Analysis and Recommendations. August 3, 2015

Transcription

1 Analysis and Recommendations August 3,

2 Overview University Health System entered into a Management Agreement with Washington County Regional Medical Center ( WCRMC ) effective December 8, University Health System provided notice of termination of the Management Agreement to The Hospital Authority of Washington County on June 12, 2015 after discussions of alternatives and negotiations to enter a lease between the parties were unsuccessful. The termination will be effective December 11, University Health System has funded Stroudwater Associates to conduct a financial and operational review of WCRMC to determine what actions should be considered to improve the financial condition of WCRMC and ensure its future viability to serve the community in Sandersville, Georgia. 2

3 Approach and Methodology Approach and Methodology Met with Senior Executive Team at University Health System on July 7, 2015 Reviewed April 25, 2014 Stroudwater Range of Value and Operational Analysis Reviewed January 21, 2015 Stroudwater Revenue Cycle Analysis and Recommendations Gathered and reviewed all pertinent financial data Current and historical financial statements Most recently filed cost report Hospital inpatient and outpatient volume statistics Analyzed GHA HeRMES 2.0 market share data Reviewed May 2014 Operational Assessment prepared by Community Hospital Corp. Prepared report and recommendations Meeting with University Health System Senior Executive Team on July 31, 2015 to review findings 3

4 Profitability Analysis Service Area $35,000 WCRMC: Financial Operating Trends (in 000's) 0.00% $30,000 $25,000 $20,000 $15,000 $10,000 29,583 $26, % 27,121 $23,889 24,627 $22, % -2.00% -4.00% -6.00% -8.00% % % $5, % % $ TTM May Total Operating Revenue Total Operating Expenses Operating Margin % WCRMC continues to experience operating expenses in excess of revenue Simultaneously, operating revenue is trending in a downward direction TTM improved operating margin is primarily due to expense reductions in 2014 and 2015 Biggest impact was 53 FTE reduction in force in early

5 Liquidity Analysis Service Area Historical Liquidity Days Cash on Hand Days in Accounts Receivable Payment Days Days Cash on Hand decreased from 36.1 days in FY 2011, to a low of 9.1 in FY 2014, and then increased to 32 days at May 2015 (University credit line of $500,000 provided) Payment Days have increased consistently since 2011 (41 days) to May 2015 (61.5 days)most likely in an effort to preserve cash Net Days in A/R are unusually low, which may be indicative of Revenue Cycle challenges or limitations. Gross Days in A/R are extremely high. 5

6 Financial Statement Review Conclusions Service Area Overall Situation Summary Patient service revenues continue a steady decline due to volume and payment reductions Operating losses persist though less than in prior periods due to significant expense reductions in late 2014 Weak cash flows emanate from revenue cycle and business office challenges This report highlights several revenue enhancement and expense reduction strategies and opportunities Recommendations to Follow Evaluate the opportunities and priorities discussed in this report for improvement of operating profitability and organizational liquidity 6

7 Operating Stats: ADC & Surgery Volume Average Daily Census TTM Routine ICU Swing bed Routine and swing bed ADC has trended lower during the historical period ICU was on the same trajectory until it was closed during 2014 This is consistent with national rural trends Surgeries WCRMC is experiencing industry trend to more ambulatory procedures Historical volumes are attributable primarily to two surgeons General surgeon - employed Orthopedic - contract TTM Surgery IP Surgery OP 7

8 Operating Stats: Lab Orders & Radiology Exams 120,000 80, ,211 Lab orders 115,214 94,017 90,110 Lab orders have declined with the reduction in pediatric clinic visits and general volume reductions 40,000-16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, TTM Radiology Exams Diagnostic CT scans Mammo Untrasound MRI Nuclear Medicine TTM Radiology exams have mostly been consistent in part to increased outpatient surgical volumes 8

9 Operating Stats: Therapy & Clinic Visits 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Therapy Respiratory PT OT ST Wound Care TTM With the exception of respiratory, therapy units have generally trended downward 15,000 13,000 11,000 9,000 7,000 5,000 3,000 1,000 (1,000) Clinic Visits 14,175 13,898 9,332 9,350 6,425 6,071 6,546 6,582 3,494 1,938 2,067 2, TTM Pediatric Office Surgery Practice Family Practice Pediatric clinic visits have declined from 2013 due to the departure of two pediatricians. Surgery practice visits have increased in 2015 with the addition of Dr. Barja 9

10 Medical Staff: Active Medical Staff Provider Name Specialty Practice Location Employer Richard Eaton Family Medicine Sandersville WCRMC Erin Nobles Family Medicine Sandersville WCRMC Chandler McDaniel Family Medicine Sandersville ORMC Cherilyn Zellner Family Medicine Wrightsville CHS FQHC Bridgett Bailey Family Medicine Tennille CHS FQHC Israel Bryson Family Medicine Wrightsville CHS FQHC Kent Ford Family Medicine Sandersville CHS FQHC Charles Jackson Family Medicine CHS FQHC Crystal Owens Family Medicine Irwinton CHS FQHC Lisa Counsell Internal Medicine Sandersville WCRMC Linus Ejim Internal Medicine Sandersville Self Mark Harvey Internal Medicine Sandersville Self Kim Kitchens Internal Medicine Sandersville Self Layne Kitchens Internal Medicine Sandersville Self Jean Sumner Internal Medicine Wrightsville Self Christy Mountain Pediatrics Sandersville WCRMC Jennifer Tarbutton Pediatrics Sandersville WCRMC Robert Gatliff General Surgery Sandersville WCRMC Roberto Barja Orthopedics Sandersville Contract Mohan Papudesu OB/Gyn Sandersville Self Janice Stahl CRNA Sandersville WCRMC John Compton CRNA Sandersville Contract Paul Mayer CRNA Sandersville Contract Victor Ethridge Dentist Sandersville Self John Wright Podiatry Sandersville Self Thuy Giang Podiatry Sandersville Self Frederick Falchook Radiology Sandersville ORMC John Penuel Radiology Sandersville ORMC Laurence Steinfeld Radiology Sandersville ORMC William Willoughby Radiology Sandersville ORMC ACTIVE MEDICAL STAFF DISTRIBUTION Radiology 14% Podiatry 7% Dentist 3% CRNA 10% OB/Gyn 3% Orthopedics 3% General SurgeryPediatrics 3% 7% Family Medicine 30% Internal Medicine 20% WCRMC has access to a robust primary care base, which is essential to providing service in a value-based / population health model. 10

11 Medical Staff, Service Area, & Market Share Dynamics SERVICE AREA 11

12 WCRMC Service Area WCRMC s service area was determined by looking at contiguous ZIP codes that make up 80% of patient origin for WCRMC in Source: Georgia Hospital Association HeRMES2.0 12

13 Inpatient Market Share Patient Count Hospital Washington County Regional Medical Center - Sandersville, GA 1,934 1,498 1,309 1,122 1,040 Fairview Park Hospital - Dublin, GA Medical Center, Navicent Health - Macon, GA University Hospital - Augusta, GA Georgia Regents Medical Center - Augusta, GA Oconee Regional Medical Center, Inc. - Milledgeville, GA Doctors Hospital of Augusta - Augusta, GA Jefferson Hospital - Louisville, GA Coliseum Medical Centers - Macon, GA All others Grand Total 5,085 4,704 4,500 4,405 4,337 40% 35% 30% 25% 38.13% 32.73% Discharge Year (Calendar) 30.10% 26.41% 23.68% % of Total Patient Count Hospital Washington County Regional Medical Center - Sandersville, GA 38.0% 31.8% 29.1% 25.5% 24.0% Fairview Park Hospital - Dublin, GA 8.2% 11.5% 14.3% 14.3% 14.8% Medical Center, Navicent Health - Macon, GA 8.9% 8.6% 8.8% 10.5% 10.7% University Hospital - Augusta, GA 8.1% 8.3% 8.3% 9.0% 10.3% Georgia Regents Medical Center - Augusta, GA 10.1% 10.8% 11.8% 10.8% 9.7% Oconee Regional Medical Center, Inc. - Milledgeville, GA 8.9% 9.5% 8.7% 8.5% 9.3% Doctors Hospital of Augusta - Augusta, GA 1.9% 2.3% 2.5% 3.2% 2.8% Jefferson Hospital - Louisville, GA 1.5% 1.5% 0.3% 1.3% 2.1% Coliseum Medical Centers - Macon, GA 2.5% 3.1% 3.5% 2.9% 2.0% All others 11.9% 12.5% 12.7% 14.1% 14.3% Grand Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: Georgia Hospital Association Excludes Normal Newborns WCRMC market share has fallen 14 points since 2010 Fairview Park has experienced 80% increase in IP market share since 2010 % o 20% 15% 10% 5% 0% p (g p) Washington County Regional Medical Center - Sandersville, GA Fairview Park Hospital - Dublin, GA Georgia Regents Medical Center - Augusta, GA Oconee Regional Medical Center, Inc. - Milledgeville, GA Medical Center, Navicent Health - Macon, GA University Hospital - Augusta, GA Coliseum Medical Centers - Macon, GA Doctors Hospital of Augusta - Augusta, GA Jefferson Hospital - Louisville, GA All others 13

14 Improving Financial Performance, Cash Flow, and Strategic Options OPPORTUNITIES 14

15 Summary List of Opportunities Stroudwater s assessment identified the following areas for improvement that, when appropriately addressed, have the potential to yield performance improvements and financial sustainability for WCRMC: 1. Implement/Outsource Revenue Cycle Action Plan Status of ICD-10 Readiness is critical as conversion is 60 days from now 2. Enhance POS patient collections and overall billing and collections processes and procedures Engage with a vendor to improve patient collections 3. Restructure the hospitalist program 4. Revise relationship with outsourced billing provider 5. Convert clinics to provider-based rather than free-standing: a. DSH WCRMC would be eligible for enhanced (professional and technical) Medicare reimbursement b. Clinic patients would be eligible for 340B discount drug program. 6. Recapture Market Share 7. Further develop clinical relationships with specialist physicians 8. Study repurposing hospital to an ambulatory-focused facility 9. Closely evaluate supply costs and group purchasing arrangements and compliance 15

16 Opportunity 1: Implement/Outsource Revenue Cycle Action Plan Findings and Analysis Pricing policies should be updated regularly. ED revenue capture not optimized. Up to $91,000 in lost gross revenue. Observation increased revenue opportunity of $259,058 as compared to current practices There has been an opportunity to increase gross revenue up to $6 M Collections needs to be a focus. Please see detailed opportunity list included in the Appendix Recommendations Monitor annually for compliance. Coding needs to be reviewed monthly and auditor annually. Consider changing revenue recognition practices. Correct variability Opportunity 2: Enhance patient collections and overall billing and collections efforts and results Findings and Analysis Days in A/R are high and likely a function of the recent pricing increases. Patient responsibility is increasing throughout the US., resulting in higher than traditionally averaged patient days in A/R. Recommendations Point of Service collections need to be focused upon Consider proposal from a preferred vendor with projected increased collections of up to $92,208/ year and cost savings of and additional $33,720/year 16

17 Opportunity 3: Restructure Hospitalist Program Findings and Analysis WCRMC currently employs an IM physician that splits time between the ER, the family practice clinic, and hospitalist duties Current hospitalist program incurs approximately $250,000 annually for locum tenens to cover nights and week ends The routine and swing bed census of 15 does not justify a full time hospitalist Engage ED group to potentially cover these patients Recommendations Restructuring of the hospitalist program could result in an annual savings of approximately $200,000 for locum tenens Consider allocating employed primary care physicians to support hospitalized patient needs Opportunity 4: Revise Outsourced physician billing contract/engage new provider Findings and Analysis Current provider charging above market rates (6%) which does not include patient responsibility Recommendations Negotiate better contract with current provider and consider a request for proposal from other providers. 17

18 Opportunity 5a: Clinic Conversion to Provider Based Findings and Analysis Hospitals have two options regarding how to account for their off-site physician practices. They can treat them as free-standing or as part of the hospital, referred to as provider-based. Based on our high level review of WCRMC s most recently filed Medicare Cost Report the Washington County Surgical Center clinic and the Washington County Family Practice clinic are both classified as free-standing. If a hospital treats the physician practice as part of the hospital, the hospital can include the operating costs of the practice in the hospital s cost report. Medicare reimburses hospitals using interim payments which are reconciled with the hospital s actual costs at the end of the cost reporting period. The payments for these provider-based services are typically higher than the payment for services provided in a free-standing physician office. Past experience with other clients suggests that the clinics can expect a $20 - $30 increase per visit in Medicare reimbursement. Clinic conversion will require significant capital and management resources to facilitate the change Recommendations In the interest of time and costs we have not performed a detailed analysis of the projected financial impact of converting the two free-standing clinics to provider-based designation. However, as a rough estimate of the revenue impact of converting to provider-based we estimate the following: Clinic visit volume is approximately 40% Medicare. TTM May 2015 clinic visits (Surgery Practice Clinic and Family Practice Clinic) = 10,076 Approximate Medicare clinic visits = 4,000 Anticipated increase in clinic revenue per Medicare visit =$25 (mid-point of expected range) Expected revenue impact of conversion to provider-based clinic = $100,000 annually less set up fees of approx. $15,000 18

19 Opportunity 5b: 340B Drug Pricing Program Findings and Analysis The 340B Drug Discount Program is a U.S federal government program created in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations at significantly reduced prices WCRMC meets two specific criteria that are common to most of the 340B eligible hospitals: the requirement to be a disproportionate share hospital (DSH) and the requirement that the hospital : be owned or operated by a state or local government (Hospital Authority of Washington County); Additionally, if WCRMC s free standing clinics were to be designated as provider based clinics they would also be eligible to participate in the 340B Program. We understand that WCRMC is enrolled has been assigned a provider number to participate in the 340B Program but has elected not to because of onerous reconciliation and reporting requirements and IT system limitations Implementing this program will require capital and management resources Recommendations Engage a 340B third party administrator to assist with the restoration of the pharmacy program Convert the free standing clinics to provider based and implement 340B in the clinics as well Establish retail clinic contracts in the community Absent a detailed analysis of the potential cost saving and retail rebate revenue impact we can note the following: Approximately 19,000 clinic visits in TTM May 2015 (includes pediatric clinic) Approximately 50% of outpatient visits are 340B eligible Expected potential revenue impact of a 340B program at the WCRMC clinics (9,500 visits X 1.2 Rx X $25) is approximately $285,000 annually less a 10% TPA fee 19

20 Opportunity 6: Recapture Market Share 40% 38.13% Discharge Year (Calendar) 35% 30% 32.73% 30.10% 25% 26.41% 23.68% 20% % o 15% 10% 5% 0% p (g p) Washington County Regional Medical Center - Sandersville, GA Fairview Park Hospital - Dublin, GA Georgia Regents Medical Center - Augusta, GA Oconee Regional Medical Center, Inc. - Milledgeville, GA Medical Center, Navicent Health - Macon, GA University Hospital - Augusta, GA Coliseum Medical Centers - Macon, GA Doctors Hospital of Augusta - Augusta, GA Jefferson Hospital - Louisville, GA All others Patient outmigration from WCRMC s service area is not concentrated in any one direction The fragmented nature of the market provides opportunities to recapture lost market share 20

21 Opportunity 7: Further Develop Clinical Relationships with Specialist Physicians The service lines with the most significant outmigration from the service area are cardiology, general surgery and orthopedics The Fairview Park hospital in Dublin, GA and Medical Center of Central GA (Navicent) have seen the healthiest gains in market share for general surgery and orthopedics Medical Center of Central GA has seen healthy volume gains from cardiology A more coordinated effort between WCRMC and key specialist MDs to provide specialist clinic services and perform appropriate procedures in Sandersville would allow local patients to remain close to home and would enhance the ability of WCRMC to sustainably provide services throughout the region 21

22 Opportunity 8: Analyze Impact of Repurposing WCRMC to an Ambulatory Care Campus The changing dynamics of providing healthcare services in a volume based / fee for service model to a quality based / bundled payment model is having significant impact on patient volumes in rural communities High deductible health insurance plans, ACOs, the introduction of narrow networks of care are changing the way traditional healthcare services and procedures are provided Small, rural community hospitals need to repurpose themselves to provide high quality, cost efficient care in a lower acuity setting Their focus needs to be on primary care, wellness, post acute services, swing beds, ambulatory care, urgent care and emergency services 22

23 Opportunity 9: Evaluate supply costs and GPO compliance Review all purchasing and supply chain procedures to maximize best pricing and terms with all vendors. 23

24 Conclusion As healthcare transforms to more market-based competition and population-based payment arrangements, rural hospitals will be required to operate at highest levels of efficiency Stroudwater identified the preceding list of recommendations that, when implemented, will have the greatest immediate effect on WCRMC s short-term finances and operations. These recommendations will also position WCRMC to effectively provide healthcare services for the long term. The most impactful initiatives for the short term are: 1. Implement/Outsource Revenue Cycle Action Plan: $1.8 million annual estimated financial impact Status of ICD-10 Readiness is critical as conversion is 60 days from now 2. Enhance POS patient collections and overall billing and collections processes and procedures: $92K annual revenue impact, $33K annual expense reduction Engage with a vendor in order to improve patient collections 3. Restructuring the hospitalist program: $200K annual expense reduction 4. Revise relationship with outsourced billing provider 5. Convert clinics to provider based rather than free-standing: a. As a DSH WCRMC would be eligible for enhanced (professional and technical) Medicare reimbursement: $100K annual revenue impact b. Clinic patients would be eligible for 340B discount drug program: $285K annual revenue impact WCRMC should collaborate with physicians, non-physician providers, and hospital staff to develop an urgent and comprehensive implementation plan for the opportunities identified in this assessment report 24

25 Identified Opportunities: Financial Impact Service Area Pro Forma Initiatives TTM Implement/Outsource Rev Cycle Action Plan Enhance Patient Collections/Billings Restructure Hospitalist Program Provider based clinics 340(B) Pharmacy Purchasing* New Revenue/Expense Reduction Projected Pro Forma Operating Revenue: Patient Revenue $ 29,559 $ 26,635 $ 24,677 $ 1,800 $ 92 $ 100 $ 1,992 $ 26,669 Bad Debt (5,600) (4,869) (3,635) (987) (4,622) ICTF* UPL* EHR* 1, Net Revenue $ 26,420 $ 23,559 $ 22,488 $ 1,800 $ 92 $ - $ 100 $ - $ 1,005 $ 23,287 Other Operating Revenue Total Operating Revenue $ 26,951 $ 23,889 $ 22,788 $ 1,800 $ 92 $ - $ 100 $ 285 $ 1,290 $ 23,872 Operating Expenses: SALARIES 14,452 12,687 11,296-11,296 CONTRACT LABOR BENEFITS 2,913 2,546 2,678-2,678 PROFESSIONAL FEES 2,892 2,632 2,251 (200) 15 (185) 2,066 SUPPLIES 2,929 2,951 2,574-2,574 PURCHASED SERV 1,601 1,514 1, (34) ,887 REPAIR & MAINTENANCE 1, UTILITIES INSURANCE RENT & LEASE DUES & SUBSCRIPTIONS TRAVEL OTHER INTEREST TAXES DEPRECIATION Hospital & ECF Provider Tax Total Operating Expenses 29,583 27,121 24, (34) (200) ,917 Income (Loss) from Operations (2,633) (3,232) (1,839) (1,045) Operating Margin -9.77% % -8.07% -4.38% Operating EBIDA $ (1,600) $ (2,228) $ (796) $ (2) Bad Debt Reduction in Pro Forma represents an historical average; EHR Meaningful Use revenue is eliminated from Pro Forma given forthcoming industry-wide reductions and eliminations 25

26 Questions, Comments, Discussion Terrence L. Bauer, Principal (O) (M) Douglas M. Johnson, Principal (O) (M) C. Ryan Sprinkle, Consultant (O) (M) 26

27 Thank you 27

28 APPENDIX 28

29 Appendix I: Revenue Cycle Tasks List Update visit agenda to reflect names and titles of all meeting 1 participants 2 Obtain updated chargemaster file 3 Obtain updated utilization file 4 5 Create, develop and implement formal departmentally driven revenue cycle team meetings Refine OP Ancillary reports to determine / identify ordering MD / Clinician by CPT 6 Refine OP Ancillary reports to designate CPT utilization by payor 7 Refine reports to illustrate OP, ER and OBS utilization for Radiology and Laboratory services by CPT 8 Provide Lab Services presentation as a resource Obtain Reference Lab designation by CPT and Charge code. Modify CDM possibly by GL to ease identification and facilitate QA review Examine opportunity to modify Radiology charge recognition process to bill based on "complete " status Review the Radiology diagnosis scrubber to determine baseline payor Examine process for and placement of 50 modifier within Radiology revenue cycle Review utilization to determine high frequency exams within Lab, CT, MRI and NM for patients in OP status Create new ancillary Lab and Radiology order forms for placement within physician practices Obtain 20 CT Scan claims to examine billing and reimbursement process and pricing concerns Obtain 20 MRI claims to examine billing and reimbursement process and pricing concerns Obtain 20 Nuclear Medicine claims to examine billing and reimbursement process and pricing concerns Provide modality specific revenue reports for Radiology and Lab services Obtain 25 Inpatient claims to examine physician documentation, revenue recognition, billing and reimbursement process Obtain 20 professional Oncology E&M claims to examine 20 documentation, revenue recognition, billing and reimbursement process 21 Examine coding options for surgical services 22 Examine efficacy of time based vs. procedural revenue recognition Obtain surgical case volume, by CPT, from abstracting system for 23 past 6-12 months Obtain 25 OR claims to examine revenue recognition, billing and 24 reimbursement process and pricing concerns. 5 each from Endoscopy / Colonoscopy / GS / Ortho / GYN Submit OP Drug sheet to Pharmacy for identification of OP / 25 Ambulatory drugs Obtain fee schedules from major payors ( BCBS, Aetna ) for 26 pharmaceutical HCPCS Review pharmaceutical utilization to determine the frequency and 27 use of revenue code 636 by HCPCS Validate drug recognition and administration code selection process 28 for Ambulatory Infusion / Oncology areas Obtain 20 OP Ambulatory Infusion claims to examine revenue 29 recognition, billing and reimbursement process and pricing concerns. Obtain 20 OP Oncology Infusion claims to examine revenue 30 recognition, billing and reimbursement process and pricing concerns. 29

30 Appendix I: Revenue Cycle Task List (continued) 31 Determine process for assignment of pharmaceutical revenue codes and HCPCS 32 Create Min Max review methodology for ambulatory drug administration 33 Create and provide Oncology encounter form to assist with revenue recognition 34 Compare Item Master and CDM. Provide comparisons for examination in description, EACH pricing and revenue code assignment 35 Provide supply policy 36 Identify supplies which should be inactivated or deleted from active CDM Create policy for the consistent, compliant determination of oxygen hours Obtain 25 ER claims to examine facility level assignment and compare results to secondary audit mechanism Obtain 25 ER claims to examine revenue recognition, billing and reimbursement process and pricing concerns. 49 Create and provide ER encounter form to assist with claim review 50 Create mechanism to train nursing staff on consistent, complaint selection of drug administration codes 37 Investigate potential quality review process to ensure all submitted charges from the lab, radiology, pharmacy, respiratory therapy and OR interfaces are received, reconciled and posted on appropriate accounts 51 Provide 2 Midnight Rule Presentation for review and distribution 52 Provide actively monitored care policy example to Nursing 38 Examine 10 Barium Swallow claims from Speech Therapy to understand reimbursement components 39 Provide Rehab Services Presentation on new G code utilization Obtain 25 Rehabilitation Services claims to examine billing and reimbursement process and pricing concerns Obtain contracts governing Rehabilitation Services reimbursement - Commercial, BCBS, HPHC and Aetna Create Rehabilitation Services reimbursement grid to guide reimbursement review Provide Respiratory Therapy utilization reports, by CPT, for revenue cycle review Review Respiratory Therapy CDM components to ensure all are representative and based on CPT Review Respiratory Therapy order entry components / set up to ensure it is representative of current services 53 Create and Submit Observation encounter form Obtain 25 Observation claims to examine documentation, revenue recognition, billing and reimbursement process Obtain contracts governing Observation reimbursement - Commercial, BCBS and Aetna Create Observation reimbursement grid to guide reimbursement review Obtain 25 Wound Clinic claims to examine physician and facility documentation, revenue recognition, billing and reimbursement process Obtain 15 Breast Clinic claims to examine physician and facility documentation, revenue recognition, billing and reimbursement process 59 Review new wound care procedures and provide CDM options 30