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ED Operations Follow the Money.

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Presentation on theme: "ED Operations Follow the Money."— Presentation transcript:

1 ED Operations Follow the Money

2 The Big Question Can we provide care for our patients (treatment and service) and receive reimbursement that will cover our costs ?

3 Healthcare is a Business
Like it or not, healthcare is a business An efficient ED can be a source of revenue for a hospital, or it can be a cost center In many hospitals, the ED is the main source of admitted patients

4 Healthcare is a Business, cont.
Compare an ED to an assembly line: Units produced must be of high quality Must be produced in a timely fashion Fluctuations in demand must be met Cost of production cannot exceed payment received One key to the success for any ED is being efficient enough to provide the level of service needed in a cost effective manner.

5 Considerations Does standard work exist for: Is communication strong ?
Patient process flow Documentation Ancillary tests Data flow Supply levels Quality Assurance Exception processing Is communication strong ? What is the mix of payer sources ?

6 Charges & codes entered
Patient arrives Patient roomed Provider treats Charges & codes entered Bill created Bill(s) sent to payer Payer Processes Payer Pays ED Revenue Cycle Money in Bank WHAT could go wrong ? Professional Bill Facility Bill

7 What Could Go Wrong ? Using and billing for items or services that are not reimbursable Assuming they are Billing on incorrect form or using incorrect codes Using supply items that cost more than the reimbursement amount Poor documentation prevents appropriate billing codes being assigned

8 What Could Go Wrong ? Overstaffing drives costs up with no reimbursement benefit Paperwork gets lost Lack of standard work creates waste in motion, supplies, inventory, human capacity Business office does not maximize collections – leaves $$$$ on the table

9 Profit margins in healthcare are razor thin
Simplified Example Facility Charges = Total of $850 $ 250 for E&M level 2 $ 200 for lab tests $ 400 for EKG Facility Costs = Total of $85 $70 for staff $5 for labs $10 for EKG Patient Pay Source = Medicare Reimbursement = $ 87.25 Operating margin for some hospitals (ours included) is below 1% Profit margins in healthcare are razor thin

10 Given the previous example, imagine how many Medicare patients it would take to offset losses/expenses incurred due to: Billing opportunity lost due to poor documentation or misplaced chart Patients without insurance Overuse/waste of supplies or drugs Equipment downtime Staff overtime due to sick calls Rework costs due to errors in patient information or billing issues

11 Not to mention…………….. Transport costs (getting sample to Lab)
Facility overhead (rent, utilities, maintenance) Technical costs (lab staff, lab supplies) IT costs (phones, PC’s, support) Administrative costs (coders, QA, billing office, payroll, etc)

12 What Can You Charge For? Facility Physician
Evaluation & Management (E&M) services and procedures Non-routine supplies Drugs Physician E&M services Procedures and treatment Other services (possibly)

13 Facility E&M Charge Facility E&M charge typically includes:
Overhead costs building maintenance, housekeeping, utilities, depreciation costs, equipment, administrative costs, personnel costs All of these costs should be analyzed on a per patient basis prior to establishing each facility E&M charge

14 Charges Beyond the E&M In a busy ED, there are many opportunities for revenue beyond the E&M charge Laceration repair Casting IV infusion therapy Catherization Transfusion CPR Intubation Immunizations Injections Fracture treatment

15 Professional Charges Professional charges (Pro-fees) are intended to charge for: Physician training and knowledge Physician procedural skill set Physician medical decision making The method used to set charges for professional services is often determined by a Board of Directors or other governing body

16 Reimbursement With both facility and pro-fee charging, it is critical to understand how reimbursement is calculated Charges do not equal CASH Proper documentation, along with skilled coders (both facility and pro-fee), and an aggressive billing department will result in appropriate reimbursement

17 2nd Example of Medicare Reimbursement
E&M Level three = cpt 99283 “Emergency department visit for the evaluation and management of a patient, which requires these three key components: an expanded problem focused history, an expanded problem focused examination; and medical decision making of moderate complexity….. Usually, the presenting problem is of moderate severity.” Reimbursement = $

18 Know Your Payer Mix Payer Mix is the % of each type of payment source across your patient population You can’t always pick your payer mix but you can maximize it: Measure and track the quality of patient registration information Develop a strong discharge process Collaborate with other areas of hospital to share info Build rapport with the billing office Monitor up front collections of patient co-pays

19 Know Your ED What are the demographics of your ED ?
How many beds? What is the bed turn-over rate? Do you have a flow problem? What % of patients are > 65 or < 15? What different types of treatment do these disparate age groups require ? How does that contribute to your expenses ?

20 What is the most frequently provided treatment in your ED ?
How much does it cost to provide? Are you minimizing the cost ? How are resources (RN’s, MD’s, techs) used in your ED ? Are resources used to their level of training ? Nurses transporting non-monitored patients

21 Know How Coding is Assigned
Regardless of the use of an Electronic Medical Record (EMR) or paper records, it is important to know how procedure codes are assigned All coding is based on documented services Follow the old axiom – “if it isn’t written down (or in the computer) – it didn’t happen”

22 Facility vs Pro-fee Facility coding and pro-fee coding are very different Each should have a dedicated, specially trained staff A feedback loop to educate clinicians on documentation improvement is critical In a hospital setting, RN documentation supports the facility charges, MD documentation supports the pro-fee charges

23 Charges and Cash If you can’t charge for it, you sure won’t get paid for it ! At the end of the day – your cash has to exceed your expenses Remember: Charges are not cash Net income is not cash

24 Expanding Your Comfort Zone
More and more physicians are “business savvy” Not unusual to see MD followed by MBA This is almost a necessity in today’s competitive healthcare market Health providers should understand basic business concepts

25 Basics Inflows must exceed outflows The bottom line:
No different than your household budget The bottom line: + Charges - Less Contractual Adjustments - Less Bad Debt (non-payers) - Less other expenses (direct and indirect) Equals Net Income

26 Net Income is only a term that describes the mathematical difference between charges, contractuals, and expenses Net Income does not equal Cash A percentage of net income (based on historical cash collections from charges) is typically used to project actual cash

27 Contractual Adjustments
Most hospitals have a variety of contractual arrangements with insurance carriers (eg: Blue Cross, Aetna) Services are provided at the hospital standard price to all payers Government payers (Medicare, Medicaid) establish their own payment rates Contracts for payment from insurance carriers are established at either a % of billed charges or a flat rate

28 Contractual Arrangements, cont.
The gross charge amount is reduced by the contractual (netted) prior to the subtraction of expenses. Example: Charges = $850 – payer is Blue Cross Blue Cross has a flat rate agreement to pay $200 per ED visit Charges are netted to $200, then expenses are subtracted to arrive at Net Income

29 Bad Debt Bad Debt is an (indirect) expense created when amounts owed to an organization are not paid Bad Debt expense is usually due to patient non-payment, but can be due to insurance non-payment Minimizing bad debt through strong billing and collection practices is essential

30 Other Expenses “Other” expenses can vary from hospital to hospital, but usually include: External resources (eg: consultants, contracted billing companies) Allocated overhead amounts (eg: maintenance, equipment, utilities, information technology) Travel, education, subscription fees

31 Net Income Continuing the example – from your “Net” charge of $200:
Subtract your direct expense: Expense for RN’s = $40 Expense for MD’s = $75 Supply Expense = $ 10 Your net income becomes $ 75 Subtract your indirect expense: Overhead = $50 Bad Debt = $15 Your net income is now $ 10

32 Finance Speak Don’t confuse “net income” with Cash
Net Income is the difference of charges less ALL expense Some organizations use the term “revenue” to indicate charges, and “net revenue” to indicate charges less contractuals “Overhead” is typically an allocated expense that combines all indirect costs Some organizations use actual bad debt and an estimate of overhead as reductions to charges

33 Tracking & Reporting All organizations (non-profits included) carefully track all information related to net income (charges & expenses) Departmental annual budgets are based upon the anticipated volume of patients and related charges Departments where expenses exceed expectations can expect to answer some tough questions

34 Asking for New Equipment ?
Today’s medical professionals must have a good understanding of profit and loss issues Be prepared to discuss revenue (charges), cash, bad debts, and other expenses if asking for an investment by your organization Demonstrate your knowledge of business concepts by submitting a business plan to justify an expenditure request

35 Business Plans Don’t have to be complex – keep it simple Describe:
What you want Why you want it What will it cost How quickly can the cost be recovered (through increased patient volumes and/or reimbursement)

36 Remember – charges do not equal cash
Few organizations are in a position to acquire new technology or equipment based on improved patient care alone Budgets are tight, and expenditures must demonstrate a Return on Investment (ROI)

37 Basic Business Plan Format
Vision statement Why this is good for the organization, and for patients The people involved – stakeholders, management, customers Who will directly benefit and who is committed Business profile The volumes anticipated, day to day operational facts and figures Economic assessment (money making opportunity) Bottom line = what cash will this bring ?

38 Example New Ultrasound Machine Cost $100,000
If used 20 times per day for one year, each use has an expense of $13.69 (equipment only) Facility Charge for US is $125.00 Average reimbursement for US is $20.00

39 Anticipate Questions Like
What payer mix was used to calculate the average reimbursement How long will it take to pay for the initial cost of this equipment What is the useful life of the equipment What staffing is needed to operate this Is special training involved What are those costs Are there 20 patients per day that need an US

40 And….. What are the warranty costs How long is the warranty
What about maintenance expense after the warranty What hours would this service be offered Are those hours when demand exists Is there a related professional fee charge What is the reimbursement And those are just a few !

41 Work with your Finance Department or Business Office Manager to confirm assumptions and calculations
Develop a “best case” and “worst case” scenario And a back up plan

42 Summary

43 Summary Medicine is a business Be business savvy
You can get what you need But is does take preparation Emotional arguments only get you so far

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