Ten value added audits bringing in the money
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Ten Value Added Audits Bringing in the Money. Agenda. Bringing in the Money—Internal Audit as a value added function Ten value added audits Reporting on value added contributions. Bringing in the Money. Who is not losing money to: Economic pressures? Eroding margins?

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Ten value added audits bringing in the money

Ten Value Added AuditsBringing in the Money


Agenda

Agenda

  • Bringing in the Money—Internal Audit as a value added function

  • Ten value added audits

  • Reporting on value added contributions

2009 AHIA Annual Conference


Bringing in the money

Bringing in the Money

  • Who is not losing money to:

    • Economic pressures?

    • Eroding margins?

    • RACs (or the anticipation thereof) and other audits from government and commercial payors?

    • Reduced reimbursements?

    • Increased costs for labor and supplies?

    • Increased bad debt and charity care?

    • Increased number of self-pay patients?

    • Etc, etc, etc?

2009 AHIA Annual Conference


Hfm magazine june 2009

HFM Magazine, June 2009

  • 54% of 203 hospital financial executives reported negative margins

  • 78% reported declines in non-op revenues

  • 73% reported decreases in days cash on hand

  • 43% reported decreases in patient revenues

  • 60% reported increases in the numbers of un-insured patients

  • 22% had cut programs

  • 77% reduced capital spending

2009 AHIA Annual Conference


Internal audit as a value added function

Internal Audit as a Value Added Function

  • Financial and Operational Audits

  • Risk based

  • Focus on controls

    • Compliance with regulations and internal policies

    • Safeguarding of assets

    • Efficient and effective operations

    • Reliability of reporting and integrity of data

  • People, processes, systems

2009 AHIA Annual Conference


Rules of engagement

Rules of Engagement

  • Quick wins

  • $ not process—Process-intense issues should go to the parking lot

  • Tight focus, small teams

  • Brainstorm lists

    • 2 per quarter = 8 initiatives

  • Under commit—Over deliver

2009 AHIA Annual Conference


Ten value added audits

Ten Value Added Audits

  • Revenue Cycle

    • Charge Capture

    • Contracts

    • Net Revenue Strategies

  • Vendor contracts

    • Purchasing

    • IT

  • Outsourcing Opportunities

  • Co-sourcing Opportunities

  • Cost Avoidance Opportunities

  • Contracting reviews—before the contract is signed

  • Labor Opportunities

2009 AHIA Annual Conference


1 revenue cycle charge capture

1. Revenue Cycle—Charge Capture

Start with:

  • Chart Reviews—Orders, documentation, charges

    • This will provide areas for data reviews

    • Identify your team

    • Select from IP, OP, Procedural services

    • Focus review on charge capture, not clinical documentation (though findings there should be noted as potential compliance issues)

2009 AHIA Annual Conference


1 revenue cycle charge capture1

1. Revenue Cycle—Charge Capture

  • Data Analysis—What’s missing?

    • J code drugs and infusions—if a drug is given, then you should have an administration charge

      • J-codes are separately reimbursable

      • Check Oncology, Emergency Department

      • Review Infusion chart documentation

        • Look for: Missing orders, missing start and stop times (charged in 15 minute increments).

        • Key charge terms: For hydration, Therapeutic, Sequential

        • See Example (next page)

2009 AHIA Annual Conference


1 revenue cycle charge capture2

1. Revenue Cycle—Charge Capture

2009 AHIA Annual Conference


1 revenue cycle charge capture3

1. Revenue Cycle—Charge Capture

  • Facility fees (for ED and provider based services)

  • Check E&M facility bell curves for alignment issues

  • Review your facility charge tool

2009 AHIA Annual Conference


1 revenue cycle charge capture4

1. Revenue Cycle—Charge Capture

  • Supplies—for major procedural areas (Cath Lab, Interventional Radiology, Implants) check procedures against a standard supply listing; compare to CDM; test billings

  • Check Pharmacy spend listing (what you buy) against CDM (what you charge for)

    • How do you charge for new drugs not currently in the Charge Description Master?

    • How do new drugs get on the Formulary?

    • Can providers order off formulary? How do they get billed?

    • Audit for discrepancies

2009 AHIA Annual Conference


1 revenue cycle charge capture5

1. Revenue Cycle—Charge Capture

Other Reviews

5.Check Zero Charge report (patient showed for services but no charges)

  • Check Insurance denials

  • Check payor contracts for carve-outs

    • High tech drugs, implants

    • Check correct assignment of revenue codes to ensure payment

2009 AHIA Annual Conference


1 revenue cycle charge capture6

1. Revenue Cycle—Charge Capture

  • Check expected to actual reimbursement reports

    • Process for collecting underpayments

      • Internal? External?

    • Check trends over years

    • Is this included on a Revenue dashboard?

      • If it is not reported, it does not get resourced, addressed

2009 AHIA Annual Conference


1 revenue cycle charge capture7

1. Revenue Cycle—Charge Capture

  • Check your infrastructure (this is process work)

    • Training for charge entry/capture/reconciliation

      • Are there current training materials available?

      • Are they used to train new employees?

    • Fixing errors—credits, mapping, wrong patient, date

      • Are there instructions for how to fix the most common errors?

      • Is this done on a timely basis?

    • Daily, monthly reports, revenue variance reporting, actual to budget

    • Charge description master (CDM) maintenance, compliance checks for coding, completeness, accuracy,

    • Pharmacy CDM—check for accuracy of billing quantities

      • Compliance Issue

2009 AHIA Annual Conference


2 revenue cycle contracts

2. Revenue Cycle—Contracts

  • Inventory of Revenue Cycle Contracts

    • When was the last time they were put to bid?

    • How current are the terms and conditions?

    • When was the last time the rates were negotiated?

    • How much revenue cycle work is done in house versus contracted out?

2009 AHIA Annual Conference


2 revenue cycle contracts1

2. Revenue Cycle—Contracts

Outsourced collection of large $ accounts:

To speed up collections

Effect of implementation of Payment Caps

2009 AHIA Annual Conference


2 revenue cycle contracts2

2. Revenue Cycle—Contracts

Large $ accounts: To speed up collections

Effect of re-negotiation on contract rates

(for example: from 15% to 12%)

2009 AHIA Annual Conference


2 revenue cycle contracts3

2. Revenue Cycle—Contracts

  • Medicaid Pending

    • Check contract—terms and conditions; incentives

      • # of accounts submitted

      • # converted to Medicaid (Medicaid pays better than self-pay)

  • Bad Debt

    • Check contract—terms and conditions

    • Consider two firms—splitting alphabet; creating competition

2009 AHIA Annual Conference


3 revenue cycle net revenue strategies

Gross Revenue

Rates (Charge Capture)

Services

Prices

Volumes

Net Revenue

Contracted rates

Carve-outs

% of charges payments

Collections

Cash collections

Insurance payments

Patient payments

Bad Debt

Charity Care

Denials

3. Revenue CycleNet Revenue Strategies

2009 AHIA Annual Conference


3 revenue cycle net revenue strategies1

3. Revenue Cycle— Net Revenue Strategies

  • Contract Carve-outs

    • Check contracts for carve-outs (pharmacy, medical devices, supplies—high cost/high tech)

    • Audit for revenue code assignment (generally processed based on revenue code)

  • Increase Point of Service cash collections

    • Improves AR

    • Reduces billing/collection expenses

    • Reduces bad debt

    • Determine total current and total opportunity for POS cash collections

2009 AHIA Annual Conference


3 revenue cycle net revenue strategies2

3. Revenue Cycle— Net Revenue Strategies

  • Maximize clinical appeals

  • Convert off-campus services to hospital based

    • Bill under Part A versus Part B = increased net reimbursement

    • Compliance with Medicare criteria

2009 AHIA Annual Conference


3 revenue cycle net revenue strategies3

3. Revenue Cycle— Net Revenue Strategies

  • Check packaged payment arrangements

    • When were they last updated?

    • Review cost/contribution margin

  • Monitor large write-offs (specific review of all write-offs over a certain limit)

  • Review all Admin Adjustments

    • Customer Service

    • Residency Program

    • Legal

    • Other

2009 AHIA Annual Conference


4 vendor contracts purchasing

4. Vendor Contracts—Purchasing

  • Bulk purchasing

    • Check for high cost items in purchase quantities of 1

      • Compare quantity of 1 price to price for multiples

      • Example: Pacemakers at $28K for one; $16K in any quantity

      • Report savings for buying in multiples

      • See Example (next page)

        Purchase thresholds (if you hit a threshold the price is reduced—timing intervals, monitoring, reporting)

    • End of quarter discounts

2009 AHIA Annual Conference


4 vendor contracts purchasing1

4. Vendor Contracts—Purchasing

2009 AHIA Annual Conference


4 vendor contracts purchasing2

4. Vendor Contracts—Purchasing

  • Clinical Engineering

    • Warranty costs versus service contracts

      • Compare equipment purchases (with warranties) in last year to service costs

    • Compare service contract costs to utilization of service

    • Check for service contract payments on equipment no longer in service

  • Universal Garbage pick-up

    • Check costs for scheduled pick-up versus cost for pick-up based on capacity/weight/volume

      • MHS experience = 33% fewer pick-ups; $127K savings

2009 AHIA Annual Conference


5 vendor contracts it

5. Vendor Contracts—IT

  • Software licenses—inventory of software used to payments

    • Microsoft licenses

      • Added licenses over time, by entity—re-negotiated for a system license; saved over $500K

    • Check for payments on software no longer in service

  • Computers and peripherals

    • Terms

    • Vendor bids

    • Bulk purchases

    • Standardized computers

2009 AHIA Annual Conference


5 vendor contracts it1

5. Vendor Contracts—IT

  • Vendor discounts/rebates

    • Good install discounts

    • Volume discounts (# of users, devices)

    • Consulting expenses with build/implementation

      • Audit expenses

  • Telecommunications

    • Pagers—check usage by pager; if not used in the last X months, delete from inventory and billing

      • # of companies used—move to one for larger discounts

2009 AHIA Annual Conference


6 outsourcing opportunities

6. Outsourcing Opportunities

  • When to Outsource?

    • Lack of specific expertise

    • Specialized area

    • Not frequently reviewed

    • Politics

  • Manage your consultants

    • Define scope of project

    • Define expectations

    • Define report requirements

    • Manage timeline

2009 AHIA Annual Conference


6 outsourcing opportunities1

6. Outsourcing Opportunities

  • Tax reviews (state specific)

    • Property taxes—exemptions for hospital services

    • B&O taxes—review for intercompany transactions

    • Sales and Use tax exemptions

    • Tax credits

      • Training programs

      • Research, R&D

      • UBI—Work opportunity credits

2009 AHIA Annual Conference


6 outsourcing opportunities2

6. Outsourcing Opportunities

  • Medical Devices

    • Purchasing

    • Inventory management

    • Billing

    • Compliance

  • Telecomm reviews—usage, billing

  • Utility reviews—usage, billing

2009 AHIA Annual Conference


6 outsourcing opportunities3

6. Outsourcing Opportunities

  • Check out vendors at this conference

  • Contingency vs. Negotiated fee arrangements

  • Check references

  • Give references

  • Manage your consultants

2009 AHIA Annual Conference


7 co sourcing opportunities

7. Co-Sourcing Opportunities

  • When to Co-Source?

    • When you can learn from an expert and expect to then provide the audit services in-house

    • Audit considerations

      • Size

      • Complexity

      • Time

  • Clearly define roles

  • Manage your consultants

2009 AHIA Annual Conference


7 co sourcing opportunities1

7. Co-Sourcing Opportunities

  • Major construction projects (see New Perspectives Feb 2009)

    • Audit to contract.

    • Identify unallowable/unsupported costs (see example).

    • Tie out labor rates to union contracts.

    • Self-performed Work

  • IT Reviews and/or System Optimization projects

    • # of servers

  • IT Penetration testing

  • Data quality reviews (clinical data analysis)

2009 AHIA Annual Conference


Construction unsupported costs

Construction – unsupported costs

2009 AHIA Annual Conference


8 cost avoidance opportunities

8. Cost Avoidance Opportunities

  • External Audit support

  • Fines and Penalties

  • Legal and Finance support (in lieu of attorneys and consultants)

    • Establish internal billing rate

    • Track hours

    • Obtain internal agreement

2009 AHIA Annual Conference


9 contracting reviews before the agreement is signed

9. Contracting Reviews—Before the Agreement is Signed

Where you don’t have the specific expertise,

Buy it, in advance!

  • Construction contracts

    • Reviewed by external consultant experienced in construction work during the negotiations

    • Savings in rates, terms

      • Cost 28K; savings $2M+

  • Management Services Agreements

    • Validation of market rates (property purchases and sales; management service fees; broker fees)

      • Cost $16k; savings $240K

2009 AHIA Annual Conference


10 labor opportunities

10. Labor Opportunities

  • PTO usage (balance sheet impact first year)

    • Audit use it or lose it limits; # of exceptions

  • Overtime usage (address top users)

  • Agency use costs

    • Audit use over time, by department

    • Check overtime use and sick use in conjunction with agency

  • Eligible dependent audit (out-source)

2009 AHIA Annual Conference


10 labor opportunities1

10. Labor Opportunities

  • Audit health insurance use

    • Utilization trends

    • If self-funded and using a third party administrator, ask for SAS 70 and audit if needed

  • Reduce travel expense (time and money) by optimizing internal webinars and teleconferences

2009 AHIA Annual Conference


Other

Other

  • Read New Perspectives—many great ideas

  • Grant Writer (should have at least 4:1 payback)

  • Contract Manager (for negotiations, management, FMV documentation) (should have payback)

2009 AHIA Annual Conference


Summary

Summary

  • Current hot topic

    • Many lists/many opportunities

  • Share

  • Focus on returns

  • Report savings

    • Taking and giving credit

2009 AHIA Annual Conference


Contacts

Contacts

  • Catherine Wakefield

    • VP Corporate Compliance and Internal Audit

    • [email protected]

    • 253-459-8002

  • Nate Morgan

    • Compliance/Internal Auditor II

    • [email protected]

    • 253-459-8015

2009 AHIA Annual Conference


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