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Chicot Memorial Hospital Enhancing Operating Margin thru Cost Report Review & Revenue Cycle Improvements Russ Sword, Former Interim CEO Greg Britt, Consultant.

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Presentation on theme: "Chicot Memorial Hospital Enhancing Operating Margin thru Cost Report Review & Revenue Cycle Improvements Russ Sword, Former Interim CEO Greg Britt, Consultant."— Presentation transcript:

1 Chicot Memorial Hospital Enhancing Operating Margin thru Cost Report Review & Revenue Cycle Improvements Russ Sword, Former Interim CEO Greg Britt, Consultant

2 Chicot County Arkansas Located in rural southeast Arkansas near the MS River and on the banks of Chicot Lake – A very rural area and largely a farming community The average household income of Chicot County is $24, % of the county residents are 65 years or older Hospital census is 50+% Medicare and 20% Medicaid

3 Chicot Memorial Hospital (CMH): Background A county owned and operated CAH New patient wing was opened in 2006 The old hospital was completely renovated –Designated as a CAH in 2006 to coincide with the opening of the new patient wing –CMH had ~$2M in reserve funds when the wing opened –All reserves were spent on renovations of the old facility and the recruitment and income guarantees of a general surgeon and an obstetrician / gynecologist

4 Other Healthcare Providers in Chicot County Lake Village Nursing Home Southeast Rehabilitation Hospital : –Leases space and purchases services from CMH –Provides physical, occupational, and speech therapy services –3 physicians on CMH Medical staff have part ownership interest Mainline Health System: –A system of 5 federally funded primary care clinics –Mainline physicians have privileges at CMH Lake Village Clinic: – A private RHC is located on CMH campus that has 3 family practice physicians, 1 general surgeon, and 1 PA

5 Other Healthcare Providers in Chicot County 1 general surgeon and 1 obstetrician / gynecologist in private practice (Employed by CMH) McGehee-Desha County Hospital: –Great non-competitive relationship between both CAHs Delta Regional Medical Center (DRMC): –DRMC specialty physicians have clinics at CMH AR Depart of Health – Public Health Center AR Depart of Health Home Health Agency: –Direct completion for home health services Hospice services are provided through Hospice Agency from Pine Bluff, AR

6 CMH Financial Status FY 20099/30/2009FY 2010FY 20116/30/2011 Net Gain / Loss ($0.4 M)($0.5 M) Accounts Receivable $4.5 M$4.8 M Days in AR6574 Accounts Payable $1.7 M$1.8 M Days Cash On Hand 34

7 INTERIM CEO RUSS D. SWORD, FACHE EFFECTIVE - OCTOBER 19, 2009

8 Key Observations Great Board, Medical Staff, and Employees –Uninformed relating to Critical Access Hospital operations and lacked confidence in the future financial viability of the hospital Very supportive community – they approved: –1.0% sales tax to build the patient wing – 1% to support operations Hospital was behind on payroll taxes –~ $185,000 to IRS + $62,000 in penalties –~$206,000 to Arkansas+ $40,000 in penalties

9 Key Observations Hospital was not participating in AR provider assessment –Use1.0% of net revenues for federal Medicaid match –Increase reimbursement by ~ $1.4 M per year. Venders required advanced payments Hospital was leasing offsite property Hospital did not provide rehab services – Contractor withdrew from the hospital due to non-payment Home health services were at minimal level –could not meet the patient needs for therapy services Hospital was receiving less than cost for rent and services from the Southeast Rehab Hospital agreement

10 Initial Corrective Actions Frequent meetings to improve communications and build confidence Changed to 501c(3) not-for-profit hospital –Increased reimbursement by ~ $1.4 M annually Conducted education programs with the Board, Medical and hospital staffs on cost based reimbursement –Education on LOS, swing bed utilization, and use of observation status Reduced staffing levels –Saved ~ $350,000 per year Updated Southeast Rehab Lease and service agreement –Increased revenue by more than $125,000 per year

11 Initial Corrective Actions Paid federal and state taxes by mid-November 2009 Reopened cost reports for 3 preceding years to correct errors –Received ~$517,000 in additional reimbursement and revised the 2010 cost report for an additional $200,000. ($500,000 on the cost of employee health insurance) Established contract with Southeast Rehab for inpatient, outpatient, and home health services Cancelled lease of offsite property for home health services Established contract for mobile MRI services Requested CDM analysis and cost report review by Greg Britt through the RHPI Project

12 Chicot Memorial Hospital RHPI Project Purpose Help the hospital achieve a sustainable operating margin Identify financial performance improvement opportunities Objectives Identify opportunities to improve cost reporting Identify opportunities to improve the revenue cycle Identify specific cost reimbursement matters applicable to the hospital for management education

13 Strategies to Complete Objectives Revenue Cycle Review –Review focused on the Charge Description Master (CDM) coding and analysis of non-cost based third party reimbursement rates. –Review processed claims remittances Cost Report Review –Reviewed cost report and supporting work papers. –Review cost center assignment of salary and other costs. –Review Charge Master mapping of revenue.

14 Findings Opportunities related to Hospital organizational structure included: –Converting private physician offices to hospital provider based clinics. –Having the non-cost reimbursed home health agency report to the CEO rather than to Nursing Administration. Opportunities related to cost reporting structure included: –Adding cost centers to improve cost matching. –Changes in the basis for statistical allocations. Cost report errors identified included: –Allocation of cost to cost centers that are not served by the allocating cost center. –Square footage allocations.

15 Critical Access Hospital CDM & Medicare Cost Reporting Compliant Medicare cost reporting depends on accurately mapping revenue and costs to the correct cost center in a way that it can be properly matched to Medicare paid claims. Medicare paid claims are summarized by your fiscal intermediary and are provided for cost settlement on your Provider Statistical Summary report (PS&R).

16 Critical Access Hospital Medicare Cost Reporting Charges must be mapped internally to general ledger accounts that are matched to the cost center where the expenses corresponding to the services provided are accumulated. This is essential to accurate calculation of cost to charge ratios. A Revenue Code is assigned that determines how your fiscal intermediary accumulates paid claim data to match to the appropriate cost center for settlement.

17 Revenue Crosswalk

18 PS&R Crosswalk

19 Critical Access Hospital Medicare Cost Reporting In oversimplified terms Medicare cost reporting and settlement is a calculation of the product of paid claims multiplied by a cost to charge ratio. Each series of Medicare cost report schedules serves a purpose to this end.

20 Critical Access Hospital CDM & Medicare Cost Reporting The A schedules report allowable costs by cost center. The B schedules allocate all costs from non- revenue producing cost centers to revenue producing cost centers. The C schedules report revenue by cost center and calculate cost to charge ratios. The D schedules calculate costs. The E schedules report interim payments and calculate a settlement.

21 Critical Access Hospital CDM & Medicare Cost Reporting The A schedules report allowable costs by cost center. The B schedules allocate all costs from non- revenue producing cost centers to revenue producing cost centers. The C schedules report revenue by cost center and calculate cost to charge ratios. The D schedules calculate costs. The E schedules report interim payments and calculate a settlement.

22 Cost Report- WKST A Summary of Costs

23 Cost Report- WKST B Allocation of Indirect Costs

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26 Cost Report- WKST C Cost to Charge Calculation

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28 Cost Report- WKST D Calculation of Medicare Costs

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33 Cost Report- WKST E Medicare Settlement Calculation

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37 CDM Hard Coding ITEM MASTER LIST PT EVALUATION 0-30 MIN (0424) INV.GL= EXP.GL= CPT CODE: 97001GP

38 Outcomes & Impact Improved Operating margin Improved financial performance.

39 Project Outputs New cost accounting practices. Cost reporting changes. Revenue cycle revisions. Calculated sustainable non-Medicare third party payer contract pricing. Cost reimbursement educational references.

40 CMH Financial Status FY 20099/30/2009 3/31/2010 FY2010 FY 20116/30/2011 Net Gain / Loss ($0.4 M)($0.5 M)$0.5 M$1.9 M Accounts Receivable $4.5 M$4.8 M$4.0 M$4.2 M Days in AR Accounts Payable $1.7 M$1.8 M$1.5 M$0.5 M Days Cash On Hand 34543

41 CHIEF EXECUTIVE OFFICER DAVID CHUMLEY, FACHE EFFECTIVE – JULY 12, 2010 (Russ Sword continues as Consultant, working primarily on Financial Issues)

42 CMH Financial Status FY 20099/30/2009FY 2010FY 20116/30/2011 Net Gain / Loss ($0.4 M)($0.5 M)$0.5 M$1.9 M $0.3M Accounts Receivable $4.5 M$4.8 M$4.0 M$4.2 M Days in AR Accounts Payable $1.7 M$1.8 M$1.5 M$0.5 M Days Cash On Hand

43 Benefits of Participation & Next Steps Continue to educate Board, Medical Staff, Employees and the Community relating to hospital operations and cost report Development of new services (Wound Care Clinic, Level III Trauma Center, 1.5T MRI, Digital Mammography, etc.) Physician Recruitment (Internal Medicine, Family Practice and Pediatrics) Foundation to support the hospital Balanced Scorecard and PMI Program

44 LESSONS LEARNED 1. CEO MUST UNDERSTAND COST REPORT AND TAKE CHARGE 2.BOARD/MEDICAL STAFF/ STAFF AND COMMUNITY EDUCATION 3.ASSOCIATION INVOLVEMENT 4.WORK WITH AND QUESTION AUDITOR AND COST REPORT PREPARER 5.GET A SECOND/THIRD LOOK AT COST REPORT

45 Contact Information Russ Sword (870) J. Greg Britt (502)


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