December 2011 PRACTICE CHECK-UP XYZ Anesthesia Group AdvantEDGE Healthcare Solutions www.ahsrcm.com info@ahsrcm.com (908)-279-8120
AdvantEdge Healthcare Solutions Anesthesia Practice Check-Up I. Introduction: AdvantEdge Healthcare Solutions is one of the nation s leading healthcare accounts receivable and practice management companies. Thirty years of AHS anesthesia coding and billing experience points the way to efficient and cost effective billing / accounts receivable management. A. The ANESTHESIA PRACTICE CHECK-UP has been developed to provide anesthesiologists with an independent evaluation of the following areas of their practice: 1. Billing Procedures and Effectiveness Billing Case Review Yield Analysis Aging Analysis Claims Adjudication Analysis 2. Fee / Profile Analysis Procedure/Case Fee Review Remittance Review Rejection Ratios 3. Compliance with Medicare and Other Third Party Mandates Procedure Coding Review Anesthesia Record Review Review of the Practice's Ability to Withstand Audit Scrutiny 4. Cost of Billing / Practice Management Financial Analysis 5. Business and Financial Document Analysis Hospital Contracts Employment Contracts/Partnership Agreements Managed Care Contracts 6. The completed analysis is compared against industry and regional standards to provide the group with a factual evaluation of the operational and financial health of the practice. AdvantEDGE Healthcare Solutions www.ahsrcm.com info@ahsrcm.com (908)-279-8120
II. PRACTICE CHECK-UP: The following is an overview of the specific steps taken during the ANESTHESIA PRACTICE CHECK-UP: A. Internal Audit of A/R and Financial Information: A complete audit of the practice financial data will be performed in order to obtain an understanding of the accuracy and consistency of the financial data. B. Billing / Accounts Receivable Review: 1. A review of historical charges, payments, and adjustments is performed as well as a review of the A/R aging on a payor-by-payor basis. Various ratios are utilized to compare your present collection effort and yields with attainable levels. C. Information Flow / Paperflow: 1. The billing information flow that is currently being utilized is reviewed in the following areas: 1. Demographic Capture 2. Case (charge) Capture 3. Charge / Case Reconciliation 2. Recommendations are made, where applicable, to improve the information gathering process. D. Fee Schedule and Payment Review: The fee schedule will be reviewed in conjunction with the major insurance carriers allowances to insure that fees are appropriate. Insurance remittances are checked for accuracy, as well as to determine the level of staff understanding as it relates to Medicare and other insurance mandates. Claim rejection patterns are analyzed in the context of coding and billing protocols. E. Third Party Compliance: Coding methodologies are evaluated to assess the practices ability to withstand audit scrutiny. Anesthesiology records are reviewed and compared against the billing codes utilized. F. Financial Analysis of Billing Effort: A complete analysis of the billing costs will be performed. The current cost of the billing service or internal billing plus associated practice personnel (if any), systems, postage, and other miscellaneous items will be analyzed and compared to industry standards. AdvantEDGE Healthcare Solutions www.ahsrcm.com info@ahsrcm.com (908)-279-8120
December 2011 PRACTICE CHECK-UP XYZ Anesthesia Group AdvantEDGE Healthcare Solutions www.ahsrcm.com info@ahsrcm.com (908)-279-8120
I. EXECUTIVE SUMMARY... 2 II. PRACTICE REVIEW GOALS... 4 III. ADVANTEDGE HEALTHCARE SOLUTIONS CREDENTIALS... 5 IV. MONTHLY ACTIVITY TRENDS... 6 CASES, CHARGES AND PAYMENT TRENDS... 6 PAYOR MIX TRENDS... 9 AGING ANALYSIS... 11 DENIAL MANAGEMENT... 12 V. BILLING PERFORMANCE INDICATORS USED FOR ANALYSIS... 14 KEY INDICATOR #1: ADJUSTED COLLECTION PERCENTAGE... 14 KEY INDICATOR #2: DAYS CHARGES IN ACCOUNTS RECEIVABLE... 15 KEY INDICATOR #3: ACCOUNTS RECEIVABLE AGING PERCENTAGE OVER 120 DAYS... 16 VI. CODING AUDIT RESULTS... 17 VII. FINANCIAL FORECAST & PROJECTIONS... 18 VIII. OTHER CONSIDERATIONS... 19 PHYSICIAN QUALITY REPORTING SYSTEM... 19 TREND REPORTING & DASHBOARDS... 19 HIPAA 5010 & ICD-10... 21 IX. SUPPORTING DATA & DOCUMENTATION... 22 Note: This report is a sample. All data and conclusions are illustrative and do not represent any particular practice. The results and recommendations shown may or may not be applicable to other practices. Each practice s results are unique and require individual analysis. Page 1
I. EXECUTIVE SUMMARY The following summary highlights our major findings of XYZ Anesthesia Group s coding and billing performance. Data was analyzed for the time period between January - December 2010 and January - September 2011. Charge, payment and case trends, accounts receivable balances, coding, and the overall cost of billing were analyzed. When evaluating an anesthesia practice, one needs to look at both the revenue side and the expense side of the practice to measure the overall effectiveness of the billing/collection performance. Major Findings: Revenue Cycle Management Days Charges in Accounts Receivable The group s days charges in accounts receivable as of September 30, 2011 were 68 days. This measure provides a context for evaluating the total accounts receivable balance among practices whose operations are very different in size and scope. This means that it is taking 68 days from the time charges are billed to the time of resolving the charges in the accounts receivable. The anesthesia industry and AHS benchmarks show this key performance indicator should be substantially lower, in the range of 35-40 days. Experience shows that the older the receivable the more difficult it is to collect. Accounts Receivable Aging Percentage Over 120 Days When managing outstanding accounts receivable, prevailing wisdom is that the older the account, the more difficult it becomes to collect. Based on the group s overall accounts receivable as of September 30, 2011, the practice s accounts receivable dollars outstanding over 120 days old is 37%. The anesthesia industry and AHS benchmarks show this key performance indicator should be substantially lower, in the range of 9-13%. More specifically, we found that your Medicaid charges over 120 days were very high at 44.7%; HMO charges were 67.2%, and Self-Pay charges were 39.9%. It is critical to have in place a denial management tracking system to efficiently work and resolve outstanding claims and the reasons for the denial. In addition, there should be collection protocols in place to effectively collect monies for both insurance and self-pay balances. This metric tells us that the outstanding charges are not being worked timely. Each practice s results are unique and require individual analysis. Page 2
Inconsistent Monthly Charge Processing Resulting in Delayed Collections In 2010, cases, charges and collections are relatively consistent from month to month. However, in reviewing 2011 cases, charges and collections, there is inconsistency in monthly charge processing resulting in delayed collections. For example, from December 2010 to January 2011, case volumes decline from 15,405 to 10,373, a 32% reduction. Charges in the same period decline from $1,556,542 to $1,015,774, a 34.7% reduction. As a result, February 2011 payments are affected and result in delayed payments. February payments decline from $490,942 in January to $259,480, a 47.1% reduction. Then in March 2011, payments increase from $259,480 to $661,117, a 154.7% increase. Consistent monthly charge processing is needed for consistent monthly cash flow to the practice. Cost of Billing When evaluating an anesthesia practice s cost of billing/collections, we are looking for excellent billing performance in conjunction with cost-effective billing. In comparing the practice s cost of billing to the anesthesia industry and AHS average billing fees, we found that your current cost of billing is very high. With further automation of electronic claims submission, payment remittance and automated coding technologies, the market rates have declined over the past three years. Your current billing fee of 7.9% of net collections is substantially higher than the anesthesia industry and AHS averages. The average AHS anesthesia fee in your area is 5.5%. Financial Forecast & Projections AHS performed a net-to-net collections analysis to compare the practice s current collection performance and costs to what AHS could offer the practice. Based on the results, AHS could increase collections by over $400,000 and reduce billing costs by over $100,000. This would provide the practice over $500,000 in financial improvement resulting in increased revenue for physician distribution. Overall the coding error rate is well above benchmarks. Medicare requires a coding error rate of 5% or less; AHS uses an internal benchmark of 2% or less. The XYZ error rate of 8.6% for CPT coding and 14.3% for ICD-9 coding is unacceptably high. As a result, the practice faces undue compliance risk and may be under or overcollecting for its work. The following pages of this report provide more detail of our analysis. We look forward to reviewing our findings in greater detail. AHS thanks XYZ Anesthesia Group for the opportunity to verify the performance of their practice. In today s healthcare landscape, downward pressures on reimbursement require physician practices to operate as efficiently as possible to ensure they are collecting all monies due the practice while decreasing expenses to be financially viable for the long term. Each practice s results are unique and require individual analysis. Page 3
II. PRACTICE REVIEW GOALS XYZ Anesthesia Group is a 9-physician anesthesia group practice providing anesthesia services at XYZ Hospital System. The practice currently outsources their billing and collection services to Vendor LMN. The group has not had an external review of billing and collection performance for over ten years. Practice leadership felt that having an experienced, local anesthesia billing team perform the review would allow comparison with a significant number of anesthesia clients in their market. The comparisons and related analyses are expected to verify the overall effectiveness of the current XYZ Anesthesia Group s billing and collection services. The practice s stated goals for the analysis are: To identify the effectiveness of the current billing and collection performance Compare current billing performance to MGMA/ASA Key Billing Performance Indicators Compare current billing performance to AHS peer group clients Identify areas of improvement based on observations found Each practice s results are unique and require individual analysis. Page 4
III. ADVANTEDGE HEALTHCARE SOLUTIONS CREDENTIALS AdvantEdge Healthcare Solutions (AHS) is a private billing and practice management firm focused on partnering with hospital-based practices to drive positive financial results, minimize billing compliance risk and reduce the capital investments in billing technology required in order to manage and run their practices. Anesthesia practices today are faced with a myriad of business challenges in running and maintaining a profitable practice. Some of these challenges are: Continued downward pressure on reimbursements and stipends Increased complexity and regulatory requirements to bill for their services Difficult to attract and retain high quality staff Technology and staff investments are expensive AHS Commitment to Each Client: Generate - More money, faster (People, Process and Technology) Practice financial data, anytime, anywhere (Web-based Dashboards and Reporting) Regulatory Compliance (Comprehensive billing compliance program to minimize risk to the practice) ClientFirst Service (Customer service philosophy based on meeting our clients needs) AdvantEdge Healthcare Solutions AHS Ranked among the Top 10 Billing Companies in the Nation Over 500 staff focused exclusively on physician coding and billing Technology State of the art billing technology Outstanding collection performance & results 99% first pass clean claim rate Charge capture reconciliation & verification Full denial management reporting Payor contract management Online client reporting and dashboards Patient portal Each practice s results are unique and require individual analysis. Page 5
IV. Monthly Activity Trends Cases, Charges and Payment Trends The following tables and graphs are used to identify established trends and changes in practice activity. Theoretically, direct correlations between case frequency and charge volume, on a monthly basis, should exist. Monthly Case Trends 1,600 1,400 1,200 1,000 800 600 400 200 0 Comments & Observations: 1. In 2010, case volumes are relatively consistent from month to month. 2. In 2011, there are issues associated with data capture/entry of cases and charges. For example, from December 2010 to January 2011, case volumes dropped from 1540 to 1037 which is a 32% reduction. The inconsistent capture of charges is creating peaks and valleys in the practice s collections. Cases Average/Month 2010 1372 Average/Month 2011 1327 Total 2010 16470 Total 2011 (9 Months) 11950 Each practice s results are unique and require individual analysis. Page 6
Charges Average/Month 2010 $ 1,378,853 Average/Month 2011 $ 1,314,031 Total 2010 $ 16,546,242 Total 2011(9 Months) $ 11,826,287 Comments & Observation: 1. 2011 posting of charges is inconsistent month to month, which results in a delay of collections in the following months. 2. For example, from December 2010 to January 2011, Charges drop from $1,556,542 to $ 1,015,774 which is a 34.7% reduction. The inconsistent capture of charges is creating peaks and valleys in the practice s collections. Each practice s results are unique and require individual analysis. Page 7
Comments & Observation: 1. Due to the inconsistent capture of charges, payments are affected, creating a delay in cash. 2. For example, payments from January 2011 to February 2011, decline from $490,942 to $259,480: a 47.1% reduction. Then in March 2011, payments increase from $259,480 to $661,117: a 154.7% increase. The inconsistent capture of charges is creating peaks and valleys in the practice s collections. Timely processing of charges and payments is important for consistent monthly cash flow to the practice. 3. 2011 payments correlate with the inconsistent charge posting in prior months (Feb, Mar, Apr, May, Sept) Payments Collection/Case Average/Month 2010 $ 450,265.21 Average/Month 2011 $ 454,859.04 Total 2010 $ 5,403,182.49 Average 2010 $ 328 Total 2011(9 Months) $ 4,093,748.42 Average 2011 $ 342 Each practice s results are unique and require individual analysis. Page 8
Payor Mix Trends The payor make up of a practice provides us with useful information relative to appropriate fee structures, participation status with various payors, and future directions for the group. We evaluate payor mix as Percentage of Charges. This approach enables the practice to identify the variances that affect practice revenue. The following chart represents XYZ Anesthesia Group s payor mix, relative to charges for 2010 and nine months of 2011. Payor Mix by Charges 35% 30% 25% 20% 15% 10% 5% 0% Payor Mix by YTD Jan. - Sept. Variance Charges 2010 2011 Medicare 29.82% 31.55% 1.73% Public Aid 13.37% 13.52%.15% BCBS 25.16% 22.73% (2.43%) Managed Care 14.67% 13.02% (1.65%) HMO 1.23% 1.21% (.02%) Capitated 8.06% 8.71%.65% Commercial 2.25% 2.91%.66% Workman's Comp 0.55% 0.39% (.16%) Self Pay 4.89% 5.96% 1.07% Comments & Observations: 1. Medicare increased by 1.73% in 2011 vs. 2010 2. BCBS decreased by 2.43% in 2011 vs. 2010 3. Managed Care decreased by 1.65% in 2011 vs. 2010 4. Self Pay increased by 1.07% in 2011 vs. 2010 YTD 2010 Jan. - Sept. 2011 Each practice s results are unique and require individual analysis. Page 9
Each practice s results are unique and require individual analysis. Page 10
Aging Analysis From March to September total A/R has increased $430,000 or 16.5%., PaySource Auto Self Pay Blue Cross Blue Shield Capitation Cigna Pending Commercial Insurance HMO Hold Collection Legal Collection Agency 1 Medicaid Collection Agency 2 Medicaid Pending Medicare Managed Care PHO Bonuses 2nd Placement Professional Courtesy Pre Collection Status Periodic Payments Self Pay Special Situations Workers Comp Insurance Workers Compensation Zero Balance Total: 9/30/2011 Aging Report Balance 0-30 31-60 61-90 91-120 121-150 151+ % > 120 Days $ 94,187.52 $ - $ - $ - $ - $ 21,743.96 $ 72,443.56 $ 256,463.36 $ 189,258.92 $ 52,826.77 $ 9,447.86 $ 4,117.14 $ 515.58 $ 297.09 $ 241,708.02 $ 80,430.00 $ 85,364.29 $ 4,932.95 $ 2,828.18 $ 789.99 $ 67,362.61 28.20% $ 33,847.62 $ - $ 347.80 $ 2,449.66 $ 3,357.77 $ 3,876.57 $ 23,815.82 81.81% $ 72,126.75 $ 20,820.33 $ 33,856.63 $ 7,329.54 $ 12,288.61 $ 3,245.05 $ (5,413.41) $ 93,755.87 $ 10,065.00 $ 10,993.71 $ 7,078.12 $ 2,617.10 $ 1,148.08 $ 61,853.86 67.20% $ 19,505.61 $ - $ - $ - $ - $ - $ 19,505.61 $ 10,715.25 $ - $ - $ - $ - $ - $ 10,715.25 $ 571,754.72 $ - $ - $ - $ - $ - $ 571,754.72 $ 740,274.70 $ 97,407.00 $ 162,942.67 $ 132,692.51 $ 16,346.88 $ 10,704.79 $ 320,180.85 44.70% $ 5,925,133.57 $ - $ - $ - $ - $ - $ 5,925,133.57 $ 62,813.79 $ 3,643.00 $ 14,220.72 $ 18,601.00 $ 10,768.40 $ 8,693.00 $ 6,887.67 24.80% $ 403,891.48 $ 270,797.83 $ 26,556.15 $ 6,113.86 $ 2,695.42 $ 4,578.47 $ 93,149.75 24.20% $ 191,807.05 $ 109,115.92 $ 58,592.44 $ 15,863.68 $ 6,873.17 $ 2,458.26 $ (1,096.42) $ (994,075.27) $ 2,457.94 $ - $ 2,580.15 $ 4,905.40 $ (7,945.07) $ (996,073.69) $ 156,994.07 $ - $ - $ - $ - $ - $ 156,994.07 $ 3,546.62 $ 2,320.00 $ 155.00 $ - $ - $ - $ 1,071.62 $ 94,850.27 $ - $ - $ - $ - $ - $ 94,850.27 $ 24,627.72 $ - $ - $ 168.00 $ 517.20 $ 137.00 $ 23,805.52 $ 597,858.44 $ 55,446.32 $ 106,318.19 $ 105,655.92 $ 91,832.02 $ 90,775.12 $ 147,830.87 39.91% $ 54,381.91 $ 4,059.00 $ 9,543.23 $ 5,096.00 $ 4,701.00 $ 6,511.59 $ 24,471.09 $ 6,322.91 $ 1,891.00 $ 1,241.00 $ 1,362.43 $ 1,433.04 $ 40.00 $ 355.44 $ 11,645.00 $ 2,318.00 $ 2,298.00 $ 2,392.00 $ 2,070.00 $ 1,216.00 $ 1,351.00 $ (5,488.55) $ - $ (32.54) $ (323.80) $ (1,125.60) $ (836.00) $ (3,170.61) $ 8,668,648.43 $ 850,030.26 $ 565,224.06 $ 321,439.88 $ 166,225.73 $ 147,652.39 $ 6,618,076.11 True A/R: Percentage $ 3,008,841.34 $ 847,572.32 $ 565,224.06 $ 318,859.73 $ 161,320.33 $ 155,597.46 $ 960,267.44 100.00% 28.17% 18.79% 10.60% 5.36% 5.17% 31.91% A/R Greater 120 Days % A/R Greater 120 Days $ 1,115,864.90 37.09% Comments & Observations: 1. 37.09% of total accounts receivables are aging at over 120 days. We would expect to see this number between 9-13%. 2. Medicaid monies over 120 days are high at 44.7%. 3. HMO monies over 120 days are high at 67.2%. 4. Cigna monies over 120 days are high at 81.81%. 5. Self Pay monies over 120 days are high at 39.9%. 6. Total accounts receivable increased by 16.5% from March to September 2011. Each practice s results are unique and require individual analysis. Page 11
Denial Management AHS requested sample denial reports to determine the percentage of claim denials and the trends associated with the volume and types of denials. No reports were provided. Payors deny claims for multiple reasons; therefore it is critical that a billing service have in place a denial management tracking system to effectively resolve claim denials. Every medical practice experiences claim denials. Better performing practices have denial rates below 5%; while some poor performing practices can experience denials in the 10% - 15% range, or even higher. One of the best ways to evaluate your performance is to know why claims are being denied. With that information you can determine what your practice needs to do to reduce the denials and increase the percentage of time that you get paid correctly the first time. Some billing services may not aggressively pursue denials due to the additional resources required. AHS s denial management system automatically tracks every denied claim and the type of denial by automating the ANSI denial codes provided by payors on the EOB. Our denial management system automatically routes the denied claim based on the type of denial to the appropriate staff work queue for resolution. The process includes the ability to create rules for automatic follow-up steps for specific denials plus reporting capabilities for trending purposes. Below are examples of denial reports that are shared with our clients: XYZ Client Denial Management Quarter End 12/31/2010 Current Uncollected $ Current Uncollected % % of Resolved Denials Total Resolved Charges Total Resolved Payments Quarter Charges Denied Initial Denial % 3 months $ 276,585 3.8% $ 126,646 1.7% 55.7% $ 153,939 $ 55,530 6 months $ 277,116 3.8% $ 108,089 1.5% 61.0% $ 169,027 $ 65,037 9 months $ 277,988 3.8% $ 107,257 1.5% 61.4% $ 170,731 $ 65,745 Each practice s results are unique and require individual analysis. Page 12
Denial Management Report: Denied Charges by Denial Category Category Charges Denied Initial Denial % Payment Amount Total Payment Resolution % Total Denial Resoluti on % Current Uncollected Amount Current Balance Eligibility $ 126,597 45.54% $ 29,315 23.16% $ 56,318 67.64% $ 40,963 $ 2,654 Pending Ins Review $ 34,870 12.54% $ 12,352 35.42% $ 16,142 81.71% $ 6,377 $ 1,115 Not Covered $ 32,739 11.78% $ 6,260 19.12% $ 7,883 43.20% $ 18,596 $ 1,480 Info Req From Patient $ 31,136 11.20% $ 11,799 37.90% $ 15,146 86.54% $ 4,191 $ 247 Bundled $ 14,635 5.26% $ 787 5.38% $ 2,934 25.42% $ 10,914 $ 0 Workers Comp Denial $ 12,382 4.45% $ 569 4.59% $ 1,108 13.54% $ 10,705 $ 1,084 Disallowed $ 9,804 3.53% $ 625 6.38% $ 2,370 30.55% $ 6,809 $ 0 Diag Insufficient $ 4,039 1.45% $ 260 6.44% $ 744 24.86% $ 3,035 $ 0 Not Authorized $ 3,818 1.37% $ 1,235 32.34% $ 42 33.45% $ 2,541 $ 0 Pre Auth Not Obtained $ 2,294.83% $ 1,677 73.11% $ 554 97.26% $ 63 $ 0 Charge Quantity $ 1,877.68% $ 265 14.12% $ 878 60.91% $ 734 $ 0 Paid to Other Provider $ 1,802.65% $ 8.46% $ 0.46% $ 1,794 $ 0 Exceeded Time Limit $ 1,395.50% $ 490 35.09% $ 369 61.55% $ 536 $ 0 Out of Network $ 600.22% $ 103 17.11% $ 497 100.00% $ 0 $ 0 Totals: $ 277,988 $ 65,745 23.65% $ 104,986 61.42% $ 107,257 $ 6,580 Denied Management Report: Denied Charges by Payclass by Category Payor By Category Charges Denied Initial Denial % Payment Amount Total Payment Resolution % Contractu al Adjustment Amount Contractual Adjustment Amount Total Denial Resolution % Current Uncollected Amount Current Balance Medicare Eligibility $ 39,922 69.17% $ 6,808 17.05% $ 22,336 73.00% $ 10,779 $ 1,108 Disallowed $ 5,106 8.85% $ 116 2.28% $ 510 12.27% $ 4,480 $ 0 Bundled $ 4,935 8.55% $ 719 14.58% $ 2,775 70.81% $ 1,441 $ 0 Diag Insufficient $ 2,254 3.91% $ 8.34% $ 32 1.78% $ 2,214 $ 0 Pending Ins Review $ 1,766 3.06% $ 239 13.51% $ 737 55.27% $ 790 $ 0 Not Covered $ 1,323 2.29% $ 196 14.85% $ 978 88.76% $ 149 $ 0 Info Req From Patient $ 827 1.43% $ 161 19.47% $ 662 99.55% $ 4 $ 0 Paid to Another Provider $ 644 1.12% $ 8 1.28% $ 0 1.28% $ 636 $ 0 Out of Network $ 600 1.04% $ 103 17.11% $ 497 100.00% $ 0 $ 0 Pre Auth Not Obtained $ 257.45% $ 47 18.37% $ 198 95.40% $ 12 $ 0 Charge Quantity $ 84.15% $ 16 18.50% $ 65 95.38% $ 4 $ 0 Medicare Totals: $ 57,718 $ 8,421 14.59% $ 28,791 64.47% $ 20,507 $ 1,108 Each practice s results are unique and require individual analysis. Page 13
V. Billing Performance Indicators Used for Analysis AdvantEdge Healthcare Solutions uses the MGMA/ASA benchmarks as a comparison to our billing and collection performance. The key indicators used for benchmarking XYZ Anesthesia Group s billing and collection performance are shown here. 2011 data is used in the following analyses. Key Indicators: 1. Adjusted Collection Percentage 2. Days Charges in Accounts Receivable 3. Accounts Receivable Aging Percentage over 120 Days Key Indicator #1: Adjusted Collection Percentage The adjusted collection percentage is a measure of the effectiveness of a business in collecting on accounts that are available for collection. Formula: (Adjusted Collections/Adjusted Charges) X 100 Definitions: Adjusted Collections: (Gross Collections Collection Offsets) Adjusted Charges: (Gross Charges Total Adjustments) Gross Collections: Revenue collected from Gross Charges Collection Offsets: Refunds of dollars collected in error + returned checks Gross Charges: Full dollar amount of all services rendered to patients XYZ Median 25th % 75th % AHS Avg. 90% 80% Adjusted Collection % 87.4% 88.0% 82.4% 80.0% 72.1% 70% 60% 50% 40% 30% 20% 10% 0% XYZ Median 25th % 75th % AHS Avg. Adjusted Collection % 82.40% 80.00% 72.10% 87.40% 88.00% Each practice s results are unique and require individual analysis. Page 14
Key Indicator #2: Days Charges in Accounts Receivable The days charges in accounts receivable indicator provides a measure of the number of days that are outstanding in the accounts receivable. Generally a smaller value is better, and experience shows that the older the receivable the more difficult it is to collect. Formula: (Total A/R Balance/Average Daily Gross Charges) Definitions: Average Daily Gross Charges: (3 month average gross charges/# Days) Days Charges in AR 70 68.0 60 50 40 40.5 47.3 34.9 38.0 30 20 10 0 XYZ MGMA Median MGMA 25th % MGMA 75th % AHS Avg. MGMA/ASA MGMA/ASA MGMA/ASA AHS XYZ Median 25th % 75th % Avg. Days Charges in AR 68.0 40.5 47.3 34.9 38.0 Each practice s results are unique and require individual analysis. Page 15
Key Indicator #3: Accounts Receivable Aging Percentage over 120 Days When managing outstanding accounts receivable, prevailing wisdom and years of experience show that the older the account, the more difficult it becomes to collect. It is important to analyze this key indicator by responsible party to facilitate the identification of specific payor problems within the aging category. Formula: (Dollars Aged > 120 Days/Total A/R Balance) X 100 Accounts Receivable Aging % Over 120 Days 40% 0.37 35% 30% 25% 0.20 20% 15% 0.13 0.09 0.10 10% 5% 0% XYZ MGMA Median MGMA 25th % MGMA 75th % AHS Avg. XYZ MGMA/ASA Median MGMA/ASA 25th % MGMA/ASA 75th % Accounts Receivable Aging % Over 120 Days 37.09% 13.30% 19.90% 8.90% 9.90% AHS Avg. Each practice s results are unique and require individual analysis. Page 16
VI. Coding Audit Results AHS reviewed cases dated XX/XX/11 and below are the findings from the audit. The case comparison detail can be found in Section 11, Supporting Data and Documentation at the end of this report. Overall Observations: Overall the coding error rate is much higher than expected. Medicare requires a coding error rate of 5% or less; AHS uses an internal benchmark of 2% or less. The XYZ Anesthesia Group error rate of 8.6% for CPT coding and 14.3% for ICD-9 coding is unacceptably high. As a result, the practice faces undue compliance risk and may be under or over-collecting for its work. In many cases of CPT coding errors, the issue was. In many cases of ICD-9 coding errors, the coding was. XYZ Anesthesia Group Coding Audit Summary Findings Total CPT Codes/Cases Reviewed 475 Total ICD-9 Codes/ Cases Reviewed 475 CPT Codes Agreed With 434 ICD-9 Codes Agreed With 407 CPT Codes Disagreed With 41 ICD-9 Codes Disagreed With 68 CPT Error Rate 8.6% ICD-9 Error Rate 14.3% Each practice s results are unique and require individual analysis. Page 17
VII. Financial Forecast & Projections The following financial forecast was prepared based upon attainable yields reflecting the following attributes of the XYZ Anesthesia Group practice. Payor mix Procedural mix and frequency Fee schedule (unchanged) Financial Forecast & Projections - Past 12 Months Gross Charges: Oct 2010 - Sept 2011 AHS Forecast Variance Beginning A/R $ 2,946,456 Plus Charges $ 16,198,258 Less Ending A/R $ 3,008,842 Adjusted Gross Charges $ 16,135,872 $ 16,135,872 Less: Contractual Adjustments $ 9,490,304 $ 9,490,304 Net Collectible Charges $ 6,645,568 $ 6,645,568 Net Payments $ 5,447,003 $ 5,848,100 $ 401,097 Net Collection Percentage 81.96% 88.00% 6.04% Less Cost of Billing $ 430,313 $ 321,645 $ (108,668) Total Cash For Physician Distribution $ 5,016,690 $ 5,526,454 $ 509,765 Cost of Billing 7.90% 5.50% Each practice s results are unique and require individual analysis. Page 18
VIII. Other Considerations Physician Quality Reporting System With all of the impending Medicare cuts that anesthesiologists face today, anesthesiologists must look for revenue from all possible sources. This includes revenue from Medicare incentive programs like the Physician Quality Reporting System (PQRS). Physicians who successfully participate in PQRS will earn an incentive payment equal to 1% of their total Medicare Part B Physician Fee Schedule allowed amount in 2011. For example, if a physician s total allowed amount for Medicare is equal to $250,000 in 2011, then that physician will earn an incentive payment of $2,500. From 2012 through 2014, the eligible incentive payment is 0.5% of the physician s Medicare Part B Physician Fee Schedule allowed amount. In 2015, there will be a penalty of 1.5% for non-participation. In 2016 and beyond, this penalty will increase to 2.0%. While the review of the PQRS material remains quite cumbersome, the actual documentation requirements have decreased substantially. Specifically, in 2010, physicians had to have appropriate PQRS documentation on 80% of eligible cases (Medicare patients). In 2011 and beyond, the 80% threshold dropped to 50%. And anesthesiologists only have 3 measures to report for 2011. All AHS anesthesia clients have received 100% of their PQRS payments since they began participating in the program. XYZ Anesthesia Group should ensure that the practice is participating and receiving this reimbursement. We did not see any reports that reflected whether XYZ Anesthesia Group is participating and receiving the incentive payments. Trend Reporting & Dashboards Based on the reports that were reviewed for this analysis, we did not see any trending reports that would allow the group to easily view charge, payment, case and accounts receivable trending information. AHS clients have complete visibility into the AHS billing process and results. This information is available anytime, anywhere from the AHS InfoEdge dashboard. As illustrated below, this HIPAA-compliant dashboard provides a summary and detail of charges, adjustments, collections, A/R, and case volumes. The data is updated daily with drill-down access to detailed information by payor, provider, location, etc. and can be exported in a variety of formats. In addition, regularly scheduled reports are delivered to InfoEdge with no delays from paper distribution and no need to email patient-protected information. Ad hoc reports can also be requested via InfoEdge and will be delivered to the dashboard. Each practice s results are unique and require individual analysis. Page 19
Here is an example of the daily dashboard screen available to every AHS client. Examples of InfoEdge drill-down screens are shown here (first by payor type, then by day for a specific payor type): Each practice s results are unique and require individual analysis. Page 20
HIPAA 5010 & ICD-10 HIPAA 5010 transactions and ICD-10 represent a new set of transactions between health care providers (including their billing companies) and payers. HIPAA 5010 transactions will officially go into effect January of 2012 (though CMS has recently allowed a three month grace period before it begins enforcing the 5010 requirement). It is very important that your practice is ready to submit claims in the new format or else payments will be disrupted. AHS technology has already been tested to submit claims in the new format and is currently submitting claims in 5010 format with many payors. ICD-10 is an entirely new set of 68,000 diagnosis codes that will replace the 13,000 ICD-9 codes in 2013. The magnitude of this change means that there will be significant requirements on all providers for more detailed documentation in their dictated reports in order to allow proper coding of the services. AHS has already begun the process of internal education and system changes in preparation for this change and will be offering training opportunities for client providers in 2012. In addition, AHS is currently participating in a beta trial with OptumInsight (previously A-Life) to trial computer-assisted coding for ICD-10 and is applying those lessons to the overall AHS ICD-10 plan. Each practice s results are unique and require individual analysis. Page 21
IX. Supporting Data & Documentation AHS has summarized XYZ Anesthesia Group s historical data from multiple reports for YTD 2010 and thru September 2011 from which to prepare this report and compile our findings. ABC RADIOLOGY GROUP SCHEDULE OF ACCOUNT ACTIVITY COLLECTION OFF CONTRACTUAL BAD DEBT A/R AGENCY SYSTEM AGENCY CPT MONTH YEAR CHARGES NET PAYMENTS ADJUSTMENTS ADJUSTMENTS BALANCE COMMISSION RECEIPTS RECEIPTS COUNT JANUARY 2010 1,252,538.47 373,841.96 512,288.31 80,000.00 2,420,688.00 0.00 0.00 2,402.62 12,494 FEBRUARY 1,323,868.66 286,013.23 535,209.69 85,796.00 2,837,538.00 0.00 0.00 2,092.22 13,116 MARCH 1,369,327.28 504,560.92 1,031,408.49 93,612.00 2,577,285.00 0.00 0.00 3,627.43 13,515 APRIL 1,457,326.87 493,175.10 881,889.25 60,830.00 2,598,717.00 0.00 0.00 4,410.41 14,275 MAY 1,253,487.11 438,598.48 790,390.68 62,075.00 2,561,141.00 0.00 0.00 3,725.92 12,689 JUNE 1,269,316.73 495,486.53 910,242.61 75,178.00 2,349,551.00 0.00 0.00 0.00 13,016 JULY 1,377,887.03 409,879.81 737,935.53 51,082.00 2,528,542.00 0.00 150,000.00 2,767.09 13,627 AUGUST 1,518,303.28 430,546.71 697,137.53 65,966.00 2,853,196.00 0.00 0.00 5,063.51 15,164 SEPTEMBER 1,352,215.88 417,825.04 713,125.23 128,006.00 2,946,456.00 0.00 0.00 61.84 13,712 OCTOBER 1,362,152.24 503,819.61 888,216.70 91,824.00 2,824,748.00 0.00 0.00 3,175.88 13,467 NOVEMBER 1,453,276.33 476,801.17 822,819.18 71,726.00 2,906,678.00 0.00 0.00 2,792.49 14,221 DECEMBER 2010 1,556,542.73 572,633.93 923,249.37 51,651.00 2,915,687.00 0.00 50,000.00 2,712.71 15,405 CURRENT Y-T-D 16,546,242.61 5,403,182.49 9,443,912.57 917,746.00 2,915,687.00 0.00 200,000.00 32,832.12 164,701 ABC RADIOLOGY GROUP SCHEDULE OF ACCOUNT ACTIVITY COLLECTION OFF CONTRACTUAL BAD DEBT A/R AGENCY SYSTEM AGENCY CPT MONTH YEAR CHARGES NET PAYMENTS ADJUSTMENTS ADJUSTMENTS BALANCE COMMISSION RECEIPTS RECEIPTS COUNT JANUARY 2011 1,015,774.85 490,942.30 852,069.17 81,101.00 2,507,350.00 0.00 0.00 2,653.65 10,373 FEBRUARY 1,425,716.10 259,480.76 440,199.35 111,112.00 3,122,274.00 0.00 0.00 1,034.29 15,242 MARCH 1,347,813.87 661,117.08 1,139,252.54 88,240.00 2,581,479.00 0.00 0.00 2,617.82 14,132 APRIL 1,191,143.58 352,499.84 598,526.80 95,333.00 2,726,263.00 0.00 0.00 4,055.40 11,676 MAY 1,549,449.09 518,626.39 889,957.73 69,268.00 2,797,860.00 0.00 0.00 1,693.33 15,497 JUNE 1,225,331.12 422,570.17 702,506.57 134,059.00 2,764,055.00 0.00 50,000.00 2,766.40 12,302 JULY 1,362,239.47 422,587.22 676,345.96 63,208.29 2,964,153.00 0.00 0.00 2,493.51 13,533 AUGUST 1,170,269.18 408,912.03 659,020.87 107,058.00 2,959,431.00 0.00 0.00 0.00 11,577 SEPTEMBER 1,538,550.39 557,012.63 898,139.97 33,986.00 3,008,842.00 0.00 0.00 4,173.56 15,176 OCTOBER 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 NOVEMBER 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 DECEMBER 2011 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 CURRENT Y-T-D 11,826,287.65 4,093,748.42 6,856,018.96 783,365.29 3,008,842.00 0.00 50,000.00 21,487.96 119,508 A/R DAYS 2010 2011 1/31/2011 57.3 2/28/2011 70.3 3/31/2010 58.8 3/31/2011 61.3 4/30/2010 55.7 4/30/2011 61.2 5/31/2010 57.7 5/31/2011 63.0 6/30/2010 53.7 6/30/2011 63.4 7/31/2010 59.6 7/31/2011 65.9 8/31/2010 63.0 8/31/2011 72.5 9/30/2010 63.8 9/30/2011 68.0 10/31/2010 60.7 11/30/2010 63.5 12/31/2010 61.4 Coding Review Details Follow on pages 22 through 34. Each practice s results are unique and require individual analysis. Page 22
Coding Review Details XYZ Anesthesia Group Confidential Information of Advantedge Healthcare Solutions and ABC Radiology Group Unauthorized Copying or Distribution is Prohibited. Page 23