How To Reduce Costs And Improve Financial Performance using NextGen Practice Management
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The document outlines 11 best practices that medical practices can implement to improve their financial performance, such as collecting patient balances on the same day as service to speed cash flow, establishing performance standards and providing feedback to employees to boost productivity, and claims scrubbing to reduce denial rates and unnecessary work. Implementing these best practices could potentially result in annual financial gains ranging from thousands to over $100,000 per physician, depending on the specific practices adopted and metrics of the individual clinic.
How To Reduce Costs And Improve Financial Performance using NextGen Practice Management
- 1. How to Reduce Costs & Improve Financial Performance with NextGen Practice Management The 11 Best Practices to Improve Financial Performance James Muir VP Sales Southwest NextGen Healthcare Information Systems, Inc.
- 2. Now Presenting - James Muir • Presenter – James Muir – Vice President Sales Southwest
- 3. Disclosure • There are a lot of stats in this presentation • I have done my best to use the best sources – Typically the MGMA or Physician’s Practice • To keep the slides simple I have: – Summarized the return for each best practice – Normalized the returns to per doc per year • Using primary care volumes & metrics
- 4. Top 30 Challenges for Medical Practices Top 15 Challenges Rank Dealing with operating costs that are rising more rapidly than revenues 1 Maintaining physician compensation levels in an environment of declining reimbursement 2 Collecting from self-pay, high-deductible health plan, and/or Health Savings Account patients 3 Managing finances with the uncertainty of Medicare reimbursement rates 4 Recruiting physicians 5 Negotiating contracts with payers 6 Selecting and implementing a new electronic health record system 7 Modifying your physician compensation methodology 8 Participating in the Medicare Physician Quality Reporting Initiative 9 Hiring and retaining quality staff 10 Participating in commercial pay-for-performance programs 11 Understanding physician performance-rating criteria 12 Preparing for participation in the Medicare e-prescribing incentive program 13 Improving patient flow through the practice 14 Dealing with the Medicare physician credentialing process 15 Source: MGMA 2009 Survey
- 5. Sum up challenges Top 30 Challanges by Category 1. Cut Costs / Improve 17% Revenue 24% 2. Improve 31% Operations 28% 3. Strategic Initiatives Cut Costs / Improve Revenue Improve Operations Strategic Initiative Reporting 4. Reporting Source: MGMA 2009 Suruey
- 6. Cost Structure for Medical Practices 5% 1% 5% 2% 5% 55% Payroll & Benefits 5% Office Space Medical Supplies & Drugs 8% Laboratory Professional Liability Business Supplies Equiptment & Furnishings Outside Professional Services 14% Promotion/Marketing
- 7. What have some groups tried? • Hiring freezes • Freezing pay increases • Cutting perks – Getting rid of the break room for chart space – Eliminating Bottled Water, Coffee, etc. • What most these have in common: – Negative Impact – Low Morale & increased turnover – downward spiral – STORY: We’re freezing hiring (but paying $86,000 in overtime) • Invest in automating first
- 8. Where can run to find efficiency & cut costs?
- 9. Where the Physician Money “Leaks” Actually Come From • Enhanced authorization and certification • Eligibility and authorization Denial Management 2% – 4% • Complete and timely billing • Improved registration data quality • Better front office processes and technology Reduction of aged • Improved follow-up processes all financial classes A/R and 2% - 3% • Access to state-of-the-art, collection tools Bad Debt Write-offs Write- 5% – 10% loss of • Enhanced accounts receivable management cash Process and • Process Tasking Workflow 3% - 5% • Processes re-engineered to standards Improvement • Benchmarks and standards implemented training and certification • Automated contract management • Enhanced management and performance evaluation Underpayments • Technology-enabled tools to monitor payer compliance 3% – 5% with contract terms and conditions • Timely follow-up of underpayments MGMA and HFMA study of Physician Practices 2009
- 10. Top 11 Best Practices to Improve Financial Performance Ranking Best Practice 1 Collect patient balances same day of service 2 Establish performance standards, report & provide feedback 3 Claims Scrubbing 4 Tracking & Preventing Denials 5 Improve statement quality & frequency 6 Create & Enforce Write-off policy 7 Manage Insurance Under-payments 8 Remind Patients of Appointments 9 Verify Eligibility 10 Outsource Electronic Statements 11 Maximize Electronic Remittance Advice
- 11. Top 11 Best Practices to Improve Financial Performance by Category Category Best Practice Process Collect patient balances same day of service Process / Report Establish performance standards, report & provide feedback Process / Report Claims Scrubbing Process / Report Tracking & Preventing Denials Process Improve statement quality & frequency Process Create & Enforce Write-off policy Process / Report Manage Insurance Under-payments EDI Remind Patients of Appointments EDI Verify Eligibility EDI Outsource Electronic Statements EDI Maximize Electronic Remittance Advice
- 12. Application Run-through 1. Briefly run though some aspects of EPM – Focus on today’s top 11 2. Return and calculate the financial upside if each best practice 3. Conclude
- 13. Worklog Manager The Worklog Manager tells clinic staff: • What to do • When to do it • How to do it • Measures Productivity
- 14. The Worklog Manager Auto Create Auto Complete Event Event
- 16. 1. Collect Patient Balances Same Day of Service “Keying in at checkout is the most efficient way to enter charges. Real-time processing of work is the most efficient.” – Elizabeth Woodcock, MBA, FACMPE From Mastering Patient Flow, MGMA
- 17. 1. Collect Patient Balances Same Day of Service • Three Stars that Must be Aligned 1. 90% of charges must be coded by the time the patient hits checkout • EHR makes this easy 2. Your payer contract must be in your system • So patient responsibility can be determined 3. Your building must physically allow for collection to happen at checkout • Or congestion will result • Dentists have been doing this for years
- 18. 1. Collect Patient Balances Same Day of Service • Collecting Patient Balances Same Day Improves Financial Performance Because: 1. Eliminates Statement Costs 2. Patient Balances are Collected sooner • Speeds Cash Flow & Reduces A/R Days 3. Labor associated with collecting final balances is eliminated
- 19. 1. Collect Patient Balances Same Day of Service - Metrics Metrics Low High Range of Average Practice A/R days 40 47 Source: Physicians Practice Range of A/R days reduced (32 & 35 days in A/R respectively) 20% 26% One-time cash infusion as patient days are collected (per doc) $89,400 $152,360 Statement costs are reduced (per doc) $24,000 $86,000 Labor costs to collect private balances over 60 days (per doc) $10,185 $13,352 Source: Dartnell Institute Total upside of collection patient balances to same day of $34,185 $99,352 service *not counting* the one-time cash infusion (per doc) *Normalized for Primary Care Per Provider Per Year
- 20. 2. Establish Performance Standards, Report & Provide Feedback • Setting performance standards & automating feedback improves financial performance because: – Defining Expectations Improves Performance • Study: Engage Employees & Boost Performance, Hay Group. 2002 Robinson, Dilys and Sue Hayday – Hawthorne Effect – Feedback Changes Behavior Which Prevents Errors
- 21. The Hawthorne Effect • The Hawthorne Effect is a form of reactivity whereby subjects improve an aspect of their behavior simply in response to the fact that they are being studied. • Q. How Much? • A. It varies. On average 30% – Study: Richard E. Clark and Timothy F. Sugrue (1991, p.333) in a review of educational research say that uncontrolled novelty effects cause on average 30% of a standard deviation (SD) rise. • “What get’s measured get’s managed.”
- 22. Feedback Changes Behavior Which Prevents Errors • Most employees want to do a good job. • Managers don’t provide frequent enough feedback • Feedback prevents errors • Unbiased feedback is most effective – Study: Feedback & Management: A review of research into behavioural consequenses, Ian R. Eggleton University of New South Wales, USA 1991 • Q. Does posting results in the lunchroom work? • A. Yes. – High performers perform better, and low performers are unaffected. • Study: “The improved outcomes from rank-order grading largely arise among the high performers, but not at the expense of low performers.” International Review of Economics Vol. 4, issue 1 (2005), pp. 9-19
- 23. 2. Establish Performance Standards, Report & Provide Feedback Metrics Metrics Low High NextGen clients using Worklog Manager utilized an average of 19 Hours 69 Hours 44 hours (or 1.1 FTE) less per provider than the national (.475 FTE) (1.725 FTE) MGMA average Study: NextGen Healthcare 2008, MGMA Cost Survey 2008 using 2007 data MGMA Staffing Average FTEs per Physician 4.19 FTE 5.13 FTE Study: MGMA Cost Survey 2008 using 2007 data Total Annualized Upside Range $27,456 $102,960 *Normalized for Primary Care Per Provider Per Year
- 24. 3. Claims Scrubbing • Claims Edits validate claims for: – Demographic Errors – Coding Edits (i.e. CCI, LMRP) – Historical Edits • High-end solutions create automated feedback to prevent errors from happening again.
- 25. Worklog & Claims Edits Registration Providers Claims Edits Engine Coding • Creates Automated Feedback Loop • Create Accountability which Prevents Problems
- 26. 3. Claims Scrubbing Metrics Metrics Low High Average industry-wide denial rate: 5% 15% Source: Physicians Practice Annualized value in reduced claims denial of Improving first- $16,537 $74,692 pass-clean-claim-rate to 98% or 99% Annualized value per doc of labor costs cut by claims $5,269 $31,121 scrubbing & unnecessary work elimination Total Annualized upside per doc for claim scrubbing and $21,806 $105,813 unnecessary work elimination *Normalized for Primary Care Per Provider Per Year
- 27. 4. Tracking & Preventing Denials Process Top 8 Reasons for Denials 1. Patient Registration Errors 2. Lack of Insurance Verification (ineligible) 3. Invalid ICD9 Code at Time of Entry 4. Incomplete information regarding referrals & preauthorizations 5. Duplicate Claims for the Same Services 6. Medical Necessity (correctly linking CPT & ICD9 codes) 7. Complete Documentation for Medical Services Provided 8. Bundled or Non-Covered Services (correctly using modifiers) Source: MGMA, Sarah Larch, MS, FACMPE & Deborah Walker, MBA, FACMPE
- 28. 4. Tracking & Preventing Denials Process • Step 1 – Document reason codes (either manually or automatically via ERA) for each denial • Step 2 – Run denial reports by reason code & by payer to identify patterns • Step 3 – Evaluate reason codes starting with the most frequent – Is it us? Or is it them? • Step 4 – For denials that originate with us make process changes that prevent all clinic originated denials • Step 5 – Repeat steps 2 through 4 monthly
- 29. 4. Tracking & Preventing Denials Metrics Metrics Low High Average industry-wide denial rate: 5% 15% Source: Physicians Practice Annualized value in reduced claims denial of Improving first- $16,537 $74,692 pass-clean-claim-rate to 98% or 99% Annualized value per doc of labor costs cut by claims $5,269 $31,121 scrubbing & unnecessary work elimination Total Annualized upside per doc for claim scrubbing and $21,806 $105,813 unnecessary work elimination • Note: This return calculation is essentially the same as that for Claims Scrubbing. Clean claims obviates the need to work denials so it is important to note that you cannot collect this return twice. *Normalized for Primary Care Per Provider Per Year
- 30. 5. Improve Statement Quality & Frequency • Improving statement quality and frequency improves financial performance because: – It reduces call volume – It improves patient payment compliance
- 31. Typical Call Volumes in a Medical Practice 1400 1200 Not enough capacity (over-utilization) 1000 Call Volume 800 600 400 200 0 Monday Tuesday Wednesday Thrusday Friday Call Volume Staff Bandwidth
- 32. 5. Improve Statement Quality & Frequency Metrics Percent of calls related to billing: 26% 41% Percent of increased call volume on Monday: 30% 42% Average Calls Per day 100 200 Calls related to Billing 26 82 Average Time to field each billing call 7 26 Total Time fielding calls 182 2132 Call volume reduction do to clean statement w more frequency 10% 50% Hourly rate of billers/collectors $ 13.00 $ 26.00 Cost of fielding statement calls $ 39.43 $ 923.87 Cost for clean statement w more frequency $ 35.49 $ 461.93 Saving for clean statement w more frequency $ 3.94 $ 461.93 Business days per year 260 260 Annualized Savings $ 1,025 $ 120,103 *Normalized for Primary Care Per Provider Per Year
- 33. 6. Create & Enforce Write-off Policy • Analyze your bad debt & determine the culprit – Is it self-pay? – Or Payers? • Important to use different adjustment codes for different types of adjustments. Example: – Bad Debt Adjustment – Insurance Adjustment • Have a policy that defines the rules for write-offs • Limit who can do write-offs & how much they can write off without approval • Use Practice Management system to enforce policy
- 34. 6. Create & Enforce Write-off Policy Metrics Metrics Low High Unnecessary Write-offs annually per physician $30,000 $60,000 Source: Physicians Practice Percentage of Unnecessary Write-off eliminated 95% 100% Total Annualized Upside per doc for elimination of $28,500 $60,000 unnecessary write-offs *Normalized for Primary Care Per Provider Per Year
- 35. 7. Manage Insurance Under-Payments Insurance Companies Underpay in 2 Ways: 1. They underpay the expected reimbursement amount Charge Amount $150 Allowable Amount $100 Reimbursement @ 80% $80 Actual Reimbursement $79 Underpayment $-1 2. They misstate the allowable amount Charge Amount $150 Allowable Amount $100 Reported Allowable $95 Reimbursement @ 80% $76 Underpayment $-4
- 36. 7. Manage Insurance Under-Payments • Contract Management Systems are Vital to Prevent Losses due to Insurance Underpayments – Automatic Alerting Systems are Ideal • Losses due to underpayments range from $17,800 to $35,160 annually per physician • Occasionally Dramatically Higher – Jack Reed & Piedmont Metrics Low High Total Annualized Upside per doc for stopping leaks $17,880 $35,160 from contractual underpayments Source: MGMA *Normalized for Primary Care Per Provider Per Year
- 37. 8. Remind Patients of Appointments • Call Stats: – 2% - 4% National No-show rate – 75.7% of practices have staff make telephone reminder calls – 19.3% send postcards/mailers – 18.8% have an automated attendant system make calls – 5.9% have a vendor handle reminders & confirmations • Physicians lose money on no-shows because time is consumed but services cannot be billed (under-utilization) • Clinics lose on average between $9,700 - $35,000 per doc annually due to no- shows depending on the no-show rate. Metrics Low High National no-show rate average 2% 4% Source: MGMA Annual labor costs per doc for those who have staff $3,279 $8,873 make reminder calls Either but not both Total Annualized Upside per doc by eliminating no- $9,700 $35,000 shows (opportunity cost) Source: MGMA *Normalized for Primary Care Per Provider Per Year
- 38. 9. Verify Eligibility • Eligibility Verification is the second largest reason for claims denial • It is one of the easiest things automate in a clinic Metrics Low High Percentage of all claims denied (as reported by the 4% 8% insurance industry. Physician’s Practice reports higher) Source: American Medical Association’s National Health Insurer Report Card for 2008 & Medical Banking Institute Percentage to improve denial rate by: 10% 25% NOTE: The Verden Group estimates reductions in denials due to eligibility in the range of 7 to 35 percent. We are being more conservative here. Annual Labor Expense per physician for manual eligibility $334 $2,496 checking. Low number represents very few checks per year. Total Annualized Upside per doc to automate eligibility $1,800 $14,400 verification *Normalized for Primary Care Per Provider Per Year
- 39. 10. Outsource Electronic Statements • Outsourcing Patient Statements is one of the easiest ways a medical clinic can save money. • It can allow you to increase statement frequency which lowers call volumes • Make sure your system keeps an image of the statement for reference Metrics Low High Total Annualized Upside per doc to outsource statements $24,000 $49,200 electronically *Normalized for Primary Care Per Provider Per Year
- 40. 11. Maximize Electronic Remittance Advice • “Take advantage of available technology. Electronic remittance automation can reduce your staff cost tremendously and diminish the possibility of fraud.” – Elizabeth Woodcock, MBA, FACMPE • Every practice should utilize electronic remittance to the greatest extent possible Metrics Low High Total Annualized Upside per doc to maximize Electronic $24,000 $49,200 Remittance Advice (ERAs) Source: MGMA *Normalized for Primary Care Per Provider Per Year
- 41. Summary of Top 11 Best Practices to Improve Financial Performance Ranking Best Practice Range of Savings 1 Collect patient balances same day of service $34,185 $99,352 2 Establish performance standards, report & $27,456 $102,960 provide feedback 3 Claims Scrubbing $21,806 105,813 4 Tracking & Preventing Denials $21,806 105,813 5 Improve statement quality & frequency $1,025 $120,130 6 Create & Enforce Write-off policy $28,500 $60,000 7 Manage Insurance Under-payments $17,880 $35,160 8 Remind Patients of Appointments $9,700 $35,000 9 Verify Eligibility $1,800 $14,400 10 Outsource Electronic Statements $24,000 $49,200 11 Maximize Electronic Remittance Advice $2,674 $6,500 *Normalized for Primary Care Per Provider Per Year
- 42. How does NextGen address these Best Practices? Ranking Best Practice Addressed By 1 Collect patient balances same day of service AutoFlow, Contract Management 2 Establish performance standards, report & provide Worklog Manager feedback 3 Claims Scrubbing Claims Edits, Worklog Manager 4 Tracking & Preventing Denials Reporting, Worklog Manager 5 Improve statement quality & frequency Statements, EDI 6 Create & Enforce Write-off policy Security, Worklog 7 Manage Insurance Under-payments Contract Management, Worklog Manager 8 Remind Patients of Appointments Scheduling, EDI 9 Verify Eligibility Background Business Processor, EDI 10 Outsource Electronic Statements EDI 11 Maximize Electronic Remittance Advice EDI, Background Business Processor
- 43. Case Study – Piedmont • About Piedmont Physicians Group – 72 Physicians – 14 Locations • Operational Improvements – Reduced billing and collection costs by 35% • Reduced staff from 42 to 23 Operational – New employee training time reduced by 71% Overhead – Time per patient call reduced 52% • Financial Improvements – Reduced A/R days from 73 to 28 – Reduced claim denials by 70% Revenue – Recovered $288,000 in insurance underpays – Improved cash flow by $1,250,000
- 44. Conclusion 1. Technology can create tremendous efficiency – invest in automation before hiring, firing, initiating pay freezes, cutting perks, etc. 2. Execute technology correctly – money spent on technology executed poorly is wasted money 3. There are lots of great areas you can focus on to improve your financial performance. Be Passionate and get started!
- 45. Thank you! Questions? • Contact Info: – James Muir, VP Sales Southwest – jmuir@nextgen.com – Mobile: 801-633-4444
- 47. Integration in NextGen’s PM & EMR Drives Down Costs & Improves Financial Performance • Creates Efficiency – Drives Down Human Resource Costs – Improves Financial Performance • Increased Collections • Faster Collections (reduced A/R days) • To achieve these results integration must be In the Right Places
- 48. Where in NextGen Does Integration Create Cost-Saving Efficiency? Top 3: 1. Claims Edits Automate Workflow – Superior to Traditional Edits because in addition to sophisticated Payer Edits they also Create Workflow Tasking 2. AutoFlow & Contract Management – Allows Collection of Patient Responsibility at Checkout 3. Workflow Integration between EPM & EMR – Which allows Tasking & Messaging between clinical & administrative staff • Reporting on Your Data
- 49. 2. AutoFlow & Contract Management • Allows Collection of Patient Responsibility at Checkout • Eliminates 90% of labor needed to collect patient amounts after encounter • Speeds Payment & Lowers A/R Days – Case Study: Piedmont • What makes this possible? 1. Real-time Charge Information from EMR 2. Real-time Contract Information from EPM 3. Simple AutoFlow Process to Prompt User for Correct Patient Amount
- 50. Practice Management Integration Demographics Scheduling Information CPT & ICD9 NextGen EMR 3rd Party Practice Management System • What’s Missing? Messaging & Tasking “38-50% of all medical administrative errors are caused during the manual exchange of information between parties.” Gartner Group
- 51. 3. Workflow Integration Between EPM & EMR • What Interfaces can • What We Lose: Achieve with Interfaces: – Demographics – Messaging – Appointments – Tasking – Charges NOTE: These are very important for improving efficiency within the practice & manifest themselves in terms Human Resource costs savings. Examples: • ABNs – Advanced Beneficiary Notices • Follow-Up Appointments • Physician ordering surgery (requires additional administrative tasks) • Physician ordering a services that require authorization • Generally, any time tasks cross from the clinical side to administration & vice verse
- 52. Reporting • NextGen Dashboard – Create Dashboards for Any Metrics Within NextGen • Ad-Hoc Reporting – Easy enough that each department can access and create their own reports • Background Business Processor – Schedule Reports & eMail them as Excel Spreadsheet Attachments
- 54. Ad-Hoc Reporting • Based on Microsoft SQL Server • Active ‘Seed’ Report Concept • Easily: – Customize – Memorize – Run – Drilldown • One click to: – Graph – Excel – ASCII – HTML Make Better Decisions Faster with Less Effort
- 55. Background Business Processor • Define Processes • Schedule Frequency • Run Unlimited Jobs in Each Process • Example: Run scheduled reports, convert them to excel spreadsheets & email them out. All unattended.
- 56. Case Study - NeuroSource • About NeuroSource – Specializing in the Business of Neuroscience – Over 130 providers – Over $100 Million Annually • Operational Improvements Operational – New employee training time reduced by 61% Overhead • (from 13 days to 5) – Time required for Month-end reduced by 87.5% • (from 4 days to 4 hours) – Overtime Reduced by 84.5% – Staff turnover reduced from 12% to 1% • Financial Improvements Revenue – Charges increased 22% with no increase in staff – Days in A/R reduced by 54% – Collections improved by 40.9%
- 57. Case Study - Ogden Clinic • About Ogden Clinic – 54 Providers Multi-specialty group in Ogden Utah – 8 Locations • Operational Improvements Operational – Reduced average check-in time by 2 minutes Overhead • Saving 2.5 FTEs – Reduced Average Employee Time • From 2 weeks to 2 days – Eliminated 12 FTEs and shifted 5 FTEs • Financial Improvements – Reduce A/R Days from 50 to 38 Revenue – Reduced Annual Supply costs by nearly $100,000 – Health Maintenance Revenue Increase 7% – Overall Increased Annual Revenue $980,000
- 58. Operational Reports • Move Beyond Financial Reporting • Operational Reporting • Identify Bottlenecks