PAL90 – % of accounts liquidated > 90% (AVG– 30%)
PPE – Payments per event (touch) (AVG- 0.3)
PTPD – Promise to pay default (BM <10%)
ADFP – Average days to first payment (BM < 47)
16
Leverage Analytics
Manage the Process
Measure Improvement
Create a Vested Partnership
Prioritize Vendor Management
Agenda
17
“Barry Bonds doesn’t step up to the plate thinking home run.
He steps up to the plate focused on a sweet swing”
– Jim Camp
18
Correlating Process to Outcomes
• Account Activities Audited
• Financial & Compliance Measured
• Errors Halved• Outcomes Doubled• Immediate Impact
19
Measuring Your Vendor’s ProcessSimple File Spec from Vendor
• Identifier (MRN, guar. #)
• Placed Date
• Last Pay Date
• Placed Balance
• Current Balance
• Financial Class/Type
• Status (pay plan, etc)
• Event Date
• Event Type
Compare Actual to SLAsACTIO
N ITEM
Data + Experience = Better Results
20
21
Leverage Analytics
Manage the Process
Measure Improvement
Create a Vested Partnership
Prioritize Vendor Management
Agenda
22
Measuring Improvement
• Seasonality and Cyclicality• Month Over Month / Year Over Year• Notification of Performance Deterioration – Typically 8%
Annual Decline After Year 3
ACTION IT
EM
23
Leverage Analytics
Manage the Process
Measure Improvement
Create a Vested Partnership
Prioritize Vendor Management
Agenda
24
Creating Vested Partnerships
• Sharing Mutual Success• Safety Net• Compliance with Service Level Agreements• + - Competition
25
WIIFM or Vested Partnership?
• Shift as Soon as Month 18• Vendor Margins Steady or Grow • Hospital Performance Declines
26
Examples of Vested Partnerships
Year 1 Year 2 Year 3Base Fee 7% 6% 5%
Yield Fee NA 1.5% 3%
Total Fee 7% 7.5% 8%
Sharing Mutual Success(e.g. EOSP)
Safety Net Fee Rebate (e.g. EOSP)
• In the event bad debt performance exceeds a certain threshold (e.g.4%), EOSP vendor rebates difference in fees
• Also works for secondary Medicaid eligibility and underpay recovery
FeeEarly Out Self-Pay 7%
Bad Debt Fee 18%
Difference 11%
• If baseline exceeded, auto-renew; if missed, term
• Easiest to use cash equivalent on monthly basis
ACTION IT
EM
27
Leverage Analytics
Manage the Process
Measure Improvement
Create a Vested Partnership
Prioritize Vendor Management
Agenda
28
29
30
Functions of a Vendor Management Office
Financial & Compliance Auditing
Remediation & Correction
Inventory & Invoice Reconciliation
Contracting Management & (Re)Negotiations
Evaluation & Implementation
Outcome-Based Reporting & Budgeting
ACTION IT
EM
31
Prioritize Meetings
1. Historical performance review and forecast2. Goal to actual performance review and process compliance 3. “Chalk-talks” – account-level review and corrective planning (based on
auditing, etc)
ACTION IT
EM
Hospital
CFO & VPRC (60 min)
Director-Level
Manager/Supervisor – Level
Operations Executive
Revenue
Cycle Outsourcers
Dedicated Client Contact
Dedicated Client Contact and On-site Rep
1Quarterly
2Monthly
3Weekly/Daily
32
Staffing Ratio
Position Description Staffing Ratio
Analyst • Vendor evaluations• Custom research• Vendor scorecard generation• Implementation oversight• Contract negotiation support
• 0.25 FTEs per outsourcer
• 0.25 FTEs per bolt-on tech
Auditor • Account-level auditing• Root cause analysis and reporting• Inventory reconciliations• Invoice reconciliations• Tech optimization analysis
• 0.4 FTEs per outsourcer
• 0.25 FTEs per bolt-on tech
33
Results
• 43 cohort hospitals over last 4+ years
• 7 revenue cycle outsourcers + 8 bolt-on tech
• Average size: $410M NPR ($105M-$1.3B)
• 10-20% cost savings
• 20-30% performance improvement (high was 67%)
• Yield = 1-1.5% of annual net patient revenue
34
Leverage Analytics
Manage the Process
Measure Improvement
Create a Vested Partnership
Prioritize Vendor Management
Agenda
35
Questions?
324 East Wisconsin AvenueSuite 1300Milwaukee, Wisconsin 53202414.988.1130
Nicholas [email protected]