More Related Content Similar to Details and Dollars: Using Data and Analytics to Optimize Revenue Cycle Performance (20) More from Health Catalyst (20) Details and Dollars: Using Data and Analytics to Optimize Revenue Cycle Performance1. 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
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
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.
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
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
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