Scottsdale Instit Presentation- Wegmiller

8/8/2019 Scottsdale Instit Presentation- Wegmiller

1/116

Health Care OutlookThe Need forCost Management is Real

Scottsdale Institute ConferenceScottsdale, ArizonaApril 14, 2000

Health Care OutlookThe Need forCost Management is Real

Scottsdale Institute ConferenceScottsdale, ArizonaApril 14, 2000

bybyDonald C. Wegmiller, PresidentDonald C. Wegmiller, President

HealthCare Compensation StrategiesHealthCare Compensation Strategies

HEALTHCARE COMPENSATION STRATEGIESa division of Clark/Bardes


2/116

Environmental Assessment 2000Environmental Assessment 2000--20042004

Leadership Survey 1999Leadership Survey 1999 Financial Status 2000Financial Status 2000--20022002 Managed Care Plan StatusManaged Care Plan Status Shortage of ProfessionalsShortage of Professionals Current and Future Leadership in Health CareCurrent and Future Leadership in Health Care Physician Hospital Integration (Retain orPhysician Hospital Integration (Retain or

Divest ?)Divest ?) Credit CrunchCredit Crunch

Critical Success FactorsCritical Success Factors Review Top 10 Critical Success Factors toReview Top 10 Critical Success Factors to

Succeed in New EnvironmentSucceed in New Environment

SummarySummary


Leadership Survey 1999Leadership Survey 1999 Financial Status 2000Financial Status 2000--20022002 Managed Care Plan StatusManaged Care Plan Status Shortage of ProfessionalsShortage of Professionals Current and Future Leadership in Health CareCurrent and Future Leadership in Health Care Physician Hospital Integration (Retain orPhysician Hospital Integration (Retain or

Divest ?)Divest ?) Credit CrunchCredit Crunch

Critical Success FactorsCritical Success Factors Review Top 10 Critical Success Factors toReview Top 10 Critical Success Factors to

Succeed in New EnvironmentSucceed in New Environment

SummarySummary

Overview of PresentationOverview of PresentationOverview of PresentationOverview of Presentation


3/116

ENVIRONMENTAL ASSESSMENT 2000ENVIRONMENTAL ASSESSMENT 2000--20042004

EALT

AREOM

ENSATION

STRATE IES


4/116

Leadership Survey 1999Leadership Survey 1999

L

S

S S


5/116

ByByHospitals and Health NetworksHospitals and Health Networks 700 health care executives700 health care executives

Rank 30 issues for both importance andRank 30 issues for both importance andpreparednesspreparedness

ByByHospitals and Health NetworksHospitals and Health Networks 700 health care executives700 health care executives

Rank 30 issues for both importance andRank 30 issues for both importance andpreparednesspreparedness

Leadership Survey 1999Leadership Survey 1999

L! "

#

R

#

$ % & '

S ! ( $ '

S! R ! ) ( S


6/116

Top 5 issues for importance:Top 5 issues for importance:Physician and administrative collaborationPhysician and administrative collaborationControlling costsControlling costs Improving customer serviceImproving customer service Increasing patient satisfactionIncreasing patient satisfaction Investment incomeInvestment income

Top 5 issues for importance:Top 5 issues for importance:Physician and administrative collaborationPhysician and administrative collaborationControlling costsControlling costs Improving customer serviceImproving customer service Increasing patient satisfactionIncreasing patient satisfaction Investment incomeInvestment income

0

1 2 3 4 5

C2 6 1

C7 8 P1 9 @ 2 4 I7 9

A

4 6 2 4 1 B

I1

@

eadership urvey 1999eadership urvey 1999


7/116

Top six* issues for strategic gap:Top six* issues for strategic gap:

Controlling costsControlling costs Improving customer serviceImproving customer service Increasing patient satisfactionIncreasing patient satisfaction

Improving community health statusImproving community health statusMeasuring quality of care/improvingMeasuring quality of care/improvingoutcomesoutcomes

Medicare managed care contractingMedicare managed care contracting

Top six* issues for strategic gap:Top six* issues for strategic gap:

Controlling costsControlling costs Improving customer serviceImproving customer service Increasing patient satisfactionIncreasing patient satisfaction

Improving community health statusImproving community health statusMeasuring quality of care/improvingMeasuring quality of care/improvingoutcomesoutcomes

Medicare managed care contractingMedicare managed care contracting

*last three issues tied*last three issues tied

C

D E F G H

CE I D

CP MQ D R S E G IP R

T

G I E G D U

ID

S

eadership urvey 1999eadership urvey 1999


8/116

Financial Status 2000Financial Status 2000--20022002

V

W X Y ` a

b

X c W

b

d e f W g

SX ` h d g

S` c X ` W i h W S


9/116

0.2

2.8

0.

5.

1.1

8.5

1.

11.0

2.2

13.4

0

5

10

15

$

illion

1980 1990 1998 2004 2008

Health Care as a % of GDP

% Health Care% Health Care 8.9%8.9% 12.2%12.2% 13.5%13.5% 15.4%15.4% 16.2%16.2%

Health care is growingin dollar value and asHealth care is growingin dollar value and as

a percent of GDPa percent of GDP

Source: HCFA

Financial Status 2000Financial Status 2000--20022002Financial Status 2000Financial Status 2000--20022002


10/116

41.50%

18.30%

4.90%7.10%

28.20%

36.70%

20.90%

5.40%7.30%

29.70%

33.30%

20.00%

7.90%

7.60%

31.20%

31.40%

19.40%

9.90%

7.00%

32.20%

30.30%

19.10%

11.20%

6.90%

32.50%

1980 1990 1998 2004 2008

Distribution of Health Care Costs

Hospitals Physicians Drugs Long-Term Care Administration, Construction, Other

Source: HCFA

Hospitals are shrinking as a percentage ofHospitals are shrinking as a percentage of

the health care dollarthe health care dollar

Hospital($ Billions) $256 $103 $383 $531 $660

8.6 p

8.0%

11.3%

8.3%

6.9%

CompoundAnnual

Growth Rate

0%0%

20%20%

40%40%

60%60%

80%80%

100%100%



11/116

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

1996 1997 1998 1999 2000 2001 2002

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

1996 1997 1998 1999 2000 2001 2002

Urban All Hospitals Rural

Shrinking MarginsShrinking MarginsPayment cuts under the 1997 Balanced Budget Act will push hospital Medicare marginsPayment cuts under the 1997 Balanced Budget Act will push hospital Medicare marginson a downward slopeon a downward slope

Assuming costs grow at marketbasket,Assuming costs grow at marketbasket,Medicare margins for all hospitals willMedicare margins for all hospitals willdrop to negative 7.8% by 2002drop to negative 7.8% by 2002

if costs grow at marketbasket minusif costs grow at marketbasket minusone percentage point, margins will dropone percentage point, margins will dropto negative 4.4%.to negative 4.4%.

Post BBA-projections

ActualActual

Post BBA-projections

Source: The Lewin Group, May 1999



12/116

Summary of Key Findings - BBA

Total

Major Service Areas Studied

Inpatient PPS (operatingcapital, and bad debt)

Outpatient

Hospital-Based Home Health

PPS-Exempt Units andHospitals

-$71.2

-$40.7

-$11.2

-$5.5

-$2.8

-10.5%

-9.5%

-14.4%

-21.6%

-6.9%

-4.4%

7.5%

-20.3%

-11.4%

-4.7%

-7.8%

4.2%

-28.8%

-11.4%

-6.8%

5 YrPaymentImpact

(Billions)

5 YrPaymentImpact

(Percent)

2002 ProjectedMargin RangeDepending onCost Growth

Source: The Lewin Group analysis of Medicare Cost Report and AHA Annual Survey data.



13/116

45%

46%48%

55%57%

61%66%

68%70%

52% 54%

43% 39%34% 32% 30%

0% Medicare Margin

Percent ofHospitals withNegative Margins

Percent ofHospitals with

Positive Margins

Margins of Hospitals

1996 1997 1998 1999 2000 2001 20021995Source: The Lewin Group analysis of Medicare Cost Report and AHA Annual Survey data.



14/116

Balanced Budget Refinement Act of 1999Balanced Budget Refinement Act of 1999

Return total of $13.7 billion to MedicareReturn total of $13.7 billion to Medicarepaymentspayments

Represents only 12% of $115 billion BBA cutsRepresents only 12% of $115 billion BBA cuts

Only $7.5 billion of return goes to hospitalsOnly $7.5 billion of return goes to hospitals Improves Lewin hospital Medicare marginsImproves Lewin hospital Medicare margins

fromfrom --7.8% to7.8% to --6.9%6.9%

Balanced Budget Refinement Act of 1999Balanced Budget Refinement Act of 1999

Return total of $13.7 billion to MedicareReturn total of $13.7 billion to Medicarepaymentspayments

Represents only 12% of $115 billion BBA cutsRepresents only 12% of $115 billion BBA cuts

Only $7.5 billion of return goes to hospitalsOnly $7.5 billion of return goes to hospitals Improves Lewin hospital Medicare marginsImproves Lewin hospital Medicare margins

fromfrom --7.8% to7.8% to --6.9%6.9%

q

r

AL

s t

u

AR

r

u

OMv r w

x As

IOw

y

s

RAs r

Ir

x

Financial tatus 2000Financial tatus 2000--20022002


15/116

Results of BBA thus far: Two years into the BBA,Results of BBA thus far: Two years into the BBA,and with the BBRA, the following has occurred:and with the BBRA, the following has occurred:

Four of largest nursing home chains, withFour of largest nursing home chains, withover 1,500 homes, have filed for bankruptcyover 1,500 homes, have filed for bankruptcy(Vencor, Sun Healthcare Group, Mariner Post(Vencor, Sun Healthcare Group, Mariner Post--Acute Network, Integrated Health Services).Acute Network, Integrated Health Services).10% of all nursing homes in bankruptcy.10% of all nursing homes in bankruptcy.

Fifth national chain misses bond payments; isFifth national chain misses bond payments; islikely bankruptcy candidatelikely bankruptcy candidate

648 home health agencies have shut down648 home health agencies have shut downsince 1997since 1997

Hospital margins, both operating and total,Hospital margins, both operating and total,are decreasing dramaticallyare decreasing dramatically

Results of BBA thus far: Two years into the BBA,Results of BBA thus far: Two years into the BBA,and with the BBRA, the following has occurred:and with the BBRA, the following has occurred:

Four of largest nursing home chains, withFour of largest nursing home chains, withover 1,500 homes, have filed for bankruptcyover 1,500 homes, have filed for bankruptcy(Vencor, Sun Healthcare Group, Mariner Post(Vencor, Sun Healthcare Group, Mariner Post--Acute Network, Integrated Health Services).Acute Network, Integrated Health Services).10% of all nursing homes in bankruptcy.10% of all nursing homes in bankruptcy.

Fifth national chain misses bond payments; isFifth national chain misses bond payments; islikely bankruptcy candidatelikely bankruptcy candidate

648 home health agencies have shut down648 home health agencies have shut downsince 1997since 1997

Hospital margins, both operating and total,Hospital margins, both operating and total,are decreasing dramaticallyare decreasing dramatically



16/116

Financial Status 2000Financial Status 2000--20022002Financial Status 2000Financial Status 2000--20022002

One In Ten Nursing Homes BankruptOne In Ten Nursing Homes BankruptOne In Ten Nursing Homes BankruptOne In Ten Nursing Homes Bankrupt

West14.9%

South14%

Midwest4.9%

Northeast6.7%

(Percentagebankrupt by

region)

Total U.S. 9.8%Source: American Health Care Association


17/116

Hospital Quarterly Operating Margins for 1998

0%

2%

3%

4%

5%

6%

7%

8% 7.94%

6.72%

6.38% 5.41%

4.15%3.78%

4.01%

2.60%

4.51%

3.87%

2.92%3.17%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

0 to 99 Bed Facility 100 to 299 Bed Facility 300+ Bed Facility



18/116

4.5%

4.3%

4.9%

3.2%

2.0%

3.7%

-0.4%

0.5%

2.0%1.5%

3.1%

3.9%

-1%

0%

1%

2%

3%

4%

5%

1994 1995 1996 1997 1998 1999**

*Major teaching hospital indicated by membership in Council of Teaching Hospitals **EstimatedSource: HealthCare Advisory Board

NonNon--teaching hospitalsteaching hospitals

Major teaching hospitals*Major teaching hospitals*

In addition to absorbing standard reductions in Medicare payments, teaching hospitals also faceIn addition to absorbing standard reductions in Medicare payments, teaching hospitals also facesubstantial cuts in indirect medical education payments, and reductions in disproportionatesubstantial cuts in indirect medical education payments, and reductions in disproportionate--sharesharepayments.payments.

Operating margins in crisis



19/116

Hospital Total Margins(operating income plus investment income)

6.3%6.3%

4.3%4.3%

2.7%2.7%

1.1%1.1%

0

1

2

3

4

5

6

7

1997 1998 1999 2000 (est)



20/116

Tell me what you need, and Ill tell youTell me what you need, and Ill tell you

how to get along without it.how to get along without it.

Tell me what you need, and Ill tell youTell me what you need, and Ill tell you

how to get along without it.how to get along without it.

Dilberts Wisdom and Laws

T

TI

T

T

I

Financial tatus 2000Financial tatus 2000--20022002


21/116

Managed Care Plan StatusManaged Care Plan Status

C

C MP S

S S


22/116

10.9%10.9%199319936.6%6.6%

2.1%2.1%

2.2%2.2%2.1%2.1%

19951995

3.3%3.3%19971997

199919997.8%7.8%

Private HC PremiumsPrivate HC PremiumsHealth Care CostsHealth Care Costs

Managed Care PlansManaged Care PlansManaged Care PlansManaged Care Plans

Overall Percentage Change from Previous YearOverall Percentage Change from Previous Year

Source: VHA andDeloitte & Touche

5.7%5.7%

20002000 10.0%10.0%6.5%6.5%


23/116

Operating MarginsOperating Margins

19971997 57% of all HMOs reported losses57% of all HMOs reported losses

$768 million in total losses$768 million in total losses

Blue Cross plans had underwriting losses ofBlue Cross plans had underwriting losses of$790 million$790 million


$490 million in total losses$490 million in total losses 45 of 55 Blue Cross plans had underwriting45 of 55 Blue Cross plans had underwriting

losses; total $835 millionlosses; total $835 million

Operating MarginsOperating Margins


$768 million in total losses$768 million in total losses

Blue Cross plans had underwriting losses ofBlue Cross plans had underwriting losses of$790 million$790 million


$490 million in total losses$490 million in total losses 45 of 55 Blue Cross plans had underwriting45 of 55 Blue Cross plans had underwriting

losses; total $835 millionlosses; total $835 million

Managed Care Plan StatusManaged Care Plan StatusManaged Care Plan StatusManaged Care Plan Status

H

j k l m

HC

k n j

COMPj o Sk m Oo

Sm n k m j j S


24/116

Comparison of HMO Profit Margins and Overall PercentComparison of HMO Profit Margins and Overall Percent

Increases in HMO PremiumsIncreases in HMO Premiums

Comparison of HMO Profit Margins and Overall PercentComparison of HMO Profit Margins and Overall Percent

Increases in HMO PremiumsIncreases in HMO Premiums

92 93 94 95 96 97 98 99

PercentPercentIncrease inIncrease in

OverallOverallPremiumsPremiums

HMO ProfitHMO ProfitMarginsMargins

Overall HealthOverall HealthInsurance PremiumsInsurance Premiums

HMO Profit MarginHMO Profit Margin

15%

10%

5%

0%

15%

10%

15%

10%

5%

0%

15%

10%



25/116

-2

10

12

14

Annual Percent ChangeAnnual Percent ChangeAnnual Percent ChangeAnnual Percent Change

0

2

4

6

8

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

HMO PremiumsHMO Premiums

General InflationGeneral Inflation

Source: KPMG Peat Marmick, Sherlock Company, Bureau of Labor Statistics



26/116

Shortage of ProfessionalsShortage of Professionals

z {

P |

S } z |

S ~ } S


27/116

US population age 30US population age 30 -- 44:44:

1999 = 64.3 million1999 = 64.3 million2003 = 62.3 million (2003 = 62.3 million (--3.2%)3.2%)2009 = 57.5 million (2009 = 57.5 million (--10.5%)10.5%)

Growth in US employment:Growth in US employment:Conservative estimates = +9.0% 1999 to 2009Conservative estimates = +9.0% 1999 to 2009Last two decades have had far greater growthLast two decades have had far greater growth

ratesrates

Conclusions:Conclusions:

20% shortfall in available prime20% shortfall in available prime--ofof--lifelifeemployees over next ten yearsemployees over next ten years

US population age 30US population age 30 -- 44:44:

1999 = 64.3 million1999 = 64.3 million2003 = 62.3 million (2003 = 62.3 million (--3.2%)3.2%)2009 = 57.5 million (2009 = 57.5 million (--10.5%)10.5%)

Growth in US employment:Growth in US employment:Conservative estimates = +9.0% 1999 to 2009Conservative estimates = +9.0% 1999 to 2009Last two decades have had far greater growthLast two decades have had far greater growth

ratesrates

Conclusions:Conclusions:

20% shortfall in available prime20% shortfall in available prime--ofof--lifelifeemployees over next ten yearsemployees over next ten years

Shortage of ProfessionalsShortage of ProfessionalsShortage of ProfessionalsShortage of Professionals


28/116

Health care delivery organizations not viewed asHealth care delivery organizations not viewed as

positively as employers, as in past decades:positively as employers, as in past decades: Evening, night, weekend, holiday schedules not asEvening, night, weekend, holiday schedules not asappealing to baby boomers who value lifeappealing to baby boomers who value lifestyle/work balancestyle/work balance

Alternative employment opportunities to use healthAlternative employment opportunities to use healthcare professional skills abound:care professional skills abound: Pharmaceutical firmsPharmaceutical firms

Medical supply companiesMedical supply companies

Medical device firmsMedical device firms

HMOs, managed care plansHMOs, managed care plans Consulting firmsConsulting firms

Equal/greater pay, better benefits, wealthEqual/greater pay, better benefits, wealthaccumulation, better life style, attractive featuresaccumulation, better life style, attractive featureselsewhereelsewhere

Health care delivery organizations not viewed asHealth care delivery organizations not viewed as

positively as employers, as in past decades:positively as employers, as in past decades: Evening, night, weekend, holiday schedules not asEvening, night, weekend, holiday schedules not asappealing to baby boomers who value lifeappealing to baby boomers who value lifestyle/work balancestyle/work balance

Alternative employment opportunities to use healthAlternative employment opportunities to use healthcare professional skills abound:care professional skills abound: Pharmaceutical firmsPharmaceutical firms

Medical supply companiesMedical supply companies

Medical device firmsMedical device firms

HMOs, managed care plansHMOs, managed care plans Consulting firmsConsulting firms

Equal/greater pay, better benefits, wealthEqual/greater pay, better benefits, wealthaccumulation, better life style, attractive featuresaccumulation, better life style, attractive featureselsewhereelsewhere

Shortage of ProfessionalsShortage of ProfessionalsShortage of ProfessionalsShortage of Professionals


29/116

AONE SurveyAONE Survey

Median age of R.N.s is 44 years; up from 38 tenMedian age of R.N.s is 44 years; up from 38 tenyears agoyears ago

Satisfaction downSatisfaction down----76% will remain in field;76% will remain in field;down from 86% ten years agodown from 86% ten years ago

Rigid hoursRigid hoursWorking conditions (staffing)Working conditions (staffing) Enrollment in fourEnrollment in four--year nursing programs downyear nursing programs down

AONE SurveyAONE Survey

Median age of R.N.s is 44 years; up from 38 tenMedian age of R.N.s is 44 years; up from 38 tenyears agoyears ago

Satisfaction downSatisfaction down----76% will remain in field;76% will remain in field;down from 86% ten years agodown from 86% ten years ago

Rigid hoursRigid hoursWorking conditions (staffing)Working conditions (staffing) Enrollment in fourEnrollment in four--year nursing programs downyear nursing programs down

E

E

E

E

E

hortage of rofessionalshortage of rofessionalshortage of rofessionalshortage of rofessionals


30/116

Other areas of shortage looming:Other areas of shortage looming:

Physical therapistsPhysical therapistsPharmacistsPharmacistsImaging TechnologistsImaging Technologists

Other areas of shortage looming:Other areas of shortage looming:

Physical therapistsPhysical therapistsPharmacistsPharmacistsImaging TechnologistsImaging Technologists

Source: AHA

T

P

TI

T

T

I

hortage of Professionalshortage of Professionalshortage of Professionalshortage of Professionals


31/116

Study by American Society of Health SystemStudy by American Society of Health SystemPharmacistsPharmacists

350 system directors polled350 system directors polled

50% reported vacancies50% reported vacanciesAverage open positions = 17%Average open positions = 17% National Association of Chain Drug StoresNational Association of Chain Drug Stores

Estimate 3,800 pharmacist vacanciesEstimate 3,800 pharmacist vacancies

Study by American Society of Health SystemStudy by American Society of Health SystemPharmacistsPharmacists

350 system directors polled350 system directors polled

50% reported vacancies50% reported vacanciesAverage open positions = 17%Average open positions = 17% National Association of Chain Drug StoresNational Association of Chain Drug Stores

Estimate 3,800 pharmacist vacanciesEstimate 3,800 pharmacist vacancies

Source: AHA


Shortage of ProfessionalsShortage of Professionals

EA

A

E

PE

SA

S A E ES


32/116

Lack of investment in training and developmentLack of investment in training and development

American Society of Training andAmerican Society of Training andDevelopment 1998 surveyDevelopment 1998 surveyall industriesall industries All firms = $649/employee; 1.8% of payrollAll firms = $649/employee; 1.8% of payroll Leading edge firms = $1,966/employee;Leading edge firms = $1,966/employee;

4.4% of payroll4.4% of payroll Health care = $345/employee; 1.2% of payrollHealth care = $345/employee; 1.2% of payroll

Lack of investment in training and developmentLack of investment in training and development

American Society of Training andAmerican Society of Training andDevelopment 1998 surveyDevelopment 1998 surveyall industriesall industries All firms = $649/employee; 1.8% of payrollAll firms = $649/employee; 1.8% of payroll Leading edge firms = $1,966/employee;Leading edge firms = $1,966/employee;

4.4% of payroll4.4% of payroll Health care = $345/employee; 1.2% of payrollHealth care = $345/employee; 1.2% of payroll

H

AL

H

A

-

A -

A

hortage of rofessionalshortage of rofessionalshortage of rofessionalshortage of rofessionals


33/116

Current and Future Leadership in Health CareCurrent and Future Leadership in Health Care

H

L

H

C

C


34/116

The changing face of health care leadership:The changing face of health care leadership:attitudes and trends.attitudes and trends.The changing face of health care leadership:The changing face of health care leadership:attitudes and trends.attitudes and trends.

Current and Future Leadership in Health CareCurrent and Future Leadership in Health CareCurrent and Future Leadership in Health CareCurrent and Future Leadership in Health Care

John S. LloydJohn S. LloydVice ChairmanVice Chairman

Witt/Kieffer, Ford, Hadelman & LloydWitt/Kieffer, Ford, Hadelman & LloydACHEACHE

March 9, 1999March 9, 1999

HEALTHCA EC M E SAT

ST ATE ES


35/116

AESCAESC--Witt/Kieffer survey focuses on executivesWitt/Kieffer survey focuses on executives

opinionsopinionsInIn--depth interviews with current and futuredepth interviews with current and future

CEOs (Up & Comers health care leaders)CEOs (Up & Comers health care leaders)

Compared findings with comments fromCompared findings with comments fromFortune 1000 executivesFortune 1000 executives

AESCAESC--Witt/Kieffer survey focuses on executivesWitt/Kieffer survey focuses on executives

opinionsopinionsInIn--depth interviews with current and futuredepth interviews with current and future

CEOs (Up & Comers health care leaders)CEOs (Up & Comers health care leaders)

Compared findings with comments fromCompared findings with comments fromFortune 1000 executivesFortune 1000 executives

E C E

CO E IO

E

IE

Current and Future eadership in ealth CareCurrent and Future eadership in ealth CareCurrent and Future eadership in ealth CareCurrent and Future eadership in ealth Care


36/116

CEOs expect short tenureCEOs expect short tenure

40% of health care CEOs expect shorter40% of health care CEOs expect shortertenures in the next 10 yearstenures in the next 10 years

But 69% of Fortune 1000 CEOs expect shorterBut 69% of Fortune 1000 CEOs expect shortertenurestenures

CEOs expect short tenureCEOs expect short tenure

40% of health care CEOs expect shorter40% of health care CEOs expect shortertenures in the next 10 yearstenures in the next 10 years

But 69% of Fortune 1000 CEOs expect shorterBut 69% of Fortune 1000 CEOs expect shortertenurestenures

E C E

CO E O

E

E



37/116

The portable CEO negatively affects loyalty toThe portable CEO negatively affects loyalty tothe organizationthe organization

2/3 or more of current health care CEOs agree2/3 or more of current health care CEOs agreeit has had a negative impact on loyaltyit has had a negative impact on loyalty

throughout corporate Americathroughout corporate America

The portable CEO negatively affects loyalty toThe portable CEO negatively affects loyalty tothe organizationthe organization

2/3 or more of current health care CEOs agree2/3 or more of current health care CEOs agreeit has had a negative impact on loyaltyit has had a negative impact on loyalty

throughout corporate Americathroughout corporate America

EA CA E

CO E

A

O

A

E

E



38/116

Future health care CEOs see opportunities inFuture health care CEOs see opportunities in

current positioncurrent positionHealth care: 55% of future CEOsHealth care: 55% of future CEOsFortune 1000: 57% of future CEOs expect theirFortune 1000: 57% of future CEOs expect their

opportunity will come elsewhere; 25% say in aopportunity will come elsewhere; 25% say in adifferent industrydifferent industry

Future health care CEOs see opportunities inFuture health care CEOs see opportunities in

current positioncurrent positionHealth care: 55% of future CEOsHealth care: 55% of future CEOsFortune 1000: 57% of future CEOs expect theirFortune 1000: 57% of future CEOs expect their

opportunity will come elsewhere; 25% say in aopportunity will come elsewhere; 25% say in adifferent industrydifferent industry

HE HC ECO

E

O

E

E

Current and Future eadership in Health CareCurrent and Future eadership in Health CareCurrent and Future eadership in Health CareCurrent and Future eadership in Health Care


39/116

Health care CEOs are less concerned aboutHealth care CEOs are less concerned aboutcompensationcompensation Health care CEOs are less concerned aboutHealth care CEOs are less concerned aboutcompensationcompensation

20%

27%

Say compensation causes high CEO turnoverSay compensation causes high CEO turnover

Current CEOsFuture CEOs

HE HC ECO

E

S

O

S E ES

Current and Future eadership in Health CareCurrent and Future eadership in Health CareCurrent and Future eadership in Health CareCurrent and Future eadership in Health Care


40/116

CEOs as mentorCEOs as mentor CEOs as mentorCEOs as mentor

100%

18% say current CEO is active in developing training

Current CEOsFuture CEOs

E C E

CO

E

O

E

E



41/116

Management training is lackingManagement training is lacking

But 100% of CEOs and 64% of future CEOs agree itBut 100% of CEOs and 64% of future CEOs agree itmakes sense to invest in training and developmentmakes sense to invest in training and development

Management training is lackingManagement training is lacking

But 100% of CEOs and 64% of future CEOs agree itBut 100% of CEOs and 64% of future CEOs agree itmakes sense to invest in training and developmentmakes sense to invest in training and development

90%

82%

Current CEOs

Future CEOs

E C E

COM

E

O

E!

E



42/116

Future health care CEOs need fastFuture health care CEOs need fast--tracktrackdevelopment programsdevelopment programs

But 50% of CEOs and 100% of future CEOs sayBut 50% of CEOs and 100% of future CEOs say

these programs dont existthese programs dont exist

Future health care CEOs need fastFuture health care CEOs need fast--tracktrackdevelopment programsdevelopment programs

But 50% of CEOs and 100% of future CEOs sayBut 50% of CEOs and 100% of future CEOs say

these programs dont existthese programs dont exist

90% agree

82% agree

Current CEOs

Future CEOs

"

E# $ % & C# ' E

CO( )

E0

1

# % 2

O0

3

% ' # %

E4

2

E1



43/116

Without training, finding qualified CEOs becomesWithout training, finding qualified CEOs becomesmore difficultmore difficult

Percent who say finding firstPercent who say finding first--rate CEOs willrate CEOs willbecome harder during the next ten yearsbecome harder during the next ten years

Without training, finding qualified CEOs becomesWithout training, finding qualified CEOs becomesmore difficultmore difficult

Percent who say finding firstPercent who say finding first--rate CEOs willrate CEOs willbecome harder during the next ten yearsbecome harder during the next ten years

% of future CEOswho agree

% of future CEOswho agree

9%9%

91%91%

60%60%

40%40%

Current and Future Leadership in Health CareCurrent and Future Leadership in Health CareCurrent and Future Leadership in Health CareCurrent and Future Leadership in Health Care


44/116

New CEOs will come from outside theNew CEOs will come from outside theorganizationorganization

But these new CEOs must have health careBut these new CEOs must have health careindustry experienceindustry experience

60%

82%

Current CEOs

Future CEOs

5

E6 7 8 9 C6 @ E

COA B

ENC6 8 D

ON

E

8 @ 6 8

EF

D

EC



45/116

Organizational flattening affects internal CEOOrganizational flattening affects internal CEOcandidate developmentcandidate development

Agree organizational flattening has a negativeAgree organizational flattening has a negativeeffect on internal CEO candidate developmenteffect on internal CEO candidate development

60%

64%

Current CEOs

Future CEOs

G

EAH I P CAQ E

COR S

ET

U AI V

OT

W

I Q

AI

EX

V

EU



46/116

Current CEOs rarely opt out, but future onesCurrent CEOs rarely opt out, but future onesmaymay

20%

64% say opting out willbecome more widespreadand a drain on talent

Current CEOs

Future CEOs

Y

E` a b c C` d E

COe f

Eg

h

` b i

Og

p

b d ` b

Eq

i

Eh



47/116

If CEOs leave, stress is the most likely reasonIf CEOs leave, stress is the most likely reason

Dealing with physicians and job burnout areDealing with physicians and job burnout areamong the factorsamong the factors

Pressure from shareholders contributes to CEOPressure from shareholders contributes to CEOturnoverturnover

r

Es t u v Cs w E

COx

PEy

s u

Oy

u w s u

E

E



48/116

Recognize factors contributing to stressRecognize factors contributing to stress

54% of CEOs in 1997 survey: stress has54% of CEOs in 1997 survey: stress hasincreased substantially in last five yearsincreased substantially in last five years

Only 34% say they achieve balance in theirOnly 34% say they achieve balance in their

personal livespersonal lives

E C E

CO

E

O

E

E



49/116

Find fun at workFind fun at work

Be a mentorBe a mentorChoose and train your successorChoose and train your successorFocus on the big pictureFocus on the big picture

Recognize exemplary performanceRecognize exemplary performanceTake a doc out to lunchTake a doc out to lunchVisit a patientVisit a patient

T C R

C

j

Tk

l TR

T

m

k

j



50/116

Find fun away from workFind fun away from work

Association workAssociation workGive something backGive something backAdvocacy programsAdvocacy programs

Education programsEducation programsBusiness travelBusiness travel

n

EAo

A

E

E

A

z

A

EG

E

urrent and Future eadership in ealth areurrent and Future eadership in ealth areurrent and Future eadership in ealth areurrent and Future eadership in ealth are


51/116

Health care is a circusHealth care is a circus

Why join the circus?Why join the circus? Be enchanted by the ability to perform theBe enchanted by the ability to perform the

impossibleimpossible

Ability to lift the human spiritAbility to lift the human spirit

Thrill to feats of courageThrill to feats of courage

{

|

A}

T~

A |

|

AT

T

AT|

|

urrent and Future eadership in ealth areurrent and Future eadership in ealth areurrent and Future eadership in ealth areurrent and Future eadership in ealth are


52/116

Physician Hospital Integration (Retain or Divest?)Physician Hospital Integration (Retain or Divest?)

H H

R

P

I

R

I


53/116

Early IntegrationEarly Integration

Primary care physicians had many suitors withPrimary care physicians had many suitors withsome very attractive offerssome very attractive offers

Hospitals pursued strategies to affiliate withHospitals pursued strategies to affiliate with

PCPs for both offensive and defensive reasonsPCPs for both offensive and defensive reasons Keep physicians from joining a practiceKeep physicians from joining a practice

management company or competing hospitalmanagement company or competing hospital

Gain negotiating leverage against payersGain negotiating leverage against payers

Positioning to accept global capitationPositioning to accept global capitation Gain market share through a PCP networkGain market share through a PCP network

C

C

P

G

Physician ospital ntegration ( etain or Divest?)Physician ospital ntegration ( etain or Divest?)Physician ospital ntegration ( etain or Divest?)Physician ospital ntegration ( etain or Divest?)


54/116

Top ten common hospital mistakesTop ten common hospital mistakes

1. High guaranteed salaries, no incentive to continue to work1. High guaranteed salaries, no incentive to continue to work2. Hospital signs bad managed care contracts2. Hospital signs bad managed care contracts3. Hospital business office does billing for physicians3. Hospital business office does billing for physicians4. Removed ancillaries from practices4. Removed ancillaries from practices

5. Excess plant capacity5. Excess plant capacity--Hired too many new physiciansHired too many new physicians6. Dont worry well manage your practice6. Dont worry well manage your practice7. Poor physician governance structure7. Poor physician governance structure8. Amortized the cost of the practice back to the network8. Amortized the cost of the practice back to the network9. Employees are provided with hospital salaries and benefits9. Employees are provided with hospital salaries and benefits10. Paid too much for the practice10. Paid too much for the practice

HEA TH

ARE

PE

AT

TRATE

E

Physician Hospital ntegration (Retain or Divest?)Physician Hospital ntegration (Retain or Divest?)Physician Hospital ntegration (Retain or Divest?)Physician Hospital ntegration (Retain or Divest?)

h l ( )h l ( )h l ( )h l ( )


55/116

< $25,000

17%N L ss

16%

>$100,00014%

$75,0001 -

$100,000

14%

$50,001 -

$75,000

16%

$25,001 -$50,000

19%N/A

4%

Percentage of Hospitals Reporting Losseson Physician Practices (per PCP)

Source: Health Care Advisory Board 1999

HEALTHCARE

COMPENSATION

STRATEGIES

PhysicianHospital Integration (Retain or Divest?)PhysicianHospital Integration (Retain or Divest?)PhysicianHospital Integration (Retain or Divest?)PhysicianHospital Integration (Retain or Divest?)

h i i i l i ( i i )h i i i l i ( i i )h i i i l i ( i i )h i i i l i ( i i )


56/116

35%

60%

5%

Considering Divesting

Keeping Practice

Divesting

InformalSurvey ofMembers (1999)InformalSurvey ofMembers (1999)InformalSurvey ofMembers (1999)InformalSurvey ofMembers (1999)

Source: Health Care Advisory Board 1999

Physician HospitalIntegration (Retain or Divest?)Physician HospitalIntegration (Retain or Divest?)Physician HospitalIntegration (Retain or Divest?)Physician HospitalIntegration (Retain or Divest?)

Ph i i H i l I i (R i Di ?)Ph i i H i l I i (R i Di ?)Ph i i H i l I i (R i Di ?)Ph i i H i l I i (R i Di ?)


57/116

Retain or Divest?Retain or Divest?

Review initial strategy and current marketReview initial strategy and current marketconditioncondition

Review physician employment contractsReview physician employment contracts

Assess legal and political climateAssess legal and political climatePrimary networkPrimary network ---- assess impact onassess impact onspecialistsspecialists

Assess impact on hospital core programsAssess impact on hospital core programs

Retain or Divest?Retain or Divest?

Review initial strategy and current marketReview initial strategy and current marketconditioncondition

Review physician employment contractsReview physician employment contracts

Assess legal and political climateAssess legal and political climatePrimary networkPrimary network ---- assess impact onassess impact onspecialistsspecialists

Assess impact on hospital core programsAssess impact on hospital core programs

HEALTHCARE

COMPENSATION

STRATEGIES

PhysicianHospital Integration (Retain or Divest?)PhysicianHospital Integration (Retain or Divest?)PhysicianHospital Integration (Retain or Divest?)PhysicianHospital Integration (Retain or Divest?)

Ph i i H i l I i (R i Di ?)Ph i i H i l I i (R i Di ?)Ph i i H i l I i (R i Di ?)Ph i i H i l I i (R i Di ?)


58/116

Organization merit

bankable credit? Central to y tem

trategy Self perpetuating

organizational tructurewitha proven trackrecord and ufficient

ize? Economic model with

ufficientreturn tore erve forfutureuncertainty?

NO

YES

Source: Financing Sustainable Physician Organizations Tiber Group; February 9, 1999Source: Financing Sustainable Physician Organizations Tiber Group; February 9, 1999

Decision Rules for the FutureDecision Rules for the Futureof the Employed Medical Groupof the Employed Medical Group

Decision Rules for the FutureDecision Rules for the Futureof the Employed Medical Groupof the Employed Medical Group

INVESTINVEST

everage the strategiceverage the strategicbenefits ofbenefits of

the organization by using itthe organization by using itasabasis for futureasabasis for future

financingfinancingand growthand growth

Physician Hospital Integration (Retain or Divest?)Physician Hospital Integration (Retain or Divest?)Physician Hospital Integration (Retain or Divest?)Physician Hospital Integration (Retain or Divest?)

Ph i i H it l I t ti (R t i Di t?)Ph i i H it l I t ti (R t i Di t?)Ph i i H it l I t ti (R t i Di t?)Ph i i H it l I t ti (R t i Di t?)


59/116

Do we have theresourcesand

commitmentto turnthe cornerfinancially?

EVOLVEEVOLVE

Implement financialImplement financialrestructuringrestructuring

Considersecond generationConsidersecond generationmodelsmodelsJoint Ventures/JointJoint Ventures/Joint

OperatingagreementsOperatingagreements

Management/FranchiseManagement/Franchise

AgreementsAgreementsMasterMaster--AffiliationAffiliation

AgreementsAgreements

CarveCarve--Outs/CarveOuts/Carve--InsIns

Venture CapitalVenture Capital

CorporationsCorporations

YES

Decision Rules for the FutureDecision Rules for the Future

of the Employed Medical Groupof the Employed Medical Group



NO





60/116

Isthe market safeto

turn the physiciansloose?

No cherry pickingby newcompetitors

No shiftto rival

hospitals

No physician

activism

DIVESTDIVEST

SpinSpin--offsome oroffsome orall ofthe physiciansall ofthe physicians

YES

NO

RETAIN, but make tough financial decisions.RETAIN, but make tough financial decisions.









61/116

Six key steps to follow:Six key steps to follow:

ReRe--assess organizational structure, managementassess organizational structure, managementmodelmodelEvaluate physician governance/medicalEvaluate physician governance/medical

leadershipleadership

Financial assessment of the practice to developFinancial assessment of the practice to developappropriate benchmarksappropriate benchmarksEvaluate physician staffingEvaluate physician staffingReinforce physician performance withReinforce physician performance with

compensationcompensationProvide performance reports and holdProvide performance reports and holdphysicians accountablephysicians accountable

Six key steps to follow:Six key steps to follow:

ReRe--assess organizational structure, managementassess organizational structure, managementmodelmodelEvaluate physician governance/medicalEvaluate physician governance/medical

leadershipleadership

Financial assessment of the practice to developFinancial assessment of the practice to developappropriate benchmarksappropriate benchmarksEvaluate physician staffingEvaluate physician staffingReinforce physician performance withReinforce physician performance with

compensationcompensationProvide performance reports and holdProvide performance reports and holdphysicians accountablephysicians accountable


HEALTHCARE

COMPENSATIONSTRATEGIES



62/116

Divestiture process (key issues)Divestiture process (key issues)

Analyze employment contractsAnalyze employment contractsBuyBuy--out of remaining term (Economic Harm)out of remaining term (Economic Harm)Use of severance paymentsUse of severance paymentsAssess impact on nonAssess impact on non--physician employeesphysician employeesMethod for transfer of practices tangibleMethod for transfer of practices tangible

assetsassetsCoordinate divestiture process with legalCoordinate divestiture process with legal

counselcounsel

Evaluate impact to physician medical staffEvaluate impact to physician medical staffManage public relationsManage public relations

Divestiture process (key issues)Divestiture process (key issues)

Analyze employment contractsAnalyze employment contractsBuyBuy--out of remaining term (Economic Harm)out of remaining term (Economic Harm)Use of severance paymentsUse of severance paymentsAssess impact on nonAssess impact on non--physician employeesphysician employeesMethod for transfer of practices tangibleMethod for transfer of practices tangible

assetsassetsCoordinate divestiture process with legalCoordinate divestiture process with legal

counselcounsel

Evaluate impact to physician medical staffEvaluate impact to physician medical staffManage public relationsManage public relations


HEALTHCARE



63/116

Credit CrunchCredit Crunch

HEALTHCARE


C dit C hC dit C hC dit C hC dit C h


64/116

Leaders surveyLeaders survey

Phoenix Management ServicesPhoenix Management Services95 major leading organizations95 major leading organizations85% unwilling to lend to health care85% unwilling to lend to health care

industry; up from 69% and 55% in twoindustry; up from 69% and 55% in twoprevious quartersprevious quarters

Lowest rating of an industry in history orLowest rating of an industry in history orsurveysurvey

Leaders surveyLeaders survey

Phoenix Management ServicesPhoenix Management Services95 major leading organizations95 major leading organizations85% unwilling to lend to health care85% unwilling to lend to health care

industry; up from 69% and 55% in twoindustry; up from 69% and 55% in twoprevious quartersprevious quarters

Lowest rating of an industry in history orLowest rating of an industry in history orsurveysurvey

HEALTHCARE


Credit CrunchCredit CrunchCredit CrunchCredit Crunch

C dit C hC dit C hC dit C hC dit C h


65/116

Moodys 2000 Credit ReportMoodys 2000 Credit Report

1999 downgrades affect $13.4 billion; upgrades1999 downgrades affect $13.4 billion; upgradesaffect $1.7 billionaffect $1.7 billion

Moodys 2000 Credit ReportMoodys 2000 Credit Report

1999 downgrades affect $13.4 billion; upgrades1999 downgrades affect $13.4 billion; upgradesaffect $1.7 billionaffect $1.7 billion

80

010

20

30

40

5060

70

90

100

1997 1998 1999

Downgrades Upgrades




66/116

Zimmerman & Associates study, February 2000Zimmerman & Associates study, February 2000

Hospitals bad debts equal $30 billionHospitals bad debts equal $30 billionHospitals aggregate operating profits equalHospitals aggregate operating profits equal

$10 billion$10 billion

20% of net revenues come from private pay; up20% of net revenues come from private pay; upfrom 10% ten years ago due to deductibles andfrom 10% ten years ago due to deductibles andallowancesallowances

Zimmerman & Associates study, February 2000Zimmerman & Associates study, February 2000

Hospitals bad debts equal $30 billionHospitals bad debts equal $30 billionHospitals aggregate operating profits equalHospitals aggregate operating profits equal

$10 billion$10 billion

20% of net revenues come from private pay; up20% of net revenues come from private pay; upfrom 10% ten years ago due to deductibles andfrom 10% ten years ago due to deductibles andallowancesallowances

HEALTHCARE




67/116

CRITICAL SUCCESS FACTORSCRITICAL SUCCESS FACTORS

HEALTHCARE


Critical Success FactorsCritical Success FactorsCritical Success FactorsCritical Success Factors


68/116

If at first you dont succeed, try again.If at first you dont succeed, try again.Then quit. No sense being a damn foolThen quit. No sense being a damn foolabout it.about it.

If at first you dont succeed, try again.If at first you dont succeed, try again.Then quit. No sense being a damn foolThen quit. No sense being a damn foolabout it.about it.

Dilberts Wisdom and Laws


HEALTHCARE




69/116


ReRe--establish trust with key stakeholdersestablish trust with key stakeholders

Visibly educate communities/leaders aboutVisibly educate communities/leaders abouthealth care industrys issues/problemshealth care industrys issues/problems

Actively participate in patient/consumerActively participate in patient/consumeradvocacy issue groups; e.g., service health,advocacy issue groups; e.g., service health,womens health, uninsuredwomens health, uninsured

All parts of the system need to participate;All parts of the system need to participate;Board members, physicians, nurses,Board members, physicians, nurses,technicians, managers, . . . everyonetechnicians, managers, . . . everyone

ReRe--establish trust with key stakeholdersestablish trust with key stakeholders

Visibly educate communities/leaders aboutVisibly educate communities/leaders abouthealth care industrys issues/problemshealth care industrys issues/problems

Actively participate in patient/consumerActively participate in patient/consumeradvocacy issue groups; e.g., service health,advocacy issue groups; e.g., service health,womens health, uninsuredwomens health, uninsured

All parts of the system need to participate;All parts of the system need to participate;Board members, physicians, nurses,Board members, physicians, nurses,technicians, managers, . . . everyonetechnicians, managers, . . . everyone

HEALTHCARE




70/116


Engage every employee in our solutionsEngage every employee in our solutions

Investment in training, education, andInvestment in training, education, andhuman resource development as a corehuman resource development as a corestrategystrategy

Dollars spent on retention may be moreDollars spent on retention may be moreeconomical than recruitingeconomical than recruiting

A sense of commitment felt by employeesA sense of commitment felt by employeesgenerates greater loyalty than any othergenerates greater loyalty than any otherfactorfactor

Engage every employee in our solutionsEngage every employee in our solutions

Investment in training, education, andInvestment in training, education, andhuman resource development as a corehuman resource development as a corestrategystrategy

Dollars spent on retention may be moreDollars spent on retention may be moreeconomical than recruitingeconomical than recruiting

A sense of commitment felt by employeesA sense of commitment felt by employeesgenerates greater loyalty than any othergenerates greater loyalty than any otherfactorfactor

HEALTHCARE




71/116


Make an extraordinary commitment toMake an extraordinary commitment to

innovationinnovationCase managementCase managementClaims managementClaims management

Complementary managementComplementary management

Disease managementDisease managementHealth risk assessmentsHealth risk assessmentsPhysician practice managementPhysician practice management

Hospitals/systems have not masteredHospitals/systems have not masteredany/many of theseany/many of theseBiotechnology is next new areaBiotechnology is next new area

Make an extraordinary commitment toMake an extraordinary commitment to

innovationinnovationCase managementCase managementClaims managementClaims management

Complementary managementComplementary management

Disease managementDisease managementHealth risk assessmentsHealth risk assessmentsPhysician practice managementPhysician practice management

Hospitals/systems have not masteredHospitals/systems have not masteredany/many of theseany/many of theseBiotechnology is next new areaBiotechnology is next new area

HEALTHCARE




72/116


Develop ability to coordinate care across theDevelop ability to coordinate care across the

continuumcontinuumSystems linkages to physician networks withSystems linkages to physician networks with

strong physician governance, management,strong physician governance, management,and ownershipand ownership

Risk sharingRisk sharingJoint ownership/management of servicesJoint ownership/management of services

Develop ability to coordinate care across theDevelop ability to coordinate care across the

continuumcontinuumSystems linkages to physician networks withSystems linkages to physician networks with

strong physician governance, management,strong physician governance, management,and ownershipand ownership

Risk sharingRisk sharingJoint ownership/management of servicesJoint ownership/management of services

HEALTHCARE




73/116


Focus on operations managementFocus on operations management

Costs, productivity, and qualityCosts, productivity, and qualityBenchmark against top 10% of systemsBenchmark against top 10% of systemsMultidisciplinary team approachMultidisciplinary team approach

Use experts to assistUse experts to assist Example of revenue cycle reExample of revenue cycle re--engineeringengineering

Focus on operations managementFocus on operations management

Costs, productivity, and qualityCosts, productivity, and qualityBenchmark against top 10% of systemsBenchmark against top 10% of systemsMultidisciplinary team approachMultidisciplinary team approach

Use experts to assistUse experts to assist Example of revenue cycle reExample of revenue cycle re--engineeringengineering

HEALTHCARE



74/116


75/116



76/116


Organization AnnualRevenue

AnnualIncome

Improvement

inancialBenefit toDate

niversity of California-Davis, CA

$1.6 billion $10 million $55 million

Vanderbilt niversityHospital and Clinic-

ashville, T

$550 million $9 million $40 million

Baystate Health Systems-Springfield, MA


Providence Health

System-Portland, OR

$1 billion $3 million $8 million

Cedars-Sinai MedicalCenter-Los Angeles, CA

$1.3 billion $14 million $45 million

St. Josephs Hospital-Atlanta, GA


Source: Stockamp & Associates, Inc.- References

Revenue Cycle ReRevenue Cycle Re--engineeringengineering



77/116


Organization Annual

Revenue

Annual

IncomeImprovement

inancial

Benefit toDate

niversity of California-IrvineCA


Oregon Health Sciencesniversity-Portland, OR


Santa Clara Valley MedicalCenter-San Jose, CA

600 million $6 million $22 million

CS Stanford Health Care-CS Medical Center

$1.4 billion $7 million 39 million

niversity of Kansas Medical

Center-Kansas City, KS

350 million $7 million $22 million

Source: Stockamp & Associates, Inc.- References

HEALTHCARE


Revenue Cycle ReRevenue Cycle Re--engineeringengineering



78/116


Source: Stockamp & Associates Recent Project Highlights

roject Sco e

B C

roject

i e Fra e Jul 98 to

a 99 Ju 98 to

a 99 Ja 99 to

o 99

ec 98 to Se 99

ar 99 to Se 99

ri i al Be efit

rojectio sI co e State e t $4

to $6M $4 to $6M $6M to $8M $3M to $8MBala ce S

eet $11M to $16M $20M to 25M $25M to $35M $8M to $16M

B

ilot

ual I co e State e tI ro e e t $8M $7M $8M $6M $2M to $3M est.

First

ear Cas

Flo

I ro e e t $25M $32M $25M $15M 12

i crease i

. Mo t

l

Cas

erall Cas

Be efits o er 5- ear erio

$65M $80M $60M $45M $15M to $25M est

/

e

uctio 24

21

20

17

36

U bille

or

-i -

ro ress

e

uctio 90

64

70

75

42

e e ue C cle ee e ue C cle e--e i eerie i eeri



79/116

Analysis ObjectiveAnalysis ObjectiveTo assess the effectiveness of billing andTo assess the effectiveness of billing and

collection activitiescollection activities

Sample SizeSample SizeApproximately 150 accounts greater than 90 daysApproximately 150 accounts greater than 90 days

from dischargefrom discharge


HEALTHCARE


Revenue Cycle ReRevenue Cycle Re--engineeringengineering---- AccountAccount

FollowFollow--up Sampling Analysisup Sampling Analysis



80/116

Summary FindingsSummary Findings

No or little followNo or little follow--up occurring on majority ofup occurring on majority ofoutstanding A/Routstanding A/R

FollowFollow--up frequencyup frequency

83% of A/R balance reviewed had no or randomly83% of A/R balance reviewed had no or randomlydocumented followdocumented follow--upup

12% of A/R balance reviewed had regular but no12% of A/R balance reviewed had regular but notimely followtimely follow--upup

Quality and effectiveness of followQuality and effectiveness of follow--upup

74% of A/R balance reviewed had no or reactive and74% of A/R balance reviewed had no or reactive andineffective followineffective follow--upup

19% of A/R balance reviewed had proactive but19% of A/R balance reviewed had proactive butineffective followineffective follow--upup

7% of A/R balance reviewed had proactive and7% of A/R balance reviewed had proactive andeffective followeffective follow--upup

Summary FindingsSummary Findings

No or little followNo or little follow--up occurring on majority ofup occurring on majority ofoutstanding A/Routstanding A/R

FollowFollow--up frequencyup frequency

83% of A/R balance reviewed had no or randomly83% of A/R balance reviewed had no or randomlydocumented followdocumented follow--upup

12% of A/R balance reviewed had regular but no12% of A/R balance reviewed had regular but notimely followtimely follow--upup

Quality and effectiveness of followQuality and effectiveness of follow--upup

74% of A/R balance reviewed had no or reactive and74% of A/R balance reviewed had no or reactive andineffective followineffective follow--upup

19% of A/R balance reviewed had proactive but19% of A/R balance reviewed had proactive butineffective followineffective follow--upup

7% of A/R balance reviewed had proactive and7% of A/R balance reviewed had proactive andeffective followeffective follow--upup


Revenue Cycle ReRevenue Cycle Re--engineeringengineering----AccountAccount


Source: Stockamp & Associates



81/116

Summary Findings (contd)Summary Findings (contd)

Account documentation and activity does notAccount documentation and activity does notsupport effective management and followsupport effective management and follow--upup

Lack of standard followLack of standard follow--up procedures andup procedures andguidelines in placeguidelines in place Appears highly probable that numerousAppears highly probable that numerous

accounts were adjusted and/or written off toaccounts were adjusted and/or written off tocontractual allowances rather than bad debt,contractual allowances rather than bad debt,administrative and charity writeadministrative and charity write--off categoriesoff categories

Summary Findings (contd)Summary Findings (contd)

Account documentation and activity does notAccount documentation and activity does notsupport effective management and followsupport effective management and follow--upup

Lack of standard followLack of standard follow--up procedures andup procedures andguidelines in placeguidelines in place Appears highly probable that numerousAppears highly probable that numerous

accounts were adjusted and/or written off toaccounts were adjusted and/or written off tocontractual allowances rather than bad debt,contractual allowances rather than bad debt,administrative and charity writeadministrative and charity write--off categoriesoff categories


HEALTHCARE


Revenue Cycle ReRevenue Cycle Re--engineeringengineering----AccountAccount





82/116

Representative ExamplesRepresentative Examples Representative ExamplesRepresentative Examples


$481,675

$463,549

$405,721

$232,357$206,918

$157,020

$127,931

$117,066

$104,735

$65,371$58,349

$21,878

$20,163

$10,485

$9,209

134

267

288

124159

139

338

162

115

274281

309

177

153

348

o follow-up since initial follow-up to bill pro fee

Billed timely, no follow-up activity

Rebilled after first bill to Medicare, no follow-up

Rebilled 112 days after first bill to Medicare, no follow-upMedicare denied for overlap, no follow-up for 156 days

Billed 48 days post discharge, one follow-up in 90 days

Billed 15 days post discharge, one follow-up in 180 days

Billed 30 days post discharge, no follow-up


Billed 90 days post discharge, no follow-upMedicare; overlap with S ; no follow-up for 90+ days


Billed 60 days post discharge, billed to wrong payer, no rebill

Blue Cross, no follow-up

Billed, new payer found 279 days later, no follow-up

Total ChargesDays fromDischarge Findings

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----Account FollowAccount Follow--upupSampling AnalysisSampling Analysis




83/116

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----Bad Debt,Bad Debt,

Administrative and Charity WriteAdministrative and Charity Write--off Samplingoff SamplingAnalysisAnalysis

Analysis ObjectiveAnalysis Objective

To assess whether overall writeTo assess whether overall write--off levels canoff levels canbe reduced in the areas of bad debt,be reduced in the areas of bad debt,administrative and charity writeadministrative and charity write--offoffcategoriescategories

Sample SizeSample Size

Approximately 175 accounts written off toApproximately 175 accounts written off torepresentative transaction codesrepresentative transaction codes

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----Bad Debt,Bad Debt,

Administrative and Charity WriteAdministrative and Charity Write--off Samplingoff SamplingAnalysisAnalysis

Analysis ObjectiveAnalysis Objective

To assess whether overall writeTo assess whether overall write--off levels canoff levels canbe reduced in the areas of bad debt,be reduced in the areas of bad debt,administrative and charity writeadministrative and charity write--offoffcategoriescategories


Approximately 175 accounts written off toApproximately 175 accounts written off torepresentative transaction codesrepresentative transaction codes


HEALTHCARE

COMPENSATIONSTRATEGIES Source: Stockamp & Associates



84/116

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----Bad Debt,Bad Debt,Administrative and Charity WriteAdministrative and Charity Write--off Samplingoff SamplingAnalysisAnalysis

Summary FindingsSummary Findings Probability of preventable writeProbability of preventable write--offsoffs

41% of write41% of write--off amounts review wereoff amounts review were

preventable with better processes andpreventable with better processes andcontrolscontrols

39% of write39% of write--off amounts reviewed mayoff amounts reviewed mayhave been prevented with better processeshave been prevented with better processes

and controlsand controls 20% of write20% of write--off amounts reviewed appearedoff amounts reviewed appeared

appropriate, but unclear due to lack ofappropriate, but unclear due to lack ofdocumentationdocumentation

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----Bad Debt,Bad Debt,Administrative and Charity WriteAdministrative and Charity Write--off Samplingoff SamplingAnalysisAnalysis

Summary FindingsSummary Findings Probability of preventable writeProbability of preventable write--offsoffs

41% of write41% of write--off amounts review wereoff amounts review were

preventable with better processes andpreventable with better processes andcontrolscontrols

39% of write39% of write--off amounts reviewed mayoff amounts reviewed mayhave been prevented with better processeshave been prevented with better processes

and controlsand controls 20% of write20% of write--off amounts reviewed appearedoff amounts reviewed appeared

appropriate, but unclear due to lack ofappropriate, but unclear due to lack ofdocumentationdocumentation





85/116

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----Bad Debt,Bad Debt,Administrative and Charity WriteAdministrative and Charity Write--off Samplingoff Sampling

AnalysisAnalysis Summary Findings (contd)Summary Findings (contd)

Areas of writeAreas of write--off preventionoff prevention 48% of accounts required better quality and48% of accounts required better quality and

more timely followmore timely follow--up by financial counselingup by financial counseling 16% of write16% of write--offs sampled were related tooffs sampled were related to

absent or late checking of patient benefitsabsent or late checking of patient benefits

Majority of accounts were poorly documentedMajority of accounts were poorly documentedpreventing effective followpreventing effective follow--up to take placeup to take place

Patient payment plans were rarely initiated, inPatient payment plans were rarely initiated, inelective cases where patients made oneelective cases where patients made onepayment (less than 20% of charges), thepayment (less than 20% of charges), theaccounts were written off immediatelyaccounts were written off immediately

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----Bad Debt,Bad Debt,Administrative and Charity WriteAdministrative and Charity Write--off Samplingoff Sampling

AnalysisAnalysis Summary Findings (contd)Summary Findings (contd)

Areas of writeAreas of write--off preventionoff prevention 48% of accounts required better quality and48% of accounts required better quality and

more timely followmore timely follow--up by financial counselingup by financial counseling 16% of write16% of write--offs sampled were related tooffs sampled were related to

absent or late checking of patient benefitsabsent or late checking of patient benefits

Majority of accounts were poorly documentedMajority of accounts were poorly documentedpreventing effective followpreventing effective follow--up to take placeup to take place

Patient payment plans were rarely initiated, inPatient payment plans were rarely initiated, inelective cases where patients made oneelective cases where patients made onepayment (less than 20% of charges), thepayment (less than 20% of charges), theaccounts were written off immediatelyaccounts were written off immediately





86/116

Representative ExamplesRepresentative Examples

$75,732

$61,834$55,360

$46,921

$40,886

$34,176

$34,212

$27,345

$23,376$22,514

$21,595

$20,169

235

33281

189

391

270

330

240

364174

261

310

Inpatient service coded four months post discharge, denied for timely filing

Slow application process, Medicaid granted, billed 90 days later, no follow-upSlow financial counseling follow-up, billing delays

o follow-up on Medicaid eligibility for over four months

Poor collection of patient information, no verification, no follow-up

Insurance eligibility check during visit but no follow-up, billed four months post disch.

Auth. or Medicaid 150 days post discharge, no follow-up, no pay for seven months

o verification, denied for no benefits remaining, no follow-up

Denied for no pre-cert; no appeal attempts even though auth. attempt documented

Elective referral; admitted without pre-auth; eventually approved for charity w/o

o verification, denied for no benefits remaining

o screening, no collection of patient deposit, no follow-up

TotalCharges

Daysfrom

Discharge Findings


Revenue Cycle ReRevenue Cycle Re--engineeringengineering----Bad Debt, AdministrativeBad Debt, Administrativeand Charity Writeand Charity Write--off Sampling Analysisoff Sampling Analysis



87/116

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----ContractualContractual

Allowance Sampling AnalysisAllowance Sampling Analysis Analysis ObjectiveAnalysis Objective

To assess if contractual allowance writeTo assess if contractual allowance write--offofflevels can be reduced by determining iflevels can be reduced by determining ifavoidable, administrative writeavoidable, administrative write--offs areoffs arebeing classified inappropriatelybeing classified inappropriately


Approximately 150 accountsApproximately 150 accounts

HEALTHCARE

COMPEN

SATION

STRATEGIES Source: Stockamp & Associates



88/116

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----ContractualContractual

Allowance Sampling Analysis (Contd)Allowance Sampling Analysis (Contd) Summary FindingsSummary Findings

Numerous accounts were immediately reducedNumerous accounts were immediately reducedto a zero balance once a zero payment wasto a zero balance once a zero payment was

received by the payerreceived by the payer Significant improvement opportunities forSignificant improvement opportunities for

accounts written off to bad debt, administrativeaccounts written off to bad debt, administrativeand charity writeand charity write--off codes, as well as misoff codes, as well as mis--

classified contractual allowancesclassified contractual allowances Majority of accounts lacked documentation toMajority of accounts lacked documentation tosupport any type of write offssupport any type of write offs

Clear that many of these writeClear that many of these write--offs are avoidableoffs are avoidableHEALTHCARE

CO

MPE

NSATIO

NSTRATEGIES Source: Stockamp & Associates



89/116

Revenue Cycle ReRevenue Cycle Re--engineeringengineering----ContractualContractualAllowance SamplingAllowance Sampling

Representative ExamplesRepresentative Examples

$25,728

$24,518$21,733

$18,723

$17,354

$12,751

$12,020

$10,891$9,322

$4,802

61

72228

24

87

323

28

16947

60

HMO claim denied for timely filing; balance written off to provider contractual

Medicaid application filed, no follow-up, w/o to Medicaid denialo authorization on elective service, denied, w/o to Medicaid denial

Payer denied for no authorization, total charges to contractual

Blue Cross denied for no pre-cert, written off to denial appeal

Account written off to C/A, later approved for Medicaid, Medicaid never billed

Zero payment received from managed care plan, total charges w/o to contractual

Medicaid rejected as non-covered service, entire balance to Medicaid contractualPatient eventually approved for Medicaid, Medicaid never billed, w/o to contractual

HMO payer denied for no pre-cert, account written off to payer contractual

TotalCharges

Daysfrom

Discharge Findings


HEALTHCARE

COMPENSA

TION

STRATEGIES



90/116

Achieve a certain critical mass and geographicAchieve a certain critical mass and geographic

reach to effectively achieve the first five factorsreach to effectively achieve the first five factorsMarket share and capital access are crucial toMarket

Scottsdale Instit Presentation- Wegmiller

Documents

Transcript of Scottsdale Instit Presentation- Wegmiller