Accretive Health - Revenue Cycle Management - Medical Billing Services


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Accretive Health - Revenue Cycle Management - Medical Billing Services

  1. 1. Accretive Health Revenue Cycle ManagementDriving Growth Through Measured Results DECEMBER 3, 2012
  2. 2. Safe HarborCertain statements contained in this presentation may be considered forward-looking asdefined by the Private Securities Litigation Reform Act of 1995. In particular, any statementsmade about Accretive Health’s expectations for future financial and operational performance,expected growth, new services, profitability or business outlook are forward-lookingstatements. Investors are cautioned not to place undue reliance on such forward-lookingstatements. There is no assurance that the matters contained in such statements will occursince these statements involve various risks and uncertainties that could cause actualresults to differ materially from those expressed in such forward-looking statements. Theserisks and uncertainties include those listed under the heading Risk Factors in the company’sQuarterly Report on Form 10-Q for the quarter ended September 30, 2012, which is availableon the SEC’s website as well as in the investor relations portion of Accretive Health’s websiteat The forward-looking statements made in this presentation arebased on the company’s beliefs and expectations as of December 3, 2012 only and shouldnot be relied upon as representing the company’s views as of any subsequent date. While thecompany may elect to update these forward-looking statements at some point in the future,Accretive Health specifically disclaims any obligation to do so, even if its views change. Driving Growth Through Measured Results 2
  3. 3. Use of Non-GAAP Financial MeasuresIn order to provide stockholders with greater insight and to We believe adjusted EBITDA is useful to stockholders in evaluating ourallow for better understanding of how our management and operating performance for the following reasons:board of directors analyze our financial performance and • these and similar non-GAAP measures are widely used by investors tomake operational decisions, we supplement our condensed measure a company’s operating performance without regard to items thatconsolidated financial statements presented on a GAAP can vary substantially from company to company depending upon financingbasis with the adjusted EB ITDA and adjusted net income and accounting methods, book values of assets, capital structures and themeasures *. methods by which assets were acquired;Adjusted EBITDA measure has limitations, as noted below, • securities analysts often use adjusted EBITDA and similar non-GAAPand should not be considered in isolation or in substitute for measures as supplemental measures to evaluate the o verall operatinganalysis of our results as reported under GAAP. performance of companies; and • by comparing our adjusted EBITDA in different historical periods, ourOur management uses adjusted EBITDA: stockholders can evaluate our operating results without the additional • as a measure of operating performance, because it does not variations of interest income (expense), income tax expense (benefit), include the impact of items that we do not consider indicative depreciation and amortization expense and share-based compensation of our core operating performance; expense. • for planning purposes, including the preparation of our We understand that, although measures similar to adjusted EBITDA are annual operating budget; frequently used by investors and securities analysts in their evaluation of • to allocate resources to enhance the financial performance companies, these measures have limitations as analytical tools, and you of our business; should not consider it in isolation or as a substitute for analysis of our • to evaluate the effectiveness of our business strategies; and results of operations as reported under GAAP. To properly and prudently • in communications with our board of directors and investors evaluate our business, we encourage you to review the GAAP financial concerning our financial performance. statements included elsewhere in our regulatory filings, including the Preliminary Prospectus, Form 8-K, and Form 10-K, and not to rely on any single financial measure to evaluate our business.*Reconciliations of non-GAAP measures to their most directly comparable GAAP measures are presented, where possible in the Appendix, as well as in theCompany’s financial press releases and related Form 8-K filings with the Securities and Exchange Commission. This information can be accessed for free inthe Investor Relations section of the Company’s website at Driving Growth Through Measured Results 3
  4. 4. ACCRETIVE HEALTH OVERVIEW Driving Growth Through Measured Results
  5. 5. Our Guiding Principles• Our primary goal is to help our healthcare clients strengthen their financial stability and deliver better care to the communities they serve• We use technology to drive best practices and best outcomes• We work collaboratively with clients to create solutions to existing challenges• We promote an entrepreneurial culture to encourage innovation and continuously upgrade our functionality with a focus on value creation Driving Growth Through Measured Results 5
  6. 6. Accretive Health SnapshotFounded in 2003, headquartered in ChicagoWin – Win Proposition with our Client Partners • We are paid based on our results; no upfront costs for Quality or Revenue Cycle Services • We have partnered with some of the most well-respected health systems in the U.S.We Drive Measured Results for our Partners • Since inception we have delivered $1.5 billion in cash benefits to clientsInnovation and Operational Excellence is at the Core of What We Do • Success of our RCM offering is driven by applying technology and innovative process improvements to drive measurable results • Seeded Physician Advisory Services in 2009, now a $60 million run-rate business • Developed unique offerings to improve care quality at lower costs – Intra-Stay Quality and Population Health Management Infrastructure Driving Growth Through Measured Results 6
  7. 7. Three Distinct Offerings Revenue Quality and Physician Cycle Management Care Coordination Advisory Services Proven end-to-end Utilize physician-driven Compliance services solution that lowers best practices to that maintain detailed collection costs and improve care quality at audit trails for claims reduces yield a lower cost leakage Driving Growth Through Measured Results 7
  8. 8. Multiple Growth Drivers in Each BusinessRevenue Cycle Management • Large market opportunity, low current penetration • Proven end-to-end solution with a win-win proposition • Margin expansion by driving further efficiency and reducing reimbursement leakageQuality and Care Coordination • Population Health Management is developing as the next frontier of healthcare • Lack of provider infrastructure for population health management • Intra-Stay Quality has broad appeal and could create beachhead into new hospitalsPhysician Advisory Services • Increasing frequency of audits • Opportunity for continued market share gains • Expansion into compliance and workflow advisory services Driving Growth Through Measured Results 8
  9. 9. Providers are Getting Squeezed • Value-based payment models Health Reform • Medicaid expansion/State budget constraints • Insurance exchanges• Declining reimbursement• Rising bad debt Economic• Rising costs • ICD-10 from medical Compliance • RAC Audits innovation • Capital constraints • Patient satisfaction scores Insufficient • Significant variance Resources • Higher out-of-pocket costs in provision and Patients quality of care • Aging population • Personalized medicine Driving Growth Through Measured Results 9
  10. 10. Market Opportunity RCM Quality PAS Market Size $1.0 Trillion $1.6 Trillion $ 710 billion % to AH 5.0% 6.25% 0.12% Revenue Revenue $50 $100 $850 Opportunity Billion Billion MillionSources: CMS National Healthcare Expenditures, September 2011 and Definitive HealthcareRCM market scope includes net patient revenue at all hospitals based on CMS 2014 projected expendituresQuality market scope includes all hospital and physician expendituresPAS market scope includes all hospitals with >$250 million in net patient revenue Driving Growth Through Measured Results 10
  11. 11. Value PropositionRevenue Cycle and Quality Require No Upfront Investment from Clients • Accretive Health is compensated based on Measured Value delivered to clientsOur End-to-End Solution Delivers Superior Results by Combining People,Process and Technology • People: Well-trained professionals who work directly with the client • Process: Market-leading best practices to allow seamless workflow at all stages of the revenue collection process • Technology: Comprehensive tools to measure and improve efficiency for clinical and financial outcomes Driving Growth Through Measured Results 11
  12. 12. A Differentiated Offering Accretive Health Operating Partnership NOT  Pay for measured results a consulting firm  Unparalleled form of collaboration NOT  End-to-end scope an outsourcing model  AH makes significant investment of resources NOT  Pay for results not input a software provider We create operating partnerships that result in distinctly different outcomes than other models Driving Growth Through Measured Results 12
  13. 13. End-to-End RCM Solution Provides Competitive Advantages Value Patient Patient Lost Payor Compliance Proposition Advocacy Share Charges Follow-Up (% revenue lift) 4-6% (Measured) SaaS / Est. 0.5-1% Technology- (Not Measured)Supported RCM Est. 0.5-1% Consulting (Measured) IT Outsourcing / Est. 0.5-1.5% Non-HC BPO (Not Measured)Note: Based on Accretive Health’s estimates Driving Growth Through Measured Results 13
  14. 14. Partnering with Innovative Leaders Driving Growth Through Measured Results 14
  15. 15. REVENUE CYCLE MANAGEMENT Driving Growth Through Measured Results
  16. 16. Market Drivers for RCM Solutions Financial Increasing Obsolete Investment Pressures Complexity Technology Risk • Declining • ICD-10 • Old-generation • No upfront reimbursement financial systems investment • Health still in use with Accretive • Increasing Reform Health patient • Fragmented responsibility solutions • Poor collection ratesWe compete with numerous vendors who approach themarket with incomplete solutions Driving Growth Through Measured Results 16
  17. 17. Collection Yield: Uncovering Hidden LeakageOpacity in the revenue cycle process hides leakage Typical hospital Calculation after calculation AH analysisGross charges $1,000 $1,000 Less: Accurate contractual adjustments - 500 - 500 Less: Hidden leakage disguised as - 35 0 contractual adjustmentsGross charges less contractuals (collectable cash) $465 $500 Less: Payor write-offs -5 -5 Less: Bad debt -25 -25 Less: Hidden leakage 0 -35 Areas for AHCash collected $435 $435 to drive improvement $435 $435Yield (cash collected/collectable cash): $465 = 94% $500 = 87% We uncover hidden leakage to derive a real picture of collection yield Driving Growth Through Measured Results 17
  18. 18. How do we Uncover Hidden Leakage?Our proprietary AHtoContract tool is vital in calculating Best Possible revenue 12-month period All contracts All patient visits and charge information AHtoContract Tool Best Possible Revenue Driving Growth Through Measured Results 18
  19. 19. Understanding Leakage: Illustrative Example Revenue Mix100% 4.1% 7.7% % of Yield Total75% Uninsured 5% 0.2% 4.1% x 5.0% = 0.2% Insured patient responsibility 30% 2.3% 7.7% x 30% = 2.3%50% 88.2% Payors 95.8% 84.5% 88.2% x 95.8% = 84.5%25% Overall Collection Rate: 87.0% Uninsured patients Insured patients residual responsibility 0% Payor reimbursement In an industry where operating margins average ~2%, 13% revenue leakage is significant Note: Based on Accretive Health’s estimates Driving Growth Through Measured Results 19
  20. 20. RCM Win-Win Proposition I: Improved Revenue Lift 5% • Pre-registration • Automated insurance verification Payor yield: 2% • Automated plan code correction • Prior authorizations 4% • Continuous denials review/fix • Automated denial resolution • Automated underpayment trolling • Proper contractualization of receivables 3% • Specialized physicians to appeal denials Insured • Real-time patient responsibility estimation patient yield: 1% • Simplified billing statements • Prior balance visibility 2% • Patient education Patient self-pay • Alternate sources of coverage conversion: 1% • Expeditious charity care application • Manage secondary coverage as backup 1% Increase to • Identification of missing or unbilled charges • Pricing initiatives “Best Possible”: 1% • Post-coding, pre-bill quality review 0%We retain a portion of the revenue lift as our Incentive Fee Driving Growth Through Measured Results 20
  21. 21. Reducing Collection Costs: MethodologyWe help our clients reduce costs through: • Process efficiency – eliminate • Vendor cost management redundant effort • Demand-driven staffing and scheduling • Technology-driven productivity • Use of Shared Service Centers to drive improvements – automation economies of scaleWhat services are included? Front-End Middle Back-End Scheduling Transcription Billing Pre–registration Coding Claim follow–up Registration Case coordination Cash posting Eligibility Records storage Pre-collect Insurance verification Clinical documentation Underpayments Pre–authorization Release of information Denial management Financial counseling Medical records Contract compliance Admitting Charge capture Driving Growth Through Measured Results 21
  22. 22. RCM Win-Win Proposition II: Reducing Collection CostsCost Baseline: Hospitals spend about 4.0-4.5% of NPR on their collection effort• This baseline serves as the initial basis of our Base Fee $120 $100 Cost Baseline 15-30% expense $80 reduction after engaging with AH $60 $40 $20 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Reducing collection costs: • Accretive Health aims to reduce cost to collect by 15-20%, or 20-30% if services are migrated to Shared Service Centers • Cost savings are shared with clients, providing a mutual incentive Driving Growth Through Measured Results 22
  23. 23. Shared Service CentersWe operate 10 Shared Service Centers domestically and offshore89% of revenue cycle management customers utilize at least one sharedservice; 55% of customers utilize at least three shared servicesShared services deliver enhanced benefits – more cost savings thanprocessing on-siteServices delivered via Shared Service Centers: • Financial Clearance • Customer Service • Pre-collect • Medicaid Eligibility • Patient Financial Services • Underpayments • Transcription • Coding Driving Growth Through Measured Results 23
  24. 24. Why Our End-to-End Solution is BetterSuperior results through complete oversight of the revenue cycle• Fragmented solutions are sub-optimal, with no complete view of data• Competitors with limited scope can only deliver limited value • Root cause analysis shows significant problems are caused by poor inputs • Garbage in…garbage out!• Effective revenue cycle must capture all inputs and outputs at the front, middle and back end Accretive Health Oversight Patient Cash Information FRONT MIDDLE BACK Collected (input) (output) Competitors with limited scope Driving Growth Through Measured Results 24
  25. 25. Our Technology is a Critical Piece of our OfferingAccretive Health technology integrates with client patient accounting,scheduling, and electronic health record systems • Existing patient accounting system remains “System of Truth” • Industry-standard protocols (HL7, EDI, etc) • Seamless interfacing, NOT a system conversion • Experienced implementation teams • No local hardware or software installation • Hosted in world-class SAS-70 compliant data center Driving Growth Through Measured Results 25
  26. 26. Technology ModelOur technology…Detects accounts that have financial riskStreamlines the Execution of resolving the riskMeasures the efficiency and effectiveness of our process and outcomes Driving Growth Through Measured Results 26
  27. 27. Core Revenue Cycle Technology AHtoContract™ Best Possible calculation, contract modeling, insurance payer follow up payment AHtoAccess™ Patient pre-registration and registration, insurance eligibility checking AHtoCharge™ Charge integrity and compliance Yield-Based Follow Up™ Follow-Up™ Follow-up Follow up for un-billed and billed claims with payors AHtoAnalytics™ Operational reporting and analytics with drill-through to account level detail Driving Growth Through Measured Results 27 Proprietary & Confidential
  28. 28. Eliminating Leakage Drives Returns Potential Sources of Leakage Throughout End-to-End Process Actual Leakage FRONT-END MIDDLE BACK-END Realized Registration and Health Information Uncompensated Care Billing and Follow-up Financial Clearance Management • Bad debt • Charity care • Denial write-offs• Incomplete patient data • Insufficient or • Insufficient follow up• Incomplete insurance incomplete with payer/patient verification documentation • Failure to appeal Hidden Leakage in • Coding errors denial • Contractuals• Incorrect payor code (Underpayments,• Failure to obtain • Missed charges • Billing errors misclassified denials) pre-authorization • Discharge not final• Incorrect residual billed (DNFB) Hidden Leakage Due to estimate • Cash posting errors • Missing charges• Failure to discuss patient • Failure to bill • Documentation and share/ prior balance secondary coding errors• Failure to find • Delays in timely filing secondary insurance • Third-party take• Coordination of benefits backs Driving Growth Through Measured Results 28
  29. 29. AHtoCharge Metrics Manual Internal Audit* AHtoCharge Total Registered Visits 1,000,000 1,000,000 Reviewed Accounts 1,000 1,000,000 % Reviewed 0.1% 100% Worked Accounts 1,000 30,000 Reconciled Revenue Leakage (# of accounts) 100 8,000 Gross $s Reconciled $50,000 $4,000,000*Based on Accretive Health’s estimates Driving Growth Through Measured Results 29
  30. 30. Lifecycle of a Claim Thorough analysis of claims Balance (BAL) Compare to: REI $4642.01 Aug.15,2012 – Nov 13, 2012 Charges BAL $0 CHR $9423.75 PMT $4642.01 ADJ $4781.74 L Payments Patient Payments Discharged Insurance Payments8000.00 8/22/2012 Adjustments Exp Reimbursement6000.00 Admitted Patient Payment 8/18/2012 11/7/20124000.00 Contractual Allowance Insurance 11/7/2012 Insurance Payment adjustment2000.00 S 10/11/2012 Insurance R payment P R E C U Y LL A U T B 2 8 C Z Y 8 2 8 $ B 2 8 $ $ 0 Pre-Registration Aug 20 Aug 27 Sep Sep 20 Sep 17 Sep 24 Oct Oct 8 Oct 15 Oct 22 Oct 29 Nov 8/15/2012 Insurance plan info added Driving Growth Through Measured Results 30
  31. 31. Yield-Based Follow-upThe Yield-Based Follow-up Tool utilizes proprietary algorithms and businesslogic to assign accounts to appropriate risk categories. Initial Prioritization based on factors including: • Payor type and plan code • Days from discharge • Current insurance balance • Days before filing appeals deadline • Expected reimbursement • Most recent activity on the account • Denial type (if any) • Recommended follow-up date Advanced Prioritization Algorithms • Customizable business rules engine utilizing 30+ • Insights from predictive models based on analysis of variables for each account historical data Workflow Management • Grouping of accounts into risk levels • Campaigns focused on specific claim types Prioritized claims for each follow-up representative Driving Growth Through Measured Results 31
  32. 32. Factors that Contribute to Long-Term Client Partnerships• Technology is integrated into all key steps in the revenue cycle process• Industry knowledge, reporting, and analytics capabilities are integrated into management of the operations• Embedded management teams are integral to execution of revenue cycle processes• Utilization of Shared Service Centers delivers additional cost savings• Operational excellence and a focus on continuous improvement, combined with consistent financial results, generates loyalty Driving Growth Through Measured Results 32