1. MMA Preparedness Survey Roberta Buell, MBA Patricia Falconer, MBA ANCO Consultants

2. Today’s Agenda  Project Objectives  MMA Revenue Loss Projections  “Underwater” Drugs Compared to First Quarter ASP + 6%  E&M Audits and Profiling  Superbill Issues  Charge Issues  Accounts Receivable  Action Items

3. Objectives  Estimate MMA revenue reduction  Identify potential drugs that may be “underwater”.  Determine quality of E&M coding and documentation.  Assess charge profiles and accounts receivable management.  Create action items to assist practices cope with 2005 changes.

4. Profile of Practices  All Located in Northern California  Practice Size Ranges from 1 to 11 Physicians  Average Practice Revenue of $11.2 Million

5. MMA Model  Compared reimbursement data for 21 ASP drugs published by CMS for Q1 2004 with current 2004 SDP  Reduction of drug administration reimbursement from the 32% transitional rate to 3% in 2005  Reimbursement increase of 1.5 % for E&M services.  Scenario 1: 100% of payers convert to the MMA reimbursement methodology  Scenario 2: Only Medicare segment converts to MMA reimbursement methodology.

6. MMA Results Scenario 1 All Payers  Average Practice Revenue Reduction for Drug Reimbursement = $519,000  Average Practice Revenue Loss on Drug Administration =$237,000  Average Total Revenue Loss per Physician = $206,000

7. MMA Results Scenario 2 Medicare Only  Average Practice Revenue Reduction for Practice = $337,000  Average Total Revenue Loss per Physician = $101,000

8. MMA Results  Average Percentage of Practice Revenue Lost Scenario 1 = 8%  Range of % of Practice Revenue Lost Scenario 1 = 4-12%  Average Percentage of Practice Revenue Lost Scenario 2 = 4%  Range of % of Practice Revenue Lost Scenario 2 = 2-6%  Cash profit impacts were far more profound, but profit calculations were quite variable.

9. MMA Results  What makes the difference? Payer Mix Drug and Administration revenue relative to other revenue from E&M, research, legal, and/or medical directorships. Specific drug mix in terms of brand vs. generics such as paclitaxel and pamidronate. Volume of growth factors. Volume of Lupron and Zoladex Collected revenues

10. Potential “Underwater” Drugs  Practice drug acquisition costs do NOT include accrued rebates!  Drug reimbursement based on Q1 ASP.  Drugs where acquisition cost exceeded ASP Taxotere Gemzar Procrit Lupron Zoladex Navelbine Pamidronate Camptosar Herceptin

11. Drug Purchasing  Prices were truly variable. Best prices were not always contingent on practice size.  Everyone thinks they have the best deal, but the best deals take effort by your staff.  Best prices achieved by purchasing from multiple sources.

12. Evaluation & Management  Documentation Audit Number of charts audited = 169 Average Office Visit Error Rate (99212- 99215) = 36% Average Office Consult Error Rate (99241-99245) = 52% Average Overall Error Rate = 49%

13. Evaluation & Management  Common Problems: Consults  Definition—what is a consult?  ROS in the history  PFSH in the history  8+ organ systems in the physical  High level decision-making in Level 5s

14. Evaluation & Management  Common Problems Office Visits (99212-99215)  Modifier -25 ‘separately identifiable’ service  Legibility  Chief complaint  Missing notes or dictation  Mis-matched dates of service

15. Evaluation & Management  Avoiding Common Problems Read E&M guidelines once per year at minimum Make sure each of your consults notes document the referring MD, their request for your consult, and that you are conveying your advice and treatment plan. Dictate or type your notes. Dictate your note right after the visit and charge for the service based on your dictation. Use a consistent template matching AMA/CMS guidelines. Note ‘non-contributory’ (history) or within normal limits (physical) in areas that you have checked. Make sure all tests, path reports, and differential treatments considered are documented—particularly in high-level services. Do not use complicated charting systems like pasting in notes for each date. This causes backlogs and filing delays.

16. Evaluation & Management  Following this slide are: Northern California practices versus 2002 Medicare medical oncology profiles for:  Office visits  Consults

17. Office Visit Profile

18. Consult Profile

19. Evaluation & Management  Northern California Profile: Aggressive coding—this is fine as long as your patients are complex, have a cancer (not anemia) diagnosis, and your charts are organized and legible. Clustering—consistent billing of Established Patient Office Visits at Level 4 and Level 5. This acceptable as long as the documentation matches the level of service. This coding pattern may attract attention.

20. Superbills  Common Problems If your profile shows clustering, you must have all levels of service on Superbills. Include 99271-99274 for confirmatory consults. Use them for second opinions. Include 36550 for de-clotting of ports. Medicare pays for this! Include 36540 for blood draws through a port. Privates pay for this. Investigate whether your private payers will pay for a facility fee for 96549.

21. New CPT and HCPCS Codes  Make sure any new CPT and HCPCS codes for 2005 are set up in your billing system and reflected on your Superbill before January 1, 2005.

22. Accounts Receivable  Average Total Account Receivable =3 Million  Average % Accounts Receivable over 90 days old = 25%  Average months outstanding =2.2

23. Accounts Receivable  Common Issues No Pre-Certification process No financial plan established with patients prior to treatment No procedure for routine collection of patient co-payments at the time of service Poor management of A/R Employee turn-over Poor organization, training, and delegation of responsibilities to business office staff No physician notification of diagnosis and/or therapy change prior to treatment

24. Action Items  Establish Pre-Certification Process All patients treatment reviewed for treatment compared with diagnosis. Is diagnosis FDA approved or Compendia supported? Use the MOASC Drug Grid as a tool. All patients insurance must be verified prior to treatment. Benefits, co-payments, authorization requirements should be determined. Patient should be advised of out of pocket costs. Payment arrangements need to be made. Get a credit card on file. Advanced Beneficiary Notice signed in cases where denial is probable and/or you think that drug will be paid for my someone other than Medicare.

25. Action Items  Evaluate Drug Purchasing and Terms Average time to collect was 68 days. Weigh drug cost reduction benefit for shorter payment terms with financial consequence of drug inventory financing. Decrease your A/R days

26. Action Items  Effective Accounts Receivable Management Make sure your outstanding Medicare A/R is collectable. Medicare pays within 14 days for clean claims. If there is Medicare A/R over 45 days old, you have a problem or these accounts may not be transferred to the supplemental insurance or patient. Have physicians evaluate the denials that occur on a frequent basis. This way, they can see why money is not coming in the door. Is it a billing or clinical problem? Make A/R a centerpiece of your management meetings. Ensure you know what the status is and that cash never waivers. Some of you will not survive without better cash flow management.

27. Action Items  Data Management Review Management Reports Monthly  Accounts Receivable Aging  Productivity Reports  Financial Statements Invest In Practice Management Software Use data to evaluate important practice bench marks, i.e. profit per physician, injections and infusion hours billed per MD, infusion hours billed per Nurse per month, hours of infusion per chair, and $ collected per month per employee

28. Action Items  Proper Documentation and Coding Quarterly Evaluation & Management Auditing Review Productivity Reports for Coding Trends Group Practices are Liable for All Members

29. Action Items  Ensure that Nurses Manage: Inventory Charge capture Proper documentation of “Incident to” services per Medicare requirements. Cost effective strategies to deliver care Purchasing

30. What We Learned  Most practices will survive but physician income will decrease.  Managing cash will be critical to ensure successful operations next year.  Practices need to assess and use data more effectively.  Nurses need to “own” the documentation and reimbursement process for drug administration.  Physicians will need to play a more active and interventional role in the financial management of their practices.