Revenue Cycle and Information Technology

1. Revenue Cycle and Information Technology June 9, 2014

2. Learning Objectives This session is intended to inform and educate MSHA students about Revenue Cycle Management (RCM) and the role I/T plays within the Revenue Cycle. By the end of this session you will: Understand more about Aspen Advisors and our perspective on the market Understand Revenue Cycle as both a series of processes and an organization structure in a provider setting Have insight into current and historic challenges within the Revenue Cycle Understand how I/T helps (or sometimes hurts) Revenue Cycle performance Get tips for your Residencies specific to Revenue Cycle

3. Personal Background Kevin Ormand – Director • Almost 20 years of healthcare administration experience, focusing on revenue cycle management, finance and operations management, strategic consulting, and project management. • Proven track record of success at identifying improvement opportunities, developing sustainable solutions to drive cash flow, maximizing operational efficiency, and assuring regulatory compliance. • MSHA (1998) , FACHE, PMP, and current student in Masters of Healthcare Engineering program. • Columbia, Columbia/HCA, Quantum Innovations, Children’s Medical Center Dallas, Seton Healthcare Network, Phase 2 Consulting, Seton Healthcare Family, maxIT-Vitalize/Leidos Health, Aspen Advisors (whew!)

4. About Aspen • Founded in 2006; steady growth over the past eight years • Track record of success and demonstrated outcomes –100% of our clients serve as references • Over 100 associates nationwide; over 100 clients in 25+ states • Strong KLAS ratings • Top 3 Overall Services Firm two years in a row • 2013 ICD-10 Category Leader • 2011, 2012, 2013 Modern Healthcare Top 20 Best Places to Work • 2014 Consulting Magazine Small Jewel • Committed to education, research, and innovation • Seasoned, senior-level engagement teams • Balance of highly-skilled consulting practitioners, clinicians and implementation experts • Experience with community hospitals, academic medical centers, integrated delivery networks and health plans • Focus on facilitation, consensus-building and knowledge transfer Our Core Values

5. Effective Revenue Cycle Operations • A-player Rev Cycle organizations optimize their technology integration with business process requirements. • It is much more broad than just business office operations. • It touches almost every aspect of patient care delivery!!

6. The Revenue Cycle is an interconnected series of multi-disciplinary functions

7. Top 8 Priorities in the Hospital C-Suite* Revenue Cycle Revenue Cycle Revenue Cycle Revenue Cycle Revenue Cycle Revenue Cycle Source: American Hospital Association's survey (April 2014) of more than 1,100 executives from health systems or community hospitals, "Building a Leadership Team for the Health Care Organization of the Future."

8. Addressing Industry Priorities

9. The Glory Days of Revenue Cycle Strategy…

10. Revenue Cycle Headlines

11. The Revenue Cycle Conundrum Revenue Cycle Leadership Responsibility – Ownership of Operations,Technology, Patient Experience, and Results: • Organization Pressures: • Reduce cost to collect • Increase cash flow • Support a larger footprint in a growing and changing health system • Respond to / adapt to regulatory updates • Improve the patient experience • Market Response: • Operations consolidation / regionalization(Ascension, Bon Secours) • Comprehensive outsourcing(Conifer, Parallon, Accretive, etc.) • New RCM vendor options (Epic, Cerner, Soarian, etc.) • Continued bolt-on proliferation • Increased patient expectations(self-service, recognize me, make it less complicated) • Options: • Consolidate operations • Outsource (fully or partially) • Upgrade / replace existing technology • Infuse new technology • Reduce manual processes • Process redesign • Leadership Questions: • How do I tie improvement initiatives to organization strategy? • Outsourcing – what is the right balance? • Am I getting the most out of my current technology? • How do I evaluate what is on the market? • Vendor options – Who can I trust? How do I develop trust? • Where do I start, and how do I stay on top of this stuff? Revenue Cycle Leadership Calling – the professional as a technologist, process engineer,and entrepreneur… while maintaining financial subject matter expertise.

12. Our Perspective on Revenue Cycle • Market pressures are driving macro-level change across the Revenue Cycle Management landscape. • The voice of the customer continues to drive revenue cycle technology investment. • Constant trade-offs between core revenue cycle vendors and bolt-on technology. • Revenue Cycle operations are multi-disciplinary. • New call for leadership: technologist, process engineer, and entrepreneur… while maintaining operational & financial subject matter expertise.

13. Market Dynamics • Revenue Cycle operations have long been the focus of consolidation for the achievement of economies of scale and information technology optimization; recent large examples include: • Parallon, Conifer, etc. • Accretive Health, Cymetrix, etc. • A 2012 study indicates that almost ¾ of all hospitals in the U.S. anticipate either replacing their current Revenue Cycle platform or substantively upgrading their Revenue Cycle system environment within the next two years. • Large-scale change • Bolt-on technology infusion • Thus, the Revenue Cycle market is continually in a state of flux. Pressure Chaos Opportunity

14. Almost every healthcare leader has skin in the Rev Cycle game A Few Cold Hard Facts… • Effective Revenue Cycle operations are fully dependent on a true multi-disciplinary team to execute seamlessly on requirements. • No organization’s revenue cycle executes perfectly – it is technically impossible to do so. • The universal truth is that every revenue cycle operation has opportunity, and Revenue Cycle Operations and Technology improvements represent one of the few areas within the healthcare provider space where a measurable Return on Investment (ROI) can be readily determined.

15. Potential Impact of a Well-Managed Rev Cycle Improvement Initiative • It is reasonable to expect a 0.5% improvement to NOI as a result of a well-managed Revenue Cycle Improvement engagement • The rhetorical question is: “How much would you be willing to invest to realize $xxM in ROI for the next 5 years?”

16. The Flip-Side of the Paradox… • Lack of awareness (or conversely, acceptance…) • Many managers and directors are long-tenured contributors who promoted up from the ranks over the years – they’re excellent at what is required to do the job but not historically trained to be adept innovators and/or process transformers. • Incremental improvements have occurred already and they are satisfied/celebratory • They are simply swamped • Competing initiatives • Drowning in today’s pressure on operations • Don’t think they can afford the time or the money • They think they can do it themselves • They don’t realize how much hard work it actually is… • They don’t realize that the extra expenditure in the short-term can accelerate the payback

17. Revenue CycleHow the Voice of the Customer is Driving Revenue Cycle Technology Investment • Legacy systems support the core revenue cycle processes. The newer versions are starting to provide functionality to replace bolt-ons. None of them provide a full revenue cycle solution for complex environments. • Meditech • Epic Financials • Enhancements • Siemens Invision, • MS4, Soarian, et al • CPSI, APS, HMS • Other small community hospital vendors • Add-on Svcs. • Consolidations • Conversions • Upgrades • Replacements • Cerner ProFit, et al • McKesson Paragon, Horizon, RelayHealth, et al • eCW, Next Gen, multiple ambulatory options Scheduled/ Pre-registered The Basic Revenue Cycle Process Rebill Clinical documentation Emergency Department Bill dropped Payment variance Care delivery: Ancillary, surgery Inpt & Out pt Patient discharged Appeal? Direct Admits Bill edits applied Clean claim submitted Unique account is created/ upgraded Contractuals applied Denials Write-offs/ adjustments Charge generation Code entry by HIM DRG/CD-9 Transfers 100% payment? ADT transmission sent to ancillary systems Encounter goes to A/R Zero-balance account is closed The Voice of the Customer I need help managing my payer denials / RAC audits/ etc. Why is there so much manual data entry? I don’t understand my bill. I need my medical record information. Why don’t they remember me? Can’t I do this online? Why don’t they remember me? Already provided this information. What is this going to cost me? How do I know that I charged everything I was supposed to? Did my charges post? Did the data flow accurately to the bill? Where is the original order? Is everything signed? Is there an easier way to work these errors? Why didn’t they fix this sooner? What is the error rate? How are we doing? Why is it taking so long? What is the status of the claim? Are we collecting what we should We need to do better with fewer people. Patient Do you have insurance? Can we help you get insurance? Are you eligible? Is there an easier way to get an authorization? What is the copay, co- insurance, & deductible? Bolt-onTechnology Patient Clinical Care Team Charge Capture Analyzer Request of InformationPortal Document Imaging Registration Q/A Strategic Pricing System CaseMgmt.System Charge Reconcilia-tion Tools Encoder Claims Statusing Claims Scrubber Document Imaging Contract Mgmt. Payment Variance & Denials Mgmt. Electronic Cash Posting Vendor Mgmt. Portal Rev Cycle Dashboard & Analytics Audit Mgmt. Patient Statements Document Imaging Patient Portal Forms Automation Electronic Authoriza-tion Insurance EligibilityVerification Scheduling & Pre-Reg Portal e-Fax Order Repository ABN Checking Charity WorkflowProcessing Financial AssistanceScreening Demog.Verifica-tion Workflow Mgmt. Workflow Mgmt. Patient Estimation

18. Information Technology AcrossRevenue Cycle Landscape • Centralized scheduling and/orpre-registration • Forms automation • Registration quality assurance • Productivity modeling • Upfront eligibility/authorization and patient responsibility estimation • Portal / kiosk design, development, and implementation • Financial counseling/assistance • Demographic verification • Workflow automation • Claims scrubbing/edits root cause analysis • Electronic claims status and/or cash posting • 3rd party vendor automation / monitoring • Denials management programs • Financial assistance adjudication • Under payment monitoring • Contract management • Call center management • Patient Portal development • Charge Description Master (CDM) optimization • Centralized charge capture and/or reconciliation • Revenue integrity monitoring / bill analyzer • Regulatory update assessment and implementation support • RAC audit support • Clinical Documentation Improvement (CDI) programs • Discharge Not Final Billed (DNFB) improvement • Case management • Strategic pricing Strategy, System Selection, & TVO Implementation Planning Program Management, Implementation &Value Realization ICD-10 Planning, Execution, Risk Mitigation, Forensics Impact Analysis on Clinical Systems and Workflow (RVR) Assessment & Optimization

19. Elements of the Rev Cycle Value Realization Maturity Model HIGH LOW Value is expected Streamlined access & real-time eligibility Regional centers of excellence Documentation-driven charging and coding Centrally chartered performance improvement projects Increased patient self-service RISK & WASTE PRODUCTIVITY & QUALITY Training addresses needs More complex revenue monitoring New technology enabling PI Scheduling and pre-reg efficiencies in some areas Analytics capabilities enhanced Processes are established to manage and measure metrics and KPIs Productivity and process efficiency is low Large backlog of errors Low standardization and high decentralization LOW HIGH FOUNDATIONAL ASPIRATIONAL PROFICIENT TRANSFORMED PEOPLE, POLICIES, TECHNOLOGY ADOPTION

20. Recent Revenue Cycle Assessment Success Story • Opportunity: Hospital had its first non-profitable year on record: • Clinical redesign in process • System / technology review already completed • Hospital Revenue Cycle key performance indicators spiraling out of control. • Key leaders either on the way out or aware of the hot seat. • Objective analysis/assessment requested by corporate leadership. • Two month assessment included data analysis, interviews, and process observations for Root Cause Analysis. • 12 prioritized recommendations identified, including high-level critical path for implementation. • Total implementation time & cost: • 2 month consulting engagement • Total consulting costs = $35K • Value Proposition: Targeted bad debt and other expense reduction, plus net revenue enhancements = $900K annually. Would you spend $35K in consulting to identify $3.9M?

21. Recent Optimization/System Selection Success Story – Front-end of the Revenue Cycle • Opportunity: Multi-hospital health system in acquisition mode: • Aggressively searching for ways to optimize its current environment to grow capital for acquisitions • Cerner EHR and Siemens Invision Rev Cycle • Data analysis identified that while bad debt as a % of net revenue was flat, the dollars associated with patient responsibility had grown from $12M to $36M annually. • Recommendation: • System Selection for bolt-on that improves electronic eligibility verification and Patient Responsibility estimation with workflow management included. • Business process redesign to optimally integrate new technology. • Total implementation time & cost: • 6 month consulting engagement • Year one consulting and implementation support: = $450K • Subsequent years = $225K in annual fees • Value Proposition: 10% reduction in patient responsibility bad debt in first 12 months of deployment. Would you spend $450K in consulting to get $13.1M?

22. Recent Optimization/Redesign Success Story – Middle of the Revenue Cycle • Opportunity: Multi-hospital health system facing intense financial pressure: • Recent reduction in workforce • Past success hid broken processes • Data Analysis identified that incredible disparity across like services and sites for IV infusion and injection charge capture. • Recommendation: • Develop and implement a centralized charge capture team. • Redesign/standardize technology and forms for optimal documentation, charge capture, and reconciliation. • Business process redesign to optimally support clinicians (alleviate workload, ensure balance of managerial oversight). • Total implementation time & cost • 9 month initial consulting engagement • Year one consulting and implementation support: = $750K • Subsequent years = $225K in annual fees • Value Proposition: $38.5M in sustained incremental net revenue by year 3. Would you spend $750K in consulting to get $125M?

23. What to look out for in your Residencies • Understand what a patient encounter is from start (scheduling/pre-reg) to finish (zero-balance account). • Flowchart the process of who does what, when, and where • Identify your own process pain points (possible cash aneurisms?) • Who are the customers of the revenue cycle process at each step? • Learn what Revenue Cycle KPI’s are on the CEO’s dashboard, and then drill down to the CFO, the VP of Rev Cycle, the Rev Cycle Department Directors, etc. • Understand connections between lead measures (e.g. % possible upfront collections) and lag measures (e.g. bad debt associated with patient responsibility). • Build your overall Revenue Cycle understanding (see next few slides).

24. Questions from Revenue Cycle Stakeholders

25. Revenue Cycle Management –Market Competitors • Major consulting firms that offer a broad suite of revenue cycle consulting services and (more and more) their own proprietary technology: e.g. Deloitte, Huron Consulting Group, PwC, Advisory Board Company. • Outsourcing companies that take over the entirety of the revenue cycle operations: e.g. Conifer, Accretive, Parallon, OptumInsight. • Major Core vendors with consulting arms: e.g. Siemens, Cerner, McKesson. • Bolt-on technology vendors: Over 100 players in this space offering more nimble opportunities to bridge gaps where Major Vendors are less effective and to respond to growing customer (provider, patient, payer) requirements, e.g. MedeAnalytics, MedAssets, SSI, HealthWare Systems, JDA eHealth. • Small boutique consulting firms that specialize in either a market niche (e.g. Home Health revenue cycle) or a single area of focus (e.g. Charge Description Master maintenance and optimization).

26. Industry Jargon • A/R Days • DNFB and DNB • Front End / Patient Access (Scheduling & Registration) • Middle (Coding & Revenue Integrity) • Back End (Billing & Collections) • Cost to Collect • Days Cash on Hand • Accelerate Cash Flow • Reduce Bad Debt • Timely Filing • ICD-10 CM / ICD-10 PCS • POS / Upfront Collections • Compliance / Regulatory / CMS • Ancillary Departments • P4P

27. Key Revenue Cycle Phrases • Operating margins are near zero/loss • Revenue loss • Days in Accounts Receivable (A/R) are rising • Write-offs increased • Denials are up • Bad debt increased • Increased number of patients without insurance or with high deductible • Cash collection rate decreased • Reimbursement decreased • Profit margins are negative • DNFB is rising • Lost charges • Unprofitable service lines • Manual processes and /or tools • Workflows not integrated • Upcoming system implementation and/or upgrade • Unsuccessful system implementation (i.e., HIS, EMR, EHR) • Project over budget • Little to no involvement in EHR Implementation • Patient satisfaction decreased due to revenue cycle processes • Not prepared for ICD-10 • Lack of reporting or tools • Rising expenditures

28. In Summary • Understand more about Aspen Advisors and our perspective on the market. • Aspen history, perspective on the RCM market • Understand Revenue Cycle as both a series of processes and an organization structure in a provider setting. • Comprehensive requirements for Effective Revenue Cycle Operations • Front, middle, and back (and many points in between!) • Have insight into current and historic challenges within the Revenue Cycle. • Revenue Cycle Operations and Technology improvements represent one of the few areas within the healthcare provider space where a measurable Return on Investment (ROI) can be readily determined. • Consolidation, competing initiatives, lack of understanding • Understand how I/T helps (or sometimes hurts) Revenue Cycle performance. • How the VOC is driving Revenue Cycle technology investments • Information Technology Across the Revenue Cycle Landscape • Elements of the Rev Cycle Value Realization Maturity Model • Get tips for your Residencies specific to Rev Cycle. • Rev Cycle I/T market competition, success stories, Residency pointers