Florida_AAHAM_032120..

Report
The Unique Alternative to the Big Four®
Accelerating Net Revenue Analysis and the Related
Month End Close Process
March 21, 2013
AAHAM
The Unique Alternative to the Big Four®
Topics for Today
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Introduction and Assumptions
Critical Issues & Risks with Net Revenue
Revenue Cycle Analytics (RCA) Overview
Fundamentals for GPSR & A/R Valuation
Accelerated Monthly Closing Process for Net Revenue
Perspective from BayCare Health System
Questions?
Audit | Tax | Advisory | Risk | Performance
© 2011 Crowe Horwath LLP
2
The Unique Alternative to the Big Four®
Challenges Facing Healthcare Finance Executives
 Soaring patient responsibility
for A/R (growing uninsured, high
deductibles/consumerism, etc.)
 Increasing number of accounts
that are Pending Medicaid and
challenges in estimating conversion and
related reserves
 Difficulty in explaining the impact
of changes in prior estimate affecting
the current period results
 How do I explain that we have more
Medicaid contractual than revenue this
month?
Audit | Tax | Advisory | Risk | Performance
© 2011 Crowe Horwath LLP
3
The Unique Alternative to the Big Four®
Challenges Facing Healthcare Finance Executives
 Difficulty in quickly projecting
net revenue mid-month
 Material year end reserve adjustments
can have unpleasant consequences
 Reporting come from many data sources
 Reserve estimation approach needs to
be standardized and consistent yet allow
for end-user judgment
Audit | Tax | Advisory | Risk | Performance
© 2011 Crowe Horwath LLP
4
The Unique Alternative to the Big Four®
What is Crowe® Revenue Cycle Analytics?
Financial Reporting, Planning &
Monitoring
Provides analytics to:
Explain & forecast net revenue
Estimate reserves
Accelerate monthly close process
Identify revenue opportunities
Strengthen internal controls
Designed to support external audit
Audit | Tax | Advisory | Risk | Performance
© 2011 Crowe Horwath LLP
5
The Unique Alternative to the Big Four®
National perspective on net revenue challenges
Audit | Tax | Advisory | Risk | Performance
© 2011 Crowe Horwath LLP
6
The Unique Alternative to the Big Four®
Single source of truth for net revenue
Audit | Tax | Advisory | Risk | Performance
© 2011 Crowe Horwath LLP
7
® Net Revenue Reporting modules
RCA
Modules
Crowe
1 - Hindsight Analysis
1 - Hindsight Analysis
2 - Monthly Reserve Analysis
2 - Monthly Reserve Analysis
3 – Net Revenue Analysis
3 - Variance Analysis
4 - Net Revenue Budgeting
4 - Net Revenue Budgeting
5 – Revenue Cycle Monitor
5 – Revenue Cycle Monitor
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
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GPSR and Account Receivable Valuation:
Hindsight vs. Zero Balance Account Analysis
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
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Hindsight Analysis Overview
Hindsight or “Look-back” Analysis
 Regular hindsight analysis is fundamental in tracking accuracy of
estimation approach and providing supporting data
 Leverage Historical Data for Real Time Insight
 Supporting data for current reserves calculation
 Validation of Historical G/L estimates
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
10
Example: Hindsight Analysis
• Take A/R as of June 30, 2005 and show the actual resolution of
those balances over a period of time (e.g., through June 30, 2006)
Analysis Date
Activity Through Date
Report Type
Bad debt write-offs
Charity care
Contractual allowances
Administrative adjustments
Payments
Remaining balances
All Transactions & Remaining Balances
Summary Aged Trial Balance - Debits
Charge Variance
06/30/05
06/30/06
(9,852,475)
(6,011,683)
(43,630,183)
(1,653,575)
(86,975,177)
(148,123,092)
1,070,683
(149,193,775)
149,607,742
413,967
0.28%
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
11
Single hindsight analysis – June 30, 2005
A c t iv it y a s a % o f G ro s s A / R
7.0%
6.0%
5.0%
Bad debt writ e-of f s
4.0%
Charit y care
Administ rat ive adjust ment s
3.0%
Remaining balances
2.0%
1.0%
0.0%
06/ 05
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
12
Two years of analysis – June 30, 2004 & 2005
A c t iv it y a s a % o f G ro s s A / R
7.0%
6.0%
5.0%
Bad debt writ e-of f s
4.0%
Charit y care
Administ rat ive adjust ment s
3.0%
Remaining balances
2.0%
1.0%
0.0%
06/ 04
06/ 05
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
13
3 Reference Points – June 2004, June 2005, April 2006
A c t iv it y a s a % o f G ro s s A / R
8.0%
7.0%
6.0%
5.0%
Bad debt writ e-of f s
Charit y care
4.0%
Administ rat ive adjust ment s
Remaining balances
3.0%
2.0%
1.0%
0.0%
06/ 04
06/ 05
04/ 06
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
14
Complete Picture -Monthly Hindsight Analysis
June 2004
June 2005
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
15
Example Hospital – 12 Month Hindsight
Inpatient
Amounts as a % of Gross A/R
Bad debt write-offs
Charity care
Remaining balances
Administrative adjustments
Denials
Combined BD and Rem Balance
Contractual allowances
Payments
Bad debt recovery %
Takeback %
08/11
6.1%
6.2%
6.7%
-0.2%
7.5%
12.8%
49.3%
24.1%
1.0%
-2.6%
09/11
6.9%
8.5%
4.8%
-0.6%
7.2%
11.7%
49.2%
23.8%
1.1%
-2.1%
10/11
7.7%
9.2%
4.8%
-0.5%
6.3%
12.5%
49.1%
23.3%
1.3%
-2.2%
11/11
7.6%
9.7%
4.9%
-0.7%
5.1%
12.5%
50.9%
22.6%
1.2%
-2.7%
12/11
8.5%
10.4%
5.4%
-1.8%
4.6%
13.9%
50.2%
22.8%
1.1%
-2.8%
01/12
8.6%
12.8%
5.5%
-2.2%
4.6%
14.0%
48.5%
22.3%
1.2%
-3.0%
02/12
9.1%
13.3%
5.4%
-1.9%
4.3%
14.4%
47.0%
23.0%
1.2%
-3.1%
Outpatient
Amounts as a % of Gross A/R
Bad debt write-offs
Charity care
Remaining balances
Administrative adjustments
Denials
Combined BD and Rem Bal
Contractual allowances
Payments
Bad debt recovery %
Takeback %
08/11
8.4%
5.6%
7.5%
0.9%
6.6%
15.9%
56.2%
14.2%
1.0%
-0.2%
09/11
8.9%
7.0%
7.9%
0.5%
6.8%
16.8%
54.9%
13.5%
1.0%
-0.3%
10/11
8.7%
7.9%
8.1%
0.2%
6.9%
16.8%
55.0%
12.7%
2.1%
-0.3%
11/11
9.4%
7.9%
7.2%
-0.7%
5.8%
16.7%
56.7%
12.9%
2.0%
-0.6%
12/11
11.0%
9.0%
7.5%
-1.5%
6.0%
18.6%
54.0%
13.2%
1.9%
-0.6%
01/12
11.0%
8.7%
7.1%
-1.6%
5.4%
18.1%
55.6%
13.3%
1.9%
-0.5%
02/12
10.9%
8.4%
6.8%
-1.8%
4.9%
17.7%
55.7%
14.4%
1.9%
-0.5%
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
16
Charity Care and Bad Debt considerations
• Hindsight data will be best source of supporting data
• Determine what is the appropriate hindsight time period
 12 months is industry norm
 Remaining balance should be 3% or less
• Consider updating reserve percentages monthly and no later
than quarterly
• Bad debt recoveries
 Closed A/R should continue to generate cash collections from
agencies
 Must consider “takeback” in addition to recoveries on Bad Debt and
Inactive Accounts
 Should mirror Hindsight Ranges
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
17
High Risk Payors
• Use hindsight data instead of ZBA data
• What are high risk payors?
 Examples
 Self Pay Primary
 Medicaid Pending
 Self Pay After Insurance
 State or local programs
• Focus on historical net realizable value
• We typically see 5-10% realization on Self Pay Primary
• We typically see 25-35% realization on Self Pay After Insurance
• Medicaid Pending realization should be somewhere between Self Pay
Primary and approved Medicaid
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
18
Supporting Data for Current Reserves Calculation
MEDIC ARE PPS (MC )
181-270 $ 181-270 %
271-360 $ 271-360 %
GROSS A/R
$132,858
0.00%
$150,128
ADMIN ADJUSTMENT &
DENIAL
BAD DEBT & REMAINING
BALANC E
C HARITY
($45,696)
-34.39%
($28,648)
($9,178)
-6.91%
($2,187)
-1.46%
$0
0.00%
$0
0.00%
C ONTRAC TUAL
($44,421)
-33.44%
($83,881)
-55.87% ($172,114)
PAYMENT
($33,563)
-25.26%
($35,412)
-23.59%
VARIANC E
SELF PAY (SELF)
GROSS A/R
0.00%
361+ $
$750,517
-19.08% ($511,957)
361+ %
Total $
Total %
0.00% $11,716,057
0.00%
-68.21%
($739,712)
-6.31%
$7,086
0.94%
($184,995)
-1.58%
$0
0.00%
($35,350)
-0.30%
-22.93% ($6,031,412)
-51.48%
-9.80% ($4,724,589)
-40.33%
($73,532)
$0
0.00%
($1,087)
-0.72%
($1,436)
-0.19%
$86,083
0.73%
$760,907
0.00%
$188,955
0.00%
$214,711
0.00%
$6,809,544
0.00%
$83,639
10.99%
$46,157
24.43%
$31,566
14.70%
$589,543
8.66%
ADMIN ADJUSTMENT &
DENIAL
BAD DEBT & REMAINING
BALANC E
C HARITY
($397,185)
-52.20% ($104,299)
-55.20%
($95,364)
-44.41% ($3,223,615)
-47.34%
($189,293)
-24.88% ($102,491)
-54.24%
($94,232)
-43.89% ($2,925,791)
-42.97%
C ONTRAC TUAL
($205,493)
-27.01%
($28,139)
-14.89%
($43,413)
-20.22%
($995,635)
-14.62%
($52,575)
-6.91%
($183)
-0.10%
($13,267)
-6.18%
($254,047)
-3.73%
$0
0.00%
$0
0.00%
$0
0.00%
$147,788
2.17%
PAYMENT
VARIANC E
Self Pay After Insurance GROSS A/R
(SPAI)
ADMIN ADJUSTMENT &
DENIAL
BAD DEBT & REMAINING
BALANC E
C HARITY
$880,381
0.00%
$336,044
0.00%
$622,342
0.00%
$3,376,879
0.00%
($33,867)
-3.85%
($32,236)
-9.59%
($39,919)
-6.41%
($178,703)
-5.29%
-51.27% ($1,976,647)
-58.53%
($649,355)
-73.76% ($224,437)
($106,978)
-12.15%
($16,624)
-4.95%
($32,002)
-5.14%
($360,968)
-10.69%
$66,062
7.50%
$4,879
1.45%
($58,846)
-9.46%
$59,197
1.75%
PAYMENT
($156,243)
-17.75%
($67,626)
-20.12% ($172,479)
-27.71%
($919,758)
-27.24%
VARIANC E
($160,072)
-18.18%
($13,441)
0.02%
($206,713)
-6.12%
C ONTRAC TUAL
-66.79% ($319,096)
-4.00%
$115
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
19
Validation of Historical G/L estimates
RCA Hindsight Analysis Trend
* Note Activity is for a one year period and remaining balance is as of one year after period.
Analysis Date
Activity Through Date
CONTRACTUAL ALLOWANCE RECON
AR7
Contractual allowances
AR9
Administrative adjustments
Total
G/L
AU 1000 Acct 1150-1189
Difference
% Difference
11/30/05
11/30/06
12/31/05
12/31/06
(40,516,131)
(2,298,510)
(42,814,641)
(37,813,807)
(5,000,834)
13.22%
(43,288,305)
(1,638,347)
(44,926,653)
(40,814,008)
(4,112,645)
10.08%
(48,394,779)
1,870,696
(46,524,083)
(45,030,837)
(1,493,246)
3.32%
(50,796,666)
(2,644,296)
(53,440,963)
(48,368,244)
(5,072,719)
10.49%
(53,877,022)
(2,475,747)
(56,352,769)
(52,794,991)
(3,557,778)
6.74%
(5,485,095)
(2,987,857)
(2,497,239)
83.58%
(5,440,271)
(2,890,226)
(2,550,045)
88.23%
(5,878,264)
(2,915,173)
(2,963,092)
101.64%
(6,361,148)
(4,023,116)
(2,338,032)
58.11%
(6,794,930)
(5,081,727)
(1,713,203)
33.71%
DOUBTFUL ACCOUNTS ALLOWANCE RECON
AR3
Bad debt write-offs
AR17
Remaining balances
Total B/D
G/L
AU 1000 Acct 1200-1219
Difference
% Difference
(10,140,360)
(1,457,008)
(11,597,368)
(17,351,570)
5,754,201
-33.16%
(10,042,184)
(1,159,877)
(11,202,061)
(16,983,926)
5,781,866
-34.04%
(10,554,405)
(1,534,008)
(12,088,413)
(17,172,655)
5,084,243
-29.61%
(10,796,899)
(1,493,015)
(12,289,914)
(19,214,466)
6,924,552
-36.04%
(11,576,133)
(2,133,792)
(13,709,926)
(20,882,733)
7,172,807
-34.35%
NET AR RECON
AR13
Payments
G/L
Net A/R
Difference
% Difference
(73,298,939)
(74,593,867)
(1,294,928)
1.74%
(74,085,633)
(74,909,264)
(823,631)
1.10%
(82,253,294)
(82,299,183)
(45,889)
0.06%
(84,665,576)
(85,248,954)
(583,378)
0.68%
(86,906,355)
(84,795,586)
2,110,769
-2.49%
CHARITY CARE ALLOWANCE RECON
AR5
Charity care
G/L
AU 1000 Acct 1190
Difference
% Difference
01/31/06
01/31/07
02/28/06
02/28/07
03/31/06
03/31/07
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
20
RCA Reserve Approach: Hindsight vs. ZBA
Zero Balance Account (ZBA) Analysis
 Performed on Accounts with Dates of Service in given time period
 Generally not less than Three to Six Months, or up to 1 Year.
 Total Charges = Total Charges to provide robust data sample
 Parameters used to Increase and Decrease Sample
 Large Dollar Account Threshold
 Inpatient/Outpatient Co/Deductible Threshold
 Minimum Account Threshold
 Must Consider Pricing/Realization Changes
• Use of contract modeling system should be considered in the
estimate
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
21
The Unique Alternative to the Big Four®
Example ZBA data (based on date of service)
Inpatient
Total Charges
Payments
Payment
Percent
Allowance
Contractual
Percent
Aetna (AE)
$1,905,281.93
($1,146,144.92)
-60.16%
($691,647.33)
-36.30%
BLUE CROSS MANAGED CARE (B)
$9,883,564.44
($4,517,849.34)
-45.71%
($5,201,189.20)
-52.62%
BWC (WC)
$807,472.51
($315,858.96)
-39.12%
($491,424.95)
-60.86%
Cigna (CI)
$716,527.25
($421,521.92)
-58.83%
($272,600.94)
-38.04%
COMMERCIAL TRADITIONAL (CT)
$377,850.43
($167,212.54)
-44.25%
($104,360.24)
-27.62%
Healthspan (HS)
$2,142,776.38
($1,097,876.13)
-51.24%
($1,017,186.93)
-47.47%
Humana (HU)
$5,039,775.78
($2,738,267.80)
-54.33%
($2,201,457.99)
-43.68%
MEDICAID (MD)
$2,439,112.91
($710,587.98)
-29.13%
($1,681,962.83)
-68.96%
Medicaid HMO (PW)
$5,058,116.60
($1,821,354.90)
-36.01%
($3,234,367.73)
-63.94%
Medical Mutual (MM)
$1,937,489.18
($969,361.35)
-50.03%
($927,821.01)
-47.89%
MEDICARE (MC)
$40,745,085.89
($13,870,705.81)
-34.04%
($26,707,095.11)
-65.55%
MEDICARE HMO (MB)
$13,908,555.78
($4,763,764.79)
-34.25%
($8,966,768.34)
-64.47%
OTHER (OT)
$185,888.66
($59,327.88)
-31.92%
($126,560.78)
-68.08%
OTHER MANAGED CARE (OM)
$858,835.36
($537,961.37)
-62.64%
($301,916.25)
-35.15%
PENDING MEDICAID (PM) (PM)
$960,227.64
($229,379.62)
-23.89%
($586,388.81)
-61.07%
$2,368,945.21
($58,369.34)
-2.46%
($80,185.52)
-3.38%
$4,305,907.08
($2,096,523.24)
-48.69%
($2,150,105.22)
-49.93%
$93,641,413.03
($35,522,067.89)
-37.93%
($54,743,039.18)
-58.46%
Self Pay (SP)
United Healthcare (UH)
InpatientTotal
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22
Reserve Approach: Hindsight vs. ZBA
An integrated calculation approach is best practice.
Allowance category
Source data
Contractual allowances
Zero balance account (ZBA) activity, unless
accounts are contract modeled
Administrative adjustments ZBA activity or hindsight activity (if
& denials
considerably different from ZBA)
Charity Care
Hindsight (trending) data
Bad Debt
Hindsight (trending) data
 Special Attention Provided to “High Risk” Payors
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
23
Accelerating the
Month End Close Process and
Net Revenue Reporting
Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP
and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by
Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2009 Crowe Horwath LLP
24
The Unique Alternative to the Big Four®
Fundamentals for the Month End Close Reporting Process
Identify Appropriate Month End Close Team
 Should Include Finance, PFS & MC Resources
 IT maybe necessary depending on source of data
 Make inquiries of revenue cycle & managed care
People
Develop and Outline Standard Process
 Process should included Timeline & Checklists
 Assignment of Reporting & Close Model
Completion
 Assign Roles & Responsibilities with back-ups
 Separation of Duties: Preparer vs. Reviewer
Process
Leverage Technology to Accelerate Process




Automate, Update & Refresh Assumptions
Recast New Assumptions against Prior Period AR
Decrease time spent “building” models
Increase time spent analyzing and prescribing
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Technology
© 2011 Crowe Horwath LLP
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The Unique Alternative to the Big Four®
Example Month-End Timeline for 2 - 5 Day Close
11/26/2008 - 11/27/2008
Update hindsight
trending,
prepare
ZBA comparison
11/28/2008 - 12/1/2008
Update tables and configuration
based on pre-close meeting results
12/2/2008 - 12/3/2008
Present analysis
to management,
determine follow-up
items and questions
12/1/2008 - 12/2/2008
Prepare
reserve
analysis
11/27/2008 - 11/28/2008
Conduct
pre-close
meeting with:
- Accounting
- Reimbursement
- Managed Care
- PFS
11/26/2008
Pre-close
planning
12/3/2008 - 12/6/2008
Adjust reserve analysis (if needed),
resolve follow-up questions/issues
12/1/2008
Month-end
begins
12/6/2008
Books
closed
Opportunity area where close
process could be further
condensed
Continuous net revenue monitoring
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The Unique Alternative to the Big Four®
People: Revenue Management Team
Crowe Healthcare Advisory Services
General Ledger
Finance
Net Revenue Reporting
Service Group Pricing & Payer Parity
Charity Care Reporting
Net Revenue Yield Variance
Open A/R valuation
Bad debt write-offs & recoveries
Daily cash management
Managed Care Portfolio Mgmt
Audit | Tax | Advisory | Risk | Performance
-Rate
Revenue
Management
-Volume
Managed
Care
Revenue Cycle
A/R Performance
- Open A/R
- Bad Debt Mgmt
- Denial Mgmt
Budget development & monitoring
Contract Inventory
-Expected Pmt
-Payer Mapping
Revenue Enhancement
- Discrepancies
- Underpayments
- Product parity
© 2011 Crowe Horwath LLP
27
The Unique Alternative to the Big Four®
Trouble rolls down hill…
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The Unique Alternative to the Big Four®
Who’s fault is it?
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The Unique Alternative to the Big Four®
Process: Standardize Pre-Close Activities
Revenue Management Team Meeting: “Pre-Close” Discussion
 Determine Regular Meeting Time – 5 Days Prior to Day 1
 Standardized Agenda designed to Address Potential Area of Risk
 Meeting minutes should be taken and shared
Most common issues discussed:
 Patient volumes/Payer mix
 Revenue cycle process changes; ie new initiatives
 Payer realization rates/Pricing Changes
Finance can do “heavy lifting” in Pre-close Phase
 Update all reserve assumptions: Hindsight & ZBA Analysis
 Re-Cast: Run New Assumptions against Prior Period AR to
Isolate/Understand Impact
 Large Balance Account Review
 Net Revenue Monitoring Throughout Month
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The Unique Alternative to the Big Four®
Fundamentals of net revenue reporting
 Permanently store reserve estimates at the patient account level
 Standardization of payors across multiple different entities
 Calculates current month gross revenue by payor (should tie very closely to G/L)
 Determines deductions on current month gross revenue, based on:
 Transactions posted during the month on current month revenue
 Reserves estimated on current month revenue
 Separately determines changes in prior estimate based on:
 Changes in reserves on open accounts
 Differences in actual transaction experience versus prior reserves
 Separately categorizes changes where primary insurance did/did not change
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The Unique Alternative to the Big Four®
Technology: Finance Continually Monitors Net Revenue
 Biggest barrier to accelerated close is
review and explanation of net revenue
variances
 Continuous monitoring can surface issues
and causes for variance well before close
process actually begins
 Daily or (at least) weekly reporting can
help to facilitate the quick analysis of
fluctuations in net revenue during a period
of time
 Actively monitor and project net revenue
to avoid surprises during close
 Segregation of current period activity from
prior period
 Determine cause of fluctuations
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Solving the mystery…
The Unique Alternative to the Big Four®
Change in Reserve Estimates - Primary Insurance Unchanged
Many of the material changes in prior estimates where there is a
difference between estimate & actual can be explained by revenue
cycle process issues




Issues with contract modeling system
Posting errors
Inconsistent write-off practices
Re-classing prior activity from bad debt to charity or administrative
adjustments
 Interim billed accounts
 Charge removals or late charges
Audit | Tax | Advisory | Risk | Performance
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The Unique Alternative to the Big Four®
Change in Reserve Estimates - Primary Insurance Changed
 Accounts frequently flip payors during the month will change reserve estimates
or actual activity (particularly if posting discounts at time of billing)
 Most common example is Pending Medicaid
 Reserves will be a blend of contractuals, charity, and bad debt
 If account flips to Medicaid, reserves will be mostly contractual (hit to contractuals, pick
up in bad debt and charity)
 If account flips to Self Pay, reserves will be mostly charity and bad debt (hit to charity
and bad debt, pick up to contractuals)
 No current period gross revenue, yet net revenue is impacted
Audit | Tax | Advisory | Risk | Performance
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35
The Unique Alternative to the Big Four®
Net Revenue Analysis – Summary level
11/30/2012
Inpatient
$
Gross Revenue
Outpatient
%
$
$19,822,026.00
18,1102,253
Contractuals Allowances ($11,082,452.27)
Admin Adjustments
($20,370.13)
Charity Care ($1,861,897.02)
Bad Debt
($297,798.82)
Current Period Net/Net
$6,559,507.81
Revenue
-55.91% ($10,614,959.98)
-0.10%
($179,885.85)
-9.39%
($558,489.80)
-1.50%
($419,309.75)
33.09%
$6,337,608.50
Total
%
$
%
$37,939,279.93
-58.61% ($21,697,412.25) -57.20%
-0.99%
($200,255.98)
-0.53%
-3.08% ($2,420,386.82)
-6.38%
-2.32%
($717,108.57)
-1.89%
34.99%
$12,897,116.31 34.00%
Changes In Prior Estimate
Total Net/Net Revenue
$602,495.57
$7,162,003.38
3.04%
36.13%
($1,181,624.47)
$5,155,984.04
-6.52%
28.47%
($579,128.90)
$12,317,987.41
-1.53%
32.47%
Cash Collection
Bad Debt Recoveries
Total Cash Collected
$7,662,320.87
$28,210.26
$7,690,531.13
38.66%
0.14%
38.80%
$6,073,045.64
$55,823.72
$6,128,869.36
33.53%
0.31%
33.84%
$13,735,366.51
$84,033.98
$13,819,400.49
36.21%
0.22%
36.43%
Difference
Cash to Net/Net Revenue
$528,527.75
107.38%
Audit | Tax | Advisory | Risk | Performance
$972,885.32
118.87%
$1,501,413.08
112.19%
© 2011 Crowe Horwath LLP
36
The Unique Alternative to the Big Four®
Net Revenue Analysis – Payor level
Financial Class
Gross
Revenue
Mix %
Gross
Revenue
with Pricing
Reduction
AGENCY (AGEN)
$263.3
0.63%
$263.3
AHCCCS (AHCC)
$3,484.5
8.31%
AHCCCS SENIOR PLANS
(AHCCSR)
STATE DEPT OF
CORRECTIONS (ADOC)
BCBC INDEMNITY PLANS
(BCBSIND)
BCBS HMO PLANS
(BCBSHMO)
BCBS PPO PLANS
(BCBSPPO)
CHAMPUS (CHAM)
$3,865.1
Current
Change Realization
Month Net in Prior
% - VA1
Revenue % Estimate
s
$78.9
46.23%
$3,484.5
16.78% ($398.4)
5.35%
9.21%
$3,865.1
25.62%
($75.1)
23.67%
$0.0
0.00%
$0.0
0.00%
($0.2)
0.00%
$19.2
0.05%
$19.2
27.30%
$0.2
28.11%
$0.0
0.00%
$0.0
0.00%
$3.7
0.00%
$1,674.8
3.99%
$1,674.8
32.43%
($23.0)
31.05%
$221.3
0.53%
$221.3
19.88%
$32.6
34.61%
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16.26%
© 2011 Crowe Horwath LLP
37
The Unique Alternative to the Big Four®
Net Revenue Analysis – Account level
Activity On Account
ATB Listing
Account Number
Period Date
Account Balance
Total Charges
Aging Bucket
Current Financial Class
Primary Insurance Provider
AcctXXXX
1/31/2013
$37,804.48
$37,804.48
DNFB
CHARITY
CHARITY-MISC
AcctXXXX
2/28/2013
$37,804.48
$37,804.48
31-60
Medicaid
UNIVERSITY FAMILY
CARE/Medicaid
Transaction Listing
Account Number
Posting Date
Transaction Amount Transaction Code
Transaction Type
Transaction Sub Type
Transaction Description
AcctXXXX
2/2/2013
($370.00)
ASELF ADMIN ADJUSTMENT Not Specified
SELF PAY ADJUSTMENT
AcctXXXX
2/5/2013
$370.00
ASELF ADMIN ADJUSTMENT Not Specified
SELF PAY ADJUSTMENT
AcctXXXX
2/28/2013
$0.00
PUFC1 PAYMENT
UFC ELECTRONIC PAYMENT
Insurance
Reserves On Account
ATB Listing
Account Number
Period Date
Account Balance
Contractual Estimates
Admin Adj Estimates
Charity Estimates
Bad Debt Estimates
AcctXXXX
1/31/2013
$37,804.48
$0.00
$0.00
$37,804.48
$0.00
AcctXXXX
2/28/2013
$37,804.48
$30,031.88
$215.49
$638.90
$434.60
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38
The Unique Alternative to the Big Four®
Periodic Triangulation
Three high-level indicators to validate net/net revenue reporting:
 Hindsight analysis – do historical cash collections equal net A/R?
 Source: Hindsight trending template
 Cash to Net/Net Revenue – over a period of time, are cash collections tracking
with reported net/net revenue?
 Current A/R valuation – is current ratio of net A/R to gross A/R at or below
historical hindsight payment rate?
Audit | Tax | Advisory | Risk | Performance
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39
The Unique Alternative to the Big Four®
Accounts Receivable Analysis – Payor level
Transaction Type
181-270
$
Gross A/R
Contractual
$63,947
$9,009
MEDICARE PPS (MC) Total
SELF PAY (SELF) Total
Self Pay After Insurance (SPAI)
Total
Administration Adjustment
$19
Net A/R (After C/A & AA)
Charity
$54,918
$3,185
%
14.09%
0.03%
85.88%
4.98%
7.62%
73.28%
271-360
$
$61,564
$0
$18
$61,545
$905
%
0.00%
0.03%
99.97%
1.47%
4.17%
94.33%
Bad Debt
$4,872
Net A/R (Less BD & Charity)
Gross A/R
$46,862
$1,315,169
Contractual
Administration Adjustment
Net A/R (After C/A & AA)
Charity
Bad Debt
Net A/R (Less BD & Charity)
Gross A/R
$151,113
($123,100)
$1,287,156
$398,233
$801,918
$87,005
$809,242
11.49%
-9.36%
$48,736
$4,467
8.40%
0.77%
97.87%
$526,986
90.83%
30.28%
60.97%
$113,659
$370,707
19.59%
63.89%
$42,620
7.35%
Contractual
Administration Adjustment
$136,034
$56,000
16.81%
6.92%
($1,715)
$40,065
Net A/R (After C/A & AA)
Charity
$617,209
$149,629
76.27%
18.49%
Bad Debt
$339,119
Net A/R (Less BD & Charity)
$128,461
Audit | Tax | Advisory | Risk | Performance
$2,567
360+
$58,073
$580,189
$
Total
%
$20,249
$0
$6
$20,243
$146
$18,337
$1,761
$1,028,019
0.00%
0.03%
99.97%
0.72%
90.55%
8.70%
$
%
$8,674,043
$3,783,264
$85
$4,890,695
$31,221
$183,003
$4,676,470
$6,522,286
43.62%
0.00%
56.38%
0.36%
2.11%
53.91%
$34,130
($9,766)
$1,003,655
$260,603
$677,948
$65,104
$1,125,551
3.32%
-0.95%
97.63%
25.35%
65.95%
6.33%
$807,419
($897,937)
$6,612,804
$2,623,620
$3,554,813
$434,371
$3,339,479
12.38%
-13.77%
101.39%
40.23%
54.50%
6.66%
-0.41%
9.58%
$78,676
$127,525
6.99%
11.33%
$223,081
$298,817
6.68%
8.95%
$379,861
$48,973
90.83%
11.71%
$919,350
$121,897
81.68%
10.83%
$2,817,581
$535,871
84.37%
16.05%
41.91%
$233,901
55.93%
$727,582
64.64%
$1,768,433
52.96%
15.87%
$96,987
23.19%
$69,871
6.21%
$513,277
15.37%
6.62%
$418,211
© 2011 Crowe Horwath LLP
40
The Unique Alternative to the Big Four®
Accounts Receivable Analysis – Summary level
Accounts Receivable - Debit Balance
Inpatient
Outpatient
Total Accounts Receivable
A/R % Increase/(Decrease)
Feb-2013
Jan-2013
% Change
0.58%
1.32%
0.94%
Feb-2013
$66,859,353
$64,138,287
$130,997,641
Jan-2013
$66,472,967
$63,304,534
$129,777,500
Change
$386,387
$833,754
$1,220,140
$28,860,523
$296,578
$36,248,619
$776,120
$66,181,840
$29,259,945
$417,395
$35,573,294
$780,619
$66,031,253
($399,422)
($120,817)
$675,325
($4,499)
$150,588
43.17%
0.44%
56.52%
1.21%
50.52%
% of Gross
44.02%
0.63%
56.19%
1.23%
50.88%
-0.85%
-0.18%
0.32%
-0.02%
-0.36%
($142,243)
$561,423
$419,179
($211,161)
$953,956
$742,795
$68,917
($392,533)
($323,616)
-0.21%
0.88%
0.32%
-0.32%
1.51%
0.57%
0.10%
-0.63%
-0.25%
Bad Debt
Inpatient
Outpatient
Other Bad Debt Reserves
Total Bad Debt
$9,845,740
$12,927,259
$61,695
$22,834,694
$9,400,423
$12,850,046
$64,798
$22,315,267
$445,317
$77,213
($3,104)
$519,427
14.73%
20.16%
0.05%
17.43%
14.14%
20.30%
0.05%
17.20%
0.58%
-0.14%
0.00%
0.24%
Charity
Inpatient
Outpatient
Other Charity Allowances
Total Charity
$10,144,930
$6,001,558
$82,788
$16,229,276
$10,370,269
$5,875,696
$14,293
$16,260,258
($225,339)
$125,862
$68,495
($30,982)
15.17%
9.36%
0.06%
12.39%
15.60%
9.28%
0.01%
12.53%
-0.43%
0.08%
0.05%
-0.14%
$105,664,989
$105,349,573
$315,417
80.66%
81.18%
-0.52%
Contractual Allowances
Inpatient RCA Contractual
Inpatient Unapplied Contractual Discount
Outpatient RCA Contractual
Outpatient Unapplied Contractual Discount
Total Contractual Allowances
Admin Adjust Allowance
Inpatient
Outpatient
Total Admin Adjust Allowance
TOTAL RESERVE
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41
BayCare Health System
 Background
 RCA Implementation
 RCA Next Steps
About BayCare
Leading community-based healthcare system
in Tampa Bay, Florida
 Network of 10 not-for-profit hospitals, outpatient facilities
& services including imaging, lab, behavioral health and
home health care
 More than 200 locations throughout Tampa Bay
 Founded in 1997 as integration of 3 Community
Health Alliances (CHA)
1. St. Joseph’s Baptist
2. Morton Plant Mease
3. St. Anthony’s
RCA Implementation
 April-June 2012 = 12 Week Installation for 9 hospitals
 July 2012 to December 2012 =
“Deep Dive” of data inside RCA tool
 July 2012 to present
1. Perform parallel review of RCA and BayCare allowance
methods
2.
During certain months, we applied different allowance
assumptions and completed more than one scenario
RCA Implementation (cont.)
 February 2013 = Concluded that Crowe RCA allowance
method is reasonable and started
transition with some adjustments
 May 2013 = Will book to Crowe RCA
allowance method in the
general ledger
RCA Next Steps
 March 2013 = Consider the implementation of
Budget Module of RCA
for usage of rolling
18 month net revenue
Forecast
 July 2013 = Begin
implementation of
Winter Haven Hospital
Contact Information
Mindy Arroyo
Revenue Management Specialist
BayCare Health System
(727) 519-1742
[email protected]
The Unique Alternative to the Big Four®
Crowe Horwath LLP Disclosure
 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association.
Each member firm of Crowe Horwath International is a separate and independent legal
entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or
omissions of Crowe Horwath International or any other member of Crowe Horwath
International and specifically disclaim any and all responsibility or liability for acts or
omissions of Crowe Horwath International or any other Crowe Horwath International
member. Accountancy services in Kansas and North Carolina are rendered by Crowe
Chizek LLP, which is not a member of Crowe Horwath International. © 2011 Crowe
Horwath LLP
Audit | Tax | Advisory | Risk | Performance
© 2011 Crowe Horwath LLP
48

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