Details and Dollars: Using Data and Analytics to Optimize Revenue Cycle Performance
0 likes698 views
The document discusses strategies for optimizing revenue cycle performance in healthcare using data analytics, highlighting the importance of a comprehensive assessment to identify revenue loss and improve cash collection processes. It provides insights on managing accounts receivable, appropriate staffing models, and emphasizes the need for changes due to historical pressures and challenges, particularly in the context of the COVID-19 pandemic. Key recommendations include enhancing operational efficiencies, improving time-of-service collections, and deploying technology to streamline revenue cycle management.
Details and Dollars: Using Data and Analytics to Optimize Revenue Cycle Performance
- 1. Details and Dollars: Using Data and Analytics to to Optimize Revenue Cycle Performance Health Catalyst Financial Advisory Services July 29, 2020
- 2. © 2020 Health Catalyst • How to conduct a comprehensive, data-driven revenue cycle assessment to rapidly determine the root cause of lost revenue and the erosion of cash collections. • How to use data and best practices to challenge current processes and effect change. • How to determine if accounts receivable reserve formulas acknowledge historical managed care discounts, increases in uncompensated care funding, and deterioration of revenue cycle processes. • Appropriate staffing models and productivity tools to maximize efficiency. Objectives
- 3. The Need for Change Historical Perspective Financial Impact of the Revenue Cycle What is Revenue Cycle Management? Keys to Success Looking Ahead Questions Agenda
- 4. © 2020 Health Catalyst USS Montana…identify the need for change 4
- 5. © 2020 Health Catalyst Strategic Priorities 2018 2019 1 Cost containment 24.5% Revenue growth 21.1% 2 Revenue growth 23.8% Population health and ACO strategy 20.0% 3 Population health and ACO strategy 16.8% Cost containment 13.3% C-suite executive ranking of strategic priorities in 2019 Source: Advisory Board Research Annual Health Care CEO Survey - 2019 Challenges • Revenue pressures • COVID-19 recovery • Budget constraints • Labor reductions • System wide expense reductions • Limited Capital Spending Initiatives • Supply chain improvements • Quality and safety initiatives • Pay for performance • Technology investments Additional Opportunities • Optimize revenue • Reduce leakage • Decrease denials and controllable loss • Optimize staff efficiency • Accelerate and increase cash
- 6. © 2020 Health Catalyst Historical Hospital Margins 6 Total Margins/Operating Margins • Average operating margins have increased over the past decade due to aggressive cost reductions and revenue optimization initiatives but estimated to be -8% in 2020 due to COVID-19 • Historical total margins remain flat due to decline in non-operating income and expected to decline significantly in 2020 Negative Operating Margins • 1 in 3 hospitals operate at a loss with more projected in 2020 due to COVID-19 • Negative operating margins deplete cash reserves, which hinders the ability to strategically invest capital and replace existing infrastructure 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 % of Hosp. w/ Neg. Operating Margins Source: AHD Chartbook, Modern Healthcare ? ?
- 7. © 2020 Health Catalyst Financial Considerations - IMMEDIATE 7 Trend daily volumes by site of service Closely monitor daily claim production throughput Monitor unbilled balances and unapplied cash balances Track daily cash collections by payer Monitor labor and supply costs Incorporate Emergency Waivers and new codes into business rules and workflows Access recovery dollars available Analyze impact of elective surgery cancelations Identify impact COVID-19 had on length of stay and CMI* Conduct a gap analysis to identify revenue and contribution margin post-COVID19 Quantify cashflow impact of delaying or losing 4-8 weeks of elective surgeries Identify workforce directly impacted and what additional contract labor costs incurred Redeploy working capital to essential services Develop and implement a revenue recovery plan Quantify the magnitude of extraordinary inventory costs to manage supply shortages Determine the impact of investment income and balance sheet market losses Quantify impact of pension, swap, or other liabilities that will be impacted by declining interest rates DAILY OPERATIONS IMPACT ANALYSIS BALANCE SHEET *Approx. 8 Medicare diagnosis-related groups (DRGs) that included pneumonia, respiratory infections, acute respiratory distress syndrome, sepsis, and extracorporeal membrane oxygenation life support.
- 8. © 2020 Health Catalyst Where are the Opportunities in Revenue Cycle? ($000's) Gross Charges $ 4,164,731 Contractual Adjustments (2,832,017) Net Patient Service Revenue $ 1,332,714 Other Operating Revenue 90,981 TOTAL OPERATING REVENUES 1,423,695 OPERATING EXPENSES Salaries/Wages 385,834 Benefits 111,343 Supply 327,766 Contracted Services 214,458 Other Expenses 166,267 Depreciation 53,603 Management Contract Expense 39,336 Total Operating Expenses 1,298,607 NET INCOME FROM OPERATIONS $ 125,088 Charge Capture, late charges, missed charges Adjustments, underpayments, denials, bad-debt, contracting strategy, charity care/ financial counseling, OTHER Labor, cost to collect, organizational structure, automation Outsourcing, agency collections, vendor management ASSETS ($000's) Cash and cash equivalents $ 304,600 Accounts receivable 140,300 Other current assets 71,100 Capital asset, net 878,400 Long term investments 268,700 Other noncurrent assets 112,200 Deferred outflows of resources 10,900 Total assets 1,786,200 LIABILITIES Current liabilities 190,500 Noncurrent liabilities 497,900 Total liabilities 688,400 NET POSITION Net investment in capital assets 455,400 nonexpendable other 200 Restricted expendable 11,900 Unrestricted 630,300 Total net position $ 1,097,800 Cash collections AR, DNFC, DNFB Patient refunds, credit balances Income Statement Balance Sheet 8
- 9. © 2020 Health Catalyst Strategic Alignment Example 9 - Patient Throughput - Labor/Productivity - Care Management - Cost Management - Supply Chain Enhance Operations Improve Outcomes Strategic Initiatives Strategic Growth Physician Enterprise - Readmissions/ Hospital Acquired Conditions - Population Health - Patient Safety - Patient Experience - Market Share - Primary Care Development - Strategic Investments - Service Line Strategy - Affiliation/Merger - Revenue Cycle - Productivity - Payer Rates/ Payer Mix - Expenses - Denials - Partial Payments TacticalInitiatives Opportunity: $10,000 - $20,000 per physician
- 10. © 2020 Health Catalyst Revenue Optimization 10 REVENUE CYCLE LEAKAGE • Denials, controllable loss • Bad-Debt reduction • Charge Capture/Documentation DIFFERENTIATE • Quality/Patient Experience • Service offering • Innovation BUY MARKETSHARE • Acquisition/Merger • Discount contracts • Outpatient/Physician services RevenueGrowth OPERATIONS IMPROVEMENT • Clinical variation • Care management • Labor/Supply cost • Patient safety • Improve outcomes • Population health
- 11. © 2020 Health Catalyst What is the best practice for % of total hospital revenue collected at time of service from patients? a) 0.5% – 8% b) 1.0% – 14% c) 1.5% – 24% d) 2.0% – 54% Question #1 – POS Collections 11
- 12. © 2020 Health Catalyst Point of Service Collections 12 0.13% 0.43% 0.57% 0.86% 0.95% 1.33% 2.25% 2.68% 3.38% 10th 20th 30th 40th 50th 60th 70th 80th 90th Nearly 1% of total hospital revenue is collected at the time of service for the 50th percentile of reporting organizations and over 3% from high performing organizations. Point-of-service collections have become more important to hospitals as high-deductible policies become more common and as the number of uninsured patients increase, especially with the rise in uninsured from COVID-19. Successful organizations deploy the following principles to improve time of service collections: 1. Engage the patient early in the process 2. Establish mechanisms to verify eligibility, estimate payments and predict likelihood of payment 3. Ensure clinical buy-in of financial initiatives to gain support 4. Establish measurable goals and offer incentives for employees to exceed 5. Establish payment plan mechanisms Source: Health Catalyst Advisory Services, Advisory Board
- 13. © 2020 Health Catalyst The Journey of a Claim 13 PRE- REGISTRATION REGISTRATION CHARGE CAPTURE UTLIZATION REVIEW REMITTANCE PROCESSING PATIENT RESPONSIBILITY 3RD PARTY FOLLOW-UP CLAIM SUBMISSION DENIAL PREVENTION CODING
- 14. © 2020 Health Catalyst Claims Throughput and Efficiency 14 11 9 55 61 4 2 38 28 - 10 20 30 40 50 60 70 Discharge to Code Code to Bill Bill to Insurance Payment Insurance Payment to Patient Payment AverageDays Pre Post Account life cycle example… • Average time for claim to be adjudicated is 136 days • Significant delays occur throughout the process • Delays increase write-offs and reduce cash flow 11 9 55 61 Discharge to Code Code to Bill Bill to Insurance Payment Insurance Pmt to Patient Pmt AverageDays - 20 40 60 80 100 120 140 160 Improving the account life cycle… • Identify bottlenecks that delay throughput • Prioritize improvement initiatives • Quantify resources required by function • 25% reduction in resources required 279 worked hours per day 209 worked hours per day
- 15. © 2020 Health Catalyst Revenue Yield Impact 15 Expected Payment Insurance Patient Total Medicare 206,000 4,000 210,000 Medicaid 105,000 - 105,000 Commercial 148,000 27,000 175,000 Managed Care 149,000 26,000 175,000 Self Pay - 35,000 35,000 $ 608,000 $ 92,000 $ 700,000 Actual Payment Insurance Yield % Patient Yield % Total Yield % Medicare 203,200 99% 1,900 48% 205,100 98% Medicaid 102,900 98% - 0% 102,900 98% Commercial 143,100 97% 20,700 77% 163,800 94% Managed Care 144,800 97% 21,100 81% 165,900 95% Self Pay - 0% 34,300 98% 34,300 98% $ 594,000 98% $ 78,000 85% $ 672,000 96% Charges 5,000 5,000 Contractual (3,000) (3,000) Expected Revenue 2,000 2,000 Insurance Payment 1,600 1,400 Denied or underpaid Patient Payment 400 50 Partial pay 2,000$ 1,450$ Yield: 100% 73% Example 50% 60% 70% 80% 90% 100% 110% Week 1 Week 26 Month 52 Insurance Yield Patient Yield $50 million $30.1 million Example
- 16. © 2020 Health Catalyst What is the median revenue cycle cost-to-collect $1.00 (including patient access, HIM and business office functions)? a) 1.5% – 2% b) 2.0% – 15% c) 3.0% – 32% d) 4.0% – 51% Question #2 – Cost-to-Collect 16
- 17. © 2020 Health Catalyst Cost to Collect 17 2.8% 2.3% 1.9% 4.2% 3.0% 2.6% 4.0% 3.0% 2.0% 3.7% 3.0% 2.2% 3.5% 2.9% 2.0% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% Low Performance Median High Performance 2011 2013 2015 2017 2019 est. Median cost to collect has remained steady at 3.0%. Cost to collect is a trending performance indicator that measures efficiency and productivity. HFMA cost to collect definition: “Total” Revenue Cycle Cost divided by “Total Cash Collected. Total costs include: patient access, patient accounting, HIM, outsourcing, benefits, subscription fees, software (optional), and “hard” IT (optional). Source: Health Catalyst Advisory Services, Advisory Board High performing organizations have reduced costs through centralization, automation and improved efficiency
- 19. © 2020 Health Catalyst What is Revenue Cycle Management 19 Pre-Service Time-of- Service Discharged Not-Final- Billed Final Billed Collections Final Payment Patient Access Revenue Integrity Business Office Reimbursement Scheduling / Pre-registration Verification / Authorization POS Collections Financial Counseling Registration Charge Capture Clinical Documentation Chargemaster Management Coding HIM Throughput Billing A/R Follow-up Management Payment Posting Customer Service Collections Agency Management 3rd Party Contracting Denials Management Contract Management Pricing Strategy Fees Schedule Revenue Recognition
- 20. © 2020 Health Catalyst Patient Access Leading Practices Staff have at least one quality and one productivity metric that are regularly monitored and part of their evaluation process. Physician practices use a standard scheduling form to gather required information in accordance with hospital's requirements. Estimation software is utilized and patients are informed of any past and/or current financial responsibilities (co-pays, deductibles, etc.) and provided with opportunity to pay. Pre-registration staff utilize automated worklists that facilitate daily workflow and productivity tracking. Patient are notified and provided the opportunity to meet with a financial counselor prior to the scheduled visit when coverage, benefits, or authorization issues are identified. A standardized and centralized patient registration function is in place. Policies and procedures are well documented. Registration accuracy is monitored through a formal audit process. Leading Practices
- 21. © 2020 Health Catalyst Revenue Integrity All charges are completely and accurately documented and all charges are posted to the patient account within 24 hours of the time of service. Regular charge audits of all key charge capture areas are performed to ensure complete and accurate charge capture processes. An automated charge reconciliation tool is utilized to review charges to improve accuracy and completeness of charges. The chargemaster is reviewed and updated on a regular basis and formal chargemaster reviews are conducted with clinical departments on an annual basis. HIM staff have at least one quality and one productivity metric that are regularly monitored and part of their evaluation process. AR in DNFB status is closely monitored to ensure efficient throughput of accounts through HIM. A fully electronic medical record system is utilized to facilitate efficient processing of patient records and sharing of information. Leading Practices
- 22. © 2020 Health Catalyst Business Office A well-defined and documented process is in place to work account bill holds in a timely and efficient manner. Bill edit capabilities are current and being utilized to support the creation of a clean claim before it is sent to payer. Billing staff utilize automated worklists that facilitate daily workflow and productivity tracking. Staff are organized by payer type, with certain team members dedicated to high-balance follow-up. Accounts are prioritized in descending dollar order. Controls are in place to follow-up on accounts > 30-days and < 15% of receivables is > 90-days old Online third-party payer inquiry sites/systems are utilized to check/verify status of accounts. Electronic posting technology extracts all key data elements from the ERA and posts them to the patient account including intelligent scanning technology for paper remittances. Patient complaints are tracked and addressed, as well as trended for training purposes. Leading Practices
- 23. © 2020 Health Catalyst Reimbursement A well-defined payer contracting strategy is in place as well as specific strategies for all payers with which the hospital does business. Highly utilized procedures, drugs, and implantable devices are carved out to ensure proper reimbursement for highly utilized procedures. An internal analysis of all contracts are performed and annual payment performance analyses are performed for all contracts. A dedicated individual/team, including case management and clinical appeals is in place to address denials and other payment variances. Denials outcomes and trends are communicated to appropriate departments and continuous improvement efforts are in place to reduce denials on an ongoing basis. Contracts are monitored for compliance by auditing actual payments against expected reimbursement with a payment target of 98% expected reimbursement. Prices are set to allow for "commodity" outpatient services to compete on price and revenue generation is transferred to "proprietary" inpatient services to protect market share and optimize revenue margins. Leading Practices
- 24. © 2020 Health Catalyst What is the best practice for fatal denial write-offs as a % of total net revenue? a) 0.5% – 28% b) 1.0% – 38% c) 1.5% – 16% d) 2.0% – 18% Question #3 – Fatal Denials 24
- 25. © 2020 Health Catalyst 90% 10% 25 Commercial/ Managed Care 47% Medicare 33% Medicaid 17% Other 3% 10% of initial denials are often fatal denials and written-off 47% of initial denials are commercial/ managed care 51.54% 75.73% 50.02% 75.09% 51.28% 93.37% 41.18% 77.22% 17.53% 79.43% 50th %ile 90th %ile Commercial Medicaid Medicare Medicare Advantage Other Payers Initial Denials and Fatal Denials Fatal denials range from 0.5% to 1.5% of net revenue Initial denials are payer response indicating no payment or only partial payment for services Write-offs/fatal denials are provider transactions to adjust balances off active AR and record the lost revenue on the general ledger While initial denials can range from 5-15% of Gross Revenue, 90% can be overturned after significant rework and resubmission efforts Appeal Win Rates by Payer Source: Health Catalyst Advisory Services, Advisory Board
- 27. © 2020 Health Catalyst Keys to Success 27 Measurement DisciplineAccountability
- 28. © 2020 Health Catalyst Measurement 28 Examples of measurements implemented: • Revenue strength • Pre-service efficiency • Point of service collections • Uncollectable Accounts • Revenue Cycle Expense • Revenue Cycle throughput and efficiency • Initial/Active/Fatal Denials (Authorization, Eligibility, Coding, Technical) • Appeals Incorporate the right metrics, at the right level, at the right time
- 30. © 2020 Health Catalyst Discipline 30 Workflows: A powerful tool to establish a standardized, disciplined approach to any process within the revenue cycle… …to effectively train staff and help them visually understand a process, especially when decisions must be made during the process chain
- 31. © 2020 Health Catalyst Developing KPIs 31 What to measure? • Don’t just collect data; Data Information • Metrics aren’t KPIs • KPIs help staff make better decisions to solve problems • Choose KPIs according to relevancy • Apply KPIs where you can affect change • Develop indicators for each process at the functional level Important decisions will be made based on KPIs. Choose them wisely.
- 32. © 2020 Health Catalyst Establish the Right Metrics for the Right Role 32
- 33. © 2020 Health Catalyst What is the median number of days of revenue outstanding held in coded not-final-billed status? a) 2 days – 7% b) 3 days – 33% c) 5 days – 44% d) 7 days – 16% Question #4 – Coded-not-final-billed 33
- 34. © 2020 Health Catalyst Coded-not-final-billed 34 9.2 7.6 4.6 4.4 3.7 2.3 2.0 1.2 1.1 10th 20th 30th 40th 50th 60th 70th 80th 90th DaysRevenueOutstanding The median days of revenue outstanding that is coded, waiting for final bill is 3.7 days Discharged not final billed (DNFB) cases where claims remain incomplete due to coding or documentation gaps represent an ongoing challenge for hospitals. Ineffective management of this caseload can negatively impact cash flow. Coded not final billed is where claims have been coded but not submitted to the payer and are pending additional work to meet requirements for final billing 4.0 1.9 3.7 1.1 50th %ile 90th %ile Dischargeto Code Codeto Final Bill 7.7 3.0 Source: Health Catalyst Advisory Services, Advisory Board Coded not final billed Unbilled AR
- 36. © 2020 Health Catalyst Process Observation 36 Interviews / Process Observation Sample Output How does our organization compare to leading practices?
- 37. © 2020 Health Catalyst Quantitative Assessment 37 How does our organization compare to industry performance? Sample Output Annual Income/Expense Opportunity Annual Amount Annual Metric Performance Leading Practice Cash Collection to Net Revenue $829.1M 73.0% 100% Bad Debt $42.0M 1.0% 1.5% - 3.0% Charity Care Write-offs $101.5M 2.5% 1.5% - 3.0% Net Dollar Write-Offs from Denials $14.1M 1.2% 0.5% - 1.0% Cash Acceleration Opportunity Current Amount Current Metric Performance Leading Practice Point-of-Service Collections $1.4M 0.2% 1.5% - 3.0% Initial Payer Denials - Gross Denied Dollars $473.6M 11.4% 4.0% - 6.0% Discharged-not-Final-Billed (DNFB) $40.9M 4.3 4 – 6 days Days of Gross Revenue in A/R $643.2M 57.6 35 - 45 days 3rd Party Billed A/R >90 Days (gross $) $299.0M 52.2% 15% - 20% Payroll System Income Statement / Balance Sheet Billing & Patient Accounting Departmental Revenue / Expense Denials Patient Access Benchmarking Analysis Data Sources + Quantified Opportunity
- 38. © 2020 Health Catalyst Unpaid Claims – by function example 38 A comprehensive analysis of unpaid claims identifies: • Partial-pay accounts • Accounts that may never have been denied These remain unpaid or closed and adjusted with no further follow-up. This analysis prioritizes improvement efforts.
- 39. © 2020 Health Catalyst Other success stories: https://www.healthcatalyst.com/knowledge-center/success-stories/ 39 Organization Overview Operations Assessment Implementation Design Outcome $2.7 million PATIENT STATUSING ANNUAL NEW REVENUE $700 million + ANNUAL NET REVENUE (NPR) 2 HOSPITALS (3 IN SPRING 2020) 9% OPERATING MARGIN 1.1% of NPR CONTROLLABLE LOSS (FATAL DENIALS) 0.7% of NPR TIME OF SERVICE COLLECTIONS 19% OBSERVATION RATE $2.8 million DENIAL AVOIDANCE ANNUAL NEW REVENUE $8.8 million TIME-OF-SERVICE CASH ACCELLERATION $400k ANNUAL COST AVOIDANCE $5.9 MILLION ANNUAL IMPROVEMENT C-SUITE ENGAGEMENT RESOURCE NEEDS WORKFLOW REDESIGN STRATEGIC ROADMAP TECHNOLOGY ENABLEMENT MONITOR PERFORMANCE 27 hour OBSERVATION ALOS Example Success Story
- 40. Looking Ahead 40
- 41. © 2020 Health Catalyst Rightsizing the Funnel 41 REEBILL, REWORK IDENTIFY ISSUES LOW QUALITY AUDIT FINANCIAL CLEARANCE 1st PASS ACCURACY Effort Effort HISTORICAL FUTURE Clinical Financial
- 42. © 2020 Health Catalyst What are your organization’s plans in terms of adoption of advanced analytics (artificial intelligence, robotic process automation, machine learning) to change revenue cycle workflows and improve performance? a) Currently utilizing advanced analytics to drive revenue transformation – 5% b) Currently building and adopting advanced analytical tools – 36% c) An advanced analytics roadmap exists, and plans are established to build and deploy in the next 6-12 months – 0% d) Developing an advanced analytics roadmap is part of a strategic initiative next year and beyond – 59% Question #5 – Advanced Analytics 42
- 43. © 2020 Health Catalyst •Surface data and analytics, visualize HISTORICAL trends •Compare VARIANCE to baseline and good, better, best •Implement improvements and increase performance Extract/Stage Data Referral Leakage/ Physician Turnover Apply AI Frame Opportunity Predict Overturned Denials Other Revenue Improvement opportunities Retrospective Trending Analytics Prospective Advanced Analytics 43 •Aggregate revenue cycle data from multiple systems •Validate and normalize •Apply AI modeling •Identify PATTERNS (payers, policy variation, human action) •Predict behaviors •Update AI models Translate Patterns to Improvement Workflow Intervention •Visualize output (i.e. PowerBI) •Surface ADVANCED analytics •Identify operational improvements •Design future state process •Redesign workflow •Optimize technology •Stakeholder accountability Future considerations Engagement (Current/Future) AI Integration Data and Analytics Health Catalyst Advisory Services Revenue Cycle Advanced Analytics
- 44. The Healthcare Analytics Summit 2020 - Virtual Visit hasummit.com to register and learn more • Industry-Leading Keynote Speakers • 22 Educational Breakout Sessions • Analytics Walkabout, Networking, and More • CME Accreditation for Clinicians Sept. 1 – 3, 2020 (half-day sessions) o Eric Topol, MD o Amy P. Abernethy, MD, PhD o Michael Dowling o Brent C. James, MD, MStat o Vice Admiral Raquel C. Bono, MD o Sampson Davis, MD o Laura Craft o Ari Robicsek, MD o Anita Pramoda o Yonatan Adiri o Sadiqa Mahmood
- 45. © 2020 Health Catalyst Would you like to considered for a complimentary pass to attend this year’s virtual Healthcare Analytics Summit? • Yes • No Question #6 – Complimentary HAS Pass 45
- 46. Questions
- 47. Contact Information Marlowe Dazley marlowe.dazley@healthcatalyst.com (801) 243-3202 Todd Halpin todd.halpin@healthcatalyst.com (801) 243-9387