1. © Economedix, LLC 2000 - 2007 - All Rights Reserved Welcome To The Digital Learning Center Presented by … Your Partner In Building High Performance Practices

2. © Economedix, LLC 2000 - 2007 - All Rights Reserved Analyzing the Financial Health of Your Practice Todays Presentation

3. © Economedix, LLC 2000 - 2007 - All Rights Reserved Course Faculty R. Thomas (Tom) Loughrey, MBA, CCS-P Chairman, CEO & Co-Founder of Economedix Certified Coding Specialist BS Degree from Pennsylvania State University Earned an MBA in Health & Hospital Administration from the University of Florida Former Hospital Administrator Former Owner of a Medical Billing Company Consultant to Physician Practices & Medical Societies Member of Various Professional Organizations Dealing with Medical Practice Management Developed and Presented Thousands of Seminars & Workshops Dealing with Practice Management

4. © Economedix, LLC 2000 - 2007 - All Rights Reserved ACCME Disclosure R. Thomas (Tom) Loughrey, MBA, CCS-P In accordance with the policies on disclosure of the Accreditation Council for Continuing Medical Education, presenters for this program, except for any noted below, have identified no personal relationships with a health care product company which, in the context of their topics, could be perceived as a real or apparent conflict of interest. No conflicts were disclosed

5. © Economedix, LLC 2000 - 2007 - All Rights Reserved Course Overview Key Productivity Measures Non-Financial Productivity Measures Benchmarking A Case Study Templates and Spreadsheet Downloads

6. © Economedix, LLC 2000 - 2007 - All Rights Reserved Key Productivity Measures Gross and Net Collection Percentages Accounts Receivable Ratios Resource Based Relative Value Unit Measures – Cost Accounting Methodologies Payer Analysis

7. © Economedix, LLC 2000 - 2007 - All Rights Reserved Gross Collection Percentage Compares payments to charges Very good way to compare the practice from one time to another or different aspects of the practice. Not a very good way to compare one practice to another One practice charges $100 and collects $75. Another charges $150 for the same thing and collects the same $75. Which is the better practice?

8. © Economedix, LLC 2000 - 2007 - All Rights Reserved Gross Collection Percentage Gross Collection Percent equals Total Payments divided by charges Measurement should include a minimum of three months data and preferably six months. A moving average based on the most recent twelve months, six months and three months will be the most informative

9. © Economedix, LLC 2000 - 2007 - All Rights Reserved Gross Collection Percentage Charges: $100,000 Payments: $60,000 Gross collection Percent = Payments ÷ Charges Gross collection Percent = $60,000 ÷ $100,000 Gross Collection Percent =.60 = 60%

10. © Economedix, LLC 2000 - 2007 - All Rights Reserved Net Collection Percent Net Collection Percent equals payments divided by adjusted charges. Net Collection Percent = Payments ÷ (Charges minus Adjustments) Better measure for comparisons Can now compare one practice with another

11. © Economedix, LLC 2000 - 2007 - All Rights Reserved Net Collection Percent Measurements should use same time periods as the gross collection percentage – 3 months, 6 months and 12 months A moving average of all three will provide the most information

12. © Economedix, LLC 2000 - 2007 - All Rights Reserved Net Collection Percent Net Collection Percent = Payments ÷ (Charges – Adjustments) Example: Payments = $60,000 Adjustments = $35,000 and Charges = $100,000 $60,000 ÷ ($100,000 - $35,000) = 92.3%

13. © Economedix, LLC 2000 - 2007 - All Rights Reserved Accounts Receivable Ratio Measures the number of months of charges in the accounts receivable A/R Ratio = Total A/R ÷ Average monthly charges Total A/R = $90,000 Average monthly charges = $30,000 A/R Ratio = $90,000 ÷ 30,000 = 3 There are 3 months of average charges held in the A/R

14. © Economedix, LLC 2000 - 2007 - All Rights Reserved Accounts Receivable Ratio Average monthly charges should be based on at least three months data A moving average of the previous twelve months will be the best measure The A/R Ratio can be expressed in terms of days by determining average daily charges instead of monthly charges Most published benchmarks are based on months

15. © Economedix, LLC 2000 - 2007 - All Rights Reserved A/R Aging The total A/R can be broken into groups based on the age of the individual accounts Most commonly, the aging is based on 30 day increments Aging should start from the date of service not from the posting date The amount over 90 days is the delinquent A/R

16. © Economedix, LLC 2000 - 2007 - All Rights Reserved A/R Aging Current31-6061-9091-120120+Total $31,000$24,000$12,000$8,000$25,000$100,000 31%24%12%8%25%100%

17. © Economedix, LLC 2000 - 2007 - All Rights Reserved RBRVS Measures Resource Based Relative Value Scale Relative Value Units Based on: Physician cost Practice overhead Malpractice cost Assigns unit values to each component

18. © Economedix, LLC 2000 - 2007 - All Rights Reserved RBRVS Measures CPTDescription Physician Cost OverheadMalpracticeTotal 99213 Office visit.92.71.031.66 42820T&A4.173.11.317.59 33536CABG -448.3218.115.4471.87

19. © Economedix, LLC 2000 - 2007 - All Rights Reserved RBRVS Measures RBRVS can be used as basis for cost accounting First requirement is to measure total RVUs for the practice Second step is to divide the desired parameter by the Total RVUs

20. © Economedix, LLC 2000 - 2007 - All Rights Reserved RBRVS Measures Example General Surgeon produces 15,000 RVUs per year Total non-physician cost of the practice is $225,000 Cost per RVU is $225,000 ÷ 15,000 = $15 Office visit is worth 1.66 units = 1.66 x $15 =$24.90

21. © Economedix, LLC 2000 - 2007 - All Rights Reserved RBRVS Measures Example Cardiovascular surgeon produces 15,000 RVUs per year Total non-physician cost of the practice is $150,000 Cost per RVU is $150,000 ÷ 15,000 = $10 33536 CABG is worth 71.87 units then the cost to provide this is 71.87 X $10 = $718.70

22. © Economedix, LLC 2000 - 2007 - All Rights Reserved What Is Your RVU Cost? Total RVUs = 10,000 Total non-physician costs = $180,000 What is your cost per RVU ? 1. $90 2. $18 3. $180 4. $9

23. © Economedix, LLC 2000 - 2007 - All Rights Reserved Using RVUs Instead of total cost any parameter can be measured: Occupancy cost per RVU Physician cost per RVU Non-physician labor cost per RVU Facility A costs vs. B costs Time period 1 vs. Time period 2 Or any other cost measurement

24. © Economedix, LLC 2000 - 2007 - All Rights Reserved Using RVUs Instead of total cost any parameter can be measured : Occupancy cost per RVU Physician cost per RVU Non-physician labor cost per RVU Facility A costs vs. Bcosts Time period 1 vs. Time period 2 Occupancy Cost $30,000 ÷ 15,000 = $2.00 per RVU Labor Cost $105,000 ÷ 15,000 = $7 per RVU Facility A vs. Facility B $18 per RVU vs. $21 per RVU

25. © Economedix, LLC 2000 - 2007 - All Rights Reserved Payer Analysis Compares various payers based on performance measures Payers can then be ranked on various parameters Problem payers can be easily identified Makes it easier to focus collection efforts

26. © Economedix, LLC 2000 - 2007 - All Rights Reserved Payer Analysis PlanChargesPaymentsAdjustments Gross Coll % Net Coll % RVUs Medicare $125,000$50,000$75,00040%100%1300 Blues $90,000$55,000$30,00061%91.6%1000 Foundation $60,000$33,000$10,00055%66%700 IPA $90,000$30,000$55,00033.3%85.7%950 PPOs $200,000$120,000$85,00060%104.3%2000

27. © Economedix, LLC 2000 - 2007 - All Rights Reserved Labor Analysis Staff Ratios Full Time Equivalent Employees (FTEs) per doctor FTEs per pay period Example: Total hours worked by all employees last month: 1,100 FTEs = (1,100 x 12) ÷ 2,080 = 6.35 FTEs

28. © Economedix, LLC 2000 - 2007 - All Rights Reserved Labor Analysis If there are two doctors in the practice: 6.35 FTEs for 2 doctors = 3.18 for each doctor If 100 of the hours paid were for overtime:.57 FTEs were expended doing just overtime work. Paid at time and one-half: it is the equivalent of.86 FTEs

29. © Economedix, LLC 2000 - 2007 - All Rights Reserved Benchmarks Medical Group Management Association – MGMA Annual Cost Survey Physcape – comparative benchmarking www.mgma.org www.physcape.com

30. © Economedix, LLC 2000 - 2007 - All Rights Reserved Doing Your Own Benchmarks Based on ideal income Based on desired payer profiles Based on historic actuals

31. © Economedix, LLC 2000 - 2007 - All Rights Reserved Key Benchmarks Gross Collection Percent Based on charges at 2 times Medicare allowed – 60% Net Collection Percent 95% + and not less than 90% A/R Ratio Less than 3 Delinquency Rate Less than 20% not to exceed 25%

32. © Economedix, LLC 2000 - 2007 - All Rights Reserved Financial Analysis Example ABC Sample Surgical Group

33. © Economedix, LLC 2000 - 2007 - All Rights Reserved Financial Analysis Example ABC Sample Surgical Group

34. © Economedix, LLC 2000 - 2007 - All Rights Reserved Financial Analysis Example ABC Sample Surgical Group

35. © Economedix, LLC 2000 - 2007 - All Rights Reserved Financial Analysis Example ABC Sample Surgical Group

36. © Economedix, LLC 2000 - 2007 - All Rights Reserved Financial Analysis Example ABC Sample Surgical Group

37. © Economedix, LLC 2000 - 2007 - All Rights Reserved What About Overhead? Can be misleading when looked at as a percent Need to focus on bottom-line profitability in dollars – not percentages High overhead practices can be very profitable Low overhead with small volumes may be unprofitable

38. © Economedix, LLC 2000 - 2007 - All Rights Reserved Summary Sophisticated practices and practice managers manage their decisions based on data Most data comes back to charges, payments, adjustments, A/R, patient contacts and RVUs A simple analysis paves the way to a sophisticated analysis

39. © Economedix, LLC 2000 - 2007 - All Rights Reserved Thank you for participating in this seminar presentation from Economedix! Please direct questions to … tloughrey@economedix.com To earn CME credits for this course please complete the Evaluation / CME Form and FAX it back to Economedix within 7 days of the teleconference. Please direct questions to … tloughrey@economedix.com To earn CME credits for this course please complete the Evaluation / CME Form and FAX it back to Economedix within 7 days of the teleconference.