Update: The State of the Professional Fees Revenue Cycle

1. Update: The State of the Professional Fees Revenue Cycle Pat Thompson Associate Dean for Finance & Administration Carver College of Medicine Faculty Forum September 27, 2004

2. Update Objectives • Review revenue cycle performance • Outline improvements • Describe FPP goal: A “top performing” revenue cycle mechanism by the end of 2005

3. Monthly Pro Fee Collections July 2001 through August 2004

4. “The Good Old Days”: Pre-IDX Monthly Payment Trend: July 2001 thru March 2003 Trendline for the 21 month period indicates a monthly gain of about $23,800 per month on an $11.2 million per month base. This represents an annualized increase of 0.2%, essentially flat…

5. Monthly Variances in Actual Collections vs Pre-IDX Trendline Collections The Pre-IDX collections trend—a gain of $23,800 per month—is the zero line on this graph. The variance shown is the difference between actual collections March 2003 and those payments that would have been collected under the pre-IDX system.

6. Cumulative Variances: Actual vs. Projected Pre-IDX Collections This graph portrays the cumulative difference April 2003 through August 2004 between what was actually collected vs. what would have been collected under the pre-IDX collection projection. Maximum cashflow shortfall of $16.2 million occurred September 2003; since then the collections recovery has steadily reduced the conversion shortfall. Through August 2004, all but $3.1 million of the shortfall had been recovered.

7. Cumulative Variances: Actual vs.Projected Pre-IDX Projected—Including the May/June 2003 PASC Settlement When the $11.36 million PASC settlement is loaded on top of the actual payments collected, through August 2004, the positive cumulative variance between actual vs pre-IDX projection is $8.3 million. The maximum cashflow shortfall under this scenario occurred in April, 2003 and amounted to $5.6 million.

8. Relationship of Increased RVU Production and Increased Collections • Dollars paid per RVU 7/01-3/03 $76 • Dollars paid per RVU 4/03-8/04 $81 • Dollars per RVU gained $ 5 • Percent $/RVU gained 6.6% Conclusion: Increased collections being generated by both improved RVU and collections production.

9. Revenue Cycle Recap • Performance has moved from below the median performance to the median since the implementation of IDX and the initiation of other revenue cycle improvements • Trauma during the conversion was severe, but the worst is about one year behind us • The pro fee maximum cash shortfall in September 2003 of $5.6 million against past trends has been recovered and improvements combined with the PASC settlement have generated a cumulative positive variance of $8.3 million against those trends • Recovery has not occurred for all clinical departments • Continued improvement to move to a “top performing” level , but will require increased improvement focus & effort • The FPP, in conjunction with the departments, has been increasingly directive in building in the effort to build a top performing pro fee cash machine by driving a higher level of integration between the physician clinical enterprise and the physician revenue cycle mechanisms

10. Summary of Revenue Cycle Improvement Initiatives • System/Software Improvements • Business Process Improvements • Staff improvements • Organizational Improvements • Enterprise Management Improvements

11. The Future: Revenue Cycle Goals & Expectations • What to expect from a top performing physician enterprise-driven revenue cycle machine? • Days in A/R in the low 50’s • % of Claims over 90 days in the 15-20% range • 90% of all claims being submitted, accepted and processed electronically • Responsive customer service • High integration between the “front end” & the “back end” • Net collection rate in the mid 90% range • Competent staff that understands and appreciates the relationship between physician production and payment • Effective enterprise intelligence capacity Target date for Top Performing Status? September-December 2005