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Learn about the objectives and components of financial management, benchmarks, strategies for improvement, and basics of MIPS and Alternative Payment Systems.
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Kentucky MGMA Spring 2019 Financial Management March 14, 2019
Objectives and Summary • Define financial management • Review the major components of financial management • Benchmarks • Strategies to improve • Basics of MIPS and Alternative Alternative Payment Systems
What is Financial Management • Financial Management is the planning, organizing, directing, controlling the financial activities, utilization of funds by applying general management principles to financial resources of your practice\group.
Objectives of Financial Management • The financial management is generally concerned with procurement, allocation and control of financial resources • Ensure regular and adequate supply of funds • Ensure adequate return to the owners • To ensure optimum funds utilization; once the funds are procured, they should be utilized in maximum possible way at the least cost. • To plan a sound short and long term strategy to identify and prepare for changes in the healthcare markets
Components of Financial Management • Three major components • Revenue Cycle • Expense Management • Managed Care
Revenue Cycle • An underperforming revenue cycle management program will lead to: • -lower cash collections, not just collection but loss opportunity • -coding and compliance issues • -higher operating costs • -higher accounts receivable balances • -frequent write-offs unnecessary write-off or adjustments • -patient, physician and staff dissatisfaction • -less provider compensation • -leads to other areas negative impacts on operations
Structural Elements of Revenue Cycle • Capable Management • -demonstrated understanding of all issues of revenue cycle • -establishment of procedures and performance standards • -analysis of results vs benchmarks and action planning • -establishment of the appropriate organizational model • Solid, supported and consolidated practice management system • -consistent approach to primary work flow…..seamless flow from registration to claim judication • -automated charge entry, claim submission and posting • -monitoring and solid report writer functionality • Transparency, Standards and Controls • -Activities controls: includes coding and compliance activities • Function Control Example • Insurance follow-up Days since last follow up activity report • Patient follow-up Outbound call volume per day, per worker • Payment posting Transactions posted per day, per worker • Refunds Refunds processed per day, per worker • Customer service Inbound call volume per day, per worker
Key Performance Indicators • Benchmarking is critical to maximizing revenue: • -actionable • -comparable to broad range of like practices\groups • -clearly defined metrics that are transparent and understood • -cover the entire scope of your revenue cycle • -try to find comparable practice\groups with common payor mix and geographic area • -results can be audited and verified that are accurate and timely • -be able to determine the return on investment • -posted for your staff and providers to view results • -should not be punitive, should be viewed as a opportunity to improve
Monthly Key Indicators to Consider Tracking • Point of service collections • Percent of provider schedule occupied • Total charge lag days • Deductible percentage • Professional service denial percentage • Net AR days 30, 60 and 90 • Net AR days adjusted for credentialing hold • Cash collection percentage • Total collections • Collections per wRVU • Daily collections • Bad debt write off percentage • Provider comp as a percentage of net revenue • Cost to collect • Denial rate • Clean claim acceptance rate
Collected Versus Collectable • Payments received over 90 days for charges from a month charges 90 days prior / Allowable charges • Goals: • 60 days: 80-91% • 90 days: 92-94% • 180 days: 95-97% • Why is tracking important: • Can estimate future cash flow projections (trackable by carrier) • By tracking at the provider level this may indicate issues: coding, charge entry delay, carrier issue changes • Prepares you for future contract negotiations • Compares contractual payment timeliness vs actual • Flexible under numerous payment models: FFS, bundled, pay for performance • Better understanding of your business, confidence builder with your providers • Determine if you want to remain with a contract
Expense Management • The financial health of a practice\group is not determined solely by the funds flow it also prudent to manage the finances. Each practice\group need to monitor their expenses of three major areas: • Total non-provider operating expense • Staff salaries and benefits • Provider compensation (numerous models, no model is perfect) • Developing a practice performance report package will provide the management and providers the necessary oversight to identify trends, make proactive management decisions and produce comparative market analysis trend reports. • Reports can be benchmarked against numerous sources such as: MGMA, AMGA, specialty professional societies, other geographic practices\groups. They are can be compared using percent of revenue and\or provider FTEs and\or 10,000 wRVUs measures to name few. Tracking targets are only helpful if they are timely, accurate, reflect your practice and suitable for your practice. Comparing a specialty practice to a primary care benchmark may not provide you the trend line to make sustainable future business decisions.
Possible Simple Benchmarks Report • Revenue (3 FTEs) Amount % of Total MGMA% MD\FTE MGMA • Net fee for service $1,418,068 90.78 97.83 $472,689 $601,912 • Net Capitation $ $120,436 7.71 6.65 $40,145 $36,582 • Other Revenue $23,616 1.51 2.16 $7,872 $16,535 • Total Medical Revenue $1,562,120 $520,707 $654,132 • Expense Management • Total Staff Cost $455,468 29.16 30.23 $151,823 $197,991 • Total Operating Cost $568,312 36.38 30.77 $189,437 $203,563 • Provider Comp (MD and APP) • Total Comp + Benefit $643,449 41.19 42.07 $214,483 $287,649 • Total Cost $1,667,229 106.73 100 $555,383 $689,383
Percent of Revenue Family Medicine • Staff Cost 26.28% • Staff Benefits 5.52% • Technology 1.85% • Lab 3.26% • Drug Supply 3.42% • Imaging .91% • Supplies 1.7% • Occupancy 6.81% • FF&E 1% • Office supplies 1.71% • Liability insurance 1.52% • Other insurance .23% • Outside fees (legal +) .86% • Marketing .40% • Other 1.74%
Staffing Efficiencies • How do you balance needs of the practice to a workforce that is very mobile, we no longer compete with other practices? • Reduce unnecessary tasks, if does not add value to patient outcomes, stop it • Tuition reimbursement with associated loyal contracts • How many people do really need? • What is your mix of clinical to clerical? • What can be outsourced? Technology advances? • Offer performance bonuses on patient perception of care, productivity increases etc…. • Offer improved health insurance plans • Most do not care about retirement but some may • Are your salaries in-line PAHCOM, MGMA, AMGA, local intelligence? • Profit sharing • Use scribes, more clinical connection to the patient\providers • Good luck share your success stories!!!!!
Expense Reduction Opportunities • Guiding principles of expense management • Know your costs • Attack the large categories first, low hanging fruit • Identify a strategy to reduce • Make a decision • Act • Track impact………..repeat • How can you reduce expenses: • Invest in pre-registration software, verify insurance beforehand • More training of clinical staff • Post patient rooming and discharge protocols, reducing call back from patients and familes • Efficient patient scheduling (review contracts for higher E&M reimbursement for Saturdays) • Alternative staffing (consider less than 40 hours a week, be careful) • Use technology (automated lab results software) • Consider time sharing unused space • Incent staff for savings ideas (energy savings etc…) • Supply management establish par levels • Track the results of collection companies
Managed Care Contracting • There are four components of managed care contracts: • Fee for service • Pay for performance • Bundled payments • Combination
Fee for Service Contracts • Basis: predetermined fee based on a specific CPT Code. Many practices both large and small have accepted bad deals at the risk of losing market share, access to new patients and not an organize manner to contract management. There are acute dangers to this misguided approach, biggest is unfair revenue based on the service you provide. Certainly there are 100’s of others but not being paid fairly is an unacceptable outcome. • Indicators of mismanaging manage payer contracts: • Disorganization: practice unable to produce readily the terms, payment schedules and contract themselves • Ineffective use of payment accuracy: no tool or not using your tool properly of expected payment vs received amount • Inadequate financial models: use payment reports specifically by carrier, do not merge Medicare data with Anthem • Blind acceptance of discounts: not fighting for reduced amounts in future contract years • Overlooking mandatory participation: join a Hospital PHO and now you are members of several plans without your approval or knowledge.
Strategies for Improving Contract Management • Dedicate a resource: allowing time to focus on contracting tracking, terms, notices, comparative data, expected to actual payments. • Ensure revenue cycle team is part of your contract team: those who post payments, manage denials and speak to the payers and patient have the reality of the payers vs contract. • Track performance measures: as carriers shift or hold steady on FFS, they are adding performance clauses, you need to be able track the outcomes of these contract features allowing for an understanding of the entire performance of a contract. • Adapt to market demands and pressures: nobody wants to post their fees but with HSAs and market changes you could be losing patients. We need to accept that things are changing and view this an opportunity. • Stay abreast of payment models: as pressure of expense management increases keeping contracting top of mind is no longer an option. It is a brave new world!
What is the Quality Payment Program (QPP)? • The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) ended the Sustainable Growth Rate (SGR) formula • MACRA requires CMS to implement an incentive program known as the Quality Payment Program • There are two paths in the Quality Payment Program • The Merit-based Incentive Payment System (MIPS) • Advanced Alternative Payment Models (AAPMs)
MIPS v. AAPMs MIPS • MIPS eligible clinicians earn a performance-based payment adjustment based on performance in four categories • Quality • Cost • Promoting Interoperability (Meaningful Use) • Improvement Activities (PCMH, etc) AAPMs • Those who decide to participate in an Advanced APM may earn Medicare incentive payments for sufficiently participating in an innovative payment model • Comprehensive Primary Care Plus (CPC+) – with limitations • Advanced Medicare Shared Savings Program Tracks (1+, 2, 3, Next Gen) • Some state specific programs • Others as approved by CMS
Performance categories carry different weights and shift over time There is an increased emphasis on cost control as the program progresses
Potential Payment Adjustments This is designed to be a revenue neutral program, so if there aren’t many losers there can’t be many winners – payment adjustments will most likely be lower than published
How are MIPS scores calculated?2017 Performance Year, 2019 Payment Year
Who is included? • Physicians • Doctors of Medicine, Osteopathy, Dental Surgery, Dental Medicine, Podiatric Medicine, and Optometry; Osteopathic Practitioners; and Chiropractors • Physician assistants • Nurse practitioners • Clinical nurse specialists • Certified registered nurse anesthetists NEW in 2019: • Clinical psychologists • Physical therapists • Occupational therapists • Qualified speech-language pathologists • Qualified audiologists • Registered dietitians and nutrition professionals
Current Year Benchmark Source: Epic
