ten value added audits bringing in the money. august 31, 20092009 ahia annual conference 2 agenda ...
TRANSCRIPT
Ten Value Added Audits Bringing in the Money
August 31, 20092009 AHIA Annual Conference 2
Agenda
Bringing in the Money—Internal Audit as a value added function
Ten value added audits
Reporting on value added contributions
August 31, 20092009 AHIA Annual Conference 3
Bringing in the Money
Who is not losing money to:
– Economic pressures?– Eroding margins?– RACs (or the anticipation thereof) and other audits from
government and commercial payors?– Reduced reimbursements?– Increased costs for labor and supplies?– Increased bad debt and charity care?– Increased number of self-pay patients?– Etc, etc, etc?
August 31, 20092009 AHIA Annual Conference 4
HFM Magazine, June 2009
54% of 203 hospital financial executives reported negative margins
78% reported declines in non-op revenues
73% reported decreases in days cash on hand
43% reported decreases in patient revenues
60% reported increases in the numbers of un-insured patients
22% had cut programs
77% reduced capital spending
August 31, 20092009 AHIA Annual Conference 5
Internal Audit as a Value Added Function
Financial and Operational Audits
Risk based
Focus on controls
– Compliance with regulations and internal policies– Safeguarding of assets– Efficient and effective operations– Reliability of reporting and integrity of data
People, processes, systems
August 31, 20092009 AHIA Annual Conference 6
Rules of Engagement
Quick wins
$ not process—Process-intense issues should go to the parking lot
Tight focus, small teams
Brainstorm lists– 2 per quarter = 8 initiatives
Under commit—Over deliver
August 31, 20092009 AHIA Annual Conference 7
Ten Value Added Audits
Revenue Cycle– Charge Capture– Contracts– Net Revenue Strategies
Vendor contracts– Purchasing – IT
Outsourcing Opportunities Co-sourcing Opportunities Cost Avoidance Opportunities Contracting reviews—before the contract is signed Labor Opportunities
August 31, 20092009 AHIA Annual Conference 8
1. Revenue Cycle—Charge Capture
Start with:
Chart Reviews—Orders, documentation, charges
– This will provide areas for data reviews– Identify your team– Select from IP, OP, Procedural services– Focus review on charge capture, not clinical
documentation (though findings there should be noted as potential compliance issues)
August 31, 20092009 AHIA Annual Conference 9
1. Revenue Cycle—Charge Capture
Data Analysis—What’s missing?
1.J code drugs and infusions—if a drug is given, then you should have an administration charge
• J-codes are separately reimbursable • Check Oncology, Emergency Department • Review Infusion chart documentation
– Look for: Missing orders, missing start and stop times (charged in 15 minute increments).
– Key charge terms: For hydration, Therapeutic, Sequential
– See Example (next page)
August 31, 20092009 AHIA Annual Conference 10
1. Revenue Cycle—Charge Capture
Missing Initial Hour
Hydration Order $200
Missing Order for Additional
Hydration Hours $64
Missing Stop Time on
Initial Hydration
Missing Stop Time on
Additional Hydration
Missing Stop Time on
Initial Therapeutic
Missing Stop Time on
Additional Hours
Missing Stop Time on
Sequential Infusion $134
Missing Stop Time on
Concurrent Infusion $78
Hospital 1: # of occurrences 47 170 8 40 71 10 14 1Hospital 2: # of occurrences 58 21 4 2 4 0 0 0
Total: 105 191 12 42 75 10 14 1
Total charge per item: $21,000.00 $12,224.00 $2,400.00 $2,688.00 $18,375.00 $810.00 $1,876.00 $ $78.00
Physician impact: $33,224.00
Clinician impact: $26,227.00
36.5 x $59,451.00 = $2,169,961.50 annualizedTotal overall impact: $59,451.00
Infusion Documentation SummaryTaken over a 10 day period: HP1 (3/12/07 – 3/21/07), HP2 (3/23/07 – 4/1/07)
10 days / 365 days a year = 36.5 ten day periods
August 31, 20092009 AHIA Annual Conference 11
1. Revenue Cycle—Charge Capture
E&M Bell Curve
0
200
400
600
800
1000
1200
Level 1 Level 2 Level 3 Level 4 Level 5
E&M Levels
Nu
mb
er o
f V
isit
s
Physician
Facility
2. Facility fees (for ED and provider based services) Check E&M facility bell curves for alignment issues Review your facility charge tool
August 31, 20092009 AHIA Annual Conference 12
1. Revenue Cycle—Charge Capture
3. Supplies—for major procedural areas (Cath Lab, Interventional Radiology, Implants) check procedures against a standard supply listing; compare to CDM; test billings
4. Check Pharmacy spend listing (what you buy) against CDM (what you charge for)• How do you charge for new drugs not currently in the Charge
Description Master?• How do new drugs get on the Formulary?• Can providers order off formulary? How do they get billed?• Audit for discrepancies
August 31, 20092009 AHIA Annual Conference 13
1. Revenue Cycle—Charge Capture
Other Reviews
5. Check Zero Charge report (patient showed for services but no charges)
6. Check Insurance denials
7. Check payor contracts for carve-outs
– High tech drugs, implants– Check correct assignment of revenue codes to ensure
payment
August 31, 20092009 AHIA Annual Conference 14
1. Revenue Cycle—Charge Capture
8. Check expected to actual reimbursement reports
– Process for collecting underpayments• Internal? External?
– Check trends over years – Is this included on a Revenue dashboard?
• If it is not reported, it does not get resourced, addressed
August 31, 20092009 AHIA Annual Conference 15
1. Revenue Cycle—Charge Capture
Check your infrastructure (this is process work)
– Training for charge entry/capture/reconciliation• Are there current training materials available?• Are they used to train new employees?
– Fixing errors—credits, mapping, wrong patient, date• Are there instructions for how to fix the most common errors?• Is this done on a timely basis?
– Daily, monthly reports, revenue variance reporting, actual to budget
– Charge description master (CDM) maintenance, compliance checks for coding, completeness, accuracy,
– Pharmacy CDM—check for accuracy of billing quantities• Compliance Issue
August 31, 20092009 AHIA Annual Conference 16
2. Revenue Cycle—Contracts
Inventory of Revenue Cycle Contracts
– When was the last time they were put to bid?– How current are the terms and conditions?– When was the last time the rates were negotiated?– How much revenue cycle work is done in house versus
contracted out?
August 31, 20092009 AHIA Annual Conference 17
2. Revenue Cycle—Contracts
Outsourced collection of large $ accounts:
To speed up collections
Effect of implementation of Payment Caps
Admit Date Total Charges Payment Amt Invoiced Amt Fee Cap of $5,0005/25/2007 $236,631.69 $77,823.25 $11,673.49 $6,673.499/27/2006 $265,326.40 $77,230.46 $11,584.57 $6,584.5712/8/2006 $209,032.28 $62,236.91 $9,335.54 $4,335.544/24/2006 $165,323.00 $59,469.61 $8,920.44 $3,920.442/9/2007 $151,366.00 $58,205.89 $8,730.88 $3,730.886/7/2007 $222,154.00 $56,924.91 $8,538.74 $3,538.74
7/16/2007 $189,432.05 $55,967.49 $8,395.12 $3,395.124/30/2007 $177,898.10 $52,650.82 $7,897.62 $2,897.623/5/2007 $180,489.43 $52,511.44 $7,876.72 $2,876.72
Savings $37,953.12
August 31, 20092009 AHIA Annual Conference 18
2. Revenue Cycle—Contracts
Month Total Payments Net Fee Cap Net Payments Invoice @ 15% Invoice @ 12% Net BenefitMarch 537,807.22$ 208,492.81$ 329,314.41$ 49,397$ 39,517.73$ 9,879.43$ April 509,814.05$ 226,449.43$ 283,364.62$ 42,505$ 34,003.75$ 8,500.94$ May 214,464.93$ -$ 214,464.93$ 32,170$ 25,735.79$ 6,433.95$ June 538,305.00$ 245,854.45$ 292,450.55$ 43,868$ 35,094.07$ 8,773.52$ July 434,875.50$ 142,242.73$ 292,632.77$ 43,895$ 35,115.93$ 8,778.98$ August 222,696.45$ 65,556.58$ 157,139.87$ 23,571$ 18,856.78$ 4,714.20$
Total Net Benefit (YTD) 47,081.01$ Number of Months (YTD) 6Annualized Net Benefit 94,162.03$
Large $ accounts: To speed up collectionsEffect of re-negotiation on contract rates (for example: from 15% to 12%)
August 31, 20092009 AHIA Annual Conference 19
2. Revenue Cycle—Contracts
Medicaid Pending
– Check contract—terms and conditions; incentives• # of accounts submitted• # converted to Medicaid (Medicaid pays better than self-pay)
Bad Debt
– Check contract—terms and conditions– Consider two firms—splitting alphabet; creating
competition
August 31, 20092009 AHIA Annual Conference 20
3. Revenue CycleNet Revenue Strategies
Gross Revenue
– Rates (Charge Capture)• Services
• Prices
– Volumes
Net Revenue
– Contracted rates• Carve-outs
• % of charges payments
– Collections• Cash collections
• Insurance payments
• Patient payments
– Bad Debt– Charity Care– Denials
August 31, 20092009 AHIA Annual Conference 21
3. Revenue Cycle— Net Revenue Strategies
1. Contract Carve-outs
– Check contracts for carve-outs (pharmacy, medical devices, supplies—high cost/high tech)
– Audit for revenue code assignment (generally processed based on revenue code)
2. Increase Point of Service cash collections
– Improves AR– Reduces billing/collection expenses– Reduces bad debt– Determine total current and total opportunity for POS
cash collections
August 31, 20092009 AHIA Annual Conference 22
3. Revenue Cycle— Net Revenue Strategies
3. Maximize clinical appeals
4. Convert off-campus services to hospital based
– Bill under Part A versus Part B = increased net reimbursement
– Compliance with Medicare criteria
August 31, 20092009 AHIA Annual Conference 23
3. Revenue Cycle— Net Revenue Strategies
5. Check packaged payment arrangements
– When were they last updated?– Review cost/contribution margin
6. Monitor large write-offs (specific review of all write-offs over a certain limit)
7. Review all Admin Adjustments
– Customer Service– Residency Program– Legal– Other
August 31, 20092009 AHIA Annual Conference 24
4. Vendor Contracts—Purchasing
Bulk purchasing
– Check for high cost items in purchase quantities of 1• Compare quantity of 1 price to price for multiples• Example: Pacemakers at $28K for one; $16K in any quantity• Report savings for buying in multiples• See Example (next page)
Purchase thresholds (if you hit a threshold the price is reduced—timing intervals, monitoring, reporting)
– End of quarter discounts
August 31, 20092009 AHIA Annual Conference 25
4. Vendor Contracts—Purchasing
Total Est Est Medical Devices Bulk Bulk
Savings % Savings $ 1 2 3 4 5 Total3.00% 3% 3% 3% 3%
1,485,020 2.50% 37,126 38,239 39,386 40,568 41,785 43,039 203,017 2,593,427 2.50% 64,836 66,781 68,784 70,848 72,973 75,162 354,548 2,592,747 5.00% 129,637 133,526 137,532 141,658 145,908 150,285 708,910 3,421,377 5.00% 171,069 176,201 181,487 186,932 192,540 198,316 935,475
234,535 5.00% 11,727 12,079 12,441 12,814 13,199 13,595 64,127 343,724 5.00% 17,186 17,702 18,233 18,780 19,343 19,924 93,981
10,670,831$ 4.04% 431,580$ 444,528 457,864 471,600 485,748 500,320 2,360,058$
Bulk buys 2,360,058$
Growth for Years . . .
August 31, 20092009 AHIA Annual Conference 26
4. Vendor Contracts—Purchasing
Clinical Engineering
– Warranty costs versus service contracts• Compare equipment purchases (with warranties) in last year to
service costs
– Compare service contract costs to utilization of service– Check for service contract payments on equipment no
longer in service
Universal Garbage pick-up
– Check costs for scheduled pick-up versus cost for pick-up based on capacity/weight/volume
• MHS experience = 33% fewer pick-ups; $127K savings
August 31, 20092009 AHIA Annual Conference 27
5. Vendor Contracts—IT
Software licenses—inventory of software used to payments
– Microsoft licenses• Added licenses over time, by entity—re-negotiated for a system
license; saved over $500K
– Check for payments on software no longer in service
Computers and peripherals
– Terms– Vendor bids– Bulk purchases– Standardized computers
August 31, 20092009 AHIA Annual Conference 28
5. Vendor Contracts—IT
Vendor discounts/rebates
– Good install discounts– Volume discounts (# of users, devices)– Consulting expenses with build/implementation
• Audit expenses
Telecommunications
– Pagers—check usage by pager; if not used in the last X months, delete from inventory and billing
• # of companies used—move to one for larger discounts
August 31, 20092009 AHIA Annual Conference 29
6. Outsourcing Opportunities
When to Outsource?
– Lack of specific expertise– Specialized area– Not frequently reviewed– Politics
Manage your consultants
– Define scope of project– Define expectations – Define report requirements– Manage timeline
August 31, 20092009 AHIA Annual Conference 30
6. Outsourcing Opportunities
Tax reviews (state specific)
– Property taxes—exemptions for hospital services– B&O taxes—review for intercompany transactions– Sales and Use tax exemptions– Tax credits
• Training programs• Research, R&D• UBI—Work opportunity credits
August 31, 20092009 AHIA Annual Conference 31
6. Outsourcing Opportunities
Medical Devices
– Purchasing– Inventory management– Billing– Compliance
Telecomm reviews—usage, billing
Utility reviews—usage, billing
August 31, 20092009 AHIA Annual Conference 32
6. Outsourcing Opportunities
Check out vendors at this conference
Contingency vs. Negotiated fee arrangements
Check references
Give references
Manage your consultants
August 31, 20092009 AHIA Annual Conference 33
7. Co-Sourcing Opportunities
When to Co-Source?
– When you can learn from an expert and expect to then provide the audit services in-house
– Audit considerations• Size• Complexity• Time
Clearly define roles
Manage your consultants
August 31, 20092009 AHIA Annual Conference 34
7. Co-Sourcing Opportunities
Major construction projects (see New Perspectives Feb 2009)
– Audit to contract. – Identify unallowable/unsupported costs (see example).– Tie out labor rates to union contracts.– Self-performed Work
IT Reviews and/or System Optimization projects
– # of servers
IT Penetration testing
Data quality reviews (clinical data analysis)
August 31, 20092009 AHIA Annual Conference 35
Construction – unsupported costs
PA # Inv. Date Vendor Name Inv. Total Amount Amt. Questioned Lot Sell Reason1 1 8/1/2007 Computer Vendor $6,465.57 $6,465.57 Computers2 1 9/7/2007 Computer Vendor 390.78 390.78 Computers3 16 9/4/2008 Petty Cash 494.37 494.37 Incidentals - Golf, Parking, QFC, Tolls, Lunch4 20 11/14/2008 Restaurant 30.81 30.81 Incidentals - Restaurants7 22 3/3/2009 Supply Vendor 308,375.00 308,375.00 Lot Sell - unsupported8 22 3/6/2009 Supply Vendor 26,207.00 26,207.00 Lot Sell - unsupported9 22 3/9/2009 Supply Vendor 70,500.00 70,500.00 Lot Sell - unsupported
11 23 3/25/2009 Supply Vendor 338,792.00 338,792.00 Lot Sell - unsupported13 15 7/24/2008 Office Vendor 4,183.37 4,183.37 Office Equipment - 36" ink jet printer14 23 3/20/2009 Office Vendor 108.99 108.99 Office Equipment - CHAIR15 9 2/14/2008 Office Vendor 5,110.19 406.37 Office Equipment - Copy Machine Lease16 18 10/21/2008 Office Vendor 16,794.18 406.37 Office Equipment - Copy Machine Lease20 5 9/7/2007 Office Vendor 653.38 653.38 Office Equipment - desk jet and laser printers21 5 9/7/2007 Office Vendor 2,777.40 231.45 Office Equipment - live security bulk renewal22 5 9/11/2007 Office Vendor 1,647.38 494.22 office equipment - NEC ITR24 16 6/25/2008 Office Vendor 303.07 303.07 Office Equipment - Nikon Camera and flash drives25 21 1/23/2009 Office Vendor 130.80 130.80 Office Equipment - Office Chairs26 18 10/15/2008 Office Vendor 103.00 103.00 Office Equipment - programmed radio27 23 3/30/2009 Office Vendor 103.00 103.00 Office Equipment - programmed radio28 6 9/25/2007 Office Vendor 275.00 275.00 Office Equipment - Red VIP desk phone29 23 3/13/2009 Office Vendor 100.28 100.28 Office Equipment - shredder30 6 10/29/2007 Tool Vendor 16.69 16.69 Small Tools -- 31 18 10/15/2008 Tool Vendor 5,654.60 564.60 Small Tools - 2 socket sets, fish tape, brush32 23 3/27/2009 Tool Vendor 1,633.50 1,633.50 Small tools - 30 pipe threaders33 16 8/27/2008 Tool Vendor 96.31 47.93 Small Tools - 500w Gladiator Light64 16 8/21/2008 Tool Vendor 570.25 570.25 Small Tools - string lights and service lamp65 14 6/10/2008 Tool Vendor 565.83 39.35 Small tools - torch kit66 5 10/3/2007 Tool Vendor 150.58 150.58 Small tools - voltage detector; hot stick67 23 1/20/2009 Trailers 6,093.61 6,093.61 Temporary Facilities - Trailers68 16 7/10/2008 TOLL 14.45 14.45 Travel - Edmonds/Kingston Ferry69 9 1/1/2008 Expense Reimbursement 55.86 55.86 Travel - Mileage72 19 12/2/2008 Expense Reimbursement 181.35 181.35 Travel - mileage73 19 9/24/2008 Expense Reimbursement 4.00 4.00 Travel - toll74 1 8/13/2007 TOLL 14.45 14.45 Travel - Tolls75 7 12/14/2007 TOLL 11.55 11.55 Travel - tolls76 21 1/28/2009 TOLL 60.00 60.00 Travel - Tolls77 21 1/16/2009 TOLL 1,063.69 1,063.69 Travel - Tolls & Transponders78 19 9/25/2008 TOLL 72.00 72.00 Travel - transponder
various Small tools @ 2% of labor, not in contract 4,458.29 4,458.29 various Safety, included in ovhd 4,458.29 4,458.29 various Vehicle charge included in ovhd $490.00 490.00 various Insurance - unsupported 12,950.14 12,950.14
$47,831.41 $743,874.00
August 31, 20092009 AHIA Annual Conference 36
8. Cost Avoidance Opportunities
External Audit support
Fines and Penalties
Legal and Finance support (in lieu of attorneys and consultants)
– Establish internal billing rate– Track hours– Obtain internal agreement
August 31, 20092009 AHIA Annual Conference 37
9. Contracting Reviews—Before the Agreement is Signed
Where you don’t have the specific expertise,
Buy it, in advance!
Construction contracts
– Reviewed by external consultant experienced in construction work during the negotiations
– Savings in rates, terms• Cost 28K; savings $2M+
Management Services Agreements
– Validation of market rates (property purchases and sales; management service fees; broker fees)
• Cost $16k; savings $240K
August 31, 20092009 AHIA Annual Conference 38
10. Labor Opportunities
PTO usage (balance sheet impact first year)
– Audit use it or lose it limits; # of exceptions
Overtime usage (address top users)
Agency use costs
– Audit use over time, by department – Check overtime use and sick use in conjunction with agency
Eligible dependent audit (out-source)
August 31, 20092009 AHIA Annual Conference 39
10. Labor Opportunities
Audit health insurance use
– Utilization trends– If self-funded and using a third party administrator, ask
for SAS 70 and audit if needed
Reduce travel expense (time and money) by optimizing internal webinars and teleconferences
August 31, 20092009 AHIA Annual Conference 40
Other
Read New Perspectives—many great ideas
Grant Writer (should have at least 4:1 payback)
Contract Manager (for negotiations, management, FMV documentation) (should have payback)
August 31, 20092009 AHIA Annual Conference 41
Summary
Current hot topic– Many lists/many opportunities
Share
Focus on returns
Report savings– Taking and giving credit
August 31, 20092009 AHIA Annual Conference 42
Contacts
Catherine Wakefield
– VP Corporate Compliance and Internal Audit– [email protected]– 253-459-8002
Nate Morgan
– Compliance/Internal Auditor II– [email protected]– 253-459-8015