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
Revenue Cycle Management:
The Foundation of Physician Leadership
HFMA IdahoDecember 3, 2009
