Understanding Reimbursement in Health Centers

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2. 2 GOALS Understanding the Characteristics of Patient Service Revenue Maximizing All Components of Patient Revenue Flows Evaluating Trends in Patient Revenue Managing and Evaluating Patient Receivables Utilizing Proper Analytical Procedures and Management Reports Understanding and Monitoring Managed Care Costs and Revenue

3. 3 TYPES OF PATIENT SERVICES REVENUE Traditional Sources of Patient Revenue Medicaid Medicare Private Insurance State Uncompensated Care Programs Self Pay

4. 4 FORMS OF PATIENT SERVICES REVENUE Each type of patient revenue can have different reimbursement schemes. These include: Fee-For-Service All-Inclusive Rate Prospective Payment System Capitation

5. 5 OVERVIEW OF FEE-FOR-SERVICE (FFS) REIMBURSEMENT Fee-For-Service Methodology: In a FFS environment, reimbursement is based on Current Procedural Terminology (CPT) code. Different Charges for Different Services Reimbursement Based on CPT Code at Fees Established by Third Parties Amount of Revenue Earned Is Based on the Number and Type of Billable Services Provided Fee-for-service procedures include, but are not limited to, laboratory, radiology, etc.

6. 6 MAXIMIZING FFS REIMBURSEMENT To generate more revenue, a health center can: Provide more procedures Properly code encounter forms to ensure all services provided are billed Utilize a comprehensive encounter form to ensure all billable procedures are included

7. 7 OVERVIEW OF COST-BASED REIMBURSEMENT Allowable Costs $1,000,000 Billable Visits (?) 10,000 All-Inclusive Rate = $100 per visit Medicaid Visits 7,500 Medicaid Revenue (7,500 x $100) $750,000 OR Medicaid Visits = 75% x $1,000,000 Total Visits

8. 8 All-Inclusive Rate Methodology: MAXIMIZING COST-BASED REIMBURSEMENT

9. 9 CALCULATION OF ALLOWABLE COSTS Allowable costs are calculated as total costs less non-reimbursable costs: Total Costs $1,350,000 Non-reimbursable Costs: WIC Program 250,000 Adjustment: Contracted Lab 100,000 <350,000> Allowable Costs $1,000,000

10. 10 ENCOUNTERS VS. BILLABLE VISITS UDS Billable Encounters Visits Physicians 6,000 6,000 Midlevels 1,500 1,500 Nurses 1,000 0 Dentists 1,000 1,000 Dental Hygienists 500 500 Other Health 1,500 500 Educational / Social Services 1,000 500 12,500 10,000

11. 11 ENCOUNTERS VS. BILLABLE VISITS How does using total encounters affect my cost based revenue? UDS Billable Encounters Visits Total Costs $1,000,000 $1,000,000 Visits 12,500 10,000 Rate / Visit $80 $100 Revenue $800,000 $1,000,000

12. 12 COST-BASED REIMBURSEMENT SYSTEMS Interim Rates Desk Review Final Settlement (rate reconciliations) Field Audits Retrospective Versus Prospective (by provider type)

13. 13 MAXIMIZING COST-BASED REIMBURSEMENT Tips to Maximize Reimbursement: Review provider utilization vs. productivity screens Review billable visit count vs. encounters Properly accounting for non-allowable costs and any adjustments Evaluate appropriateness of non-allowable costs and adjustments Verify FTE calculations, especially provider staff

14. 14 FQHC Medicare Interim Payment Rate - Prospective Rate Based on Submitted Cost Report Based on Prior Year Costs and Visit Information Opportunity to Adjust After Desk Review Final Reconciliation - Receive Difference Between Interim Payments for Year and Actual Cost Based Rate May Appeal Rate If Appropriate Regulations FQHC HIM-15 MAXIMIZING COST-BASED REIMBURSEMENT

15. 15 FQHC Medicare Part B billing for non-covered services (i.e. Lab & X-Ray) 100% Reimbursement for Pneumococcal and Influenza Vaccines and Administration Medicare Bad Debt Recovery Coinsurance Reimbursement and Sliding Fee Scale Applicability No Patient Deductible CMS Form 855A to enroll in FQHC � (site specific) MAXIMIZING COST-BASED REIMBURSEMENT

16. 16 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 renamed the Medicare+Choice plan and made other changes including regional PPOs, special needs plans for dual eligibles, and others, and created private drug plans effective 1/1/06. Rates paid to managed care companies were also increased in many cases. Overall HHS target is to increase Medicare enrolles in managed care to 30% by 2013 from 12% (and declining) currently. Also includes supplemental wrap-around payments to FQHCs who contract with Medicare Advantage (MA) plans. Understanding Medicare Advantage

17. 17 Three contractual requirements: Must be written contract between FQHC and MA Plan MA plan must pay FQHCs no less than it pays other non-FQHC providers FQHC must accept MA payment and wraparound as payment in full Covers FQHC services only Does not include certain Part B services such as lab and x-ray. Does not include pharmacy costs under Part D. Part B services should be billed directly to the MA plan. Understanding Medicare Wrap-Around

18. 18 System changes made to accept payment on 4/3/06 (bill type 73x and revenue code 0519) For first 2 rate years, FQHC submits an estimate of MA payments to fiscal intermediary FQHC will receive payment for each wraparound bill it submits to fiscal intermediary Understanding Medicare Wrap-Around

19. 19 Starting 1/1/06, prescription drug plans (PDPs) will be the primary mechanism for Medicare enrollees to receive prescription drug benefits Optional benefit; enrollees will need to sign up Dual eligibles will receive coverage through Medicare Part D, not Medicaid Health centers with pharmacies will need to contract with PDPs to receive reimbursement for Medicare pharmacy patients No statutory provisions preventing health centers with 340B programs from participating in Part D Understanding Medicare Part D

20. 20 Medicaid Each state has implemented the Prospective Payment system differently Each State�s Filing Requirements Differ Regulations: State Specific If Medicaid Regulations are Silent, Then Medicare Regulations Apply MAXIMIZING COST-BASED REIMBURSEMENT

21. 21 The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) - [P.L. 106-554] - Section 1902 (aa): �Payment for Services Provided by Federally Qualified Health Centers and Rural Health Clinics� (1) Effective January 1, 2001, and for each succeeding year, the State plan shall provide for payment for services described in section 1905(a)(2) (C) furnished by FQHCs in accordance with a new method (PPS). OVERVIEW OF PPS

22. 22 (2) Fiscal Year 2001: Payment to be made (calculated on a per visit basis) equal to 100% of the average of the costs of the center during fiscal years 1999 and 2000 which are reasonable and related to the cost of providing such services, adjusted to take into account any increase or decrease in the scope of such services during fiscal year 2001. (3) Fiscal Year 2002 and Succeeding Fiscal Years: Payment to be made (calculated on a per visit basis) equal to the amount calculated for the preceding year (a) increased by the percentage increase in the MEI for primary care services, and (b) adjusted to take into account any increase or decrease in the scope of such services during that fiscal year. OVERVIEW OF PPS

23. 23 (4) For New FQHCs who first qualify as an FQHC after fiscal year 2000, rates shall be established in an amount (calculated on a per visit basis) equal to 100% of the costs of providing such services during such fiscal year based on rates established for other such centers located in the same area with a similar case load, or in the absence of such center, in accordance with paragraph (2). Rates for subsequent years shall be established in accordance with paragraph (3). OVERVIEW OF PPS

24. 24 (5) In cases where an FQHC contracts with a managed care entity, the State plan shall provide for supplemental payments equal to the amount by which the amount determined in accordance with PPS exceeds the amount of payments provided under the contract. Payments shall be made pursuant to a payment schedule agreed to by the State and the FQHCs, but in no case less than every 4 months. OVERVIEW OF PPS

25. 25 (6) Alternative Payment Methodologies: The State plan may provide for payment under an alternative payment methodology that (a) is agreed to by the State and the center, and (b) results in an amount at least equal to the amount otherwise required to be paid to the center under PPS. OVERVIEW OF PPS

26. 26 PPS STRATEGIES Ensure that base year cost reports were prepared accurately Allocation of costs Billable visits Monitor �wraparound� payments Monitor rate appeal opportunities for change in scope of services

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29. 29 Final Note On an Interim Basis, CHCs Should Project Estimated Year-end Settlements and Their Impact On: Financial Statements FSR and Resulting UOB/EPI MAXIMIZING COST-BASED REIMBURSEMENT

30. 30 ANALYZING TRENDS TO MAXIMIZE PATIENT FFS REVENUE As part of the preparation of the monthly financial statements every finance department should begin to analyze even the smallest fluctuations in patient service revenue and receivables. Even though the change may be minimal, it may indicate the start of a downward trend or a negative shift in payor mix. Recognizing a trend before it becomes a dramatic shift can help avoid unnecessary cash flow problems.

31. 31 What are possible explanations for an increase in visits and decrease in revenue? ANALYZING TRENDS TO MAXIMIZE PATIENT FFS REVENUE

32. 32 Reasons why visits may increase while revenue decreases: Retroactive settlement in prior period Shift in payor mix Poor collections in current year Rate Revisions Large bad debt write-off in current period pertaining to old receivables currently on books Improper Coding ANALYZING TRENDS TO MAXIMIZE PATIENT FFS REVENUE

33. 33 ANALYZING TRENDS TO MAXIMIZE PATIENT REVENUE

34. 34 ANALYZING TRENDS TO MAXIMIZE PATIENT REVENUE

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36. 36 Rate X Visit Calculation for Cost-Based Reimbursement Exclude all one time events from calculation, including: Retroactive Takeback BBA Wraparound Protection Payment Specific State Supplemental Payments Any Other Revenue or Takeback That Was Not Based on Visits From the Current Period Calculation Should Approximate Net Revenue

37. 37 Summary of Techniques Compare % Change in Revenue to Change in Visits Compare % Change in Visits to Change in Cash Collections Analyze Payor Mix From Period to Period Rate X Visit Calculation Calculate Gross Charge and Net Revenue Per Visit (See Exhibits 1 & 2)

38. 38 What are the components of the patient receivable balance? Gross Accounts Receivable Less: Allowance for Contractual Adjustments Less: Allowance for Doubtful Accounts Equals: Net Accounts Receivable

39. 39 A good way to analyze the receivable balance is to calculate and evaluate the days in accounts receivable: Patient accounts receivable, net Patient services revenue/365 days Days in accounts receivable is an indicator of the length of time between the date a patient is seen and the date payment is received. ANALYZING PATIENT ACCOUNTS RECEIVABLE BALANCE

40. 40 Managing Accounts Receivables Days in Accounts Receivable: Compare Measure Between Periods Aged Accounts Receivable List: Compare Aging, by Category, Between Periods Analyze in Total and by Payor Analyze Gross and Net Receivable Balances ANALYZING PATIENT ACCOUNTS RECEIVABLE BALANCE

41. 41 Sample Analysis - Days in Accounts Receivable, Net: ANALYZING PATIENT RECEIVABLES

42. 42 Sample Analysis - Days in Accounts Receivable, Gross: ANALYZING PATIENT RECEIVABLES

43. 43 Factors impacting days in accounts receivable: Amount outstanding for current billing: Billing lags Payment lags Retroactive rate adjustments/final settlements Pending Claims Rebilled/denied claims Accounting Errors (Improperly Reserving) ANALYZING PATIENT ACCOUNTS RECEIVABLE BALANCE

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48. 48 Forms of Reimbursement Under Managed Care Fee-For-Service: Based on CPT Codes Earn More Revenue by Performing More Services Different Charges for Different Types of Services

49. 49 Forms of Reimbursement Under Managed Care Capitation: Revenue is based on a prepayment of a fixed periodic amount per member per month (PMPM). The amount of revenue earned is based on the number of members enrolled - not on the number of visits. To earn more, control utilization and provide fewer and/or less costly services.

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52. 52 Capitation Tracking During the month, centers will receive a capitation check with an associated roster corresponding to the payment. Centers should begin to perform the following steps: Identify MCO Members and Perform Reconciliation to Roster Specify Coverage Dates and Retroactive Changes in Coverage Evaluate Increase / Decrease in Capitation Revenue Paid Monitor Voluntary vs. Involuntary Disenrollment Identify and Track Members and Revenue by Actuarial Class Manage All Required Data for Multiple MCO Contracts and Payors MONITORING MANAGED CARE REVENUE

53. 53 Referral Tracking: Record Off-site PCP Referrals Monitor the Medical Appropriateness of the Treatments Ensure Conformance With Quality Assurance Policies and Procedures Estimate Incurred Liability Compare Treatment Patterns Across PCPS MONITORING MANAGED CARE REVENUE

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55. 55 IMPORTANCE OF A CHARGE STRUCTURE BASED ON THE COST OF SERVICES

66. 66 USING THE APPROPRIATE CHARGE STRUCTURE ON MANAGED CARE If charges ? cost, community health centers can evaluate their viability under specific managed care arrangements: HealthMed HMO Composite Capitation PMPM: $14.00 HealthMed HMO Members: 1,000 Monthly Capitated Services for HealthMed Members CPT Description # of Procedures Cost Based Charge Total Cost 99213 Off Visit � Normal 125 $ 50 $ 6,250 99214 Off Visit � Extended 147 $ 70 $10,290 90701 DTP Vaccine 44 $ 35 $ 1,540 $18,080

67. 67 Capitation Payments $ 14,000Less Monthly Cost for HealthMed Members 18,080Loss on HealthMed Contract $ (4,080) Possible Conclusions: CHC Costs Are Too High Too Many Services Are Included in Capitation Contract CHC�s Patients Are High Utilizers of Capitated Services Proposed Capitation Is Too Low Capitation Rate Developed Based on Insufficient or Inaccurate FFS Data CHC Provides Many Enabling Services Not Included in the Capitation Rate USING THE APPROPRIATE CHARGE STRUCTURE ON MANAGED CARE

68. 68 TOOLS TO MONITOR PATIENT SERVICES REVENUE AND PATIENT RECEIVABLES On a regular basis, the finance department should produce basic reports which will allow management to: Properly Monitor the Accounts Receivable Evaluate Collection Efforts Monitor Billing Efforts Maximize Collections

69. 69 TOOLS TO MONITOR PATIENT SERVICES REVENUE AND PATIENT RECEIVABLES These reports should include basic patient revenue / receivable indicators such as: Daily Basis: Self Pay Collections / Deposits Visits by Providers vs. Standard Weekly Basis: Cash Receipts by Payor Billings by Payor Visits by Payor

70. 70 Monthly Basis: Days in A/R Visits by Provider vs. Budget Visits by Payor, Patient Revenue by Payor Source, Both vs. Budget (Exhibit 2) Change in Member Mix and Capitation Analysis (Exhibit 3) Analysis of Managed Care Membership (Exhibit 4) Managed Care Member Utilization Analysis (Exhibit 5) TOOLS TO MONITOR PATIENT SERVICES REVENUE AND PATIENT RECEIVABLES

71. 71 SUMMARY Understanding patient revenue begins with mastering the different reimbursement models. Before providing services to a specific population, be sure to understand how the reimbursement rate is calculated in order to maximize revenue. Each month the finance department should perform analytical procedures on the patient revenue / receivables to identify adverse trends.

72. 72 Strategic management of financial, utilization, operational, and quality data is essential. An appropriate charge structure will ensure that the center is adequately reimbursed in a managed care environment. Monthly financial reporting is crucial in analyzing health center feasibility. SUMMARY