How to Reduce Costs & Improve Financial

Performance with NextGen Practice Management

The 11 Best Practices to Improve Financial Performance

James Muir VP Sales Southwest

NextGen Healthcare Information Systems, Inc.

Now Presenting - James Muir

• Presenter

–James Muir

–Vice President Sales SouthwestSouthwest

Disclosure

• There are a lot of stats in this presentation

• I have done my best to use the best

sources– Typically the MGMA or Physician’s Practice– Typically the MGMA or Physician’s Practice

• To keep the slides simple I have:– Summarized the return for each best practice

– Normalized the returns to per doc per year• Using primary care volumes & metrics

Top 30 Challenges for Medical Practices

Top 15 Challenges Rank

Dealing with operating costs that are rising more rapidly than revenues 1

Maintaining physician compensation levels in an environment of declining reimbursement 2

Collecting from self-pay, high-deductible health plan, and/or Health Savings Account patients 3

Managing finances with the uncertainty of Medicare reimbursement rates 4

Recruiting physicians 5

Negotiating contracts with payers 6

Selecting and implementing a new electronic health record system 7Selecting and implementing a new electronic health record system 7

Modifying your physician compensation methodology 8

Participating in the Medicare Physician Quality Reporting Initiative 9

Hiring and retaining quality staff 10

Participating in commercial pay-for-performance programs 11

Understanding physician performance-rating criteria 12

Preparing for participation in the Medicare e-prescribing incentive program 13

Improving patient flow through the practice 14

Dealing with the Medicare physician credentialing process 15

Source: MGMA 2009 Survey

Sum up challenges

1. Cut Costs / Improve Revenue

2. Improve Operations

31%

28%

24%17%

Top 30 Challanges by Category

Operations

3. Strategic Initiatives

4. Reporting

28%

Cut Costs / Improve Revenue Improve Operations Strategic Initiative Reporting

Source: MGMA 2009 Suruey

Cost Structure for Medical Practices

55%

5%

5%

5%

5%

2%

1%

Payroll & Benefits

Office Space

14%

8%Medical Supplies & Drugs

Laboratory

Professional Liability

Business Supplies

Equiptment & Furnishings

Outside Professional Services

Promotion/Marketing

What have some groups tried?

• Hiring freezes

• Freezing pay increases

• Cutting perks

– Getting rid of the break room for chart space

– Eliminating Bottled Water, Coffee, etc.– Eliminating Bottled Water, Coffee, etc.

• What most these have in common:

– Negative Impact – Low Morale & increased turnover –downward spiral

– STORY: We’re freezing hiring (but paying $86,000 in overtime)

• Invest in automating first

Where can run to find

efficiency & cut costs?

Where the Physician Money “Leaks”

Actually Come From

• Enhanced authorization and certification• Eligibility and authorization• Complete and timely billing• Improved registration data quality• Better front office processes and technology

• Improved follow-up processes all financial classes• Access to state-of-the-art, collection tools

2% – 4%Denial ManagementDenial Management

2% - 3%Reduction of aged Reduction of aged A/R andA/R andBad Debt WriteBad Debt Write--offsoffs

• Enhanced accounts receivable management• Process Tasking• Processes re-engineered to standards• Benchmarks and standards implemented

training and certification

5% 5% –– 10% loss of10% loss ofcashcash

3% - 5%Process and Process and WorkflowWorkflowImprovementImprovement

3% – 5%UnderpaymentsUnderpayments

• Automated contract management• Enhanced management and performance evaluation• Technology-enabled tools to monitor payer compliance

with contract terms and conditions• Timely follow-up of underpayments

MGMA and HFMA study of Physician

Practices 2009

Top 11 Best Practices to Improve

Financial Performance

Ranking Best Practice

1 Collect patient balances same day of service

2 Establish performance standards, report & provide feedback

3 Claims Scrubbing

4 Tracking & Preventing Denials

5 Improve statement quality & frequency

6 Create & Enforce Write-off policy

7 Manage Insurance Under-payments

8 Remind Patients of Appointments

9 Verify Eligibility

10 Outsource Electronic Statements

11 Maximize Electronic Remittance Advice

Top 11 Best Practices to Improve

Financial Performance by Category

Category Best Practice

Process Collect patient balances same day of service

Process / Report Establish performance standards, report & provide feedback

Process / Report Claims Scrubbing

Process / Report Tracking & Preventing Denials

Process Improve statement quality & frequency

Process Create & Enforce Write-off policy

Process / Report Manage Insurance Under-payments

EDI Remind Patients of Appointments

EDI Verify Eligibility

EDI Outsource Electronic Statements

EDI Maximize Electronic Remittance Advice

Application Run-through

1. Briefly run though some aspects of EPM– Focus on today’s top 11

2. Return and calculate the financial upside if each best practiceif each best practice

3. Conclude

Worklog ManagerWorklog Manager

•What to do

•When to do it

The Worklog Manager tells clinic staff:

•When to do it

•How to do it

•Measures Productivity

The Worklog Manager

Auto Create Auto Complete

EventEvent

Jump to Application

1. Collect Patient Balances Same

Day of Service

“Keying in at checkout is the most efficient way to enter charges. Real-time processing of work is the most efficient.” processing of work is the most efficient.” – Elizabeth Woodcock, MBA, FACMPE From Mastering Patient Flow, MGMA

1. Collect Patient Balances Same

Day of Service

• Three Stars that Must be Aligned

1. 90% of charges must be coded by the time the patient hits checkout• EHR makes this easy

2. Your payer contract must be in your system• So patient responsibility can be determined

3. Your building must physically allow for collection to happen at checkout• Or congestion will result

• Dentists have been doing this for years

1. Collect Patient Balances Same

Day of Service

• Collecting Patient Balances Same Day Improves Financial Performance Because:

1. Eliminates Statement Costs1. Eliminates Statement Costs

2. Patient Balances are Collected sooner

• Speeds Cash Flow & Reduces A/R Days

3. Labor associated with collecting final balances is eliminated

1. Collect Patient Balances Same

Day of Service - Metrics

Metrics Low High

Range of Average Practice A/R days Source: Physicians Practice

40 47

Range of A/R days reduced (32 & 35 days in A/R respectively) 20% 26%

One-time cash infusion as patient days are collected (per doc) $89,400 $152,360One-time cash infusion as patient days are collected (per doc) $89,400 $152,360

Statement costs are reduced (per doc) $24,000 $86,000

Labor costs to collect private balances over 60 days (per doc)Source: Dartnell Institute

$10,185 $13,352

Total upside of collection patient balances to same day of

service *not*not counting*counting* the one-time cash infusion (per doc)

$34,185 $99,352

*Normalized for Primary Care Per Provider Per Year

2. Establish Performance Standards,

Report & Provide Feedback

• Setting performance standards & automating feedback improves financial performance because:

– Defining Expectations Improves Performance– Defining Expectations Improves Performance• Study: Engage Employees & Boost Performance, Hay Group. 2002 Robinson, Dilys and Sue Hayday

– Hawthorne Effect

– Feedback Changes Behavior Which Prevents Errors

The Hawthorne Effect

• The Hawthorne Effect is a form of reactivity whereby subjects improve an aspect of their behavior simply in response to the fact that they are being studied.

• Q. How Much?• Q. How Much?

• A. It varies. On average 30%– Study: Richard E. Clark and Timothy F. Sugrue (1991, p.333) in a review

of educational research say that uncontrolled novelty effects cause on average 30% of a standard deviation (SD) rise.

• “What get’s measured get’s managed.”

Feedback Changes Behavior Which

Prevents Errors

• Most employees want to do a good job.

• Managers don’t provide frequent enough feedback

• Feedback prevents errors

• Unbiased feedback is most effective• Unbiased feedback is most effective– Study: Feedback & Management: A review of research into behavioural consequenses, Ian

R. Eggleton University of New South Wales, USA 1991

• Q. Does posting results in the lunchroom work?

• A. Yes. – High performers perform better, and low performers are unaffected.• Study: “The improved outcomes from rank-order grading largely arise among the high

performers, but not at the expense of low performers.” International Review of Economics Vol. 4, issue 1 (2005), pp. 9-19

2. Establish Performance Standards,

Report & Provide Feedback Metrics

Metrics Low High

NextGen clients using Worklog Manager utilized an average of

44 hours (or 1.1 FTE) less per provider than the national

19 Hours

(.475 FTE)

69 Hours

(1.725 FTE)44 hours (or 1.1 FTE) less per provider than the national

MGMA averageStudy: NextGen Healthcare 2008, MGMA Cost Survey 2008 using 2007 data

(.475 FTE) (1.725 FTE)

MGMA Staffing Average FTEs per PhysicianStudy: MGMA Cost Survey 2008 using 2007 data

4.19 FTE 5.13 FTE

Total Annualized Upside Range $27,456 $102,960

*Normalized for Primary Care Per Provider Per Year

3. Claims Scrubbing

• Claims Edits validate claims for:

– Demographic Errors

– Coding Edits (i.e. CCI, LMRP)

– Historical Edits

• High-end solutions create automated • High-end solutions create automated

feedback to prevent errors from happening

again.

Worklog & Claims Edits

Registration Providers

Coding

• Creates Automated Feedback Loop

• Create Accountability which Prevents ProblemsPrevents Problems

Claims Edits Engine

3. Claims Scrubbing Metrics

Metrics Low High

Average industry-wide denial rate: 5% 15%Source: Physicians Practice

Annualized value in reduced claims denial of Improving first-

pass-clean-claim-rate to 98% or 99%

$16,537 $74,692

Annualized value per doc of labor costs cut by claims

scrubbing & unnecessary work elimination

$5,269 $31,121

Total Annualized upside per doc for claim scrubbing and

unnecessary work elimination

$21,806 $105,813

*Normalized for Primary Care Per Provider Per Year

4. Tracking & Preventing Denials Process

1. Patient Registration Errors

2. Lack of Insurance Verification (ineligible)

3. Invalid ICD9 Code at Time of Entry

4. Incomplete information regarding referrals &

Top 8 Reasons for Denials

4. Incomplete information regarding referrals & preauthorizations

5. Duplicate Claims for the Same Services

6. Medical Necessity (correctly linking CPT & ICD9 codes)

7. Complete Documentation for Medical Services Provided

8. Bundled or Non-Covered Services (correctly using modifiers)

Source: MGMA, Sarah Larch, MS, FACMPE & Deborah Walker, MBA, FACMPE

4. Tracking & Preventing Denials Process

• Step 1 – Document reason codes (either manually or automatically via ERA) for each denial

• Step 2 – Run denial reports by reason code & by payer to identify patterns

• Step 3 – Evaluate reason codes starting with the most • Step 3 – Evaluate reason codes starting with the most frequent– Is it us? Or is it them?

• Step 4 – For denials that originate with us make process changes that prevent all clinic originated denials

• Step 5 – Repeat steps 2 through 4 monthly

4. Tracking & Preventing Denials Metrics

Metrics Low High

Average industry-wide denial rate:Source: Physicians Practice

5% 15%

Annualized value in reduced claims denial of Improving first-

pass-clean-claim-rate to 98% or 99%

$16,537 $74,692

Annualized value per doc of labor costs cut by claims

scrubbing & unnecessary work elimination

$5,269 $31,121

• Note: This return calculation is essentially the same as that for Claims Scrubbing. Clean claims obviates the need to work denials so it is important to note that you cannot collect this return twice.

scrubbing & unnecessary work elimination

Total Annualized upside per doc for claim scrubbing and

unnecessary work elimination

$21,806 $105,813

*Normalized for Primary Care Per Provider Per Year

5. Improve Statement Quality &

Frequency

• Improving statement quality and frequency improves financial performance because:

– It reduces call volume

– It improves patient payment compliance

Typical Call Volumes in a Medical

Practice

800

1000

1200

1400

Ca

ll V

olu

me

Not enough capacity (over-utilization)

0

200

400

600

800

Monday Tuesday Wednesday Thrusday Friday

Ca

ll V

olu

me

Call Volume Staff Bandwidth

5. Improve Statement Quality &

Frequency Metrics

Percent of calls related to billing: 26% 41%

Percent of increased call volume on Monday: 30% 42%

Average Calls Per day 100 200

Calls related to Billing 26 82

Average Time to field each billing call 7 26

Total Time fielding calls 182 2132

Call volume reduction do to clean statement w more frequency 10% 50%Call volume reduction do to clean statement w more frequency 10% 50%

Hourly rate of billers/collectors $ 13.00 $ 26.00

Cost of fielding statement calls $ 39.43 $ 923.87

Cost for clean statement w more frequency $ 35.49 $ 461.93

Saving for clean statement w more frequency $ 3.94 $ 461.93

Business days per year 260 260

Annualized Savings $ 1,025 $ 120,103

*Normalized for Primary Care Per Provider Per Year

6. Create & Enforce Write-off Policy

• Analyze your bad debt & determine the culprit

– Is it self-pay?

– Or Payers?

• Important to use different adjustment codes for different types of adjustments. Example:

– Bad Debt Adjustment

– Insurance Adjustment

• Have a policy that defines the rules for write-offs

• Limit who can do write-offs & how much they can write off without approval

• Use Practice Management system to enforce policy

6. Create & Enforce Write-off Policy

Metrics

Metrics Low High

Unnecessary Write-offs annually per physician $30,000 $60,000

*Normalized for Primary Care Per Provider Per Year

Unnecessary Write-offs annually per physicianSource: Physicians Practice

$30,000 $60,000

Percentage of Unnecessary Write-off eliminated 95% 100%

Total Annualized Upside per doc for elimination of

unnecessary write-offs

$28,500 $60,000

7. Manage Insurance Under-Payments

Insurance Companies Underpay in 2 Ways:

1. They underpay the expected reimbursement amount

Charge Amount $150

Allowable Amount $100

Reimbursement @ 80% $80

Actual Reimbursement $79

2. They misstate the allowable amount

Actual Reimbursement $79

Underpayment $$--11

Charge Amount $150

Allowable Amount $100

Reported Allowable $95

Reimbursement @ 80% $76

Underpayment $$--44

7. Manage Insurance Under-Payments

• Contract Management Systems are Vital to Prevent Losses due to Insurance Underpayments

– Automatic Alerting Systems are Ideal

• Losses due to underpayments range from $17,800 to $35,160 annually per physician$17,800 to $35,160 annually per physician

• Occasionally Dramatically Higher

– Jack Reed & Piedmont

*Normalized for Primary Care Per Provider Per Year

Metrics Low High

Total Annualized Upside per doc for stopping leaks

from contractual underpayments

Source: MGMA

$17,880 $35,160

8. Remind Patients of Appointments• Call Stats:

– 2% - 4% National No-show rate

– 75.7% of practices have staff make telephone reminder calls

– 19.3% send postcards/mailers

– 18.8% have an automated attendant system make calls

– 5.9% have a vendor handle reminders & confirmations

• Physicians lose money on no-shows because time is consumed but services cannot be billed (under-utilization)

• Clinics lose on average between $9,700 - $35,000 per doc annually due to no-shows depending on the no-show rate.

*Normalized for Primary Care Per Provider Per Year

Metrics Low High

National no-show rate averageSource: MGMA

2% 4%

Annual labor costs per doc for those who have staff

make reminder calls

$3,279 $8,873

Total Annualized Upside per doc by eliminating no-

shows (opportunity cost)Source: MGMA

$9,700 $35,000Either but

not both

9. Verify Eligibility

• Eligibility Verification is the second largest reason for claims denial

• It is one of the easiest things automate in a clinic

Metrics Low High

Percentage of all claims denied (as reported by the 4% 8%

*Normalized for Primary Care Per Provider Per Year

insurance industry. Physician’s Practice reports higher)Source: American Medical Association’s National Health Insurer Report Card for 2008 &

Medical Banking Institute

Percentage to improve denial rate by:NOTE: The Verden Group estimates reductions in denials due to eligibility in the range of

7 to 35 percent. We are being more conservative here.

10% 25%

Annual Labor Expense per physician for manual eligibility

checking. Low number represents very few checks per year.

$334 $2,496

Total Annualized Upside per doc to automate eligibility

verification

$1,800 $14,400

• Outsourcing Patient Statements is one of the easiest ways a medical clinic can save money.

• It can allow you to increase statement frequency which lowers call volumes

10. Outsource Electronic Statements

• Make sure your system keeps an image of the statement for reference

*Normalized for Primary Care Per Provider Per Year

Metrics Low High

Total Annualized Upside per doc to outsource statements

electronically

$24,000 $49,200

11. Maximize Electronic Remittance

Advice

• “Take advantage of available technology. Electronic remittance automation can reduce your staff cost tremendously and diminish the possibility of fraud.” – Elizabeth Woodcock, MBA, FACMPE

• Every practice should utilize electronic remittance to the greatest extent possible

*Normalized for Primary Care Per Provider Per Year

Metrics Low High

Total Annualized Upside per doc to maximize Electronic

Remittance Advice (ERAs)Source: MGMA

$24,000 $49,200

Summary of Top 11 Best Practices to

Improve Financial Performance

Ranking Best Practice Range of Savings

1 Collect patient balances same day of service $34,185 $99,352

2 Establish performance standards, report &

provide feedback

$27,456 $102,960

3 Claims Scrubbing $21,806 105,813

4 Tracking & Preventing Denials $21,806 105,8134 Tracking & Preventing Denials $21,806 105,813

5 Improve statement quality & frequency $1,025 $120,130

6 Create & Enforce Write-off policy $28,500 $60,000

7 Manage Insurance Under-payments $17,880 $35,160

8 Remind Patients of Appointments $9,700 $35,000

9 Verify Eligibility $1,800 $14,400

10 Outsource Electronic Statements $24,000 $49,200

11 Maximize Electronic Remittance Advice $2,674 $6,500

*Normalized for Primary Care Per Provider Per Year

How does NextGen address these Best Practices?

Ranking Best Practice Addressed By

1 Collect patient balances same day of service AutoFlow, Contract Management

2 Establish performance standards, report & provide

feedback

Worklog Manager

3 Claims Scrubbing Claims Edits, Worklog Manager

4 Tracking & Preventing Denials Reporting, Worklog Manager

5 Improve statement quality & frequency Statements, EDI5 Improve statement quality & frequency Statements, EDI

6 Create & Enforce Write-off policy Security, Worklog

7 Manage Insurance Under-payments Contract Management, Worklog

Manager

8 Remind Patients of Appointments Scheduling, EDI

9 Verify Eligibility Background Business Processor,

EDI

10 Outsource Electronic Statements EDI

11 Maximize Electronic Remittance Advice EDI, Background Business

Processor

Case Study – Piedmont• About Piedmont Physicians Group

– 72 Physicians

– 14 Locations

• Operational Improvements– Reduced billing and collection costs by 35%

• Reduced staff from 42 to 23Operational

• Reduced staff from 42 to 23

– New employee training time reduced by 71%

– Time per patient call reduced 52%

• Financial Improvements– Reduced A/R days from 73 to 28

– Reduced claim denials by 70%

– Recovered $288,000 in insurance underpays

– Improved cash flow by $1,250,000

Operational

Overhead

Revenue

Conclusion

1. Technology can create tremendous efficiency

– invest in automation before hiring, firing, initiating pay freezes, cutting perks, etc.

2. Execute technology correctly – money spent on technology executed poorly is wasted moneytechnology executed poorly is wasted money

3. There are lots of great areas you can focus on

to improve your financial performance. Be Passionate and get started!

Thank you! Questions?

• Contact Info:

– James Muir, VP Sales Southwest

– jmuir@nextgen.com

– Mobile: 801-633-4444– Mobile: 801-633-4444

Integration in NextGen’s PM & EMR

Drives Down Costs & Improves

Financial Performance

• Creates Efficiency

– Drives Down Human Resource Costs– Drives Down Human Resource Costs

– Improves Financial Performance

• Increased Collections

• Faster Collections (reduced A/R days)

• To achieve these results integration must

be IIn the Right Placesn the Right Places

Where in NextGen Does Integration

Create Cost-Saving Efficiency?

Top 3:1. Claims Edits Automate Workflow

– Superior to Traditional Edits because in addition to sophisticated Payer Edits they also Create Workflow Taskingsophisticated Payer Edits they also Create Workflow Tasking

2. AutoFlow & Contract Management– Allows Collection of Patient Responsibility at Checkout

3. Workflow Integration between EPM & EMR– Which allows Tasking & Messaging between clinical &

administrative staff

• Reporting on Your Data

2. AutoFlow & Contract Management

• Allows Collection of Patient Responsibility at Checkout

• Eliminates 90% of labor needed to collect patient amounts

after encounter

• Speeds Payment & Lowers A/R Days

– Case Study: Piedmont

• What makes this possible?• What makes this possible?

1. Real-time Charge Information from EMR

2. Real-time Contract Information from EPM

3. Simple AutoFlow Process to Prompt User for Correct Patient Amount

Practice Management Integration

DemographicsDemographics

Scheduling InformationScheduling Information

CPT & ICD9CPT & ICD9

• What’s Missing?

NextGen EMR 3rd Party Practice

Management System

Messaging & Tasking

“38-50% of all medical administrative errors are

caused during the manual exchange of information

between parties.” Gartner Group

3. Workflow Integration Between EPM & EMR

• What Interfaces can

Achieve with Interfaces:

– Demographics

– Appointments

– Charges

• What We Lose:

– Messaging

– Tasking

NOTE: These are very important for improving efficiency within the practice & manifest themselves in terms Human Resource costs savings.Human Resource costs savings.

Examples:• ABNs – Advanced Beneficiary Notices

• Follow-Up Appointments

• Physician ordering surgery (requires additional administrative tasks)

• Physician ordering a services that require authorization

• Generally, any time tasks cross from the clinical side to administration & vice verse

Reporting

• NextGen Dashboard

– Create Dashboards for Any Metrics Within NextGen

• Ad-Hoc Reporting

– Easy enough that each department can access and – Easy enough that each department can access and create their own reports

• Background Business Processor

– Schedule Reports & eMail them as Excel Spreadsheet Attachments

Integrated Dashboards

• Based on Microsoft

SQL Server

• Active ‘Seed’ Report

Concept

• Easily:– Customize

Ad-Hoc Reporting

• One click to:– Graph

– Excel

– ASCII

– HTML

– Customize

– Memorize

– Run

– Drilldown

Make Better Decisions

Faster with Less Effort

Background Business Processor

• Define Processes

• Schedule

Frequency

• Run Unlimited

Jobs in Each Jobs in Each

Process

• Example: Run scheduled reports, convert them to convert them to excel spreadsheets excel spreadsheets & email them out. All unattended.

Case Study - NeuroSourceCase Study - NeuroSource

• About NeuroSource– Specializing in the Business of Neuroscience

– Over 130 providers

– Over $100 Million Annually

• Operational Improvements– New employee training time reduced by 61%

OperationalOperational

OverheadOverhead

OperationalOperational

OverheadOverhead– New employee training time reduced by 61% • (from 13 days to 5)

– Time required for Month-end reduced by 87.5% • (from 4 days to 4 hours)

– Overtime Reduced by 84.5%

– Staff turnover reduced from 12% to 1%

• Financial Improvements– Charges increased 22% with no increase in staff

– Days in A/R reduced by 54%

– Collections improved by 40.9%

OverheadOverheadOverheadOverhead

RevenueRevenueRevenueRevenue

Case Study - Ogden ClinicCase Study - Ogden Clinic

• About Ogden Clinic– 54 Providers Multi-specialty group in Ogden Utah

– 8 Locations

• Operational Improvements– Reduced average check-in time by 2 minutes

OperationalOperational

OverheadOverhead

OperationalOperational

OverheadOverhead– Reduced average check-in time by 2 minutes

• Saving 2.5 FTEs

– Reduced Average Employee Time• From 2 weeks to 2 days

– Eliminated 12 FTEs and shifted 5 FTEs

• Financial Improvements– Reduce A/R Days from 50 to 38

– Reduced Annual Supply costs by nearly $100,000

– Health Maintenance Revenue Increase 7%

– Overall Increased Annual Revenue $980,000

OverheadOverheadOverheadOverhead

RevenueRevenueRevenueRevenue

Operational ReportsOperational Reports

• Move

Beyond

Financial

ReportingReporting

• Operational

Reporting

• Identify

Bottlenecks