Ten Value Added Audits Bringing in the Money

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Ten Value Added Audits Bringing in the Money
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Agenda

• Bringing in the MoneyInternal Audit as a value
  added function
• Ten value added audits
• Reporting on value added contributions

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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?

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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

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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

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Rules of Engagement

• Quick wins
• not processProcess-intense issues should go to
  the parking lot
• Tight focus, small teams
• Brainstorm lists
• 2 per quarter 8 initiatives
• Under commitOver deliver

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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 reviewsbefore the contract is signed
• Labor Opportunities

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1. Revenue CycleCharge Capture

• Start with
• Chart ReviewsOrders, 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)

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1. Revenue CycleCharge Capture

• Data AnalysisWhats missing?
• J code drugs and infusionsif 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)

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1. Revenue CycleCharge Capture
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1. Revenue CycleCharge Capture

• Facility fees (for ED and provider based
  services)
• Check EM facility bell curves for alignment
  issues
• Review your facility charge tool

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1. Revenue CycleCharge Capture

• Suppliesfor major procedural areas (Cath Lab,
  Interventional Radiology, Implants) check
  procedures against a standard supply listing
  compare to CDM test billings
• 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

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1. Revenue CycleCharge Capture

• Other Reviews
• 5. Check Zero Charge report (patient showed for
  services but no charges)
• Check Insurance denials
• Check payor contracts for carve-outs
• High tech drugs, implants
• Check correct assignment of revenue codes to
  ensure payment

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1. Revenue CycleCharge Capture

• 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

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1. Revenue CycleCharge 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 errorscredits, 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 CDMcheck for accuracy of billing
  quantities
• Compliance Issue

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2. Revenue CycleContracts

• 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?

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2. Revenue CycleContracts

• Outsourced collection of large accounts
• To speed up collections
• Effect of implementation of Payment Caps

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2. Revenue CycleContracts
Large accounts To speed up collections Effect
of re-negotiation on contract rates (for
example from 15 to 12)
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2. Revenue CycleContracts

• Medicaid Pending
• Check contractterms and conditions incentives
• of accounts submitted
• converted to Medicaid (Medicaid pays better
  than self-pay)
• Bad Debt
• Check contractterms and conditions
• Consider two firmssplitting alphabet creating
  competition

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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

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3. Revenue Cycle Net Revenue Strategies

• Contract Carve-outs
• Check contracts for carve-outs (pharmacy, medical
  devices, supplieshigh cost/high tech)
• Audit for revenue code assignment (generally
  processed based on revenue code)
• 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

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3. Revenue Cycle Net Revenue Strategies

• Maximize clinical appeals
• Convert off-campus services to hospital based
• Bill under Part A versus Part B increased net
  reimbursement
• Compliance with Medicare criteria

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3. Revenue Cycle Net Revenue Strategies

• Check packaged payment arrangements
• When were they last updated?
• Review cost/contribution margin
• Monitor large write-offs (specific review of all
  write-offs over a certain limit)
• Review all Admin Adjustments
• Customer Service
• Residency Program
• Legal
• Other

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4. Vendor ContractsPurchasing

• 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 reducedtiming intervals, monitoring,
  reporting)
• End of quarter discounts

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4. Vendor ContractsPurchasing
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4. Vendor ContractsPurchasing

• 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

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5. Vendor ContractsIT

• Software licensesinventory of software used to
  payments
• Microsoft licenses
• Added licenses over time, by entityre-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

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5. Vendor ContractsIT

• Vendor discounts/rebates
• Good install discounts
• Volume discounts ( of users, devices)
• Consulting expenses with build/implementation
• Audit expenses
• Telecommunications
• Pagerscheck usage by pager if not used in the
  last X months, delete from inventory and billing
• of companies usedmove to one for larger
  discounts

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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

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6. Outsourcing Opportunities

• Tax reviews (state specific)
• Property taxesexemptions for hospital services
• BO taxesreview for intercompany transactions
• Sales and Use tax exemptions
• Tax credits
• Training programs
• Research, RD
• UBIWork opportunity credits

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6. Outsourcing Opportunities

• Medical Devices
• Purchasing
• Inventory management
• Billing
• Compliance
• Telecomm reviewsusage, billing
• Utility reviewsusage, billing

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6. Outsourcing Opportunities

• Check out vendors at this conference
• Contingency vs. Negotiated fee arrangements
• Check references
• Give references
• Manage your consultants

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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

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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)

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Construction unsupported costs
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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

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9. Contracting ReviewsBefore the Agreement is
Signed

• Where you dont 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

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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)

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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

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Other

• Read New Perspectivesmany great ideas
• Grant Writer (should have at least 41 payback)
• Contract Manager (for negotiations, management,
  FMV documentation) (should have payback)

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Summary

• Current hot topic
• Many lists/many opportunities
• Share
• Focus on returns
• Report savings
• Taking and giving credit

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Contacts

• Catherine Wakefield
• VP Corporate Compliance and Internal Audit
• Catherine.wakefield_at_multicare.org
• 253-459-8002
• Nate Morgan
• Compliance/Internal Auditor II
• Nathan.morgan_at_multicare.org
• 253-459-8015