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Revenue Cycle Management

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Here’s What You’ll Learn

Introduction to Revenue Cycle Concept Zero to Zero Departments & Functions Process Key Definition & Metrics

Market Conditions Impact to Revenue Cycle

Modern Day Bounty Hunters Charity Care Future with Health Care Reform

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What is Revenue Cycle? All the administrative and clinical functions, processes, and software applications that contribute and manage the registration, charging, billing, payment and collections tasks associated with a patient encounter.

Revenue Cycle is the process that begins when a patient comes into the system and includes all those activities that have occurred in order to have a zero balance

In other words, think… Zero to Zero!

“Hospitals exist in a very uncertain time. Reimbursement risk runs high, and receiving payments from patients is not guaranteed. The ability to capture lost revenue and improve the ability to forecast actual revenue received to the budget is necessary for hospitals' and other service providers' survival and vitality.”

Source: Wall Street 2010

Importance of Revenue CycleAnd You…

REGU

LATI

ONS

PROCESS

CULTURE

TOOLS

PEOPLE

The Revenue “Cycle”

BILLING

CDMP

SCHEDULING

REGISTRATIONINSURANCE

VERIFICATION

FINANCIALCOUNSELING

CASE MGMT/QUR

CDM/CHARGECAPTUREMEDICAL

RECORDS

CUSTOMER SERVICE

THIRD PARTYFOLLOW- UP

SELF PAYCOLLECTIONS

PROGRAMADMINISTRATI

ON

CASH POSTING

POSTPAYMENT REVIEW

TECHNOLOGY

CUSTOMER

EXPECTATIONS

PAYO

RS

POINT OF SERVICE

COLLECTIONS

DENIALS MANAGEMENT

FINANCIAL CLEARANCE

Patient Access

DocumentationOf

ServicesBilling Receivables

Management Customer Service

Hospital

Scheduling

Registration

Pre-Registration

Eligibility &Verification

FinancialCounseling

CareDelivery

PatientDischarge

Transcription

ChargeMaster

Coding/CDMP

ChargeCapture

PaymentPosting

ClaimsEditor

CustomerInquiries

BillReconciliation

ContractualAdjustments

LegalCollections

IssueResolution

SecondaryBilling

Bad Debt/Write OffsPatient

Statements

Process Flow by Department

LateCharges

UtilizationManagement

DischargePlanning

CaseManagement

ClaimsSubmission Follow-Up

Appeals/Denial Mgmt

Feedback

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Patient Access

The “Front Door” to the hospital and the first step in the revenue cycle process for the majority of patients.

The important functions and information gathered in Access include: Scheduling services (surgery not included) Verifying of Insurance Obtaining Authorizations and certifications Gathering patient demographics and insurance information Pre-Services/Point of Service collections Identifying the referring physician Informing the patient on instructions for the date of service, referral

process, etc. Informing patient of referral process Financial Counseling Medicaid Eligibility/Charity Care Responsible for 50% of claims data

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Health Information Management (HIM)

Health information management (HIM) is the practice of maintenance and care of health records by traditional and electronic means in hospitals, physician's office clinics, health departments, health insurance companies, and other facilities that provide health care

The important functions and information gathered in HIM include: Providing and Managing Transcription Services Coding services documented by Physicians

CPT codes (procedures) ICD-9 (diagnosis) HCPC (supplies, drugs, etc.) ASC Codes

Ensure Codes accurately reflect patient services Acts as a Liaison between all areas Serves as Subject Matter Experts in HIPAA, Documentation and Coding Educates, presents, and trains on opportunities to improve

Case Mix Index (CMI) Oversees and responds to Defense Audits Manages storage and retrieval of medical records Implementation of Electronic Health Record System Building the Compliant Documentation Management Program (CDMP)

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Patient Financial Services (PFS) Patient Financial Services is the “cash machine” of the hospital. The important functions and information gathered in PFS include:

Charge Master/Revenue Integrity Billing Overseeing Claims Edits to ensure “Clean Claim Submissions” Employing tools to ensure accuracy in charge capture Follow-Up with Insurance companies

Appeals Denials Un-paid Claims

Customer Service Collections Cash Posting Subject Matter Experts

Government Billing Commercial and Managed Care Billing

Employs and Oversees systems and vendors to enhance Services provided to patients Revenue Cost to Collect

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Charge Master A comprehensive listing of hospital charges The Revenue Integrity team are a critical component to billing

compliance and charge capture and is often considered the "life blood" to a Hospital's Revenue Cycle by touching almost every department within the facility. Standardization of charge master Department level review of all processes and charges with

management staff to ensure all billable charges are represented on the CDM

CDM reviews and updates to ensure compliance for all payors Market pricing, transparency and defensibility strategies Revenue cycle system mapping to ensure charge capture and

compliant billing Acuity-based charging methodology development and implementation Maintenance strategies, controls and tools for maintaining an accurate

and compliant CDM Educational and training tools

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The Importance of Charge Capture A key part of the Revenue Cycle but does not report to Revenue Cycle “Bill what you do” – the process where services provided are entered

into the system; charges and expected reimbursements are calculated The important functions and information gathered in Charge Processing

include: Keyers and coders enter data automatically from a charge master

or manually input Claims Manager software scrubs entries for correctness Problems sent to department work file for processing or corrections Reconciliation performed to insure all entries received and entered

into the system Accuracy of service and charge Appropriate edits to scrub data Charge entered timely for prompt payment Daily Charge Logs Reviewed

Process Flow: For Real?

Process Flow Overview

Required Billing Elements - Where do they come from?50% - Patient Access, Registration 15% - Charge Entry Areas15% - Medical Records 20% - Billing

Patient Demographic Data Patients last name, first name, and middle initial Patient address Birth date Male (M) or Female (F) Marital Status Admission date or start of care date

Encounter Specific Hour patient was admitted for inpatient or outpatient care Occurrence Codes Code indicating the priority of admission--1 indicates emergency; 2 urgent;

3 elective; 4 newborn; and 9 information not available. Code indicating the source of admission or outpatient service Provider has patient signature on file permitting release of data (Y or N) Principal Diagnostic Coding (ICD-9-CM code) Admitting Diagnostic Coding (ICD-9-CM code)

Insurance Information The name and number identifying each payer that payment is expected Assignment of benefits (Y) yes; (N) no The name of the patient or insured individual Relationship of the insured (person having insurance) to the patient Insured’s identification number assigned by the payer organization The group name/plan through which the insurance coverage is provided The insurance group number Employment status code Employer’s name and address

Required Elements:

Revenue Cycle – Where Does the Information Come From?

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Access: Metrics

Registration accuracy rate Denials

No Authorization Not Eligible

Telephone Statistics Hold Times Abandonment Rates Other

Point of Service Collections “Red Flags” – Incorrect Claim Demographics

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HIM: Metrics Discharges Not Final Billed (DNFB) Turnaround Times

Dictation/Transcription Record Requests & TAT CDMP

Queries Rate Response Rate Agreement Rate

RAC Audits & Timeliness Responses

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PFS: Metrics Cash Expected Reports Days in A/R Aging Analysis by Payer Unbilled Accounts Receivable Late Charge Postings by Service Area Claim Denial Volumes / Amounts / Types Bad Debt / Bad Debt Recovery Levels Cost to Collect

Top Issues Influencing Health Care Industry

Record spending on health information technology Significant changes in benefit plan design, plan pricing and the health

plan landscape New risks and opportunities may emerge as payment models shift from

fee-for-service to new models that focus on performance, health outcomes and shared cost savings

Health organizations may feel the trickle down effect of decreased utilization by price sensitive consumers.

A further uptick in merger and acquisition activity to share administrative burdens and IT investments, gain market share and fill strategic gaps.

Pharmaceutical companies see an opportunity to increase their visibility with consumers, influence health outcomes and reduce healthcare costs while increasing revenue using digital strategies and technology.

The use of mobile health and wireless technologies by all health organizations is expected to continue to surge.

Source: PwC 2010 18

Source: OHA 2010 19

Revenue StreamWhere the Money Comes from...

Insurance by Percentage Enrolled

20Source: Kaiser Family Foundation 2010

21

Average Health Insurance Premiums and Worker Contributions for Family Coverage, 1999-2009

$4,247

$9,860

$1,543$3,515

1999 2009

Employer Contribution

Worker ContributionNote: The average worker contribution and the average employer contribution may not add to the average total premium due to rounding.

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009.

$5,791128% Worker

Contribution Increase

131% Premium Increase

$13,375

On the Rise…

Group Health Plan premiums up 9% with expectations of 6% in 2012

High Deductible Health Plans continue to rise

Deductibles and Out of Pockets Increasing 22%

Charity Care, Government Payors Increasing

1.3 Million Uninsured equivalent to the population of Columbus22

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Adults Living in Poverty

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Market Conditions State budget issues continue

Traditional Medicaid/Medicaid Managed Care wanting relief More Ohio residents live below the poverty level High Penetration of Self-Insured Employers Shifts of health care costs to Consumers

Increases in Deductibles Increases in Co-Pays But, still coverage offered from employers

Most markets are dominated by few payors Smaller Payors being closed out of the Market Aggressive Managed Care payors

Movements to more complicated contracts

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Market Conditions Reimbursement Variances

Commercial Payors Continue to Subsidize Government Payors

High Deductible Health Plans Increase Deductibles increasing too

Quality Scores tied to Contract Increases/Consumerism Hospitals Physicians

Multi-Year Contracts with Payors Transparency Growing

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Charges, Payments, and Cost Charges are the amount the hospital lists as the

price for services. Very few pay this “sticker price.” Payment or Reimbursement is the amount the

hospital actually receives in cash for its services. Private insurers, public insurers, Self Pay and the

uninsured all pay different amounts for the same services. Payment can be either more or less than what it costs the hospital to provide a given service.

Cost is what it actually costs the hospital to provide the services.

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Reimbursement Methodologies

Hospitals Percent of Charge Per Diems Case Rate Payment

Diagnosis Related Groups (DRGs)

Medical Severity (MS) DRGs

Globals Ambulatory Patient

Groupings (APGs) Ambulatory Payment

Classifications (APCs) Other

Carve-Outs

Professional Services Fee For Service

discounts Fee Schedules Payment based on

Resource Based Relative Value Based System (RBRVS)

Capitation Withholds Pools

Case Rates

CostGovernment Reimbursement

Charge

Commercial Reimbursement

Subsidies and Payor Mix

Note: Solid lines are status quo; dashes represent future state with costs, reimbursement, and charges shifting.

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Contracted Fee Schedule Match

Source: AMA 2011 National Insurer Report Card 31

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Administrative Costs

Pre-Authorizations Complex Benefit

Designs Limitations of Network Denials Coordination of Benefits Audits

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Importance of POS Collections Recent Studies on the “Tipping Point” –

Financial Hardship Limit – found that when the total amount billed to the patient reached 3.5% of the family's gross income, the likelihood of paying the bill dropped dramatically.

Source: TransUnion/NorthShore LIJ Study

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Modern-Day Bounty Hunters

RAC: Recovery Audit Contractors Medicare

MAC: Medicare Administrative Contractors The new Fiscal Intermediary

MIC: Medicaid Integrity Contractors Medicaid

Managed Care Audits

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RACs Findings

85%

4%4%6%

2%

Outpatient InpatientSNF OtherRehab

35%

17%8%

40%

Incorrectly CodedOtherNo/Insufficient DocMedically Unnecessary

3-7 percent of revenue on a variety of community benefit and charity care activities is likely adequate.

An IRS study found that 9 percent of revenue was spent on community benefit.

Nearly 60 percent of the hospitals surveyed provided less than or equal to 5 percent of revenue on uncompensated care

Twenty percent of hospitals surveyed reported total community benefit spending of less than 2 percent of revenue.

Source: Kaiser Daily Health Policy Report Feb 2009

Charity9

8

7

6

5

4

3

2

1

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Revenue Cycle Management Strategies

A CFO’s Focus on Revenue Cycle

Vendor Management Denials Management Technology Optimization Point of Service Collections Strategic Pricing Contract Management Compliance Documentation/Coding.

Source: Interview with: Vince Schmitz, Senior Vice President & CFO, MultiCare Health System.

Expanded Coverage

Payment Cuts New Coverage Requirements

New Economic Incentives

Eligibility Processes

Denials Prevention

Charity Care Policies & Processes

ICD-10

C2C Rational Pricing Documentation & Coding

Physician Integration

ACO/Bundled Payments

Revenue Cycle & Health Care Reform

Positioning for the Future

Rev

enue

Cyc

le im

prov

emen

ts

QUESTIONS