Managing and Preventing Insurance Payment Denials

Strategic Business Plan

This strategic business plan focuses on the financial management aspect of the Body of

Knowledge for Medical Practice Management.

Jay R. Wolitz MPH, FACMPE, FHFMA

July 19, 2019

This paper is being submitted in partial fulfillment of the requirements of Fellowship in the

American College of Medical Practice Executives.

Table of Contents

1. Project Summary……………………………………………………………… 1

2. Executive Summary …………………………………………………………. 2

a. The Company………………………………………………………... 2

b. Mission Statement…………………………………………………… 2

c. Market Opportunity………………………………………………….. 2

d. Management…………………………………………………………. 3

e. Competition………………………………………………………….. 4

f. Business’ Competitive Advantages………………………………….. 4

g. Financial Information………………………………………………... 4

3. The Organizational Plan………………………………………………………. 5

a. Summary Description of the Business………………………………. 5

i. Mission……………………………………………………… 6

ii. Business model……………………………………………… 6

iii. SWOT Analysis…………………………………………….. 7

iv. Strategy……………………………………………………… 10

v. Strategic relationships ……………………………………… 17

vi. Key stakeholders/key decision-makers…………………….. 18

b. Products or Services…………………………………………………. 18

c. Administrative Plan………………………………………………….. 19

d. Operational Plan……………………………………………………... 21

e. Incorporation Strategy……………………………………………….. 22

f. Regulatory and external governing bodies…………………………... 22

g. Exit Strategy…………………………………………………………. 23

4. The Marketing/Communication Plan…………………………………………. 23

a. Overview and goals of the marketing/communication strategy……... 23

b. Market/communication analysis……………………………………... 24

i. Target market and audience………………………………… 24

ii. Competition………………………………………………… 25

iii. Market trends……………………………………………….. 25

iv. Market research…………………………………………….. 25

c. Marketing/communication strategy…………………………………. 26

d. Implementation of marketing/communication strategy……………… 27

5. Financial Documents………………………………………………………….. 27

a. Summary of financial needs…………………………………………. 27

i. Applying for financing and funding sources……………….. 27

ii. How much capital you need………………………………… 27

iii. Resource costs associated/opportunity costs……………….. 28

iv. Identify significant cost factors…………………………….. 28

v. Return on investment (ROI)………………………………... 28

b. Prior Year Profit & Loss…………………………………………….. 29

c. Pro Forma Profit & Loss…………………………………………….. 29

d. Three-Year income projection or until breakeven…………………… 30

e. Cash Flow Projection………………………………………………… 31

f. Projected balance sheet………………………………………………. 31

g. Break-even analysis………………………………………………….. 32

h. Financial statement analysis…………………………………………. 32

6. Innovative elements and expected business outcomes……………………….. 33

7. Works Cited………………………………………………………………....... 35

1

Project Summary

Given the complexities of operating a medical practice and managing its revenue cycle, it

is not surprising that insurance payment denials have become a large industry concern. Payers

have increased their data intelligence capabilities which closely monitor technical specifications

of claims. They have increased the complicated requirements for medical necessity and pre-

authorization. They also use automated claim adjudication processes that frequently generate

automatic reviews. These factors make denials a large concern for revenue cycle leaders.

This business plan recommends strategies to more effectively manage and prevent

insurance plan denials. The plan’s goal is to move the medical practice from its current denial

rate of approximately 6 percent of net patient revenue to less than 4 percent. These strategies will

generate approximately $1.2 million in additional cash collections per year. This will enable the

medical practice to further its overall mission. This business plan’s strategy has five key

elements.

(1) Data analysis and transparency

(2) Communication

(3) Emphasis on prevention

(4) Accountability and team based approach

(5) Payer relations

These elements will be applied to insurance denial categories including

Registration/Eligibility, Authorization/Referral, Billing/Claims, Medical Necessity, Covered

Services, and Provider Credentialing/Enrollment.

There are numerous sources of benchmarks for medical practice denial rates. Among

them include data from Becker’s (Dahman, 2016), HBI (Kevit et al, 2019), and PWC (Gaffney,

2017). However, these benchmarks have wide variation, depending on the specialty type,

practice size, and payer mix. Based on the available benchmarks and the historical data of the

practice, a denial rate of less than 4 percent of net patient revenue is the plan’s target.

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Executive Summary

The Company

This business plan’s attention is a medical practice with 130 Full-Time Equivalent (FTE)

physician and 25 FTE non-physician practitioners, located in the State of Florida. The medical

practice’s focus is on multi-specialty pediatric healthcare. The medical practice began operations

in 2014 and is jointly owned and operated within the same health system as a specialty children’s

hospital. Annual utilization statistics for the medical practice include the management of 5,500

admitted inpatients, 110,000 ambulatory visits, 7,500 surgical cases, 34,000 emergency room

visits, and 48,000 radiology studies. In addition to the main hospital campus, the medical

practice has satellite outpatient offices in 10 locations within a 50-mile radius of the hospital.

The medical practice is profitable; however, insurance claim denials are approximately 6 percent

of net patient revenue, a level which when improved will increase the profitability of the medical

practice. At a current annual net patient revenue of $64 million, insurance denials generate $3.8

million in bad debt per year.

Mission Statement

The mission of the medical practice is to provide leadership, institutions, and services to

restore and improve the health of children through care and programs not readily available, with

one high standard of quality and distinction regardless of the recipient's financial status.

Market Opportunity

This business plan focuses on a strategic opportunity in the medical practice’s internal

revenue cycle. The medical practice’s revenue cycle, when compared to benchmarks, indicates

an opportunity to improve collections. Process improvements will improve collections by

reducing insurance claim denials. These process improvements have the opportunity to reduce

denials and increase collections by 2 or more percentage points, or $1.2 million per year. This

additional revenue will allow the medical practice to continue the pursuit of its mission, which is

to focus on medical programs not readily available regardless of the patient’s financial status.

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Management

A Physician President has oversight of the medical practice. Four executive-level

positions report to the President. These include (1) the Executive Vice President & Chief

Medical Officer, (2) the Executive Vice President & Chief of Quality/Safety, (3) the Executive

Vice President & Chief Financial Officer, and (4) the Executive Vice President & Chief

Operating Officer.

The Chief Financial Officer (CFO) directs the financial performance and revenue cycle of

the medical practice. Reporting to the CFO are individual Vice Presidents for Managed Care

Contracting, Operational Finance, and Revenue Cycle. Key reports to the Vice Presidents are

Directors of the Central Business Office, Revenue Integrity, Patient Financial Services,

Coding/CDI, and Payer Relations. This CFO has over twenty years of healthcare finance

experience. The individual Vice Presidents each have over fifteen years of healthcare finance

experience. Each of the director positions is held by individuals with over ten years of healthcare

finance experience. The organizational structure of this group is shown in Table 1.

Table 1: Practice Financial Leadership

Executive VP & CFO

VP, Managed Care Contracting

Director, Payor Relations

VP, Revenue Cycle

Director, Central Business Office

VP, Operational Finance

Director , Revenue Integrity

Director, Patient Financial Services

Director, Coding and CDI

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Competition

Many pediatric primary care and specialty care practices compete in this market.

However, because this business plan is targeting an internal revenue cycle process, the

competition in the market has only a minor impact on the plan’s success. The one minor area

impacted by competition is payer contracting. Payer contracting strategy and relationships with

payers influence denials. Medical practices with dominant market share can do more to assure

that payers meet regulatory and reporting requirements. Additionally, medical practices and

payers need to meet periodically to exchange information and data with the aim to resolve

disputed denied claims. A medical practice with a strong working relationship with a payer, for

example, can identify denials with high appeal overturn rates and more effectively coordinate

with the payer countermeasures to reduce the need to continually appeal. Finally, negotiated

contract terms can have a favorable impact on denials. A medical practice with dominant market

share that provides excellent access and high patient satisfaction will have an advantage in

leveraging those strengths with payers during contract negotiation.

Business Competitive Advantages

Although this medical practice has excellent patient access and patient satisfaction, the

competition in the market currently precludes the ability to leverage payers in a meaningful way

at this time. Once the medical practice substantially increases its market share, opportunities to

leverage payers will increase. However, no matter the market share, having strong working

relationships with payers will always present opportunities.

Financial Information

This business plan has two elements of investment. The first element is five additional

FTEs for the revenue cycle operations. These five positions, reflected in Table 8 in this report,

will start at varying points during Year 1. The estimated annual cost increase in Year 1 of the

plan is $145,600 for salary, benefits, and minor equipment. The cost will be $299,936 in Year 2

and $308,934 in Year 3. The second element is an expansion of licensure and subscription to the

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medical practice’s existing Business Intelligence (BI) tool. The estimated annual cost increase in

Year 1 of the plan for this expansion is $43,000. The cost will be $18,540 in Year 2 and $19,096

in Year 3. The combined cost of the additional staffing and the expansion of the BI tool licensure

is $188,600 in Year 1, $318,476 in Year 2, and $328,030 in Year 3. This business plan proposes

to fund these costs through existing working capital and ongoing favorable operating margins.

No external funding will be required. As will be reflected in later sections of this plan, break-

even will occur in Year 1, further negating the need for alternative funding sources.

This business plan projects a favorable impact on revenue. Without taking into account

potential growth in volume in the practice, the projected cash revenue increase through improved

management and prevention of insurance denials is $320,000 in Year 1, $960,000 in Year 2, and

$1,600,000 in Year 3. The return on investment (ROI) for this business plan is 69.7% through the

end of Year 1.

Organizational Plan

Summary Description of the Business

The focus of this business plan is a medical practice with 130 FTE physicians and 25

FTE non-physician practitioners, located in the State of Florida. The medical practice began in

2014 and is jointly owned and operated within the same health system as a specialty children’s

hospital. This business plan focuses on a strategic opportunity in the medical practice’s internal

revenue cycle. The practice’s revenue cycle, when compared to benchmarks, indicates an

opportunity to improve collections. Through process improvements, collections can increase

through a reduction in insurance claim denials.

For sake of clarification, this business plan only addresses changing of internal processes

in the existing business; no new business is part of this plan.

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Mission

The mission of the medical practice is to provide leadership, institutions, and services to

restore and improve the health of children through care and programs not readily available, with

one high standard of quality and distinction regardless of the recipient's financial status. The

business plan related to managing and preventing, insurance payment denials is a perfect fit for

the organization’s mission.

Services that are not readily available are frequently those services that have unfavorable

profit margins, costly barriers to entry, and may not become profitable for many years. Providing

one high standard of quality and distinction regardless of the recipient’s financial status is also a

costly aspect of the mission. Charity care, for those unable to pay for services, is a cost of

pursuing the mission. Due to these aspects of the mission, it is imperative that the practice

maximize its reimbursement for the clinical services it currently provides to patients with

insurance or Medicaid. Insurance plan denials reduce collections and increase bad debt. By

reducing the negative impact of denials, the practice can more successfully achieve the aspects of

its mission, which require increased revenue.

Business Model

The business is a multi-specialty pediatric medical practice. The medical practice

provides multi-specialty clinical services as part of a larger health system that includes a

children’s hospital, a primary care medical network, and satellite ambulatory sites for both urgent

care services and multi-specialty pediatric services. The practice also has strategic partnerships

with six-community hospitals in which pediatric care is a small component of a larger acute care

hospital.

The practice’s revenue cycle is structured with both centralized and de-centralized

elements for both the “front-end” (scheduling, insurance verification, authorization/referral,

coding, and billing) and “back-end” (central business office which handles claims, payment

posting, claims follow-up, and payment posting for both the medical practice and the hospital).

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Separate revenue cycle teams manage practice and hospital services. Managed care contracting

and payer relations function with centralized and decentralized components.

SWOT Analysis

Table 2: SWOT Graphic

Strengths

- The medical practice has substantial technical resources including a high-quality billing and

collection system, a well-structured data warehouse, and existing investment in business

intelligence software. Therefore, the resources required to address the technical/data aspects

of denial management are either in place or readily available for expansion at minimal cost.

- Leadership and staff within the medical practice include individuals with extensive

experience in revenue cycle management.

- Restructuring portions of the revenue cycle has the potential for short-term disruption as

staffing changes, processes change, and relationships with payers change. However, the

health system has the necessary cash reserves to sustain itself during a short-term disruption

of receivable collections.

STRENGTHS

Technical resources

Leadership and staff expertise

Ability to weather cash flow fluctuation

Strong belief in mission and values

Growing market share

WEAKNESSES

Modest leverage with payers

Communication gaps

Competing priorities

Large array of payers within payer mix

OPPORTUNITIES

Improved communication

Improved engagement with providers

Improved accountability

THREATS

Increasing payer sophistication

Added complexity by payers

Increasing patient responsibility

Reimbursement changes (e.g. value)

SWOT

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- Associates and physicians in the medical practice have a strong belief in the mission. This

will contribute favorably to goals of this plan which require cultural and process change.

- The practice is in a position to grow its market share for its multi-specialty services.

Naturally, this enhances growth in volume and revenue. Additionally, the organization has

future opportunities to leverage increasing market share with payers who will have increasing

reliance on the practice’s ability to provide access to services, access to unique services, and

its willingness to see patients in lower reimbursing managed Medicaid plans.

Weaknesses

- As a relatively new medical practice in a competitive market, the practice does not have a

dominant market share and therefore does not have a market advantage with payers.

- Similar to other complicated organizations, daily production is time intensive. This creates

internal communication challenges. The teams typically utilize email as a source of internal

communication, and email fatigue frequently results in ineffective communication. This can

be improved through the use of face to face meetings as well as medical practice newsletters,

which typically get more attention than single topic emails.

- The medical practice has a large number of competing priorities. It needs to fund marketing,

clinical quality initiatives, child advocacy pursuits, and research into novel cures of disease.

Therefore, increasing resources for revenue cycle often must compete with other priorities.

The advantage of prioritizing revenue cycle is that favorable results can assist the investment

of resources for other priorities (i.e. the more revenue collected the more priorities can be

met).

- The medical practice maintains contracts with virtually all payers including five managed

Medicaid plans. This large market results in a diversity of rules and guidelines that are not

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standard from one payer to the next. Therefore, the revenue cycle teams have a large burden

to stay well informed on these guidelines for a long list of payers.

Opportunities

- Internal communication via email is both a positive and negative. It is positive because of

the ease of sending internal email communications. It can be negative because often

messages go unread or partially read. There is an opportunity to improve internal

communication approaches on key issues affecting the revenue cycle and denials. As noted

in the SWOT “weakness” section other internal communication opportunities include face to

face meeting time and internal medical practice newsletters.

- Physicians and advanced non-physician practitioners are busy seeing patients, documenting

medical records, reviewing studies, and performing other important clinical tasks. These

clinical commitments take away time to review coding and billing matters that may be

causing denials. There is an opportunity to discuss with providers the effect of insurance

claim denials and work on carving out time to meet with revenue cycle teams to review

opportunities to reduce denials.

- This business plan offers an opportunity to improve the medical practice’s culture of

accountability. Accountability is an important aspect of a strong denial management and

prevention process. Accountability has three important aspects. First, the staff needs to

have the information and tools to be successful. Second, staff needs to have clear

expectations communicated to them (via policy, guidelines, and standard work processes).

Finally, staff needs to receive feedback and quantified results, so they can understand where

they are achieving goals and where they have the opportunity for improvement.

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Threats

- Insurance plans frequently change their guidelines and increase their data analysis of claims.

These efforts can result in increased claim denials. For example, the change to International

Classification of Diseases, Tenth Revision ICD-10 CM), created a substantial increase in the

number of diagnosis codes and the complexity of using those codes. Many payers increased

their sophistication in identifying diagnosis codes that when used together are mutually

exclusive of one another and therefore resulting in a denial. These rules for mutually

exclusive diagnosis codes are not standard from payer to payer and therefore create

increased challenges to coding.

- The healthcare marketplace has experienced increased financial burdens of patient

responsibility balances. This has been challenging for healthcare providers, who must

improve their efforts in pricing transparency, patient out of pocket estimates, and obtaining

payments at the time service. While this does not always impact claims denials, it does put

increased prioritization of training staff and improving workflows for patient responsibility

balances. This effort can interfere or compete with time and resources for training and

workflow modification to manage and prevent denials.

Strategy

A recent publication in Becker’s Hospital Review defined “Denial” as follows:

“Denial of a claim is the refusal of an insurance carrier to honor a request by an individual, or his

or her provider to pay for health care services obtained from a healthcare professional.” (Dahmen,

2016)

This plan’s goal is to reduce denials from the current level of 6 percent of net patient

revenue to a level of less than 4 percent. This level of reduction would have a minimal favorable

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financial impact of $1.2 million annually. As noted on page 1 of this plan, the five key

components of the plan are:

(1) Data analysis and transparency

(2) Communication

(3) Emphasis on prevention

(4) Accountability and team based approach

(5) Payer relations

Data analysis and transparency – The first element of the plan’s strategy is an

improvement in data analysis and the transparency of denial data among leaders of the medical

practice. The practice has access to valuable revenue cycle tools. Epic System software

functions as the billing and collection tool for both the practice and the hospital. Data from Epic

feeds into its Clarity database. Although Epic has many analytic and reporting tools, this plan

will utilize the practice’s data warehouse to store data from Clarity and then utilize a Business

Intelligence (BI) software to create reports and dashboards for the revenue cycle. The medical

practice and hospital already have licenses and subscriptions to the BI tool “Qlik,” which can be

further expanded for denial management and prevention opportunities.

Standardized medical practice denial reporting will begin with reports including “Denials

by Payer,” “Denials by Specialty,” “Denials by CPT code,” “Denials by Category,” and “Denials

by Reason.” While these reports will be inclusive of all Payers, CPTs, Categories, and Reasons,

higher-level reports will use condensed “Top 5” type reports for high-level dashboards for

transparency. Tables 3 and 4 depict a sample high-level dashboard and detailed denial report.

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Table 3: High-Level Dashboard “Top 5”

Table 4: Specialty detail denial report

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The value of a BI tool like Qlik is the ease with which it handles enormous volumes of

data without creating a slow-down of daily production systems like Epic. Additionally, Qlik

generates high-level dashboards, mid-level category reports, and data within those reports that

can have further drill-down. These broad capabilities contribute to data transparency. Data

transparency allows leaderships to monitor success and allow for easier escalation of issues that

may be preventing success.

Communication – Another important element of the plan’s strategy is communication. In

organizations where the structure is a combination of centralized and decentralized services,

inadvertent pockets or silos can evolve which can result in inefficient information sharing among

those in the organization who need to know. This can result in reduced efficiency in the practice.

It will be the responsibility of senior leaders and an appropriate governance structure for

denial management and prevention to break down the barriers of pockets and silos. The creation

of an effective feedback loop is important. If these groups are not frequently discussing issues,

the awareness of those issues and the potential countermeasure to those issues can remain in a

vacuum. For example, if no sharing of information on authorization denials occurs among payer

relations, the central business office, and the authorization/referral team, a vacuum might exist.

Dedicated time for those groups to meet will create an effective feedback loop for information.

Emphasis on Prevention - The single most important aspect of this plan is the re-

enforcement of denial prevention. Claim-by-claim denial follow-up and appeal work is important

to manage denials. However, managing repetitive denials is costly and inefficient. Denial

prevention seeks to identify and fix the root cause of repetitive denials. All revenue cycle teams

will receive education on root cause analysis. The education will bring two tools into play

initially.

The first tool is the identification of the root cause. If a team member identifies repeated

denials or if data indicates a common trend of denials, a team can utilize a tool such as process

mapping. For example, one might be looking at a higher than normal frequency of denials for

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Echocardiograms. The process mapping tracks the flow of the service from scheduling, to

insurance verification, to authorization, to the provision of the clinical service, to coding, to

billing, to claim submission, and then finally to payment or denial. During process mapping, a

representative for each aspect of the process comments on what is supposed to happen and when

do issues arise. As mapping proceeds the goal is to identify, with all individuals in the process

participating, what issue is arising that could be causing denials.

“PROCESS MAPPING”

WHAT HAPPENS DURING THE PROCESS? WHERE DO ISSUES ARISE

In this example what the team may learn is that a scheduled and authorized

Echocardiogram is proceeding, however during the standard Echocardiogram, the sonographer

and cardiologist determine that the standard Echocardiogram now has to be a Congenital

Echocardiogram. The result may be that the coded and billed Congenital Echo may deny because

the authorized procedure was a standard Echo. The issue may have a series of potential

countermeasures to correct the pattern of denials, but ultimately the group has now determined

the root cause and can proceed with a correction.

The second tool is a broader understanding of problem solving and prioritizing. Using

the same Echocardiogram example, the second tool looks at the issue from a higher level. Similar

to the prior example someone identifies either through reporting or repetitive observation of

denials for Echocardiograms. The change in Echo type is determined to be the root cause.

However, in this situation, the group may also be looking at denials for other services (e.g.

Electroencephalograms, Sleep Studies, and Pulmonary Function Tests). There are not enough

individuals available to solve all of these problems at one time. The team must prioritize the

SCHEDULING VERIFICATION AUTHORIZATION SERVICE CODING BILLING CLAIM DENIAL

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issue or procedure with the biggest financial impact resulting from denials and work to solve in

that order. Once prioritized, the team or some subset of the team work through a solution either

via systems changes, training changes, workflow changes, etc. The team or some subset of the

team develops a process change, tests the process change, communicates and educates the process

change, and implements the process change. The data analyst team will monitor the impact of the

changes to determine if the changes have reduced or completely prevented the denials. If not the

team needs to re-evaluate. If the change has been effective, the team can move on to the next

highest priority denial.

“ROOT CAUSE IDENTIFICATION – PRIORITIZATION – COUNTERMEASURE – MONITORING”

Accountability and Team-Based Approach – Subject matter expert teams will handle the

management and prevention of insurance plan denials. Governance and oversight is the

responsibility of an Interdisciplinary leadership team comprised of (1) VP of revenue cycle, (2)

Director of payer relations, (3) Director of CBO, and (4) Director of Revenue Integrity. The

other members of the leadership team will include individual leaders from “sub-teams” including

the data analysis team, the authorization team, the coding & billing team, the appeals team, the

registration team, and the clinical documentation team. “Sub-teams” will have responsibility for

workflow, policy and guidelines, training, and establishing between one and three KPIs that

effectively measure performance improvement. The structure of the subject matter expert teams,

including “sub-teams,” is in Table 5.

ID Trend ID Root CausePrioritize Trend Financial Impact

Resolve highest dollar impact

trends

Undertake process change

Monitor results going forward

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Table 5: Structure of subject matter expert teams

Each team will develop an accountability structure. The accountability structure should

model performance that contributes to the goal of achieving KPI targets. Information that guides

progress toward accountability include:

- Policies, procedures, and guidelines

- Access to data and technological resources

- Education on root cause analysis

- Timely updates on payer guidelines changes

- An opportunity to escalate barriers preventing improvement

Payer Relations – Continual building of payer relationships is an important aspect of this

business plan. Favorable payer relationships influence the ability to work effectively with payers

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to resolve issues and create mutually beneficial contracts. The following recommendations are

overriding themes for payer relations.

- Identify denials that have a high frequency of overturn on appeal. Presentation of this

information to payers allows for discussion of opportunities to reduce the frequency of

appeal and increase the frequency of payment of the initial claim submission.

- Ensure understanding of elements of payer contracts that are causing denials

- In contracting, attempt to extend the time payers must give for advance notice of

unilateral guideline changes or contract amendments. The base minimum is typically 30

terms of 60 to 90 days is preferable.

- In contracting, utilize as much language as possible to enhance payer accountability.

Additionally, seek terms that permit overrides of timely filing denials when the practice

has taken all reasonable steps to comply with payer guidelines. Finally, review contracts

for all vague language and seek to modify them into unambiguous language.

Although this is a small starting list of payer relation recommendations, the practice will

depend on the payer relations and managed-care contracting teams to engage with other teams in

the revenue cycle to identify other barriers that are creating unnecessary denials.

Strategic Relationships

The pyramid diagram in Table 6 reflects the organizational structure of the business plan.

Each tier of the pyramid will have responsibility in maintaining strategic relationships. The

Practice Executive Leadership maintains the strategic relationship with the providers and non-

revenue cycle staff in the practice. The Practice Financial Leadership maintains the strategic

relationship with the contracted payers. The Interdisciplinary Denial Leadership Team maintains

the strategic relationship with revenue cycle staff. Although the strategic relationships will have

variation at times, the relationships noted above are the primary relationship builders.

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Table 6: Organizational structure of business plan

Key Stakeholders/Key Decision Makers

Key stakeholders in this business plan include revenue cycle staff, revenue cycle

leadership, executive leadership, providers, non-revenue cycle staff, payers in the market, and

pediatric patients in the community. The key decision-makers are the Practice Executive

Leadership and the Practice Financial Leadership.

Products or Services

The services offered by the medical practice include a wide array of pediatric

subspecialties. The subspecialties include: Adolescent Medicine, Allergy & Immunology,

Anesthesiology, Behavioral Health, Cardiology & Cardiac Surgery, Critical Care, Emergency

Medicine, Endocrinology, Gastroenterology, General Surgery, Genetics, Hematology &

Oncology, Hospitalist, Infectious Disease, Interventional Radiology, Neonatology, Nephrology,

Neurology, Neurosurgery, Ophthalmology, Orthopedics, Otolaryngology, Pathology,

Practice Executive Leadership

• President, CMO, CQS, CFO, COO

Practice Financial Leadership

• CFO, VPs of Managed Care, Revenue Cycle, and Operational Finance

Interdisciplinary Denial Leadership Team

• Directors of Payer Relations, CBO, Revenue Integrity, Patient Financial Services, and

Coding

Individual Denial Teams ("Sub-Teams")

Data Analytics, Authorization, Coding & Billing, Appeals, Registration, Clinicl Documentation

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Pulmonology, Radiology, Rehabilitation Medicine, Rheumatology, Urology, and Weight

Management. This strategic business plan will have no change in the array of services, including

sub-specialties.

Administrative Plan

The organizational chart in Table 7 depicts the medical practice’s overall administrative

structure. The practice financial leadership organizational chart is located on page three of this

plan.

Table 7: Practice Organizational Chart

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The team structure reflected in Table 8 demonstrates the plan to bring together expertise

within different revenue cycle functions. All teams will report up to an Interdisciplinary Revenue

Table 8: Business plan team structure and responsibilities

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Year 1 Operational Plan

The initial phases of the operational plan will occur over 12 months. The timeline in

Table 9 summarizes the tasks associated with the 12-month rollout.

Table 9: 12-month operational rollout

Year 2 and Year 3 Operational Plan

Although the plan’s rollout initially takes place in Year 1, the efforts from the plan need

to be sustained beyond Year 1. Year 2 and Year 3 require continued internal communication,

modifications to committees, workflows, policies, and education. The checklist in Table 10

summarizes the Year 2 and Year 3 operational plans.

TASK (Table 10) DESCRIPTION YEAR 2 YEAR 3

Quarterly Report Out Report outs to the leadership teams will move from monthly to quarterly in Years 2 and 3

X X

Internal Marketing/ Communication Internal communication in Years 2 and 3 serve to

keep the overall practice informed on progress and

challenges and to maintain the credibility of the plan.

X X

Committee Structuring This would involve re-structuring on an “as

needed” basis for staffing changes.

X X

Workflow Structuring It is anticipated that as insurance plan guidelines

change, the practice will need to make

modifications to address those changes.

X X

Policy / Guideline Structuring It is anticipated that insurance plan guideline

change and the practice needs to change

workflows, internal policies may require changes.

X X

Education Education for new employees, new policies and workflows is vital to maintain the project’s

benefits.

X X

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Potential roadblocks in this business plan include items such as internal communication

not effectively resulting in buy-in from employees of the practice and ineffectiveness in moving

the culture to a higher degree of accountability. The key element needed to counteract these type

of roadblocks is the leadership of the Interdisciplinary Leadership Team. As sub-teams

experience roadblocks they need to rapidly escalate them to the leadership team. This permits a

rapid response to the roadblocks including changes in internal communication language and

presentation, as well as modification to the workflows and policies already under development.

A threat and potential roadblock in this business plan is the possibility of significant

policy and/or guideline change from payers. To counteract this threat and potential roadblock it

will be vital for the payer relations team to commence and remain in close communications with

payers and specifically adding an agenda item to each of their meetings to discuss any policy

and/or guideline change. The challenge with policy and/or guideline change is often more closely

tied to knowing about the change rather than generating a countermeasure for the change.

Incorporation Strategy

This business plan focuses on internal process improvements in the revenue cycle of an

existing business (medical practice). Therefore, an incorporation strategy is not applicable.

Regulatory and Other External Governing Bodies

Issues affecting insurance plan denials include payer automation in selecting claims for

review, payers increasing complex criteria and claim requirements, and fine print within payer

contracts. Each of these have the potential to be impacted by regulation. Regulation and

influence by external governing bodies have a great deal of variability for medical insurance. The

“players” in the regulation and governance of medical insurance include:

- The national Department of Health and Human Services oversees The Centers for

Medicare and Medicaid Services (CMS). CMS administers programs including

Medicare, Medicaid, and the Children’s Healthcare Insurance Program (CHIP).

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However, the McCarron Ferguson Act legislation places regulation of insurance in the

hands of state regulators.

- State laws require insurer’s licensure and subject to regulation in the states where they

provide medical insurance. Market regulation attempts to ensure fair practices, financial

regulations, and other critical safeguards. Within the state of Florida, the primary

oversight comes from The Florida Agency for Healthcare Administration

(https://ahca.myflorida.com/. Additionally, HMOs and PPOs within Florida have

primary oversight from the Florida Office of Insurance Regulation

(https://www.floir.com/.

- Although not a regulatory body, the Florida Hospital Administration (FHA) is a

taxpayer-funded lobbying group that promotes sound state legislation, helps members

manage their environment, and leverages the bargaining power of its membership.

Exit Strategy

This business plan focuses on internal process improvements in the revenue cycle which

will evolve over time. Unless there are major changes in the medical practice reimbursement

structure or the ownership structure of the health system the practice operates within, an exit

strategy for this business plan is not applicable

Marketing/Communication Plan

Overview and Goals of Marketing/Communication Strategy

As previously noted, this business plan focuses on a strategic opportunity in the medical

practice’s internal revenue cycle. Although it will not have a robust internal and external

marketing effort, communication still remains an important element of the plan. The success of

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this business plan will be dependent on the “buy-in” of the plan to those employees who are

impacted or are key stakeholders. Those stakeholders will need to understand why this plan will

benefit them, in order to create enthusiasm for the plan. These benefits include increased cash

collections, increased transparency of results, and opportunities for them to contribute to the

improvement.

Market Analysis

Target market and audience – This business plan has both an internal and external

marketing and communication strategy. The external marketing and communication strategy will

focus on payers. Overall, the plan will focus on holding payers accountable. The communication

plan for payers will include the following concepts:

- The plan will result in a greater focus on payer accountability for denials.

- Payer relations will meet monthly with payers and provide reports on denials for both

payer and provider issues. Additionally, it will regularly share examples of issues with

the payers.

The remainder of the marketing plan will be an internal communication strategy. The

plan to manage and prevent insurance payment denials will involve change for the practice. The

key attributes and the questions that need answers during the internal communication are:

“How does this plan benefit me?”

- Increased cash collections will allow further pursuit of the mission.

- Data transparency will be maintained.

- It will shift focus from just managing denials to a combination of managing and preventing

denials.

- Standardized data reporting, utilizing one single source of consistent data.

- Consistency in reporting, technologies used, standardized policies and procedures, clearly

defined roles, responsibilities and, accountability clearly defined.

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“Who is leading this effort?”

- A denial leadership team will govern the plan and will have progress reporting responsibility to

the Practice Executive Leadership.

“Will the plan be addressing issues with payers?”

- There will be strategies to address denials with payers both in contracting and during the term of

a contract. There is a need to manage expectations to make sure employees understand that

payers operate from a cost-containment strategy and denials will always present a challenge.

There is a goal to reduce denials; however, denials will never completely disappear.

“What is expected of me?”

- Your engagement and support.

- Participation in organization-wide education of terms/definitions and nuances of denials will

occur before rollout. The goal is to use a common language.

- Advocate the goal to hardwire a culture of accountability and denial prevention.

Competition – As previously noted, because this business plan is targeting an internal

revenue cycle process, the competition in the market has only a minor influence related to payer

contracting. The marketing/communications strategy will not focus on the issue of competition

and payer contracting.

Market Trends – The trends in the market related to payer denials will be important for

the denial leadership team to understand. Several minor aspects of these trends may be presented

during internal marketing/communications, however it will be a very minor focus.

Market Research – As part of the internal marketing/communication effort, a brief

internal survey, using a free basic tool like “Survey Monkey,” will allow the leadership team to

learn more about the opinions of employees (physicians, non-physicians, executive leaders)

regarding the medical practice’s revenue cycle, and more specifically denial management and

prevention.

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Marketing/Communication Strategy

The external marketing/communication strategy is straightforward. Payer relations will

communicate with payers about the increased focus on denials and expectations of payers in the

process. The organization marketing/communication team will collaborate with managed care

contracting and payer relations to develop speaking points that focus on the practice’s goals,

without creating using confrontational language.

The internal marketing/communication strategy will focus on obtaining buy-in from

internal stakeholders and keeping internal stakeholders informed of any changes that will affect

them. It will effectively communicate: (1) why we need the plan, (2) why it benefits the practice,

(3) the focus on accurate, consistent, and transparent data (3) who is responsible for the plan, (4)

the focus on prevention, (5) the role of education, (6) the role of accountability, (7) aspects of

payer relations, (8) what is need from stakeholders during the plan development.

The interdisciplinary leadership team for denials will work with marketing and

communication teams on speaking points and PowerPoint type presentations. The goal of

obtaining buy-in and keeping stakeholders informed requires transparency in explaining the plan

and effectively communicating the benefits of the plan. The communication of the plan will be in

face-to-face situations as often as possible. This will provide stakeholders the opportunity to

respond in person and ask questions in person. Multiple communication sessions at varying

hours (including evenings and early mornings) and the use of pre-existing meetings will aid in

avoiding additional meeting time which might take away from time for patient care.

The financial impact of a marketing and communications strategy is time and the

opportunity cost of time. Time spent on the marketing and communication strategy can result in

short term reductions in revenue cycle production. Providers should be engaged in ways which

limit the impact on their time spent with patients.

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Implementation of Marketing/Communication Strategy

With any strategy that requires a communications strategy, there will always be a balance

between effective communication and the impact on the production of routine work. It is

important to recognize the value of effective communication while balancing approaches that

limit an individual’s time away from their normal day-to-day work. Limiting individual time

away from normal day-to-day work will be require very effective use of existing meeting time.

By presenting clear and concise communication at times that employees have already set aside for

meetings reduces the need for “extra meetings.” Additionally, the interdisciplinary leadership

team will work with the marketing/communication team on a periodic email “newsletter” that

provide useful and timely communication of aspects of the plan.

Marketing and communication work and presentations will begin immediately after the

approval of the business plan.

Financial Documents

Summary of Financial Needs

Applying for financing and funding sources – This business plan proposes to fund project

costs through existing working capital and ongoing favorable operating margins. No external

funding will be required. As will be reflected in later sections of this plan, break-even will occur

in Year 1, further negating the need for alternative funding sources.

How much capital do you need - This business plan has two elements of investment. The

first element is five additional FTEs for the revenue cycle operations. These five positions,

detailed in Table 8, will start at varying points during Year 1. The positions will have roles in

data analytics, coding and billing, appeals, registration, and clinical documentation and will focus

on organization and workflow. The average cost is estimated to be $20 per hour (some positions

higher and some positions lower depending on skill set), fringe benefits of 40%, with annual cost

increases of 3 percent. The estimated annual cost increase in Year 1 of the plan is $145,600 for

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salary, benefits, and minor equipment. The cost in Year 2 and 3 for these positions will be higher

($299,936 in Year 2 and $308,934 in Year 3) due to their partial year hire in Year 1. The second

element is an expansion of licensure and subscription to the medical practice’s existing Business

Intelligence (BI) tools. The estimated annual cost increase in Year 1 of the plan for this

expansion is $43,000. This amount will decrease to $18,540 in Year 2 and $19,096 in Year 3, as

the annual cost will only include monthly subscription costs. The combined cost of the additional

staffing and the expansion of the BI tool licensure is $188,600 in Year 1, $318,476 in Year 2, and

$328,030 in Year 3.

Resource costs associated/opportunity costs – This business plan will consume time of

existing employees, including executive leadership, physician and non-physician providers,

revenue cycle staff, and all other staff. Similar to any business plan, prioritization is critical.

This business plan strategy will need to receive priority, but with the understanding that its

priority is not detrimental to patient care, patient satisfaction, and patient volume.

Identify significant cost factors – There are no other significant cost factors applicable to

this business plan.

Return on investment (ROI) - The return on investment (ROI) for this business plan is

calculated with the following formula:

((Improved Net Revenue minus Cost of Business Plan) divided by Cost of Business Plan) x 100%.

The ROI for Year 1 is calculated as follows:

- ROI for Year 1: (($320,000 - $188,600) / $188,600) x 100% = 69.7%

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Prior Year Baseline Profit & Loss

The baseline profit and loss for the practice, prior to the beginning of this business plan,

is shown in Table 11.

Table 11: Prior Year baseline P & L

Pro Forma Profit and Loss

The pro forma profit and loss for Year 1 (shown Quarter by Quarter) of the plan (when it

achieves break-even) is shown in Table 12.

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Table 12: Pro Forma Year 1 P&L

Note: This pro forma does not attempt to project reductions in provision for uncollectible patient responsibility A/R.

Although patient responsibility A/R is a current priority, in order to demonstrate the projected results for denial

management and prevention, the patient responsibility A/R has been left at status quo.

Three-Year income projection

Table 13: Three-Year Income Projection

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Cash flow projection

Table 14: Cash flow projection

Projected balance sheet

The medical practice is part of a larger health system that shares resources and manages

cash reserves in a centralized structure. Therefore, there is no individual balance sheet for the

practice. The success of this plan will result in a reduction in reserves for bad debts. Therefore,

we would expect to see an increase in current assets for the practice through the course of the

business plan. The current liabilities will experience an increase as additional payroll and benefit

liabilities increase. This is due to an increase in staffing in Years 1, 2 and 3. By Year 3 of the

business plan, overall working capital will increase as the increase in current assets (reduced bad

debt) will exceed the increase in current liabilities (salary and benefits).

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Break-even analysis

Table 15: Break-even analysis

Financial statement analysis

The following bullets summarize financial data presented in this business plan:

- The direct incremental expenses for the business plan total between $188,600 and

$328,030 per year for Years 1, 2, and 3. There is no external financing required for this

plan. Working capital or improved operating margin will fund the plan’s incremental

expenses.

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- The plan projects achieving the target denial rate in Year 3. Denial rates for insurance

A/R are projected at 5.3% in Year 1, 4.3% in Year 2, and 3.8% in Year 3.

- Although this plan is not addressing the issue of patient responsibility A/R, the

combination of improvement in denial rate and patient responsibility bad debt results in

a projected net collection ratio of 94.2% in Year 3.

- The incremental revenue from decreased denials is projected to cover the cost of

incremental plan expenses before the end of Year 1.

Innovative elements and expected business outcomes

Question: Why and how does this innovative idea positively affect the health of your

population and community?

Answer: As previously noted the mission of the practice is to provide leadership,

institutions, and services to restore and improve the health of children through care and programs

not readily available, with one high standard of quality and distinction regardless of the recipient's

financial status. Simply put, the medical practice is a patient and family-centric organization. A

reduction in denial will result in increased cash revenue. Increased cash revenue creates

flexibility to pursue strategies to invest in providing care for those with underserved specialty

needs and those with financial barriers to healthcare.

Question: What challenges were encountered during this process and lessons were

learned?

Answer: Numerous challenges, both anticipated and unanticipated were encountered

during the process. The primary challenges are listed in the bullets below. The business plan has

been developed to resolve these challenges.

- The practice has multiple sources of denial data and ways to look at the data. This creates

inconsistencies in reporting and challenges for decision-making.

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- The practice uses inconsistent terminology and definitions of revenue cycle terms. This

creates confusion during discussions.

- Cross-departmental coordination for revenue cycle is inefficient.

- There is a historical lack of visibility into data, performance, and targets for specific

revenue cycle functions.

Question: What are the next steps to put the project in action?

Answer: The next steps are listed in the bullets below.

- The business plan will be presented to the medical practice financial leadership for review and

approval. This includes the Chief Financial Officer and the VPs for Managed Care, Revenue

Cycle, and Operational Finance.

- After modifications and approval, the business plan will be presented to the Executive Practice

Leadership that includes President, Chief Medical Officer, Chief Quality & Safety Officer, Chief

Operating Officer, and Chief Financial Officer.

- After any modifications and approval, initial actions will including finalizing the governance

structure and team members for the denial management teams and beginning planning for the

marketing/communication effort.

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Works Cited

Dahmen, R. (April 2016). Implementing an Effective Denials Management Program [PowerPoint

slides] Retrieved Jan 2019 from https://www.beckerhospitalreview.com/pdfs/April30Saturday.

Kevit, B. et al (January 2019). Executive Summary Benchmark Analysis and Insight Report [PDF

file] Retrieved Feb 2019 from

https://www.membershealthcarebusinessinsights.com/research/download_document/1546442353

_0119_RCA_Executive_Summary_Feature1.pdf/63297

Gaffney, J. (June 2017) Managing Denials in Large Health Systems [PowerPoint slides]

Retrieved Jan 2019 from https://www.hfmatxgc.org/wp-

content/uploads/2015/05/1706/Gaffney.pdf