Financial Performance and Operations Improvement:

Integrating Revenue Cycle Improvement and Clinical Process Change to

Accomplish Greater Financial Results

Financial Performance and Operations Improvement:

Integrating Revenue Cycle Improvement and Clinical Process Change to

Accomplish Greater Financial Results

Presented for MCOL by Nancy Chapman

Superior Consultant Company, Inc.

Nancy_Chapman@superiorconsultant.com

Defining Potential Improvements:the Opportunity Evaluation ProcessDefining Potential Improvements:

the Opportunity Evaluation Process

Adding the horizontal viewpoint to identify systemic opportunities for financial and operations improvement

Using Technology to Support Improved ProcessesUsing Technology to Support Improved Processes

Financial Performance and Operations Improvement are goals for every process and department in the organization. The traditional, vertical focus of revenue cycle improvement falls short of exploiting all possible opportunities for financial improvement and positive change. When the

horizontal focus is added, exponential results can be achieved.

Portfolio

Optimization

Patient Access

Design

Denial

ManagementCharge Capture

and Pricing

Clinical

Management

Integration

Documentation and Coding

Billing

Process

Design

Accounts

Receivable

Management

Cash

Collections

Svc Line Growth

Capacity Management

Referral Management

New Venture Partnerships

Clinical Process Improvement

POC Med Admin

Bar Coding

Electronic ICU

Clinical Alerting

Scheduling

Pre-registration

Insurance Verification

Point-of-Service Collections

Call Center Technology

Registration Points

Prior Balance

Adjudication

Case Management

Denials and Appeals Tracking

Physician Alignment

Appeals Process

Electronic Charge Capture / Reconciliation

Market-based Pricing / Fee Screen Review

Operational Pricing

Managed Care Pricing & Contracting

Strategic Pricing

Standardization & Consolidation of Charge Description Master (CDM)

Medical Management Infrastructure

Service Line Redesign

Clinical Technologies and Process Improvement

CDMP**

Physician Alignment

Bed Management

Resource Management

DNFB* Reduction

CDMP**

Outpatient Documentation

APC Process Improvement

APC Financial Impact Assessment

HIPAA

Medical Records Redesign

Claim production work flow analysis

CDM Review & Update

Late Charge Analysis

EDI Editing & Claims management

DNFB Reduction*

Days Revenue

% > 90 Days

Hold Days

Bad Debts & Collection Policies

Contractual Modeling

Third Party Payor Analysis

Cash Acceleration

Denial Management

Self-Pay Collections Management

Follow-Up/Collector Workstations

Electronic Remittance Enablement/ Payment Posting

Agency Management

Prior To Services During Services Following Services

* Discharge Not Final Billed ** Clinical Documentation Management Program

Quantifying Potential Improvements:the Opportunity Evaluation Process

Quantifying Potential Improvements:the Opportunity Evaluation Process

It is no longer sufficient to describe potential improvements – today’s buyers need quantifiable targets and benchmarks to

measure accomplishments and sustain progress

AssumptionsGross Patient Service Revenues 1,224,000$

Net Patient Revenue (CY 2002 Estimated) 510,270$

Bad Debt Percentage (Based on CY 2001) 6.2%Contractual Percentage (Based on CY 2001) 52.1%

58.3%

Estimated Revenue Cycle Opportunity* Low High Target Low High Target

Prior to Services: 45.0%Portfolio Maximization 1.0% 2.0% 1.5% 5,103$ 10,205$ 7,654$ Patient Access Design 2.0% 3.0% 2.5% 10,205 15,308 12,757 Denial Management 1.1% 1.8% 1.8% 5,613 9,185 9,185

4.1% 6.8% 5.8% 20,921$ 34,698$ 29,596$

During Services: 35.7%Charge Capture and pricing 4.0% 6.0% 4.0% 20,411$ 30,616$ 20,411$ Clinical Management & Integration 0.3% 0.5% 0.3% 1,531 2,551 1,531 Documentation and Coding 0.3% 0.4% 0.3% 1,531 2,041 1,531

4.6% 6.9% 4.6% 23,472$ 35,209$ 23,472$

Following Services: 19.4%Billing Process Design 0.6% 0.7% 0.6% 3,062$ 3,572$ 3,062$ Accounts Receivable Management 1.5% 3.0% 1.5% 7,654 15,308 7,654 Cash Collections 0.4% 0.8% 0.4% 2,041 4,082 2,041

2.5% 4.5% 2.5% 12,757$ 22,962$ 12,757$

Total Improvement* 100.0% 11.2% 18.2% 12.9% 57,150$ 92,869$ 65,825$

Cost of Transition and Contingency:Estimated @ 25% of Inprovement 25.0% 35.0% 25.0% (14,288) (32,504) (16,456)

Net Range and Targeted Improvement Over Three (3) Calendar Years* 42,863$ 60,365$ 49,369$ * Does not include operating margin improvements

Calendar Year Distribution of Progress:CY 2003 40.0% 30.0% 40.0% 17,145$ 18,109$ 19,747$ CY 2004 40.0% 27.5% 35.0% 17,145 16,600 17,279 CY 2005 20.0% 42.5% 25.0% 8,573 25,655 12,342

100.0% 100.0% 100.0% 42,863$ 60,365$ 49,369$

Effective Percentage of Net Revenue 8.4% 11.8% 9.7%

Note: This estimate of

revenue improvement is

based upon information

believed to be reliable,

however, the estimate is

provided for discussion

purposes only and is

subject to material and

substantial changes.

Additional validation and

confirmation of the major

assumptions and related

revenue potential will be

required.

Value Proposition – Sample Hospital $(000)

Financial Performance, Operations Improvement and the Technology Connection

Financial Performance, Operations Improvement and the Technology Connection

While information systems have been expected to solve problems for years, the buying market largely missed the boat regarding the

critical need to change operations and processes that new technologies could support. This phenomena is changing rapidly

and returns on investments are being realized.

Technology-enabled approaches to financial performance and operations

improvement opportunities

Technology-enabled approaches to financial performance and operations

improvement opportunities

Traditional Approach• Cash acceleration• Back-end process improvement• DNFB reduction• System calculation of allowances• Verify of automated edits• Electronic work-lists• System notes and reminders• Electronic billing folders• Electronic posting/remittance

processing

e-Health Solutions• Integrated processes and

technology across all departments

• Web-enabled patient access• Advanced telephony systems• Self-serve kiosks• Call center technology• Workflow automation (from

the simplest (automating eligibility checking) to the most complex (CPOE)

• A core patient record with elements of the electronic medical record (EMR) which leverages current legacy systems

• Longitudinal patient EMR• Personalized web pages for

physicians with links and alerts to IDN – physician portals

• Real-time claims adjudication• Appeal & dispute resolution

with payors

DE

RIV

ED

BE

NE

FIT

LEVEL OF TECHNOLOGY ADOPTED

Technology Enabled Redesign

• Front and back end process improvement

• Denial management• Charge capture enhancements• Clinical documentation and care

management improvements• Uniform policies and procedures

throughout departments• Electronic schedule (with access

notification of service) • On-line access to multiple payors for

verification• On-line access to past balances• Physician alignments• Outsourcing opportunities• Consolidated/shared services

opportunities

Key Results Of The Opportunity Evaluation Process:

Improved Definition of Prioritized Tasks, Project Teams and Achievable Budgets

Key Results Of The Opportunity Evaluation Process:

Improved Definition of Prioritized Tasks, Project Teams and Achievable Budgets

The value statement

Key Results of the Opportunity Evaluation ProcessKey Results of the Opportunity Evaluation Process

Used to quantify and serve as the value statement for the level of effort required to accomplish change.

Used to rapidly identify areas for financial improvement in clinical service lines and operations areas.

Helps to focus required resources by skill set to allow optimized configuration of multi-disciplinary project team

Helps to more accurately project budget requirements. Projects potential future state – both from an operations and

financial perspective Provides key performance metrics and analytics for each major

clinical and business process and related sub-processes. Such metrics and analytics include:

• Process and sub-process benchmarks and analytics

• Organization’s decision triggers and analytics

• Shared risk/reward performance measurement analytics

Summary Questions and AnswersSummary Questions and Answers