oha presentation 6 2016 rev budget wrvu1w speak notes

Revenue Budgeting for Physician Practices using wRVU

Presenter

Presentation Notes

Welcome! To start things off – please help me understand your needs better by giving me a show of hands if you are a physician practice manager or executive a physician hospital executive CFO/controller other accounting professional consultant or billing company Thank you! It looks like we have a diverse audience and many different perspectives to share! This is meant to be an interactive presentation – please feel free to ask questions, challenge assumptions, etc. Today I will share with you the revenue budgeting process that is based upon wRVU methodology - then we will look at three different case studies and apply the method so you can see how it rolls out.

Does this sound familiar?

1. Multiple providers, multiple locations 2. Constant change in the practice

dynamics – providers being recruited, providers leaving, etc.

3. Multiple major projects in the works 4. Revenue budgets that either greatly

over or understated performance

Presenter

Presentation Notes

Does this sound familiar?? >Multiple providers in multiple locations around the service area, >What seems like constant change in the practice dynamics, making ‘same store’ predictions a challenge; >Major concurrent projects and initiatives – some disruptive to routine operations >Revenue budgets that either greatly overstate or understate performance compared with what actually occurred Anyone here relate to this picture?? This is a common scenario in hospital-owned physician practices.

RVU and wRVU

Medicare pays physicians for services based on submission of a claim using one or more specific CPT® codes. Each CPT® code

has a Relative Value Unit (RVU) assigned to it which, when multiplied by the conversion factor (CF) and a geographical

adjustment (GPCI), creates the compensation level for a particular service.

wRVU is the value assigned to the physician effort associated with the production of each particular code.

Presenter

Presentation Notes

>wRVU – please show your hand if your organization is currently using wRVU keep them up if you use them for compensation if you use them for budgeting

Why Work RVU?

“Different from the practice expense RVU and the malpractice RVU, the work RVU (wRVU) is a constant value across specialties and geographic locations, providing a good standard for the value of work performed.” AAPC https://www.aapc.com/practice-management/rvu-calculator.aspx

Presenter

Presentation Notes

If you are wondering why use wRVU – the AAPC has excellent resources for explanation and calculation

https://www.aapc.com/practice-management/rvu-calculator.aspx

The Budgeting Process

1. Simplified financial reporting 2. Engaged providers 3. Involved Stakeholders

Presenter

Presentation Notes

First, consider the actual budgeting process and ensure you have 3 key principals covered - Start with financial reporting systems that are simple enough for buy-in. Must be accurate, logical, fair, and easy to understand and explain. Familiarize providers with the reporting and engage them in the results via regular updates at the practice council meetings Ensure they are getting good data on their individual production every month. The true drivers of revenue in the practice setting are the providers. Engaging them in discussion regarding what can be improved, where changes are occurring and what they think is do-able is key to getting to a budget that has a good dose of reality in it. Be prepared to take it down to the aggregated impact of adding ‘1 visit per day’ or per week… demonstrate to them how that will impact the results and show them the personal impact of the changes under consideration based upon what it will do to their own compensation. A robust process will include an assumption discussion amongst key stakeholders to assure agreement on the basis and expected impacts. For the remainder of our time together we will go deeper into each of these tactics and share a couple of case studies with you as well.

Why Simplify Financial Reporting?

Common concerns- Accrual accounting – what? This information is NOT right, we didn’t spend xyz! If we were in private practice, we never would have done that, paid for this, etc….

Common realities- Messy cost accounting Inconsistent cost allocation methods Health system imposed costs Ancillary revenue removed Revenue cycle running like a SQUARE wheel

Presenter

Presentation Notes

Why Simplify? Show of hands – Who has reviewed their monthly practice financials with their providers? What types of comments are ‘typical’? You might ask – Why change the financial reporting?? Frequently attempts to discuss the office finances are met with – Lack of understanding – accrual accounting, think checkbook! Serious credibility issues of reports – expressed by both providers and managers Expressed concern of ‘games’ being played – costs allocated to the office that didn’t belong there, etc. Typically you will find – History of practice acquisition and physician employment leading to inconsistent reporting Confusion in hospital departments of the practice accounting structure leading to variation in how costs are allocated.

Simplify Financial Reporting

The solution- 1. Correct the Rev Cycle Issues 2. Clean up the cost accounting and establish

management reports that recognized the needs of physician practice operations

Align reporting to benchmarks Net1, Net 2 with a ‘break even’ on Net 1 message Provider score cards

Presenter

Presentation Notes

>>>> through slide Pause for questions Marc Halley published a paper in the October 1999 issue of Healthcare Financial Management titled: “Net One, Net Two: The Primary Care Network Income Statement” I recommend that you look it up and consider the implications of moving to this type of reporting. My experience with implementing it was an immediate reduction in provider push back and concern over the ‘fairness’ of the financials. This ultimately led to gaining their buy in and engagment in improvement to the practice’s bottom line.

Example Provider Scorecard

Presenter

Presentation Notes

This is one example of a provider scorecard which in my experience elevated the credibility of the information and gave the providers what they needed to see with month to month as well as year to year comparison data. It gives them gross charges, payments, wRVU, and encounters.


2. Engage Providers

Presenter

Presentation Notes

The true drivers of revenue in the practice setting are the providers. Engaging them in discussion regarding what can be improved, where changes are occurring and what they think is do-able is key to getting to a budget that has a good dose of reality in it. Be prepared to take it down to the aggregated impact of adding ‘1 visit per day’ or per week… demonstrate to them how that will impact the results and show them the personal impact of the changes under consideration based upon what it will do to their own compensation.

Why Engage the Providers?

What is often seen- Budgets based upon best guess of what would happen related to new physician recruitment and provider ramp up Use of Net Revenue with % change to predict Large Performance variances to budget underscoring a weak process Providers missing from the process. (too busy – not their issue….)

Presenter

Presentation Notes

Typically poor physician engagement lies at the root of these issues.

Engage the Providers

• Pull the key levers… • Establish ‘same store’ model for basis of

assumptions • Start the budget cycle with a target setting

meeting • Give the practice managers tools to use as

they put together the budget

Presenter

Presentation Notes

>Providers can be engaged with a number of levers – first – provide them with monthly scoreboards that show their revenue, wRVU, visits, payer mix, and denials second – change our physician compensation model to use a base plus wRVU production bonus – so they began to care about revenue and wRVU third – use the monthly practice leadership meetings to educate them regarding their practice’s performance and enlist them in improvement planning where it makes sense. >Two key administrative decisions that have a huge impact in the budgeting process: 1) Base everything on ‘same store’ and document predicted changes back to it 2) Only budget for new providers when the contract is signed and a start date is set. It is understood that open positions may get filled and the revenue and expense as a result of that will cause budget variances. >Target setting meeting consisting of the Practice Manager, the Practice Executive, the Health system controller and the accountant responsible for the pp reporting. at this meeting, review the key revenue metrics pertinent to that practice.


3. Involved Stakeholders

Presenter

Presentation Notes

Practice Financial accountability to the Network Operating Council or group governance council with appropriate peer review and mentoring is the final key to budgeting success in the physician practice setting. Are you ready to look at some case studies?

Case Study # 1: Anywhere Primary Care

2015 Providers: 1 Family Medicine, full-time 1 Internal Medicine, full-time 1 Primary Care NP, full-time All providers of the practice are fully ramped up. The Family Medicine physician is working the minimum expected hours of

patient face time. The Internal Medicine physician is planning to take a month long leave in

the summer of the next year. The nurse practitioner is busy, however she has only been with the team

for a year and is struggling with her documentation and coding (use of the EHR)

The practice is planning a ‘trial’ of offering vitamins and herbal supplements as a retail offering to their patients.

Presenter

Presentation Notes

>>>>>>

Case Study # 1: Anywhere Primary Care Case Study # 1: Anywhere Primary care

Visits wRVU Coding Index Charge per wRVU Total Charges

2015 Family Medicine Physician # 1 3219 4296 1.33 $ 140.80 $ 604,891

Internal Medicine Physician #2 5322 6949 1.31 $ 117.51 $ 816,587

Nurse Practioner 2684 2871 1.07 $ 120.52 $ 346,017

2015 Practice roll up 11225 14116 1.26 $ 125.21 $ 1,767,495

2016 Beginning budget assumption

Productivity Changes

- additional visits

-growth

Change Procedure w/out wRVU

Coding Index Improvement

Benchmark

Actual

Improvement needed

% Improvement target

Additional wRVU per visit

# visits

Addition due to coding improvement:

Provider Changes

New Physician

New Advanced Practice Provider

Change in Existing

Rate Increases 5.0%

2016 Budget end Assumptions Visits wRVU Coding Index Charge per wRVU

Total Gross Charges

2015 Contractual % 35.40%

Estimated Net Charges

Physicians 1.9

Advanced Practice Provider 1

Total number of Providers 2.9

Per Provider

Per Physician

Presenter

Presentation Notes

Data is loaded into the Revenue prediction tool. The target setting meeting – >Review the rolling 12 month performance compared to the annualized data. >Identify any expected ‘known’ or highly likely influences and their expected impact >All this drops down to the projected gross revenue.


Visits wRVU Coding Index

Charge per

wRVU Total Charges

2015 Family Medicine Physician # 1 3,219

4,296 1.33 $ 140.80 $ 604,891

Internal Medicine Physician #2 5,322

6,949 1.31 $ 117.51 $ 816,587

Nurse Practioner 2,684

2,871 1.07 $ 120.52 $ 346,017

2015 Practice roll up 11,225

14,116 1.26 $ 125.21 $ 1,767,495

2016 Beginning budget assumption 11,225

14,116 1.26 $ 125.21

Presenter

Presentation Notes

In this example we have a full year of data to base the budget assumptions upon. More typically you will have a partial year. In that case it is very helpful to compare annualized data to a rolling 12 month actual performance. From that you will get a sense of the data’s stability and a decision can be made regarding the most logical basis to use as the foundation of the next year’s budget.

Case Study # 1: Primary Care Practice

visits wRVU CI Productivity Changes

- additional visits - FM (3 per week over 47 weeks) 141 187.53 1.33 -growth 0 0

Change Procedure w/out wRVU Retail sales - vitamins and supplements $ 10,000.00 Coding Index Improvement

Benchmark 1.33 Actual 1.07

Improvement needed 20% % Improvement target 10%

Additional wRVU per visit 0.107 # visits 2684

Addition due to coding improvement: 287.188

Presenter

Presentation Notes

Under this scenario, in the pre-budget meetings the FM physician was presented with info re the impact to their comp as well as the practice financials if they made some changes to their office schedule. They agreed to adjust their office hours and add an hour to their weekly pt care schedule with expectation that this would add on average 3 pt visits per week. Additionally the practice planned a trial of selling supplements and developing a retail line of revenue. Also identified was an opportunity to improve the NP’s doc/coding via use of the EMR.

Case Study # 1: Primary Care Practice

visits wRVU

Provider Changes New Physician New Advanced Practice Provider

Change in Existing

IM Physician - 4 week LOA (443.50)

(579.08)

Presenter

Presentation Notes

Our IM physician in this example let us know that he was planning a four week leave to return home over the summer.


2016 Budget end Assumptions Visits wRVU Coding Index

Charge per wRVU

10,923 14,011.63 1.28 $ 131.47

Total Gross Charges $ 1,842,116.62

2015 Contractual % 35.40% (652,109.28) Estimated Net Charges $ 1,190,007.33

New 'cash' revenue $ 10,000.00

Estimated Net Revenue $ 1,200,007.33

Physicians 1.9 Advanced Practice Provider 1

Total number of Providers 2.9

Visits wRVU Estimated Net Revenue Est Net Rev per

wRVU

Per Provider 3,766

4,832 $ 413,795.63 $ 85.64

Per Physician 5,749

7,375 $ 631,582.81 $ 85.64

Presenter

Presentation Notes

All the changes drop down to the next year’s budget. From there total gross revenue can be calculated and then put into the proper format for comparison to benchmarks.

Visits wRVU Estimated Net

Revenue Est Net Rev per

wRVU

Per Provider 3,766

4,832 $ 413,795.63 $ 85.64

Per Physician 5,749

7,375 $ 631,582.81 $ 85.64

MGMA Production Benchmark Data (2015, based

upon 2014 data) Visits wRVU Coding Index

Estimated Net Revenue

Est Net Rev per wRVU

Internal Medicine 3402 4728 1.38 $ 447,729.00 82.08

Family Medicine 3616 4938 1.36 $ 462,391.00 85.26

NP: Primary Care 2478 3147 1.33 $ 285,784.00 85.64

MGMA Cost Survey Data (2015 based upon 2014 data) Visits wRVU

Coding Index



Primary Care per FTE Physician 4616 6156 1.33 $ 504,985.00 $ 82.03

Case Study #1 Anywhere Primary Care

Presenter

Presentation Notes

Based upon the benchmark data, this practice has healthy revenue generation and productive providers.

Case Study # 2: Ortho Surgical Practice

2015 Providers: 7 Physicians (2 non-surgical) 5 PAs High performing Ortho practice Two physicians at end of career, two within 3 years out of residency

and three mid-career.

Case Study # 2: You Kneed me Orthopedics

Case Study # 2: Surgery, Gen Ortho

Visits wRVU Coding Index

Charge per wRVU Total Charges Payments

2015 Practice roll up 28,687

109,640 3.82 $ 249.38 $ 27,341,648 $ 7,654,066.00

2016 Beginning budget assumption 28,687

109,640

3.82 $ 249.38 $ 27,341,648

Presenter

Presentation Notes

This practice administrator felt they were doing great and no need to discuss the budget with the group – after all, they are busy!


Charge per

wRVU

28,687

109,640 3.82 $ 261.85


2015 Contractual % 72% $ (20,671,961.10) Estimated Net Charges $ 8,036,769.30

Total Estimated Net Revenue $ 8,036,769.30

Visits wRVU Estimated Net

Revenue Est Net Rev per wRVU

Per Physician

4,098

15,663 3.82 $ 1,148,109.90 $ 73.30

MGMA Cost Survey Data (2015 based upon 2014 data) Visits wRVU Coding Index



Surgery: Gen Ortho

5,371

10,164 1.89 $ 926,701.00 $ 91.17

Presenter

Presentation Notes

At first blush – this appears to be a safe budget with no flags going up….

Case Study #2: Analytical Anne’s closer exam….

Visits wRVU Coding Index Charge per

wRVU Total Charges

2015 Gen Ortho Surg # 1 3,570 14,988 4.20 $ 230.55 $ 3,455,487 Gen Ortho Surg #2 4,452 20,003 4.49 $ 241.06 $ 4,821,969 Gen Ortho Surg #3 3,802 18,760 4.93 $ 225.61 $ 4,232,506 Gen Ortho Surg #4 4,145 15,285 3.69 $ 197.19 $ 3,013,998 Gen Ortho Surg #5 3,006 14,704 4.89 $ 216.59 $ 3,184,763 Gen Ortho NON Surg #1 4,565 8,149 1.79 $ 193.57 $ 1,577,375 Gen Ortho Non Surg #2 2,857 9,568 3.35 $ 203.63 $ 1,948,367

PA #1 490 1,482 3.02 $ 388.27 $ 575,414 PA#2 1,401 2,322 1.66 $ 307.35 $ 713,656 PA #3 33 1,290 39.09 $ 417.63 $ 538,742 PA #4 218 1,983 9.10 $ 433.72 $ 860,061 PA #5 148 1,104 7.46 $ 411.15 $ 453,911

2015 Practice roll up 28687 109638 3.82 $ 231.41 $ 25,376,249 2016 Beginning budget assumption 28687 109638 3.82 $ 231.45 $ 25,376,249

Presenter

Presentation Notes

This is the same ortho group – with a different leader’s approach. Analytical Anne looks at the roll up data, however she also takes a good look at each of her provider’s data as she reports this to them at their monthly meetings. Anne met with the group members prior to preparing the budget for input as she was concerned about rumors she was hearing of retirement as well as what she felt were some productivity opportunities within the group.

Case Study # 2 AA’s exam

Productivity Changes Visits wRVU Coding Index

Surg #1 adds 10% in office hours eff 6/30 179 749 4.20

Surg #5 adds 10% in office hours eff 1/1 301 1470 4.89

PA #5 adds 10% hour to support #1 and #5 15 110 7.46

Presenter

Presentation Notes

As a result of Ann’s discussion, three of the providers agreed with her assessment that there was opportunity to increase their earnings by increaseing their availability – so they added hours.


Provider Changes Visits wRVU Coding Index

New Physician

Change in Existing

Surg #2 retires June 30 (2,968) (13,326) 4.49

Presenter

Presentation Notes

Surgeon #2 formally declared his plans for retirement effective June 30. Anne had several conversations with him about how his patient load would be handled at the end and determined that there would be a significant ‘ramp down’ over the last two months of his time. As a result, his production was reduced in the plan by 66%.



Charge per wRVU

26,213 98,642 3.76 $ 243.03


2015 Contractual % 74% $ (17,623,796.86) Estimated Net Charges $ 6,348,903.79

New 'cash' revenue $ -

Estimated Net Revenue $ 6,348,903.79

Visits wRVU Estimated Net Revenue Est Net Rev per

wRVU Per Physician 4,033 15,176 $ 976,754 $ 64.36

MGMA Cost Survey Data (2015 based upon 2014

data) Visits wRVU Coding Index Estimated Net Revenue


Surgery: Gen Ortho 5,371 10,164 1.89 $ 926,701.00 $ 91.17

Presenter

Presentation Notes

Although the wRVU per physician and Estimated Net Rev per physician benchmark above the median, Anne is concerned by the new budget numbers as the group’s wRVU are high, however their net rev per wRVU continues to benchmark low. This will be a priority to get sorted out in the next quarter as resources needed to support the high wRVU are not being covered by the incoming cash flow.

Case Study # 2 The contrast between the two

Assumption Andy's Analytical Anne's

Total Gross Charges $ 28,708,730 $ 23,972,701

2015 Contractual % $ (20,671,961) $ (17,623,797)

Estimated Net Charges $ 8,036,769 $ 6,348,904

New 'cash' revenue $ - $ -

Estimated Net Revenue $ 8,036,769 $ 6,348,904

Presenter

Presentation Notes

Take a look at the difference in budget that resulted from Anne’s process vs. Andy’s. Questions

Summary

Simplified financials + Provider engagement + Stakeholder involvement =

A more predictive Revenue Budget

References Introduction to Relative Value Units and How Medicare Reimbursement is

Calculated, http://www.acro.org/washington/rvu.pdf Net One, Net Two: The Primary Care Network Income Statement, Marc D. Halley,

MBA, and Anthony W. Little, MBA, CPA, Healthcare Financial Management, Oct. 99.

http://www.acro.org/washington/rvu.pdf

Speaker Bio

Michelle Wasmund, MBA, FACHE Michelle is a graduate of the University of Wisconsin where she received her BS degree in Medical Technology. She completed her MBA with Baker College in Flint Michigan and became a Board Certified Healthcare Executive by the American College of Healthcare Executives in 2008. She has been in healthcare for over 25 years, serving seven years as Director of Laboratory Services prior to joining the leadership team at JTDMH in 2000. She served seven year as Director of Outpatient Services, responsible for Radiology, Rehab, Occupational Health, Outpatient Clinics, Lab, Cardiac Rehab and Diagnostics, Registration and Central Scheduling. She led the hospital accreditation/quality team and served on the Corporate Compliance Committee. Michelle moved into her role as the Executive Director with the Physician Practices in December of 2007 where she established and built the multispecialty group practice called the Grand Lake Physician Practices. Michelle is active in the community, with ongoing service to the Wapakoneta YMCA; she served on the United Way of Auglaize County board for seven years, including two years as the President. Additional service included the youth ministry at Shawnee Alliance Church where she worked with teenagers; she was a founding member of the Wapakoneta Kiwanis Club; and the WHS Soccer Parent Booster Organization. Michelle and Todd, her husband of 35 years, moved to Wapakoneta in 1998 were they raised their three children. Their daughter followed in her father’s footsteps and is a HS Principle with eCOT, an innovative Ohio charter school. Their oldest son served in the US Marine Corps with two tours of duty in Iraq. He is currently a Sales Manager with IGS Energy in Columbus while continuing to serve in the Marine reserves. Their youngest son has recently graduated from the aerospace engineering program at University of Cincinnati.

Speaker Contact Info: Michelle L. Wasmund, MBA, FACHE office 419 / 733-7962 email [email protected] Linked In: https://www.linkedin.com/in/michelle-wasmund-

mba-fache-422b5436

https://www.linkedin.com/in/michelle-wasmund-mba-fache-422b5436











oha presentation 6 2016 rev budget wrvu1w speak notes

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