1. 1

2. 2 2

3. 3 Case Study reflects financial findings/recommendations only – additional clinical findings/ recommendations are not presented 3

4. 4 14 month old ambulatory surgery center evaluated because not meeting projected revenue Semi-rural area Joint-venture – 7 physicians/ local hospital Average case volume - 350 month ABC Surgery Center

5. 5 Specialties - ENT - GI - Ophthalmology - Orthopedics - Podiatry - Pain Management Payor Mix - Medicare - Medicaid - BCBS - W/C - PPOs - HMOs - Indemnity ABC Surgery Center

6. 6 Number of reasons for negative cash flow: - Fee schedule far lower than normally seen in an ASC - Managed care contracts low with unfavorable terms - Improper billing/coding practices - Managers with no ASC experience - Inefficient use of staff - Appropriate structure and policies and procedures not in place ABC Surgery Center

7. 7 Findings Evaluation of the fee schedule revealed that most fees were exceptionally low low compared to Medicare/BCBS ASC fees for this geographic locality Many fees were actually less than Medicare allowable Fee schedule had been based on physician DRGs No consistency in fees – similar procedures had wide variances ABC Surgery Center

8. 8 Recommendations Develop fee schedule based on percentage of Medicare group rates Carve-outs for higher ticket procedures Decide on additional procedure discount Sample fee schedule given to Board - recommended 500% of current Medicare rates ABC Surgery Center

9. 9 Findings Low rates for an area with little managed care penetration Some reimbursement methodologies varied from market standard Unfavorable terms in contracts Most carriers require accreditation Some contracts were invalid as not voted on by Board ABC Surgery Center

10. 10 Recommendations Join local PHO and have them assist in recontracting for ASC Cancel five major contracts whose reimbursement is based on Medicare rate Great managed care market – suggest renegotiate for reimbursement based on percentage of billed charges Move toward becoming accredited – mark applications as Accreditation Pending ABC Surgery Center

11. 11 Findings Coder with no ASC or surgical coding experience Coding errors included: - not coding for bilateral procedures - not coding for multiple procedures - lack of sufficient modifiers - improper or no billing of toe implants - wrong anatomical part - coding from title – not from body of op note - no copy of coding history in patient chart - no cross check to ensure coded all cases ABC Surgery Center

12. 12 Recommendations Hire or outsource to certified coder, or Immediate coding certification training for current coder Code from body of operative note – use additional information when necessary ABC Surgery Center

13. 13 Recommendations (continued) Rebilling of all claims with coding errors that result in differences in reimbursement Utilize coding form Utilize schedule to make sure all patients have been coded ABC Surgery Center

14. 14 Findings Biller had no ASC/surgical billing experience No electronic filing – all paper claims All business office uses same printer Billing for non-ASC services in same module – cannot separate in reports No cross-check between coded cases and batch report ABC Surgery Center

15. 15 Recommendations Hire experienced biller, or Immediate training for current biller including the following: Electronic submission of all claims where possible ABC Surgery Center CPT codesICD-9 Dx Codes Sx ProceduresModifiers Medicare Guidelines

16. 16 Recommendations (continued) Additional printer near biller to run claim forms Purchase separate software module to bill for non-ASC services Balance billing batch report to coding forms/schedule to ensure no unbilled revenue ABC Surgery Center

17. 17 Findings Payment poster not knowledgeable regarding managed care contract allowances – no copy of contracts Accepts what payor allows – write-offs are adjusted to match what is paid and not pre-approved Not checking to determine if refund due Not balancing to deposit ABC Surgery Center

18. 18 Recommendations Hire experienced payment poster, or Provide payment poster with copy of contracts and ASC fee schedule If payment correct, transfer amount to be billed to secondary insurance or patient and send If not paid correctly or denied, start denial process If overpaid, begin refund process Balance payment batch to deposit log ABC Surgery Center

19. 19 Findings Collections not being done regularly due to lack of business office staff No system in place to determine oldest accounts and when to place with collection agency High dollar amount over 150 days old - investigate to determine how much collectible ABC Surgery Center

20. 20 Recommendations – Insurance Carriers Use Aging by Carrier report to develop collection schedule Check all outstanding balances with each carrier, oldest first Remind carrier of state prompt payment regulation Resubmit bill and/or additional documentation, if applicable ABC Surgery Center

21. 21 Recommendations – Insurance Carriers (cont) Develop tickler system to follow-up on promised payments Future collections – follow-up in 15 days to make sure carrier received claim Follow-up at 30 days to determine if carrier is following prompt payment rule Document in patients account ABC Surgery Center

22. 22 Recommendations – Patient Accounts Collect deductibles and copays up-front Perform patient financial counseling prior to DOS Bill patients monthly Add notes that increase in language as account ages Contact patients by phone to determine status and offer payment alternatives, i.e., credit card, payment schedule, etc. ABC Surgery Center

23. 23 Findings Unbilled revenue due to: - bilateral procedures–second side not billed - billing from operative note title only Sample coding review - 61 charts revealed 27 errors - estimated loss of allowable net revenue – $33,396 Review of accounts over 1 year old which received no payment and were never rebilled - $79,124 gross ABC Surgery Center

24. 24 Findings (continued) 12 patient accounts not paid or rebilled ($21,338) – few days short of 12 months – rebilled immediately to avoid timely filing Balances never transferred nor billed to secondary insurance and/or patient responsibility Coding and billing are non-compliant due to: - inequity of charges - inequity of balance billing - errors ABC Surgery Center

25. 25 Recommendations Check all accounts over one year old to determine if can be rebilled Assess all accounts over 150 days to determine need for collection, adjustments, before exceed statute of limitations It may be more cost effective to outsource coding/billing/collections than to retrain and oversee current employees while trying remain current and recoup old revenue ABC Surgery Center

26. 26 POSITIONS* DIRECTLY AFFECTING REIMBURSEMENT (Not Including Mgmt) Scheduler Admitting clerk (receptionist) Insurance verification specialist Patient financial counselor Coder/biller Payment poster/collector * Number of employees per position dependent on caseload ABC Surgery Center

27. 27 Recommendations/Findings – Business Office Currently whoever answers main phone line schedules patient Suggest dedicated phone line for scheduling Suggest one employee be assigned to schedule – others can be back-up Have Business Office Manager learn all business office positions and act as back-up Develop business office policies and procedures ABC Surgery Center

28. 28 Recommendations/Findings – Business Office If maintain billing in-house: - Add one FTE to business office staff – best choice – receptionist (lower salary and less training required) - Move current receptionist/biller to full time biller - Change current coder/biller to coding and collections If outsource billing – no additional staff needed ABC Surgery Center

29. 29 Recommendations - Business Office Manager Hire experienced ASC Business Office Manager, or Educate current BOM in following areas: - write-offs - adjustments - checking for errors - collection agency - refunds - audits ABC Surgery Center

30. 30 Findings No counter-check of deposits No auditing of coding/billing Reports invalid as reflect another business as well as ASC ABC Surgery Center

31. 31 Recommendations Utilize bank lock-box if available If doing deposit in-house: - utilize and balance to deposit log - separate payment posting and deposits - BOM should check deposit for accuracy - BOM or designee make daily deposit Weekly audits of coding and billing Move other business billing functions into separate module ABC Surgery Center

32. 32 Governing Body approved and adopted recommendations Hired outside management to institute changes Outsourced coding and billing functions Discontinued secondary business in ASC Made other clinical changes not discussed in this report ABC Surgery Center

33. 33 Within 3 months surgery center in the black for first time Gross charges tripled Average gross charges per case doubled Collections increased more than 250% Profit increased more than 400% Net income/case increased more than 300% ABC Surgery Center

34. 34 Case Study reflects financial findings/recommendations only – additional clinical findings/ recommendations are not presented 34

35. 35 10 month old ambulatory surgery center evaluated to determine compliance and efficiency and evaluate billing process Semi-rural area Solely owned by physician and non-physician partners Average case volume – 80-100 month XYZ Surgery Center 35

36. 36 Specialties - Orthopedics – 50% - Ophthalmology – 25% - Pain Management – 13% - Urology – 6% - Podiatry – 6% XYZ Surgery Center 36

37. 37 Payor Mix - Medicare - Medicaid - BCBS - W/C - PPOs - Indemnity Contract reimbursement is based on a mixture of: - percentage of Medicare groups - discount off billed charges XYZ Surgery Center 37

38. 38 Findings Sharing practice management software with clinic Software does not allow loading of contracts Shared schedule with clinic Software does not have place for Medicare groups nor APCs Clearinghouse (part of software) reports not accurate XYZ Surgery Center 38

39. 39 Recommendations Consider purchasing ASC-specific software – need to be able to schedule separately and load contracts Suggest changing to independent clearinghouse XYZ Surgery Center 39

40. 40 Findings Evaluation of fee schedule revealed that many fees were less than some contracts would reimburse No minimum fee – some fees as low as $200 - $300 XYZ Surgery Center 40

41. 41 Recommendations May want to review entire fee schedule based on evaluation and comparison to reimbursement, as well as case cost Suggest minimum fee of $1200 to $1500 XYZ Surgery Center 41

42. 42 XYZ Surgery Center Findings ASC does not have copy of most contracts Contracts not loaded in computer No insurance matrix available to determine accuracy of payments 42

43. 43 XYZ Surgery Center Recommendations Request copies of all contracts If change software, load contracts and adjust contractual allowances at time of billing Develop insurance matrix and provide to appropriate billing personnel 43

44. 44 XYZ Surgery Center Findings Physicians doing procedure coding - diagnosis coding done by clinic coder Back-up coder has no formal coding or ASC experience – also does billing, payment posting, collections for both ASC and clinic No substantiation with operative note Not being done daily Most implant invoices and pathology reports not provided to biller 44

45. 45 XYZ Surgery Center Findings (continued) Current coding books present – no CCI or other unbundling references No coding audits being performed 50 charts provided for coding review - 24 charts had errors - additional charts had insufficient back-up support for implants - $4,328 unbilled revenue - $5,558 over-billed revenue 45

46. 46 XYZ Surgery Center Recommendations Utilize certified coder Code from operative note Track pathology reports and provide to coder Code daily and balance to schedule Subscribe to CCI edits to prevent unbundling 46

47. 47 XYZ Surgery Center Recommendations (continued) Separate coding/billing from payment posting/collections Audit to check for unbilled revenue or over-billed amounts needing refund Continued monthly audits to remain compliant Provide information to physicians regarding detailed dictation 47

48. 48 XYZ Surgery Center Findings Claims are not being sent until at least 7-10 days post surgery Batches are not closed daily therefore not able to balance to schedule to prevent unbilled revenue Payments and charges are combined in same batches 48

49. 49 XYZ Surgery Center Findings (continued) Contract profiles added based on what is being paid ASC staff members unaware of upcoming 2008 Medicare changes No out-of-network policy in place and no advance notification to payors Contractual adjustments not done at time of billing 49

50. 50 XYZ Surgery Center Recommendations Separate payment and charge batches Keep necessary back-up of all charges Bill electronically wherever possible Develop tracking system to ensure billing for all implants 50

51. 51 XYZ Surgery Center Recommendations (continued) Run clearinghouse reports – verify claim on file with payor Process all claims within 48-72 hours from DOS Notify all carriers of OON status on claim Correct all errors/unsubmitted claims found on coding review and rebill 51

52. 52 XYZ Surgery Center Findings Payment poster wears all billing hats for clinic and ASC – insufficient time A/R is increasing – one week ago hired additional collector Payment poster does not have knowledge of managed care contract allowances – does not have copies Accepts what payor allows – write-offs are adjusted to match what is paid 52

53. 53 XYZ Surgery Center Findings (continued) Some secondaries have not been billed – assigned to patient responsibility in error Undetermined whether OON payments going to patient – no attempt to collect yet No way to balance to deposit as payments and charges are in same batch Not starting proceedings with denials or incorrect payments in timely manner 53

54. 54 XYZ Surgery Center Recommendations Provide payment poster with copy of all managed care contracts and/or contract matrix Payments should be posted daily Bank deposits should be made daily Keep necessary back-up of all payments received 54

55. 55 XYZ Surgery Center Recommendations (continued) Review EOBs and promptly start denial process for erroneous payment or no payment When posting, compare payment to original claim to determine accuracy Credit balances to be reviewed and promptly refunded, where applicable 55

56. 56 XYZ Surgery Center Findings Collections not being done regularly due to lack of business office staff No upfront collections No brochure for patients to outline financial policy No policies/procedures on billing or related issues No accounts have been placed with collection as no follow-ups done yet 56

57. 57 XYZ Surgery Center Findings (continued) No training in Fair Debt Collection standards Medicare claims not crossing over to secondaries 30 day prompt payment law Days in A/R 79 Over 120 – 22% (mostly insurance) 57

58. 58 XYZ Surgery Center Recommendations Review accounts that were denied or paid in error and rebill where applicable– timely filing may become an issue Follow up on OON claims – determine which paid to patient and send statements Need to audit Medicare and insurance payments to detect overpayments – correct and issue refunds where necessary 58

59. 59 XYZ Surgery Center Recommendations Use aging reports to aid in collections Use tickler files Evaluate/correct problem with Medicare secondaries Enforce prompt payment rule Institute upfront collection of deductible and copays Establish financial policies/procedures 59

60. 60 XYZ Surgery Center Findings Administrator has no previous ASC experience No business office manager Only two FT business office employees Billing staff leased part time from clinic Few business office policies/procedures Vague job descriptions – no real accountability 60

61. 61 XYZ Surgery Center Recommendations Separate clinic and ASC staff if possible If billing remains in-house, recommend hiring full time experienced coder/biller for ASC Suggested some changes in positions to cover all tasks When caseload increases, recommend hiring working business office coordinator who can fill any position as needed 61

62. 62 XYZ Surgery Center Findings and Recommendations - STAFFING Information flow is fragmented between clinic and ASC – recommend evaluation and change Need specific business office policies and procedures and job descriptions 62

63. 63 XYZ Surgery Center Findings/Recommendations – COMPLIANCE Not enough separation between Clinic & ASC Billing and payment posting should be separate and done by different employees Three members of business office staff should review deposits No Business Associate or confidentiality agreements No financial policy information available to patients 63

64. 64 XYZ Surgery Center Findings and Recommendations – 2008 MEDICARE CHANGES Administrator attended educational seminar on 2008 Medicare changes Suggest share information with key personnel and billing staff Evaluation team provided copy of proposed reimbursement to ASC 64

65. 65 XYZ Surgery Center Governing body approved and adopted recommendations Outsourced coding and billing functions Made other clinical changes not discussed in this report 65

66. 66 XYZ Surgery Center Outsource date - January 1, 2008 Average caseload 100/month Accounts receivable decreased 25% Over 120 decreased from 22% to 8% Average Collections increased from $160,000 to $250,000 per month Average Gross Charges increased from $353,860 to $584,055 Days in A/R decreased from 79 to 44 66

67. 67 Inadequate fee schedule Poor managed care contracts No copies of managed care contracts Insufficient staff Wrong staff No good policies/procedures in place Compliance issues No consistency in billing practices Not billing for implants regularly

68. 68 Caryl Serbin 239-482-1777 cas@surgecon.com 68