Assessment prepared for name of client Ambulatory Health Center Sample

Proprietary and Confidential

Achieving and Sustaining

Financial Health in Your Practice

8 Essential Metrics You Need to Know

Already challenged with an overly complex, ponderous, and slow-moving healthcare

system, physician practices today also face stringent regulations, increased payer rules

and edits, and eroding bottom lines. Healthcare managers must run physician

practices not just as healthcare delivery sites, but also as real businesses. As a NextGen

Healthcare client, you have the technology to take your business to the highest level. The

question is–are you capitalizing on your system’s functionality to optimize your

reimbursements every visit?

To help you benchmark your practice’s performance, assess your financial outcomes, and identify opportunities for improvement, we offer a two-pronged approach: InSight ReportingTM Analysis: Assessed the last 90 days of ERAs for processing time, denial detail, and payment data.

Best Practices Financial Assessment: Collected data from NextGen® Practice Management and analyzed current trends of charges, payments, and net revenue.

The report which follows is a sample of an assessment summary. It shows the eight performance indicators needed to gauge, and sustain, your practice’s financial health.

These metrics include: 1. Revenue Cycle Assessment 2. Utilization 3. Staff Processing Time 4. Payer Processing Time 5. Charge Lag 6. Denials 7. Accounts Receivable Management 8. Additional Revenue Enhancements

Compare how your practice performs against our best practice metrics, which align with our software’s optimized, automated outcomes. Leverage our experience with similarly sized organizations, and with revenue cycle issues. See how optimizing key software functions can drive your business and clinical success.

Your opportunities for optimization include:

OPPORTUNITY COST

Denial Management (annual) $1,307,387

Accounts Receivable Improvement (one-time) $312,318

Decreasing Charge Lag (one-time) $50,290

Revenue Cycle Assessment This analysis is intended to provide a “snapshot” of an Ambulatory Health Center’s financial health in the context of its revenue cycle, and to identify tangible opportunities to improve revenue and efficiency with NextGen RCM Services (Revenue Cycle Management).

The table above shows the eight areas of focus, comparing current results against NextGen®-optimized metrics.

This graph represents the practice’s per-formance relative to the optimized metrics above. There are areas for improvement in Denial Management and Accounts Receiv-able, First Pass Clean Claims, Charge Lag, Staff Processing Time, and Collections.

Performance Indicators Current State Optimized Office Visit Average Charge Lag (days) 4.62 <1 Staff Processing Time (days) 43 14 First Pass Clean Claim Rate 80% 96% Denial Percentage 14.2% 4% Percent of Eligibility Checked Before Each Visit 55% 95% Days in A/R 57 35 A/R Over 90 Days 35% 14% Net Collection Ratio 95% 96-99%

Connecting the Data with Comparative Analytics

Your revenue cycle problems will be easier to solve with actionable information in hand. We generated the following data from an assessment of your last 90 days of ERAs using the comparative benchmarking tool, Insight Reporting™. This view enables your practice to benchmark and contextually assess code utilization, denial information, and productivity measures with other healthcare organizations for relative assessment.

The graph above shows average existing patient E&M code distribution for your practice in blue. State averages in red and national averages in green.

The graph above shows average new patient E&M code distribution for your practice in blue, state averages in red, and national averages in green.

Utilization

How does my code usage compare to my peers? The graphs below compare your E&M code usage against other similar practices at the state and national level.

Your Existing Patient Utilization Profile is 4.9% below your peers.

• Taking into account your average reimbursement for an existing patient visit, and the variance from your peers, more direct alignment with state averages could result in an additional $10,474 in missed opportunity for this 90-day period, or $41,896 annually.

Your New Patient Utilization Profile is .8% below your state peers.

• Direct alignment with your state peers would result in $5,646 additional opportunity for the 90-day sample period, or $22,584 annually.

Staff Processing Time The time between the date of service and the date the payer writes a check for the claim is your processing time. InSight Reporting breaks this time down between staff processing time and payer processing time. How is your staff performing?

The graph shows monthly staff processing time in blue, compared to state averages in red, and national averages in green.

Average Staff Processing Time

Ambulatory Health Center

State Nation

Days 82 17 35 As seen in the table above, the staff processing time is nearly five times the state average

and over two times the national average.

Payer Processing Time Am I being paid at the same speed as my peers? Payer processing time is the number of days from the date of payer receipt to the check date of a claim.

Average Payer Processing Time

Ambulatory Health Center

State Nation

Days 15 15 13

As seen in in the table above, payer processing time is relative to your state and national peers.

The graph shows monthly payer processing time in blue, compared to state averages in red, and national averages in green.

Below is a comparison of payer processing times by week, compared to state and national peers. Your payer processing time is consistent with the state and national levels.

We’ve assessed your weekly payer processing time for codes 99211-99215. Your payers average 22 days to process code 99213, which is five days more than any other code below. Payer processing time for all payers has leveled out in the recent weeks.

Charge Lag Average Charge Lag: The time between the date of service and date of charge entry. Delays in both claim submission and staff processing time impact the time to collection. A 90-day sample of data was assessed. The table below shows the results for your practice: 43% of charges were entered in the same day, 65% of charges were entered within two days, and 92% of charges were entered within seven days. The average charge lag was 4.62 days.

Cost of maintaining the current state: • $92,628 in charges are generated per day.

• Nearly 8% of charges, valued at over $360k gross, are still outstanding at seven days, resulting in delayed subm ission and im pacting tim e to paym ent.

• The value of decreasing charge lag by one day is $50,290.

Charges entered same day 43.3%

Charges entered 2 days or less 65.2%

Charges entered 7 days or less 92.3%

Charges entered 31 days or less 97.3%

Longest Charge lag (days) 83%

Denials Every healthcare provider expects to be paid. However, payers continually find reasons to deny payment, to underpay, or to delay payment. In the typical practice, up to 47% of denied claims are never resubmitted.

The first pass clean claim rate, or the rate of first-pass claim acceptance at the clearinghouse, is an indicator of how often a claim being sent out is correct the first time. Although NextGen Healthcare clients average 95% first pass clean claim rates, the practice’s rate is 80%; that is, 80 out of 100 claims are processed upon their initial submission. As you will see below, 5.8% of claims are rejected at the clearinghouse and 14.2% of claims are denied by the payer.

The graph below reflects an assessment of the last 90 days of Electronic Remittance Advice, showing the current denial rate compared to state and national peers.

• Approximately 14.2% of claims are denied, which equates to about 21,580 claims per year requiring manual intervention to fix and re-submit

• Although Worklog manager is available, no tasks have been set up, including those prioritizing denials to ensure all denials are being worked.

Tracking and Preventing Denials Your denial rate is 14.2%, which is substantially higher than the 8.9% state average and 9.5% national average. NextGen® Revenue Cycle Management clients in your specialty realize an average of 3.5% denials. Why do payers deny claims? Below are the top ten denial reason codes. The claims represented had missing or incorrect information, ineligible insurance, or were submitted too late per the payer contracts.

Timely Filing • 208 denials (3.5%) were due to timely filing (Reason Code 29), charged out at $243,234 gross.

Even if these claims are fixed, they have exceeded the timely filing parameter for payers. • At your GCR, these timely filing denials equate to $132,057 in lost income.

Cost of Denials

• There were 5,862 claims, totaling $1.2M in gross charges, denied during the 90-day reporting period. This equates to nearly 23,500 claims per year, totaling $4.8M in gross charges, requiring intervention to fix.

• MGMA estimates 47% of denied claims never get reworked; these end up as lost revenue. • If 47% of your denied claims were not reworked, this would total $1,307,386 annually in

lost net income.

Reason Code

Reason Code Description

Denial Count

5862

97 The benefit for this service is included in the payment allowance for another service 1078

18 Duplicate claim/service 1153

A1 Missing Remark Code 908

16 Claim/service lacks information which is needed for adjudication 365

31 Patient cannot be identified as our insured 301

29 The time limit for filing has expired 208

50 These are non-covered services because this is not deemed a “medical necessity” by the payer 192

27 Expenses incurred after coverage termination 190

B7 The provider was not certified to be paid for this procedure this DOS 176

109 Claim not covered by this payer/contractor 176

Accounts Receivable Management This client’s A/R is a running aging of all billed, outstanding charges; that is, the charges which are awaiting payment. A typical measure of A/R is days in A/R: The average time it takes to collect payment. Lower days in A/R are more favorable, meaning less cash is locked in Accounts Receivable.

• This practice has 57 days in A/R; it takes them on average 57 days to get paid on a claim

• A more appropriate benchmark for your specialty is 35 days in A/R

In addition, too many claims are aging in A/R, not getting paid: • 34% of A/R is over 90 days old; a more appropriate benchmark for your specialty is less than

14% of charges over 90 days old

• 18% of A/R is over 180 days old

• 4% of A/R is over one year

Over 90 Over 180 Over 365

$1,771,347 $967,213 $212,846

34% 18% 4%

This graph is the current A/R aging, showing current A/R by aging category, compared to optimized A/R management, closer to 35 days in A/R.

This graph shows the aging category for which payments have been received on electronic claims over the past 90 days.

• 91% of cash is being paid on claims less than 60 days old; this is directly aligned with the appropriate bench-mark of 90%.

Cost of maintaining the current state: • Total of $5,235,442 is in A/R. Mass re-billing leads to 57 Days in A/R, delays in payment,

and timely filing write-off’s. Over 34% of A/R is over 90 days, compared to the MGMA benchmark of 14%.

Opportunity for Prompt Account Reconciliation and Increased Collections • Aged A/R has been adjusted for

collectability.

• All Commercial >180 days (90 days timely filing +90 days timely follow-up) and Govt >365 days has been adjusted.

• The Adjusted Current Days Outstanding is 47 days.

• RCM customers in your specialty realize an average of 35 Days in A/R.

• The difference between 47 and 35 Days in A/R is $600,613 in collections. See calculations in the table to the right.

Last 90 Days of Charges $8,336,559 One Day of Charges $92,628.43 Days in A/R 57 Adjusted Current DSO 47 Benchmark 35 Total A/R At Benchmark $3,241,995 Difference $1,106,256 At Net $600,613 Gross Difference GCR NET per GCR $1,106,256 54.3% $600,612

Taking into account the amount of patients due in A/R and the status of aging claims, a more appropriate expectation for a one-time cash infusion due to a decrease to days in A/R is a fraction of the upside above, closer to $312,318.

Summary of Total Opportunity Costs

Additional Revenue Enhancements This practice’s charges, collections, and adjustments for the 12-month period between July 2011 and June 2012 are as follows:

Net Collection Ratio: relationship between actual collections and what a practice should have collected, expressed as a percentage.

The Net Collection Ratio (NCR) is generally used as a barometer to assess how closely aligned collections are to contracted expectations.

A comparative benchmark for this measure is 96-100%. A practice with optimized operational and technological processes would be collecting as close to its full contracted rates as possible. This practice’s NCR is 95%.

Factors that impact NCR include underpayments, in which payers pay less than the contracted rate, as well as collections that are tied up in patient pay, among others.

OPPORTUNITY COST

Denial Management (annual) $1,307,387

Accounts Receivable (one-time) $312,318

Charge Lag (one-time) $50,290

JULY 2011 - JUNE 2012

Charges Collections Contractual Adjustments

$36,081,051 $19,589,255 $14,201,058

Improvements are not cumulative; enhancements in one area may inherently improve another.