Using Incentive Plans to Improve Revenue Cycle Results Nathan Hughes, Sr. Dir. RCS Utilization Review September 22, 2017 Making healthcare remarkable
Agenda Novant Health Overview Quarterly Incentive Plan Monthly Cash Collections Incentive Plan Monthly Denial Prevention Incentive Plan Key Takeaways 2
Mission Novant Health exists to improve the health of communities, one person at a time. Our people Vision We, the Novant Health team, will deliver the most remarkable patient experience in every dimension, every time. Safety Quality Authentic personalized relationships Voice & choice Easy for me Affordability Values Diversity and Inclusion Teamwork Personal excellence Courage Compassion We are an inclusive team of purpose-driven people inspired and united by our passion to care for each other, our patients and our communities. Our promise We are making your healthcare experience remarkable. We will bring you world-class clinicians, care and technology when and where you need them. We are reinventing the healthcare experience to be simpler, more convenient and more affordable, so that you can focus on getting better and staying healthy. Using Incentive Plans to Improve Revenue Cycle Results 3
4
4,799 2,697 209,759 539,085 6,500 1,514 463 14 19,685 132,611 7,500 529 434,870 13,308 7,571 392 104 26,532 3,781 567 49 46.7 M 8,769 823 394 429 4.4 M 677,392 Using Incentive Plans to Improve Revenue Cycle Results 5
Novant Health Revenue Cycle Services Scope The Novant Health acute RCS team directly oversees front, middle and back end revenue cycle functions. Our team includes the key areas and their subsidiary functions listed below. The acute RCS team also maintains strong relationships with other departments that impact acute care reimbursement, such as Clinical Documentation Excellence and Business Development and Sales. 6
Quarterly Incentive Plan Implementation Date: January 2010
Quarterly Incentive Plan In 2010 the Novant Health Revenue Cycle team implemented a new incentive plan for all team members Each department has 4 goals, with a base and stretch goal for each metric 2 overarching goals are set for the entire RCS team Ex: denial rate, cash collections, CFB 2 individual goals are set for each department based on their KPIs Ex: productivity, coding DNB, AR days, upfront cash collections Outcomes are measured quarterly The maximum payout is $500 per team member, per quarter The payout amount for each base goal is $75 The payout amount for each stretch goal is $125 The program includes team members up to and including managers Managers and supervisors are eligible for higher payouts 8
Initial Results The RCS team saw increases in several KPIs after the bonus plan was implemented. Example: Upfront cash collections Prior to bonus plan implementation: $2M/year Post bonus plan implementation: 2009 2010 2011 2012 2013 2014 2015 Upfront Collections $1,992,700 $6,652,590 $11,319,000 $11,800,000 $14,000,000 $17,311,180 $19,200,000 % of Net Revenue 0.09% 0.29% 0.49% 0.47% 0.55% 0.67% 0.68% However, performance began to plateau and a more aggressive approach was considered for departments who collect cash. A more lucrative, real-time program was proposed 9
Cash Collections Incentive Plan Implementation Date: January 2016
Cash Collections Incentive Plan In January 2016 a new incentive plan was implemented that focused on cash collections The program evaluated cash collections monthly and rewarded team members with a portion of the cash collections if the goal was exceeded The monthly goals provided an opportunity to reward team members realtime, improving engagement and performance The new plan also incorporated team and individual goals to encourage peak performance Departments have to meet goals to qualify for the bonus Ex: Biometric utilization Individuals also have to meet their goals to qualify for the bonus Ex: Individual quality/productivity scores, no progressive discipline 11
Cash Collections Incentive Plan (Continued) If the overall cash goal for the organization was met, the departmental goal was met, and the individual goal was met, the team member receives a payout For individual scores of 95-100%, team members will qualify for the base goal payout Payout: 0.0025% of the amount above baseline collections For individual scores greater than 100%, team members will qualify for the stretch goal payout Payout: 0.005% of the amount above baseline collections Self Pay Collections, Customer Service, Financial Counseling, Pre-Service Collections and Patient Access also qualify for a kicker bonus The kicker bonus is 1% of individual patient cash collections The payout maximum (including the kicker bonus) is $1,250 per team member 12
Cash Collection Incentive Plan Outcomes: Cash Collections and Bad Debt Trends Cash collections have increased and bad debt has declined since the program was implemented in 2016 $2,900,000,000.00 Cash Collections and Bad Debt 2.50% $2,800,000,000.00 $2,700,000,000.00 2.00% $2,600,000,000.00 $2,500,000,000.00 $2,400,000,000.00 $2,300,000,000.00 1.50% 1.00% 0.50% Cash Bad Debt % of Gross Revenue $2,200,000,000.00 2015 2016 2017 (Projected) 0.00% 13
Cash Collection Incentive Plan Outcomes: Return on Investment 2015 2016 2017 (Projected) Cash Increase N/A $171,357,179 $232,152,876 Bad Debt as a % of Gross Revenue 2.16% 1.87% 1.50% Total Bonus Expense N/A $1,285,686 $1,761,651 ROI N/A 13228% 13078% 14
Cash Collection Incentive Plan Outcomes: Upfront Cash Collections Upfront cash collections have steadily increased since 2009. The implementation of the latest incentive plan model in 2016 helped the team move beyond a plateau experienced from 2014-2015. $40,000,000 Upfront Cash Collections 1.40% $35,000,000 $30,000,000 1.20% 1.00% $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 0.80% 0.60% 0.40% 0.20% Upfront Collections % of Net Revenue $0 2009 2010 2011 2012 2013 2014 2015 2016 2017* 0.00% 15
Denial Prevention Incentive Plan Implementation Date: July 2016
Denial Prevention Incentive Plan: Building a Business Case Other revenue cycle departments were offered the same opportunity to implement a more lucrative incentive plan if they could prove it would increase cash The UR team proposed a new incentive program that rewarded team members real time for peak performance To justify a lucrative incentive plan, a metric had to be identified that: Has a direct impact on reimbursement Is avoidable and controllable by team members participating in the program Is available monthly to ensure optimal impact As a result, the team chose incorrect level of care and medical necessity denials As a next step, the team researched denial and write-off trends to determine if there was a correlation between first pass denials and write-offs for the selected denial categories 17
Denial vs. Write-Off Comparison After researching denial and write-off trends, we were able to prove a strong correlation between the selected denial types and the corresponding adjustment codes 2.25% Medical Necessity and Incorrect Level of Care Denials vs. Write-Offs 2.09% 1.75% 1.78% 1.25% 0.75% 1.13% 1.06% 0.87% 1.12% 1.00% Denials Write Offs 0.25% 0.30% 0.24% 0.26% 0.20% 0.17% 0.25% 0.16% -0.25% 2015-03 2015-04 2015-05 2015-06 2015-07 2015-08 2015-09 18
Other Considerations As a next step, the team evaluated historical levels of performance to set goals Outcomes were based on a rolling 3 month period to limit risk from random fluctuations in denials Denial rate was chosen rather than denied dollars to account for variations in revenue 19
Goals and Payouts The following goals were set for the UR team: The base goal was equal to the average denial rate from the prior year If the base goal was met, each team member would receive a $100 payout The maximum stretch goal was equal to 15% less than the best 3 month period during the prior year If the max stretch goal was met, each team member would receive an additional $1,150 payout The total max payout is $1,250 per team member To justify such lucrative payouts, an extensive ROI analysis was conducted to ensure the program s efficacy 20
Projected ROI The final step prior to implementation was to analyze the projected ROI and present it to senior leadership for approval Monthly ROI Analysis Denial Rate Write-Off Reduction Compared to Lowest Quarter (1.04%) Write-Off Reduction Compared to Avg Quarter (1.48%) Projected Write-Offs Write-Off $$ Savings Compared to Avg Individual Payout Team Payout ROI 1.35% 0% 9% $ 774,083.80 $ 74,541.40 $ 100.00 $ 4,900.00 $ 69,641.40 1421% 1.02% 2% 31% $ 584,404.60 $ 264,220.60 $ 253.33 $ 8,000.00 $ 256,220.60 3203% 1.01% 3% 32% $ 578,441.28 $ 270,183.92 $ 330.00 $ 12,000.00 $ 258,183.92 2152% 0.99% 5% 33% $ 566,514.66 $ 282,110.54 $ 483.33 $ 20,000.00 $ 262,110.54 1311% 0.97% 7% 35% $ 554,588.04 $ 294,037.16 $ 636.67 $ 28,000.00 $ 266,037.16 950% 0.94% 10% 37% $ 536,698.10 $ 311,927.10 $ 866.67 $ 40,000.00 $ 271,927.10 680% 0.88% 15% (Max Payout) 40% $ 506,881.54 $ 341,743.66 $ 1,250.00 $ 60,000.00 $ 281,743.66 470% 0.83% 20% 44% $ 477,064.98 $ 371,560.22 $ 1,250.00 $ 60,000.00 $ 311,560.22 519% 0.78% 25% 47% $ 447,248.42 $ 401,376.78 $ 1,250.00 $ 60,000.00 $ 341,376.78 569% 0.73% 30% 51% $ 417,431.86 $ 431,193.34 $ 1,250.00 $ 60,000.00 $ 371,193.34 619% 0.68% 35% 54% $ 387,615.29 $ 461,009.91 $ 1,250.00 $ 60,000.00 $ 401,009.91 668% 0.62% 40% 58% $ 357,798.73 $ 490,826.47 $ 1,250.00 $ 60,000.00 $ 430,826.47 718% 21
Denial Outcomes After the new incentive plan was introduced in July 2016, denials were consistently lower than the prior year average. The team achieved stretch goal 8 out of the first 11 months. 2.25% 2.03% Incorrect Level of Care/Medical Necessity Denials 1.75% 1.25% 0.75% 1.04% 1.34% 0.76% 1.39% 0.99% 0.73% 0.67% 0.71% 0.92% 1.25% Current Month Base Goal Stretch Goal 0.44% 0.25% -0.25% 2016-06 2016-07 2016-08 2016-09 2016-10 2016-11 2016-12 2017-01 2017-02 2017-03 2017-04 2017-05 22
Return on Investment Write-offs have also declined since the implementation of the program, providing an ROI of 475%. Pre-Bonus Write-Offs Baseline $ 10,667,695.25 Post Bonus Implementation $ 7,818,100.91 Difference $ 2,849,594.34 Cost $ 495,905.00 Return on Investment 475% 23
Next Steps The UR incentive plan is being updated in the 4Q of 2017 Authorization denials will be added to the goal Insurance verification team members are being incorporated into the program Goals will be updated to be based on a rolling 12 month period 24
Key Takeaways
Key Takeaways Well structured incentive plans can motivate team members to achieve results they may not have been able to otherwise attain. However, as programs are developed the following items are vital to your success: Select goals that the team can impact and have a strong ROI if met Exhaust all other avenues for performance improvement Be prepared to answer this question: Why can t you achieve these same results without the additional investment? Develop a clear communication plan Team members must be aware of goals, how they impact them, and how the team is performing in relation to the goals at all times Determine how to communicate with team members in other departments who may not participate in the incentive plan 26
Key Takeaways (Continued) Re-evaluate and adjust goals on a regular basis to ensure they are lofty but attainable Raise the bar and/or select new goal(s) if the team is consistently hitting the goal Lower the bar if the goal seems unattainable Re-visit the ROI at predetermined intervals 27
28 Thank You