ED Operations

1. ED Operations Follow the Money

2. The Big Question • Can we provide care for our patients (treatment and service) and receive reimbursement that will cover our costs ?

3. Healthcare is a Business • Like it or not, healthcare is a business • An efficient ED can be a source of revenue for a hospital, or it can be a cost center • In many hospitals, the ED is the main source of admitted patients

4. Healthcare is a Business, cont. • Compare an ED to an assembly line: • Units produced must be of high quality • Must be produced in a timely fashion • Fluctuations in demand must be met • Cost of production cannot exceed payment received • One key to the success for any ED is being efficient enough to provide the level of service needed in a cost effective manner.

5. Considerations Does standard work exist for: • Patient process flow • Documentation • Ancillary tests • Data flow • Supply levels • Quality Assurance • Exception processing • Is communication strong ? • What is the mix of payer sources ?

6. ED Revenue Cycle Money in Bank WHAT could go wrong ? Professional Bill Facility Bill

7. What Could Go Wrong ? • Using and billing for items or services that are not reimbursable • Assuming they are • Billing on incorrect form or using incorrect codes • Using supply items that cost more than the reimbursement amount • Poor documentation prevents appropriate billing codes being assigned

8. What Could Go Wrong ? • Overstaffing drives costs up with no reimbursement benefit • Paperwork gets lost • Lack of standard work creates waste in motion, supplies, inventory, human capacity • Business office does not maximize collections – leaves $$$$ on the table

9. Simplified Example Facility Charges = Total of $850 $ 250 for E&M level 2 $ 200 for lab tests $ 400 for EKG Facility Costs = Total of $85 $70 for staff $5 for labs $10 for EKG Patient Pay Source = Medicare Reimbursement = $ 87.25 Profit margins in healthcare are razor thin

10. Given the previous example, imagine how many Medicare patients it would take to offset losses/expenses incurred due to: • Billing opportunity lost due to poor documentation or misplaced chart • Patients without insurance • Overuse/waste of supplies or drugs • Equipment downtime • Staff overtime due to sick calls • Rework costs due to errors in patient information or billing issues

11. Not to mention…………….. • Transport costs (getting sample to Lab) • Facility overhead (rent, utilities, maintenance) • Technical costs (lab staff, lab supplies) • IT costs (phones, PC’s, support) • Administrative costs (coders, QA, billing office, payroll, etc)

12. What Can You Charge For? • Facility • Evaluation & Management (E&M) services and procedures • Non-routine supplies • Drugs • Physician • E&M services • Procedures and treatment • Other services (possibly)

13. Facility E&M Charge • Facility E&M charge typically includes: • Overhead costs • building maintenance, housekeeping, utilities, depreciation costs, equipment, administrative costs, personnel costs • All of these costs should be analyzed on a per patient basis prior to establishing each facility E&M charge

14. Charges Beyond the E&M In a busy ED, there are many opportunities for revenue beyond the E&M charge • Laceration repair • Casting • IV infusion therapy • Catherization • Transfusion • CPR • Intubation • Immunizations • Injections • Fracture treatment

15. Professional Charges • Professional charges (Pro-fees) are intended to charge for: • Physician training and knowledge • Physician procedural skill set • Physician medical decision making • The method used to set charges for professional services is often determined by a Board of Directors or other governing body

16. Reimbursement • With both facility and pro-fee charging, it is critical to understand how reimbursement is calculated • Charges do not equal CASH • Proper documentation, along with skilled coders (both facility and pro-fee), and an aggressive billing department will result in appropriate reimbursement

17. 2nd Example of Medicare Reimbursement • E&M Level three = cpt 99283 “Emergency department visit for the evaluation and management of a patient, which requires these three key components: an expanded problem focused history, an expanded problem focused examination; and medical decision making of moderate complexity….. Usually, the presenting problem is of moderate severity.” Reimbursement = $ 139.14

18. Know Your Payer Mix • Payer Mix is the % of each type of payment source across your patient population • You can’t always pick your payer mix but you can maximize it: • Measure and track the quality of patient registration information • Develop a strong discharge process • Collaborate with other areas of hospital to share info • Build rapport with the billing office • Monitor up front collections of patient co-pays

19. Know Your ED • What are the demographics of your ED ? • How many beds? • What is the bed turn-over rate? • Do you have a flow problem? • What % of patients are > 65 or < 15? • What different types of treatment do these disparate age groups require ? • How does that contribute to your expenses ?

20. What is the most frequently provided treatment in your ED ? • How much does it cost to provide? • Are you minimizing the cost ? • How are resources (RN’s, MD’s, techs) used in your ED ? • Are resources used to their level of training ? • Nurses transporting non-monitored patients

21. Know How Coding is Assigned • Regardless of the use of an Electronic Medical Record (EMR) or paper records, it is important to know how procedure codes are assigned • All coding is based on documented services • Follow the old axiom – “if it isn’t written down (or in the computer) – it didn’t happen”

22. Facility vs Pro-fee • Facility coding and pro-fee coding are very different • Each should have a dedicated, specially trained staff • A feedback loop to educate clinicians on documentation improvement is critical • In a hospital setting, RN documentation supports the facility charges, MD documentation supports the pro-fee charges

23. Charges and Cash • If you can’t charge for it, you sure won’t get paid for it ! • At the end of the day – your cash has to exceed your expenses • Remember: • Charges are not cash • Net income is not cash

24. Expanding Your Comfort Zone • More and more physicians are “business savvy” • Not unusual to see MD followed by MBA • This is almost a necessity in today’s competitive healthcare market • Health providers should understand basic business concepts

25. Basics • Inflows must exceed outflows • No different than your household budget • The bottom line: + Charges - Less Contractual Adjustments - Less Bad Debt (non-payers) - Less other expenses(direct and indirect) Equals Net Income

26. Net Income is only a term that describes the mathematical difference between charges, contractuals, and expenses • Net Income does not equal Cash • A percentage of net income (based on historical cash collections from charges) is typically used to project actual cash

27. Contractual Adjustments • Most hospitals have a variety of contractual arrangements with insurance carriers (eg: Blue Cross, Aetna) • Services are provided at the hospital standard price to all payers • Government payers (Medicare, Medicaid) establish their own payment rates • Contracts for payment from insurance carriers are established at either a % of billed charges or a flat rate

28. Contractual Arrangements, cont. • The gross charge amount is reduced by the contractual (netted) prior to the subtraction of expenses. • Example: • Charges = $850 – payer is Blue Cross • Blue Cross has a flat rate agreement to pay $200 per ED visit • Charges are netted to $200, then expenses are subtracted to arrive at Net Income

29. Bad Debt • Bad Debt is an (indirect) expense created when amounts owed to an organization are not paid • Bad Debt expense is usually due to patient non-payment, but can be due to insurance non-payment • Minimizing bad debt through strong billing and collection practices is essential

30. Other Expenses • “Other” expenses can vary from hospital to hospital, but usually include: • External resources (eg: consultants, contracted billing companies) • Allocated overhead amounts (eg: maintenance, equipment, utilities, information technology) • Travel, education, subscription fees

31. Net Income • Continuing the example – from your “Net” charge of $200: • Subtract your direct expense: • Expense for RN’s = $40 • Expense for MD’s = $75 • Supply Expense = $ 10 • Your net income becomes $ 75 Subtract your indirect expense: • Overhead = $50 • Bad Debt = $15 • Your net income is now $ 10

32. Finance Speak • Don’t confuse “net income” with Cash • Net Income is the difference of charges less ALL expense • Some organizations use the term “revenue” to indicate charges, and “net revenue” to indicate charges less contractuals • “Overhead” is typically an allocated expense that combines all indirect costs • Some organizations use actual bad debt and an estimate of overhead as reductions to charges

33. Tracking & Reporting • All organizations (non-profits included) carefully track all information related to net income (charges & expenses) • Departmental annual budgets are based upon the anticipated volume of patients and related charges • Departments where expenses exceed expectations can expect to answer some tough questions

34. Asking for New Equipment ? • Today’s medical professionals must have a good understanding of profit and loss issues • Be prepared to discuss revenue (charges), cash, bad debts, and other expenses if asking for an investment by your organization • Demonstrate your knowledge of business concepts by submitting a business plan to justify an expenditure request

35. Business Plans • Don’t have to be complex – keep it simple • Describe: • What you want • Why you want it • What will it cost • How quickly can the cost be recovered (through increased patient volumes and/or reimbursement)

36. Remember – charges do not equal cash Few organizations are in a position to acquire new technology or equipment based on improved patient care alone Budgets are tight, and expenditures must demonstrate a Return on Investment (ROI)

37. Basic Business Plan Format Vision statement • Why this is good for the organization, and for patients The people involved – stakeholders, management, customers • Who will directly benefit and who is committed Business profile • The volumes anticipated, day to day operational facts and figures Economic assessment (money making opportunity) • Bottom line = what cash will this bring ?

38. Example • New Ultrasound Machine • Cost $100,000 • If used 20 times per day for one year, each use has an expense of $13.69 (equipment only) • Facility Charge for US is $125.00 • Average reimbursement for US is $20.00

39. Anticipate Questions Like • What payer mix was used to calculate the average reimbursement • How long will it take to pay for the initial cost of this equipment • What is the useful life of the equipment • What staffing is needed to operate this • Is special training involved • What are those costs • Are there 20 patients per day that need an US

40. And….. • What are the warranty costs • How long is the warranty • What about maintenance expense after the warranty • What hours would this service be offered • Are those hours when demand exists • Is there a related professional fee charge • What is the reimbursement And those are just a few !

41. Work with your Finance Department or Business Office Manager to confirm assumptions and calculations • Develop a “best case” and “worst case” scenario • And a back up plan

42. Summary

43. Summary • Medicine is a business • Be business savvy • You can get what you need • But is does take preparation • Emotional arguments only get you so far