Optimizing Your Revenue Cycle Operations a guide to

Optimizing Your Revenue Cycle Operations - a guide to superior performance Presented by: Derek Morkel, CEO Health. Tech. S 3, GAFFEY Healthcare, LLC 1 www. gaffeyhealth. com

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GAFFEY - Solutions that Target Key Areas of Pain Revenue Recovery * Automation & Efficiency * Collection Services 20 -30% decrease Increase Cash Increase in Clean & Complete Claims Lack of Collection Automation Poor Workflow & Task Efficiency Claims Management Auto. Status Alpha. Collector Under Payment & Revenue Integrity Correct Patient Information Denial Identification & Management Contract Calculator Integrated Eligibility Remittance 360 1 -4% increase 3 www. gaffeyhealth. com

Objectives: Doing the Basics Right -------------------------------------1. 2. 3. 4. 5. 6. Revenue Cycle Optimization – what are we focused on every day and why? Learn which factors drive Revenue Cycle performance Where are we losing $ - missing opportunities Understand how technology can enable better results What should we be measuring & how often List of KPI’s and Benchmarks to use in your facility OBJECTIVES 4 www. gaffeyhealth. com

The 4 R’s – getting the right building blocks in place -------------------------------------- People + Process + Technology = Results Right Team Focused on the Right Process The right team is the critical building block Enabled by the Right Technology Drives the Right Results 5 www. gaffeyhealth. com

Measurement is the core of any process -------------------------------------² "An acre of performance is worth a whole world of promise. " - William Dean Howells ² "Don't rate potential over performance. " - Jim Fassel ² "Goal setting has traditionally been based on past performance. This practice has tended to perpetuate the sins of the past. " - Joseph M. Juran ² "If you can't describe what you are doing as a process, you don't know what you are doing. ” - W. Edwards Deming ² "In God we trust, all others bring data. " - W. Edwards Deming 6 www. gaffeyhealth. com

Measurement is the core of any process -------------------------------------- ²”Trust but verify” - Ronald Reagan 7 www. gaffeyhealth. com

What is the strategic imperative? -------------------------------------- “CASH IS KING” Cash Collections Cost to Collect 8 www. gaffeyhealth. com

What is the strategic imperative? -------------------------------------- Ø Net Revenue is the largest line item on a hospital’s Income Statement q where do your managers spend the majority of their time? Ø Accounts Receivable typically the largest liquid asset on the Balance Sheet Ø Thin operating margins put pressure on cash management 9 www. gaffeyhealth. com

What is the strategic imperative? -------------------------------------- Ø 1 -5% of Net Revenue is lost in the typical US Hospital due to Revenue Cycle inefficiency 10 www. gaffeyhealth. com

Overriding Revenue Cycle Principles: -------------------------------------- q All of the daily activities should answer one of 2 questions: Ø Does it increase cash collections? Ø Is it improving a process? 11 www. gaffeyhealth. com

Focus Areas – Back to Basics: -------------------------------------q 1. 2. 3. 4. 5. 6. 7. Always start at the beginning!! Clean & Complete Claims Bill Accounts Timely - DNFB Collector Productivity & Automation Technology to ensure accuracy & efficiency Efficient Coordination other Depts. – CM/UR CFO/Administration engagement NEW – Have a plan for Value Based Care 12 www. gaffeyhealth. com

VBC – not if but when – Have a Plan -------------------------------------- q 923 ACO’s – 32 million lives – 10% US Population Ø Data from Leavitt Partners report – Growth & Dispersion of Accountable Care Organizations. www. leavittpartners. com www. gaffeyhealth. com 13

VBC – not if but when – Have a Plan -------------------------------------- 14 www. gaffeyhealth. com

VBC – Mission Critical Software Components -------------------------------------- v CURRENT TOOLS – Will be basis for future state v Enterprise Data Warehouse – have to be able to aggregate data from different platforms v Cost Accounting – have to know what costs are by patient across enterprise – not just for hospital v Risk/Probability Modelling – have to know patients at risk v Bundled Payment Calculation Tool v Population Management – ability to drive lower cost outcomes v Verification – ability to verify calculations for Risk Sharing models 15 www. gaffeyhealth. com

Focus Areas – Back to Basics: -------------------------------------- q Time allocation 1. Decide daily/weekly priority 2. Allocate time accordingly 3. Stick to plan 16 www. gaffeyhealth. com

Back to Basics: Clean & Complete Claims -------------------------------------- q Getting it correct on the front end Ø 70% of the data required for billing comes from registration Ø Registration accuracy related to this data is ~ 50% Ø 50% of the denials can be traced back to admission based errors Ø A typical rebill costs $25 -$35 per claim 17 www. gaffeyhealth. com

Back to Basics: Clean & Complete Claims: -------------------------------------- q A clean claim is not necessarily complete!! All the data elements are complete and correct ü v Necessary charge components are all present ü v ü DOS, SSN, Name, Qty, Amounts E. g. all implants are charged and coded correctly (claim can be clean without – but not complete) Coding is appropriate for the level of service provided 18 www. gaffeyhealth. com

Back to Basics: Bill Accounts Timely -------------------------------------- q Billing efficiency starts with clean & complete claims Ø Electronic bill as many payors as possible Ø Ø Unbilled worked daily Failed claims worked daily Errors/Inefficiencies shared with admitting & preregistration [Admitting QA] Utilize all billing software auto-bill & edit capabilities 19 www. gaffeyhealth. com

Back to Basics: Collector Productivity -------------------------------------- q Productivity is directly tied to billing clean claim % Ø Measure daily Ø Ø Match payors (difficulty) to collector ability Issues shared with billing & admitting Defined strategy for denials & difficult to collect AR (Workers Compensation) Review account notes 20 www. gaffeyhealth. com

Top 10 – Lost Revenue $ - the easy money!! ------------------------------------Item Description Your Solution 1. ER Level Coding – getting the right level for acuity of service 2. Charging – making sure all charges are on the bill 3. IP Coding – better documentation of care for correct reimbursement 4. Payment to Contract reconciliation – get paid correctly 5. Claim Efficiency – making sure that the bill complies with all Payor processing rules 6. Denials & Problem AR Accounts 7. CDM – Chargemaster incomplete, has incorrect codes 8. Eligibility – getting correct information on patients – esp. Medicaid 9. Collection Automation – eliminating non value added work 10. Self Pay Collections – having a consistent collection & agency process 21 www. gaffeyhealth. com

Collections Strategy: Non Self Pay [includes Medicare, Medicaid, Managed Care] -------------------------------------- Account Age 0 -30 30 -120 120 -180 181 -365 365+ Likelihood to collect High-Med Low Bad Debt Cost to Collect Low High Strategy At facility Med Facility + Help w/Denials & Aged AR Outsource on contingency 22 www. gaffeyhealth. com

Collections Strategy: Self Pay -------------------------------------- Account Age Pre. Admit to 14 15 -60 61 -180 181 -365 365+ Likelihood to collect Medium Low Very Low Minimal Low Medium High Cost to Collect Strategy At facility Early Out Primary Agency Secondary Agency 23 www. gaffeyhealth. com

Why is technology important? -------------------------------------q ü The right technology can provide more standardized information and automate certain processes that are subject to human variability Consider ED Claims Analysis v Complexity and number of patients makes this too expensive for FTE to monitor for all claims v Claim data allows for use of algorithms to pinpoint areas of opportunity 24 www. gaffeyhealth. com

Top 10 – Required elements of a RC program ------------------------------------Item Description Checklist 1. Daily Cash Worksheet – measure critical components 2. Pre-Admission/Admission Program 3. Admitting QA – Daily on all accounts 4. Daily Charge & Coding Reconciliation 5. Pre-bill audit for clean & complete claim 6. Electronic billing – highest possible % electronic billing 7. Collection automation technology 8. Matching staff to workload 9. Defined collection strategy for each payor class – measured daily 10. Self Pay Collections – having a consistent collection agency process from POS 25 www. gaffeyhealth. com

Technology – What are key components? : -------------------------------------Area Technology Result Charge Master CDM Management Software Clean claims, consistent pricing, complete charge structure Pre Registration/Registration ABN/Medical Necessity Check Reduction of partial/complete denials Patient Registration Integrated eligibility verification Correct COB information Pre Bill Claim Analytic Complete claim, Charge Capture, Coding review Post – Bill Collection Workflow & Automation Platform Software Automation of routine tasks & improve productivity collections and oversight of collections Post Payment Contract Management Software Actual vs. Expected Payment Post Payment Business Intelligence Software Enables monitoring of KPI’s throughout RC process 26 www. gaffeyhealth. com

Establishing a culture of measurement -------------------------------------- q What should we be measuring and how often? 1. Drivers – Leading v Intense focus on these drives overall performance 2. Intermediate – Monitoring v Areas of performance that require periodic attention 3. Result Oriented v Result of previous 2 – focus will not provide change 27 www. gaffeyhealth. com

What are KPI’s? -------------------------------------- q KPI = “Key Performance Indicator” “Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization or process. ” KPI’s are the measurement tools of the philosophy that if you don’t measure something you have no way to know if you are improving. A focus on the underlying metrics (KPI’s) of AR management is the core of a successful organization. “How can I fix it if I don’t know its broken? ” 28 www. gaffeyhealth. com

KPI’s – Example hierarchy -------------------------------------- 1. Drivers – Leading v v Cash DNFB Failed Claims Late Charges 2. Intermediate – Monitoring v Cash by functional area v AR Aging 3. Result Oriented v AR Days 29 www. gaffeyhealth. com

KPI’s – Daily Cash Sheet Items -------------------------------------------- Daily Performance - Macro – Cash • vs. Budget – AR Aging > 60 days • Inpatient & Outpatient • vs. Budget, Prior Year & Prior Month – Gross Revenue – Late Charges (Note: seldom focused on but critical process issue) 30 www. gaffeyhealth. com

KPI’s – Late Charges -------------------------------------------- Late Charges – process killer – % charge contracts – every $ missed revenue – Daily Departmental Charge Reconciliation – Chargeable supplies § are you charging all items § consider bar coding potential – Create significant process issues with claims 31 www. gaffeyhealth. com

KPI’s – Daily Cash Sheet Items -------------------------------------------- Daily Performance - Micro – Discharged Not Final Billed (DNFB) > 4 days – Patient Accounting • Medical Records/HIM – DNFB – Failed Claims in Billing Software – POS Cash – Registration Accuracy 32 www. gaffeyhealth. com

KPI’s – Other potential items to measure -------------------------------------------- Weekly KPI’s – Cash by functional category – Insurance, POS, Agency – DNFB – Business Office & Medical Records – DNFB – Failed Claims in Billing Software – AR Aging > 60 days by Financial Class – AR Aging > 180 days – Denials 33 www. gaffeyhealth. com

KPI’s – Other potential items to measure -------------------------------------------- Monthly KPI’s – Cash as % Net Patient Revenue • excluding effect of amounts “due to/due from” State, Federal sources – AR Days • by facility • by Payor – AR Aging by Financial Class – Collection Agency Performance – Registration Accuracy 34 www. gaffeyhealth. com

AR & KPI’s – Keys to Success -------------------------------------- 1. Consistency v v 2. Accountability v 3. Decide what you are going to measure & keep measuring it Follow up daily, weekly on key items There has to be consequences for both success & failure Keep evaluating the process – feedback is critical v Change is constant – your KPI’s may change 35 www. gaffeyhealth. com

KPI’s – Daily Roadmap -------------------------------------- KPI Cash % NPR Benchmark Stretch Goal Strategic Importance > 100% > 101% Leading < 25% Net AR < 20% Net AR Leading Late Charges < 0. 5% Total Chgs. < 0. 25% Total Chgs. Leading DNFB > 4 Days < 1 Day Gross Chgs < 0. 5 Day Gross Chgs Leading < 0. 5 Day < 0. 25 Day Leading > 80% opportunity > 90% opportunity Leading > 95%, 100% Corrected > 98%, 100% Corrected Leading AR Aging > 60 Days DNFB – Failed Claims POS Cash Registration Accuracy 36 www. gaffeyhealth. com

KPI’s – Weekly Roadmap -------------------------------------- KPI Benchmark Stretch Goal Strategic Importance Cash by category Upward Trend Monitoring DNFB – PFS > 4 Days < 1 Day Gross Chgs < 0. 5 Day Gross Chgs Leading DNFB – Failed Claims < 0. 5 Day < 0. 25 Day Leading AR Aging > 60 Days by FC < 25% Net AR < 20% Net AR Leading AR Aging > 180 Days < 7. 5% Net AR < 5% Net AR Monitoring Denials < 1% NPR < 0. 5% NPR Monitoring 37 www. gaffeyhealth. com

KPI’s – Monthly Summary -------------------------------------KPI Strategic Importance Benchmark Stretch Goal Cash % Net Patient Revenue MTD > 100% > 101% Monitoring Cash % Net Patient Revenue YTD > 101% > 102% Monitoring AR Aging > 60 Days < 25% Net AR < 20% Net AR Leading AR Aging > 180 Days < 7. 5% Net AR < 5% Net AR Monitoring POS Collection Agency Performance > 80% opportunity > 90% opportunity Upward Trend NA Leading Result 38 www. gaffeyhealth. com

KPI’s – Monthly Summary Cont’d -------------------------------------KPI Cost to Collect Bad Debt % Net Patient Revenue Rebill % Insurance Verification % - pre-reg. Days in Credit Balances Net AR Days Benchmark Stretch Goal Strategic Importance < 3% < 2% Result < Budget 5% Result < 2% Claims < 1% Claims Monitoring 100% NA Monitoring NA Variable – Payor Relationship Dependent < 50 Days Ultimate Result < 2 Days < 55 Days 39 www. gaffeyhealth. com

Top 10 – Lost Revenue $ - the easy money!! ------------------------------------Item Description My Solution? 1. ER Level Coding – getting the right level for acuity of service 2. Charging – making sure all charges are on the bill 3. IP Coding – better documentation of care for correct reimbursement 4. Payment to Contract reconciliation – get paid correctly 5. Pricing – setting prices correctly relative to contracts and services 6. Denials – enough said!! 7. CDM – Chargemaster incomplete, has incorrect codes 8. Eligibility – getting correct information on patients – esp. Medicaid 9. Physician Practice Management 10. Self Pay Collections – having a consistent collection agency process – from POS to Agencies 40 www. gaffeyhealth. com 40

GAFFEY - Solutions that Target Key Areas of Pain Revenue Recovery * Automation & Efficiency * Collection Services 20 -30% decrease Increase Cash Increase in Clean & Complete Claims Lack of Collection Automation Poor Workflow & Task Efficiency Claims Management Auto. Status Alpha. Collector Under Payment & Revenue Integrity Correct Patient Information Integrated Reporting & Process Insight Contract Calculator Integrated Eligibility Alpha. Analytics 1 -4% increase 41 www. gaffeyhealth. com

Superior Revenue Cycle Performance -------------------------------------- Questions? www. gaffeyhealth. com