A Measure of Success Using KPIs to Accelerate Revenue Cycle Performance

Transcription

1 A Measure of Success Using KPIs to Accelerate Revenue Cycle Performance Sandy Richman, Director of Advisory Services Daniel Bergantz, Director of Advisory Services PNC Healthcare March 23, 2015

2 Today s Presentation Goals 1. Review current factors affecting the hospital industry and revenue cycle environment 2. Developing and reporting Key Performance Indicators (KPIs) 3. Interpreting the value of selected KPIs 4. How to be MAD about Revenue Cycle Management 5. Learn something new and have fun!!! 1

3 CURRENT INDUSTRY FACTORS 2

4 Challenges Inherent in the Transformation of the Payment Model Legacy systems, information silos and technical resource limitations make it hard for providers to deal with strong headwinds. 1 Systems/Statistics-TrendsandReports/NationalHealthExpendData/downloads/proj2010.pdf 2 McKinsey, Advisory Board Company, 2011, Bridging the Gap 4 Healthcare Internal Auditors, Aim High Study, June Fitch ICD-10 Report, March, 2014 Transformation from payment for volume to payment for value Increasing patient financial responsibility ICD -10 costs burden hospitals Inpatient Medicare payments will decline 18% by Only 55 cents of every $1.00 owed by patients is collected. 2 Gross denied charges have increased to 14-18% of total. 3 60% of avoidable claim denials occur at registration. 4 Revenue cycle disruptions could place added rating pressure on hospitals 5 3

5 ICD-10 What to Consider to Protect Your Revenue Cycle Costs to prepare Post implementation impacts Costs and shortages of qualified coding specialists Initial direct and indirect costs of conversion and compliance preparation Direct and opportunity costs of systems integration, testing, IT staff Updating the chargemaster, super bill, etc. Error rates are expected to jump to 6-10% of total claims from current 3% * Days in AR are projected to grow 20-40% * Claim denials are projected to increase % for 2 years or more * Under-coding likely to have most significant negative impact on revenue Identifying specialties requiring the greatest change/impact ROI of additional training, mitigating negative impact through process change Source: 2011 HIMSS ICD-10 Transformation: Five Critical Risk Mitigation Strategies 4

6 WHAT IS ALL THIS TALK OF HEALTHCARE CONSUMERISM? 5

7 Employers/Payers Shifting Responsibility to Consumers Ever increasing strategy is for employers to shift costs to the consumer by offering high deductible health plans (HDHPs) and health savings accounts (HSAs) In 2013, about 58% of employers offered a HDHP Hospital uncompensated care rose to a record $45.9 billion in 2013 Out-of-pocket payments by insured patients are expected to grow by 68% from 2009 to 2015 Increasing HDHPs = Increasing patient financial responsibility = Consumer behavior 6

8 Healthcare Consumerism Healthcare Consumerism is a movement giving the participant purchasing power that promotes decision-making in their own healthcare. It empowers the consumer to become more educated and involved in decisions like what physician they want to see, what procedures they want to have done, what facility they want to go to, and how much they are willing to pay for services. 7

9 Cashification of Healthcare With HDHPs and HSAs, consumers financial responsibility for their medical treatment is increasing Trends are moving toward employers only offering HDHP options Consumers usually don t plan on ever hitting their deductibles Behavior is modified to save $$$$ 8

10 Effects on Hospital Providers Increased pressure to update/acquire technologies and processes to help consumers understand their out-of-pocket costs prior to service and provide options to pay in an easy and timely manner Increased consumer pressure for pricing transparency Increased competition from less costly, more agile and easily accessible delivery channels, potentially putting market share at risk 9

11 And now a Demotivational Thought 10

12 The Problem Sometimes our meetings consist of a lot of talking as if it s business as usual. In Healthcare there is a lot of experience around the table. We sometimes think we know what the problem is but we often are not even looking at the real problem. 11

13 Developing KPIs What to measure? Don t just collect data, Data Information Metrics aren t KPIs KPIs help staff make better business decisions and find solutions to problems Choose KPIs according to relevancy Apply KPIs where you can affect change Develop indicators for each process at the department/ functional level as well as overall RCM indicators Important decisions will be made based on KPIs. Choose them wisely! 12

14 Developing KPIs Define how to measure selected KPIs (i.e., operational definition) A precise description of the specific criteria used for the measures The methodology to get the value for the characteristic you are trying to measure Develop a baseline - where are you today? Where have you been? Trending information is more valuable than one point in time Calculate values for the previous months Track a 3 6 month rolling average 13

15 If these were your KPIs, what would you do? 51 days Net Days in A/R Recommend Range: days 2.5% POS Collections Ratio Recommend Range: 1.5% - 3% 3.8% Denials Write-off Ratio Recommend Range: 2% - 3% 14

16 Where do you want to be? Developing KPIs Implementing initiatives to reduce operating costs is the number one priority of hospital CEOs in response to healthcare reform. Hospital CEOs report that the most effective way to reduce costs is through benchmarking and the use of decision support tools. Processes Used to Reduce Costs in the Hospital % Used Effectiveness (Scale 1-5) Benchmarking 93% 3.84 Decision Support Tools 68% 3.66 National or Regional Collaborative 58% 3.76 Lean Six Sigma 42% 3.69 Management Engineers or Financial Liaisons 33% 3.70 Use resources such as HFMA & HARA for best practice benchmarks Try to find benchmarks more specific to your type of facility and geographic region Look for opportunities and create your own target Source: American College of Healthcare Executives. CEO Survey: Hospital Initiatives to Reduce Operating Costs. Healthcare Executive. May/June

17 Good, Better, BEST! Better Performance BEST PERFORMANCE Good Performance Current Performance Gap Analysis 16

18 KPIs by Functional Area PATIENT ACCESS REVENUE INTEGRITY CLAIMS MANAGEMENT REIMBURSEMENT OTHER MANAGEMENT Pre-Registration Rate Days Gross Revenue in Discharged-Not- Final-Billed (DNFB) Final-Billed-Not- Submitted (FBNS) Initial Zero Paid Denial Rate Cash Collections as % of Net Revenue Point-of-Service Collections Rate Discharged-Not- Submitted to Payer (DNSP) Clean Claim Submission Rate Initial Partial Paid Denial Rate Days Cash on Hand Uninsured Patient Conversion Rate Late Charges as % of Total Charges Net Days in A/R Total Denial Write- Off as a % of Net Revenue Case Mix Index Insurance Verification Rate A/R Aging Distribution Overturned Denial Rate Bad Debt Writeoffs as % of Gross Revenue Insurance Authorization Rate Billed A/R >90 Days 3 rd Party >90 Days Self Pay >90Days Charity Care Write-offs as % of Gross Revenue Charity Care to Uncompensated Care Days Gross Revenue Held in Credit Balances Cost-to-Collect 17

19 KPI Reporting Process Determine how you will display and track KPIs Charts, graphs, dashboards, spreadsheets, etc. Decide which indicators will be tracked daily, weekly, monthly, quarterly Put someone in charge of collecting the data Automate data collection where possible Schedule regular meetings with the CFO and revenue cycle leadership team to review indicators Give updates on current initiatives, identify new opportunities and create action plans Results in common goals Schedule separate department meetings that includes director, managers, supervisors & leads 18

20 Using Your KPIs The ability to set goals and make projections. Use data to find value that others oversee (i.e., information). Effective KPIs allow you to find the championship combination for your organization that you can afford. Your KPI tools will be specific to your organization and will allow you to customize solutions. 19

21 And Now Time to get MAD about KPIs and Revenue Cycle Management!!! 20

22 Thomas Edison Example of a MAD Man Many often referred to Edison as a genius. What was his response? Genius is 1% inspiration and 99% perspiration. He was also noted as saying: Genius is hard work, stick-toit-iveness, and common sense. Invented the lightbulb now a symbol synonymous with idea and inspiration. 21

23 Inspiration Your lightbulb moment Involve everyone in the lightbulb process Consider rewarding staff for coming up with their own lightbulbs Your lightbulb, or idea, is only the first step, next comes the real work of implementing your idea 22

24 The Keys to being a MAD success! Measurement Patient Access Revenue Integrity Business Office Reimbursement Scheduling/ Preregistration Charge Capture Billing 3 rd Party Contracting Ins. Verification/ Authorization Clinical Documentation AR Follow-up & Management Denials Management POS Collections Chargemaster Management Payment Posting Contract Management Financial Counseling Coding Customer Service Pricing Strategy/ Fee Schedules Registration HIM Throughput Collections/ Agency Management Revenue Recognition Accountability Discipline 23

25 Measurement We ve all heard it: you can t manage what you don t measure. Measurement aids in identifying problem areas. Sets the stage for setting goals/targets and working toward them. It is also a proven principle that: When performance is measured, performance improves. When performance is measured and reported, the rate of improvement will accelerate beyond mere measurement alone. Other principles to keep in mind: Ensure that what you are measuring is accurate and meaningful. Use a standard data source. Use metrics instead of just data reporting the more standardized and widely used, the better. Examples: HARA, HFMA s Revenue Cycle MAP Keys Measure early and measure often. Automate the measurement process as much as possible. 24

26 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar % 0.99% -1.68% -1.85% -1.30% 0.22% 0.7% Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 Examples of Measurement ABC Health System 0% 0% 0% 0% Project Plan (click on image below to see detailed workplan) Safety Metrics Completeness % 0% # List of Activties Falls (per 1k IP days) 0% Current 0 0 Overall Progress Indicator Invest in Strategic Growth Progress Indicator Create a Culture of Excellence Leverage Medicare Growth % Completed 1 Increase Market Share by 5% 0% 2 Increase Market Share by 5% in Targeting Service Lines through Physician Alignment 3 ARHS Days Cash on Hand 0% 4 Increase CMI by % 5 Achieve Breakeven Status on Medicare IP 0% 6 Achieve MH "Best Places to Work" Status 0% 7 Invest in Strategic Growth Protect the Core Create a Culture of Excellence Leverage Medicare Growth Improve Overall ARHS Physician Alignment by 10% Over Baseline 8 Achieve Magnet Status 0% Protect the Core 0% 0% Days Cash on Hand Excess Margin Current 0 0.0% Project Milestones Project Dashboard May-14 Show Gantt for Planned Show Status? What is current month? 1 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb Mar-15 Apr-15 May-15 Jun-15 Project Kickoff Jul-15 Team Selection Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 Patient Access HIM Patient Accounts Denials Key Performance Indicator Target Overall pre-registration rate of scheduled patients >98% Overall insurance verification rate of scheduled/pre-registered patients >98% Registration accuracy rate >98% Successful attempts for collection of elective services deposits prior to service 100% Successful attempts for collection of inpatient self-pay deposits prior to discharge >65% Successful attempts for collection of ED self-pay deposits prior to departure >50% Days of gross revenue held in Discharged-not-Final-Billed status <4-6 days Physician documentation completion deliquency greater than 30 days <5% Final-Billed-Claim-not-Submitted backlog <1 A/R day Billed insurance A/R >90 days from service/discharge <15-20% Bad debt write-offs as a % of gross revenue <3% Charity care write-offs as a % of gross revenue <3% Total cash to net-collectible revenue (60 day average lag) ~100% Cost to collect (HIM excluded) <2-3% Net A/R days <45-55 days Point-of-service collections as a % of total cash collections >2-3% Outsourced bad debt netback ([collections-fees]/placements) >7-11% Overall initial denials rate (% of net revenue) <4% Clinical initial denials rate (% of net revenue) <5% Appealed denials overturned rate 40-60% VTEs (# of events) 0 Employee Injuries (# of events) KPIs, Dashboards, and Graphs, oh my! 25

27 Accountability Accountability must start with leadership. A waterfall without a source is just a cliff the source of accountability must be with leadership, then it can flow to the rest of the organization. Establish accountability for every process of the revenue cycle. Ensure that every revenue cycle process reports to the right person the right people in the right seats on the bus principle. Accountability is enhanced when coupled with measurement. Every metric being measured should be tied to an accountable leader. All staff level employees should be accountable to at least one quality and one productivity metric. 26

28 Accountability Admission Officer Sr. Assoc. Dir. Asst. to Director Transfer Coordinator Sr. HCPPA Associate Director Asst. Coor. Mgr. Census / TCEs Asst. Coor. Mgr. HCPPA Asst. Coor. Mgr HCPPA Assistant Director Systems Analyst Census Team Clerical Assoc. Clerical Assoc. Not this Coord. Manager Tour I Coord. Manager Tour II Coord. Manager Tour III No Accountability! Sr. HCPPA Admitting/ER Sr. HCPPA Admitting/ Discharge Sr. HCPPA Pre-Adm/ Information Sr. HCPPA ER/Bed Board Sr. HCPPA Admitting Clerical Assoc. Admitting / ER PAA Admitting Clerical Assoc. Asst. Coor. Manager ER PAA Admitting Asst. Coor. Manager ER C.A. Clerical Assoc Discharge Office Clerical Assoc Admitting C.A. C.A. Clerical Assoc. ER Clerical Assoc. Admitting C.A. C.A. C.A. C.A. C.A. 27

29 Discipline Process discipline = a standardized approach: Define each task within the revenue cycle very clearly, then stick to that definition each time the task is performed to improve overall revenue cycle performance. You don t have to be a six sigma black belt to identify areas and ways in which a process can be improved and where process discipline can be implemented. If you talk to different employees who perform the same task and they give different answers on how the task is done, you know you have a problem. Develop tools such as workflows, scripts, and training sheets so staff can easily follow the standard approach. Identify or create a process champion someone who performs the task (or is willing to) in the best manner and utilize him/her as an example/role model/trainer for others. 28

30 Develop your idea your lightbulb Putting it All Together Identify which measurements relate to the area you are desiring to improve Utilize measurements to assess where you are now compared to where you want to be Identify gaps and quantify opportunities Prioritize opportunities based on financial and operational impact Develop standardized, disciplined approaches for each process to be improved Assign accountability to each measurement and process so that everything is tied to an accountable individual Implement changes Continue to measure and report to determine progress Celebrate successes 29

31 Lessons for Success Once you figure out your KPI recipe: You can accomplish what no one has before Find the best path even in impossible situations Don t let the past define you 30

32 Contact Info Dan Bergantz - Director daniel.bergantz@pnc.com Sandy Richman - Director sandy.richman@pnc.com

33 Speaker Biography Sandy Richman has 15 years of combined clinical, financial, and consulting experience in the healthcare industry. In his current role as Director of Advisory Services for PNC Healthcare, he specializes in revenue cycle process improvement. Prior to joining PNC, Sandy was Manager of ARUP Laboratories Consultative Services Division where he and his team worked closely with hospitals nationwide to develop or expand their laboratory outreach operations. Sandy also has extensive experience in ED improvement, strategic planning, financial analysis, strategic pricing, operations improvement, and market research. He holds an MBA degree from the University of Utah, and is an active member of the Utah HFMA chapter. 32

34 Speaker Biography Dan Bergantz has 15 years of combined research, financial, and consulting experience in the healthcare industry. He currently serves as Director of Advisory Services for PNC Healthcare specializing in revenue cycle process improvement, and also has extensive experience in strategic planning, labor management and productivity, strategic pricing, and physician productivity. Prior to joining PNC, Dan developed his expertise and passion for the healthcare industry working for organizations including the Premier Healthcare Alliance, Phase 2 Consulting, GE Healthcare, and the Utah Medical Education Council. Dan earned his MBA in Health Administration from the Eccles School of Business at the University of Utah, and is an active member of HFMA s Utah Chapter. 33

35 APPENDIX 34

36 Patient Access KPIs Indicator Calculation Things to Consider Target Pre-Registration Rate of Scheduled Patients Number of patient encounters preregistered All scheduled encounters pre-registered prior to date of service. A scheduled encounter is considered prior to day of service % Number of scheduled patient encounters Point-of-Service (POS) Collections Rate POS Payments Total Cash Collected Defined as patient payments collected prior to or up to seven days after discharge/date of service for the current encounter only % Inpatient Uninsured Patient Conversion Rate Number of uninsured patients converted to a payer source Total number of uninsured patients Payer source can include COBRA, Medicaid, workers comp, other insurances such as motor vehicle, and other government programs % 35

37 Patient Access KPIs Indicator Calculation Things to Consider Target/Best Practice Insurance Verification Rate Total number of verified encounters Total number of registered encounters All scheduled patient encounters where eligibility/insurance is verified prior to date of service and non-scheduled encounters verified within one day of service/admission date % Insurance Authorization Rate Number of encounters authorized Number of encounters requiring authorization Authorization is defined as required approval from the 3 rd party payer for the services ordered % Charity Care to Uncompensated Care Charity care write-off Total uncompensated care (charity care + bad debt) 36

38 Revenue Integrity KPIs Indicator Calculation Things to Consider Target/Best Practice Days Gross Revenue in Discharged-Not- Final-Billed (DNFB) Gross dollars in A/R not final billed Average daily gross patient service revenue Include inpatient and outpatient, and exclude in-house claims. 4 6 Days Discharged-Not- Submitted to Payer (DNSP) Gross dollars in DNFB + gross dollars in FBNS Average daily gross patient service revenue 5 8 Days Late Charges as % of Total Charges Charges with post date >3 days from last service date < 2% Total gross charges 37

39 Claims Management KPIs Indicator Calculation Things to Consider Target/Best Practice Final-Billed-Not- Submitted to Payer (FBNS) Gross dollars in FBNS Average daily gross patient service revenue 1-2 Clean Claim Submission Rate Number of claims that pass edits requiring no manual intervention > 85% Total claims accepted in to billing scrubber for editing Net Days in A/R Net A/R Average daily net patient service revenue Should exclude credit balance accounts and any nonpatient service A/R Days 38

40 Claims Management KPIs Indicator Calculation Purpose Target/Best Practice Billed A/R >90 Days 3 rd Party >90 Days Self Pay >90 Days Billed A/R > 90 days Total billed A/R Should only include debit balance accounts aged from discharge date % Days Net Revenue Held in Credit Balances Dollars in credit balance Average daily net patient service revenue Should not include accounts in preadmit or in-house status Days 39

41 Reimbursement KPIs Indicator Calculation Things to Consider Target/Best Practice Initial Zero Paid Denial Rate Number of zero paid claims denied Number of claims remitted Total number of zero pay claims received from 3 rd party payers with a denial code on the remittance advice. < 4 % Initial Partial Paid Denial Rate Number of partially paid claims denied Number of claims remitted Total number of partial pay claims received from 3 rd party payers with a denial code on the remittance advice. Total Denial Rate Denial write-off amount Net patient service revenue Should include all net account balances written off within the month resulting from un-appealable denials. Do not include contractual allowances. 2-3 % Overturned Denial Rate Number of appealed claims paid Number of claims appealed and finalized or closed Should include all appealed claims (in response to a denial or take-back) that were closed/finalized within the month due to a receipt of payment % 40

42 Other Management KPIs Indicator Calculation Things to Consider Target/Best Practice Cash Collections as a % of Net Revenue Total cash collected Average net patient service revenue Total cash collected from patient service accounts. Exclude any non-patient service cash. > 100% Days Cash on Hand (Cash on hand + market securities) [(Total operating expense - depreciation expense)/365] Include all cash and other liquid assets as reported on the balance sheet. 150 Case Mix Index Total Medicare Sum of relative weights of all DRGs billed Trending indicator that reflects the diversity, clinical complexity and the needs for resources in the population of patients in a hospital Monitor for significant change Total number of DRGs billed 41

43 Other Management KPIs Indicator Calculation Things to Consider Target/Best Practice Bad Debt Write-offs as % of Gross Revenue Bad debt write-off Gross patient service revenue < % Charity Care Writeoffs as % of Gross Revenue Charity care write-off Gross patient service revenue < % Cost-to-Collect Total revenue cycle cost (patient access, patient accounts) Total cash collected Should include all Patient Access departments costs, including the functions of: scheduling, preregistration, eligibility/insurance verification, admissions, registration, and financial counseling. Include all Business Office departments costs, including the following functions: billing, A/R follow up & collections, cash posting, customer service, and denials/underpayments management. Include costs for any outsourced functions. <1.5 3 % 42