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http://standarderrors.org/Presentations/STTI2006WalshDeBariCox-ACaseStudyAnalysisOfTheImpactOfRevenueUncertaintyOnHospitalAndNursingOperations.ppt

A CASE STUDY ANALYSIS OF THE IMPACT OF REVENUE UNCERTAINTY ON HOSPITAL

AND NURSING OPERATIONS

17th International Nursing Research CongressFocusing on Evidence-Based Practice

Margaret DeBari RN, C, MALinda Walsh RN, BSN, CEN

MSN Students Seton Hall University

Thomas Cox, PhD, RNVisiting Professor

Seton Hall University College of Nursing




The AssignmentMany HC finance mechanisms shift the management of

insurance risk from 'insurers' to HC providers – Professional Caregiver Insurance Risk

How are insurance risk portfolios created and transferred?

Capitation agreements

Managed Care

Prospective Payment Systems

Nursing Unit/Department/Division budgets

Managing insurance risks adds to problems managing clinical risks

Explore how an organization is affected by PCIR for “Managed Care and Reimbursement” course




PURPOSETo describe how a hospital responds to uncertainty

State ChallengesMedicaid

Losing $14 million in 2005Continues to pay 62% of cost

Medicaid HMO mandateProposed changes to No Fault reimbursement (potential impact of $15 million to the organization)In 2005 provided $62 million in uncompensated care with only $14 million of compensation




PURPOSE

To gain an understanding of financial operations in order to influence organizational responses affecting nursing services




HOST SITE

Jersey Shore University Medical CenterAn acute care regional teaching hospital with 502 beds within Meridian Health System in Neptune, New JerseyConsists of 172 departments and 2,457.83 FTE’s A university hospital affiliate of UMDNJ — Robert Wood Johnson Medical School Part of a 3 hospital system known as Meridian Health




Since the 1980’s and 1990’s hospital reimbursement has declined causing a greater focus on the bottom line




CHALLENGES

Managed Care TrendsConsolidation of payersHorizon Blue Cross may pursue for-profit status

Payer ProfitabilityPayer ProfitabilityMedicare represents 43% of net patient revenueLosses are close to 50% of revenue basePayers that pay full charges are dwindlingRisk of changes to No Fault reimbursement




MEDICAREChallenges to Host Site

Losing $32 million in 2005Net rate decrease of approximately $4 million over the past 5 yearsProposed “pay for performance”

Proposed cuts to Medicaid matching dollars of $5 to $12 billion over 5 yearsDeficits will mandate program cuts




THE REVENUE CYCLE

Key component of the health care delivery system

It is the complex and evolving mechanism by which providers perpetuate their existence via reimbursement for services rendered, an existence, which is in perpetual crisis and is affected by the work of many departments (Crowley, 1998).




THE REVENUE CYCLE

CHALLENGESPayers often reduce costs for healthcare programs at the expense of providersConsumer expectations often outweigh provider/business capabilitiesGovernment intervention and controls are unpredictable, inefficient, and intrusiveAmbiguity exists about who is really financially responsible




THE REVENUE CYCLEBegins with patient intake

Continues to service delivery and documentation

Ends finally with revenue collectionAccess ServicesCase ManagementManaged Care ContractingUnfunded service mandatesClinical EffectivenessHealth Information management (Coding)




CHARGESIn the current climate of significant growth and margin pressure, problems in failing to capture earned revenue take on great urgency

Charges are driven by codes and include costs plus a markup




MANAGED CARE

Contracts do not always come back with the terms that were agreed upon

In order to survive in a managed care environment business must be continually monitoring contract compliance

Having a financially informed, clinical representative involved in negotiations and monitoring is an asset because it will give the hospital an edge in negotiating the contract, monitoring adherence to expected service patterns, and in effecting appeals of denied payments




MANAGED CARE

The managed care process is dependent upon each party knowing the strengths and weaknesses of each other and capitalizing on the situation

Reasonable rates are considered as somewhere between direct cost and usual and customary charges

Reasonable rates may not adequately reimburse hospitals for the risks involved




CLINICAL EFFECTIVENESS

Developed in response to mounting pressure on health care professionals to ensure that their practice is based on evidence (EBP) from high quality research

Evidence based clinical practice can increase services to clients previously underserved

Evidence based clinical practice may be used to arbitrarily limit reimbursements for services to ‘medical outliers’




CODINGThe benchmark for completing the coding process and producing a final bill is 7 days with a maximum of 4 days and a threshold of 12 days

The first source for coding is the history and physical and then the daily progress notes




CODINGIs done strictly from attending physician or resident physician notesCharts are coded on a priority basis (ie: those generating the most reimbursement are coded firstWhile billing is time limited and subject to inaccuracy – retrospective audits take place over many years




PATIENT ACCESS/FINANCIAL SERVICEPayment approaches are based on negotiated rates

Access Services primary role is financial

Payment denial can be either administrative or clinical

No outsourcing of billing and revenue collection




Cost Containment Non Labor

Supply Chain InitiativesContinued implementation of supply chain initiativeTargeted savings for 2006 of approximately $6.9 millionAreas of focus include contracting initiatives and non clinical product utilization/standardization




?




BUDGET CHALLLENGES

Hospital Physician Collaboration

Volume

Admission Growth Trend

Cost Containment Personnel

Supply Chain Initiatives




2006 Critical Success Factors

Medical Management & Physician Recruitment effortsInpatient Volumes at the two community hospitalsExpansion of Outpatient ServicesSupply Chain initiativesImplementation of a long range strategy to control utility costsReinforcement of budget discipline




There seems to be no end in sight as healthcare organizations continue to weather the storm




PAYER PROFITABILITYRevenue (In Millions)

32

114

32

191

0 0

273

0

50

100

150

200

250

300

Medicare Medicaid HorizonBlue Cross

No Fault O therInsurance &

Self Pay

Charity EmployeeSelf

Insurance




PAYER PROFITABILITY

Payer Margin (In Millions)

-32-14

16 21

36

-21-13

-40

-30

-20

-10

0

10

20

30

40

Medicare Medicaid Horizon Blue

Cross

No Fault Other

Insurance &

Self Pay

Charity Employee Self

Insurance




Hospital/Physician CollaborationMedical Management

•LOS Reduction

•169% of Medicare losses occur on cases exceeding Geometric LOS

•Focus on clinical areas of respiratory disease, cardiac medical, surgery, oncology, orthopedics and digestive system disorders

•Target of $2.9 million in expense savings & incremental revenue




Hospital/Physician CollaborationMedical Management

•Resource Consumption

•Appropriate utilization of ancillary testing

•Development of EBM protocols

•Standardization of clinical products

•Target of $2.3 million in expense savings

•DRG Assurance

•Target of $900,000 through improved documentation and charge capture initiatives




Hospital/Physician Collaboration

Physician On CallRefocus on operating principles Investment of $4.3 in the program for 2006Additional investments made for physician service agreements




Hospital/Physician Collaboration

Physician Recruitment55 New Physicians (JSUMC – 19; OMC – 19; RMC – 17)Investment of $3.3 million for recruitment expenses & practice support$330,000 partner company investment for recruitment infrastructure




VolumeInpatient Volume

Inpatient volume is budgeted to grow 3.1%

Jersey Shore growth of 3.7%Ocean growth of 3.5%Riverview growth of 1.6%

Continued impact of observation patients

Outpatient VolumeFocus on outpatient volume growthNew/expanded services




Admission Growth Trend

1,3041,364

53,523 55,293 55,828 55,561 57,279

50,000

52,000

54,000

56,000

58,000

60,000

2002 2003 2004 P-2005 B-2006

Admissions Obv Patients




Cost Containment PersonnelPersonnel Savings - $6.2 million

Reduction of 52 full and part-time positions; 12 displaced managers and employeesScale back of $1.3 million in proposed market adjustments and defer merit increases to May

Personnel InvestmentsAddition of 53 positions to promote strategic initiatives and revenue growth $8.1 million in merit and market adjustments




Other Initiatives

$2.3 million incremental investment to support initiatives

Information Technology

Surpluses from Partner Companies invested in ambulatory strategies

“Path of Growth”

$900,000 incremental investment since 2003

Marketing & Communications

$600,000 incremental investment

Clinical Excellence




Excess of revenue over expenses for 2005 includes $12.9 million in depreciation recapture settlements.

3.0%2.7%3.0%3.2%Operating Margin

(23.9)%34.245.030.232.8Excess of Revenue over Expenses

(54.9)%11.124.68.310.3Non-operating Revenue

13.6%23.220.421.922.5Operating Gain

5.3%(20.2)(19.2)(23.2)(24.0)Net estimated cost of Charity Care

9.6%43.339.545.146.5Operating Gains before Charity Care

3.6%752.6726.7709.9678.5Total Expenses

3.9%795.9766.2755.0725.0Total Operating Revenue

Inc/(Dec)

2006 Budget/

2005Projected

2006 Budget

2005 Projecte

d

2005 Budget

2004

Actual2006 Operating

Budget




Total Revenue Growth Trend

Operating revenue growth of $29 million (3.7%)

Net Patient Service Revenue = $26 millionOther Operating Revenue = $3 million

776747701660622

300

450

600

750

900

2002 2003 2004 P-2005 B-2006

Mil

lio

ns




Budgeted Net Patient Service Revenue Growth

28%10%

27%

35%

IP Volume OP Volume Rate Expanded Programs




Total Expense Trend

Operating expense growth of $26 million (3.6%)

–Represents a slowdown from our historical increases in expenses of approximately 6%

609 642 678 727 753

300

450

600

750

900

Mil

lio

ns

2002 2003 2004 P-2005 B-2006




2006 Operating BudgetJersey Shore University Medical Center

VolumeAdmissions budgeted to grow by 3.7%Surgical volume to grow due to several initiatives

Medical ManagementAverage length-of-stay to drop to 4.85Case mix index to increase to 1.82Initiatives in product standardization

Expense ManagementReduction of 44 FTEs through elimination of mgmt & vacant positionsClinical and non-clinical supply chain savings in the amount of $4.6M

Physician DevelopmentIncremental investment of $1.4M to support Medical Manpower Plan

Academic VisionBudgeted resources to further advance the Academic Vision




2006 Capital Budget

$12.0$1.3$2.0$1.5$7.2Jersey Shore University Medical

Budget2006

NewTechnology

ImagingPlantRoutine




Operating Margin Trend

2.10% 2.70% 3.20% 2.70% 3.00%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

2002 2003 2004 P-2005 B-2006




PURPOSE OF PRACTICA

Gain a greater understanding of the revenue cycle and the relationship of various hospital departments/functions to it specifically:

Patient access/financial services MedicareChargesCase ManagementManaged Care,Clinical Effectiveness,Health Information Management (Coding)




Medicare Losses 2002-2005

(29) (30) (37) (32)

-40-35

-30-25

-20-15-10

-50

510

Mill

ions

2002 2003 2004 2005




2006 Medicare Rate Changes

Market basket adjustment (3.5%) $10.0 million

Wage index adjustment (3.0) million

Transfer DRGs (2.6) million

Cardiac DRGs 1.4 million

Other IP & OP adjustments (1.6) million

Total Increase $3.2 million

Rate increase from Medicare 1.2%




LEARNING EXPERIENCES

CASE MANAGEMENTCoordination with:

Physicians

Social Workers

Nurses

Ancillary Personnel

Outside Agencies





CASE MANAGEMENT

Expedites medically appropriate and cost effective care

Applies clinical expertise and medical criteria to insure timely coordination of care and discharge planning

Reimbursement is not influenced by time




LEARNING EXPERIENCESCLINICL EFFECTIVENESS

The concentration of the VP of Clinical Effectiveness is on high priority related growth initiatives

Severity adjusted MortalitySatisfaction with pain managementRN staffing consistent against targetMICU days on ventilatorLab turn around time to the EDPatient and other customer focused resultsPhysician satisfactionPhysician growthFinancial and market share results





CODING“By the year 2010 the vacancy rate for coders is

predicted by Price Waterhouse to be 43%”.

Celeste Thomas

Corporate Manager

Health Information Management Coding



http://standarderrors.org/presentations/stti2006walshdebaricox-...

Documents

hospital system

s hospital reimbursement

uncompensated care

revenue basepayers

revenue cyclechallengespayers

impact of revenue uncertainty

health care delivery

management of insurance