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
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!!!
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CURRENT INDUSTRY FACTORS 2
Challenges Inherent in the Transformation of the Payment Model Transformation from payment for volume to payment for value Increasing patient financial responsibility Legacy systems, information silos and technical resource limitations make it hard for providers to deal with strong headwinds.
ICD -10 costs burden hospitals Inpatient Medicare payments will decline 18% by 2019. 1
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 1
2 3 4 5
https://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-TrendsandReports/NationalHealthExpendData/downloads/proj2010.pdf McKinsey, 2010 Advisory Board Company, 2011, “Bridging the Gap” Healthcare Internal Auditors, Aim High Study, June 2012 Fitch ICD-10 Report, March, 2014
Revenue cycle disruptions could place added rating pressure on hospitals 5
3
ICD-10 What to Consider to Protect Your Revenue Cycle Post implementation impacts
Costs to prepare
Costs and shortages of qualified coding specialists
Error rates are expected to jump to 6-10% of total claims from current 3% *
Initial direct and indirect costs of conversion and compliance preparation
Days in AR are projected to grow 20-40% *
Direct and opportunity costs of systems integration, testing, IT staff
Claim denials are projected to increase 100200% for 2 years or more *
Under-coding likely to have most significant negative impact on revenue
Updating the chargemaster, super bill, etc.
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
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WHAT IS ALL THIS TALK OF HEALTHCARE CONSUMERISM? 5
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
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.
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“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
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
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And now…a Demotivational Thought
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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.
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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!
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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 12 – 18 months – Track a 3 – 6 month rolling average
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If these were your KPIs, what would you do?
51 days Net Days in A/R
Recommend Range: 45 – 55 days
2.5% POS Collections Ratio
Recommend Range: 1.5% - 3%
3.8% Denials Write-off Ratio
Recommend Range: 2% - 3%
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Developing KPIs •
Where do you want to be? – 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 2011.
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Good, Better, BEST!
BEST PERFORMANCE Better Performance Good Performance
Current Performance
Gap Analysis
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KPIs by Functional Area PATIENT ACCESS
REVENUE INTEGRITY
CLAIMS MANAGEMENT
REIMBURSEMENT
OTHER MANAGEMENT
• Pre-Registration Rate
• Days Gross Revenue in Discharged-NotFinal-Billed (DNFB)
• Final-Billed-NotSubmitted (FBNS)
• Initial Zero Paid Denial Rate
• Cash Collections as % of Net Revenue
• Point-of-Service Collections Rate
• Discharged-NotSubmitted 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 WriteOff 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
• Charity Care Write-offs as % of Gross Revenue
• Charity Care to Uncompensated Care
• Days Gross Revenue Held in Credit Balances
• Cost-to-Collect
∙ 3rd Party >90 Days ∙ Self Pay >90Days
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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
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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.
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And Now…
Time to get MAD about KPIs and Revenue Cycle Management!!!
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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.
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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
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The Keys to being a MAD success! Measurement
Patient Access
Revenue Integrity
Scheduling/ Preregistration
Business Office
Reimbursement
Charge Capture
Billing
3rd 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
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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.
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Examples of Measurement ABC Health System 0
Patient Access
Protect the Core
>98% >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% >50%
Jan-17
Mar-17
Jul-16
Sep-16
Nov-16
May-16
Jan-16
Nov-15
Mar-16
Jul-15
Sep-15
May-15
Jan-15
Mar-15
Jul-14
Sep-14
Nov-14
Jan-14
Mar-14
May-14
HIM
Jan-17
Mar-17
Nov-16
Jul-16
Sep-16
May-16
Jan-16
Nov-15
Mar-16
Jul-15
Sep-15
May-15
Jan-15
Mar-15
Jul-14
Sep-14
Nov-14
0.22% 0.7%
-1.30%
Jan-14
Mar-14
Nov-13
Successful attempts for collection of ED self-pay deposits prior to departure May-14
0.99%
-1.68%
-1.85%
0.0%
Sep-13
0%
ge ra re ve ica h Le ed wt M ro G
Excess Margin
ge ra re ve ica h Le ed wt M ro G
-1.94%
Protect the Core
in st ic ve eg h In trat wt S ro G
in st ic ve eg h In trat wt S ro G
0%
Days Cash on Hand
0%
e ur ult e C nc a e e ell at c re x C of E
re tu ul e C nc a le e el at c re Ex C of
0%
43 38 41 39 35 36 35
Target
Overall insurance verification rate of scheduled/pre-registered patients
Overall pre-registration rate of scheduled patients
Current
Sep-13
0%
0%
Nov-13
Completeness %
Key Performance Indicator
Project Dashboard
Overall Progress Indicator
Days of gross revenue held in Discharged-not-Final-Billed status Physician documentation completion deliquency greater than 30 days
<4-6 days <5%
Project Plan (click on image below to see detailed workplan)
0%
3
ARHS Days Cash on Hand
0%
4
Increase CMI by ≥ 0.05
0%
5
Achieve Breakeven Status on Medicare IP
0%
6
Achieve MH "Best Places to Work" Status
0%
7
Improve Overall ARHS Physician Alignment by ≥ 10% Over Baseline
0%
8
Achieve Magnet Status
0%
Safety Metrics
What is current month?
Final-Billed-Claim-not-Submitted backlog
1 33
34
35
36 Apr-17
32
Jan-17
31
Feb-17
30
Mar-17
29
Nov-16
28
Sep-16
27
Oct-16
26
Aug-16
25
Jul-16
24
Jun-16
23
May-16
22 Feb-16
21
Apr-16
20
Mar-16
19
Jan-16
18
Dec-15
17
Nov-15
16
Sep-15
15
Oct-15
14
Aug-15
13
Jul-15
12
Dec-16
█
Show Status? 11
May-15
10
Apr-15
Jan-15
9
Feb-15
8
Mar-15
7
Dec-14
Sep-14
Planned 6 Oct-14
5
Nov-14
Jul-14
Jun-14
4
Billed insurance A/R >90 days from service/discharge Patient Accounts
0%
Increase Market Share by 5% in Targeting Service Lines through Physician Alignment
3
Aug-14
% Completed
Increase Market Share by 5%
2
May-14
# List of Activties 1
2
Jun-15
Show Gantt for 1 Progress Indicator
Bad debt write-offs as a % of gross revenue Charity care write-offs as a % of gross revenue Total cash to net-collectible revenue (60 day average lag) Cost to collect (HIM excluded) Net A/R days Point-of-service collections as a % of total cash collections Outsourced bad debt netback ([collections-fees]/placements)
Project Milestones 26 32
Tea m Selection
0 Falls (per 1k IP days)
5
4 2
0
~100%
<2-3% <45-55 days >2-3% >7-11%
35 38 38 35 40
Denials
Current
<1 A/R day <15-20% <3% <3%
Overall initial denials rate (% of net revenue) Clinical initial denials rate (% of net revenue) Appealed denials overturned rate
<4% <5% 40-60%
1 Project Ki ckoff
Mar-17
Jan-17
Nov-16
Sep-16
Jul-16
May-16
Jan-16
Mar-16
Nov-15
Jul-15
Sep-15
Mar-15
May-15
Jan-15
Sep-14
Nov-14
Jul-14
0 Employee Injuries (# of events)
May-14
VTEs (# of events)
KPIs, Dashboards, and Graphs, oh my!
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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.
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Accountability Admission Officer
Sr. Assoc. Dir.
Asst. to Director Transfer Coordinator Sr. HCPPA
Asst. Coor. Mgr.
HCPPA
Associate Director Asst. Coor. Mgr. Census / TCEs
Asst. Coor. Mgr
Census Team Clerical Assoc.
Assistant Director
HCPPA
Systems Analyst
Not this…
Coord. Manager Tour I
Coord. Manager Tour II
No Accountability!
Sr. HCPPA Admitting/ Discharge
Sr. HCPPA Admitting/ER
C.A.
Coord. Manager Tour III
Sr. HCPPA Pre-Adm/ Information
PAA Admitting
Clerical Assoc. Admitting / ER
Sr. HCPPA ER/Bed Board
Clerical Assoc.
Clerical Assoc Discharge Office
Clerical Assoc Admitting
C.A.
C.A.
C.A.
Clerical Assoc.
C.A.
Sr. HCPPA Admitting
Asst. Coor. Manager ER
PAA Admitting
Clerical Assoc. ER
Clerical Assoc. Admitting
C.A.
C.A.
Asst. Coor. Manager ER
C.A.
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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.
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Putting it All Together • •
•
• • •
• • •
Develop your idea – your “lightbulb” 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
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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
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Contact Info
Dan Bergantz - Director
[email protected] 801-755-4628
Sandy Richman - Director
[email protected] 801-300-0221
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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.
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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.
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APPENDIX
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Patient Access KPIs Indicator • Pre-Registration Rate of Scheduled Patients
Calculation
Number of patient encounters preregistered
Things to Consider
Target
All scheduled encounters pre-registered prior to date of service. A scheduled encounter is considered prior to day of service.
90-98%
Defined as patient payments collected prior to or up to seven days after discharge/date of service for the current encounter only.
1.5 - 3%
Payer source can include COBRA, Medicaid, workers comp, other insurances such as motor vehicle, and other government programs.
10-20%
Number of scheduled patient encounters • Point-of-Service (POS) Collections Rate
• Inpatient Uninsured Patient Conversion Rate
POS Payments Total Cash Collected
Number of uninsured patients converted to a payer source Total number of uninsured patients
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Patient Access KPIs Indicator • Insurance Verification Rate
Calculation
Things to Consider
Target/Best Practice
Total number of verified 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.
90-98%
Authorization is defined as required approval from the 3rd party payer for the services ordered.
90-98%
Total number of registered encounters
• Insurance Authorization Rate
Number of encounters authorized Number of encounters requiring authorization
• Charity Care to Uncompensated Care
Charity care write-off Total uncompensated care (charity care + bad debt)
36
Revenue Integrity KPIs Indicator
Calculation
Things to Consider
Target/Best Practice
• Days Gross Revenue in Discharged-NotFinal-Billed (DNFB)
Gross dollars in A/R not final billed
Include inpatient and outpatient, and exclude in-house claims.
4 – 6 Days
• Discharged-NotSubmitted to Payer (DNSP)
Gross dollars in DNFB + gross dollars in FBNS
• Late Charges as % of Total Charges
Charges with post date >3 days from last service date
Average daily gross patient service revenue 5 – 8 Days
Average daily gross patient service revenue
< 2%
Total gross charges
37
Claims Management KPIs Indicator
Calculation
• Final-Billed-NotSubmitted to Payer (FBNS)
Gross dollars in FBNS
• Clean Claim Submission Rate
Things to Consider
Target/Best Practice 1-2
Average daily gross patient service revenue
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
45 – 55 Days
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Claims Management KPIs Indicator • Billed A/R >90 Days ∙ 3rd Party >90 Days ∙ Self Pay >90 Days
• Days Net Revenue Held in Credit Balances
Calculation Billed A/R > 90 days Total billed A/R
Dollars in credit balance
Purpose
Target/Best Practice
Should only include debit balance accounts aged from discharge date.
15 – 20 %
Should not include accounts in preadmit or in-house status.
1.5 – 2 Days
Average daily net patient service revenue
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Reimbursement KPIs Indicator • Initial Zero Paid Denial Rate
Calculation Number of zero paid claims denied Number of claims remitted
• Initial Partial Paid Denial Rate
Number of partially paid claims denied Number of claims remitted
• Total Denial Rate
Denial write-off amount Net patient service revenue
• Overturned Denial Rate
Number of appealed claims paid Number of claims appealed and finalized or closed
Things to Consider Total number of zero pay claims received from 3rd party payers with a denial code on the remittance advice.
Target/Best Practice <4%
Total number of partial pay claims received from 3rd party payers with a denial code on the remittance advice.
Should include all net account balances written off within the month resulting from un-appealable denials. Do not include contractual allowances.
2-3 %
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 – 60%
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Other Management KPIs Indicator
• Cash Collections as a % of Net Revenue
• Days Cash on Hand
Calculation
Things to Consider
Target/Best Practice
Total cash collected
Total cash collected from patient service accounts. Exclude any non-patient service cash.
> 100%
Include all cash and other liquid assets as reported on the balance sheet.
150
Average net patient service revenue
(Cash on hand + market securities) [(Total operating expense depreciation expense)/365]
• 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
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Other Management KPIs Indicator
Calculation
• Bad Debt Write-offs as % of Gross Revenue
Bad debt write-off
• Charity Care Writeoffs as % of Gross Revenue
• Cost-to-Collect
Things to Consider
Target/Best Practice <2.5 -3.5 %
Gross patient service revenue
Charity care write-off
<2.5 -3.5 %
Gross patient service revenue
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 %
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