General Session – Watch List for 2013 – Roundtable – May 17, 2013 Current State of Our Industry; Strategic Partner Process and Options; Denial Management.

General Session – Watch List for 2013 – Roundtable – May 17, 2013Current State of Our Industry; Strategic Partner Process and Options; Denial Management

John Yeager, WV United Health System

Lisa Simon, Ohio Valley Medical Center

Sonja Raddish, Fairmont General Hospital

Major Transformation in the Business of Healthcare – are you Prepared?

Denial Management

Closing Comments/Questions

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3

4

Agenda

“We are what we repeatedly do. Excellence, therefore, is not an act but a habit.” Aristotle

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OVHS&E Facts; Turnaround; and Strategic Partner Process2

Major Transformation in the Business of Healthcare – are you Prepared?

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• Ohio Valley Health System and Educational Corporation is located in Wheeling, WV

OVHS&E Facts

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• Two main facilities:– Ohio Valley Medical CenterWheeling, WV (founded 1890)

150 acute beds & 84 psych beds

– East Ohio Regional Medical Center

Martins Ferry, OH (founded 1906)

80 acute beds & 50 SNF beds

• $165M operating revenue for 2012• 1,432 FTEs in 2012• Provides acute, psych, SNF, oncology, ortho and other

services• Older age of plant• 45% inpatient; 55% outpatient• Older patient base of abut 250,000• 75 min. to Pittsburgh – 120 min. to Columbus• 1.353 case mix• 10,057 discharges• No endowments

OVHS&E Facts

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• OVHS&E Consolidated Income Statement 2008 – 2010

OVHS&E Historical Financial Performance

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ACTUAL ACTUAL ACTUAL2008 2009 2010

December December December

Inpatient Revenue $ 207,264 $ 204,404 $ 188,102 Outpatient Revenue $ 191,991 $ 210,922 $ 215,697 Skilled Care Revenue $ 9,543 $ 9,890 $ 9,249 Physician Revenue $ 24,257 $ 26,474 $ 21,417 Total Patient Revenue $ 433,055 $ 451,690 $ 434,465

Revenue Deductions: Hospital Contractual Allowances $ 239,574 $ 252,163 $ 244,513 Physician Contractual Allowances $ 10,747 $ 12,864 $ 10,113 Charity $ 4,853 $ 5,788 $ 5,326 Total Revenue Deductions $ 255,174 $ 270,815 $ 259,952 Net Patient Revenue, net of Allowances & Charity $ 177,881 $ 180,875 $ 174,513 Bad Debt $ 17,671 $ 18,064 $ 24,083 Net Patient Revenue $ 160,210 $ 162,811 $ 150,430

Other Operating Revenue $ 5,215 $ 4,482 $ 5,699

Funds Released from Restriction $ 1,426 $ 3,545 $ 2,124 Total Operating Revenue $ 166,851 $ 170,838 $ 158,253

• OVHS&E Consolidated Income Statement 2008 – 2010


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ACTUAL ACTUAL ACTUAL

2008 2009 2010


Operating Expenses: Salaries and Wages 63,700 61,667 59,189 Physician Salaries and Wages 10,311 10,753 10,106 Fringe Benefits 18,305 20,527 16,680 Professional/Purchased Services 13,040 13,287 15,602 Supplies 21,188 22,911 22,764 Pharmaceuticals 10,461 11,238 10,296

Utilities 3,359 3,507 3,243 Repairs/Rent/Other 15,268 15,681 18,574 Insurance 2,785 3,515 2,100 Depreciation/Amortization 7,823 7,369 7,153 Interest Expense 2,285 1,926 1,555

Total Operating Expenses 168,525 172,381 167,262

Income (Loss) from operations (1,674) (1,543) (9,009)Nonoperating revenue (125) (287) 390

Excess (deficit) of revenue over expenses (1,799) (1,830) (8,619)

• OVHS&E Consolidated Balance Sheet 2008 – 2010


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December December December ASSETS 2008 2009 2010

Current Assets: Cash and short term investments (602) (330) (1,557)

Patient accounts receivable 51,207 52,530 44,917 Less:contractual allowance 15,388 15,589 14,738 uncollectible accounts allowance 11,313 10,999 8,424 Net patient accounts receivable 24,506 25,942 21,755

Net client accounts receivable 929 1,585 1,094

Total Current Assets 31,971 32,912 27,328 Notes receivable 76 31 29 Other Assets 256 294 272 Investment in jointly owned entity 0 0 0 Equity security investments 5 5 5 Investment in subsidiaries 1 1 1 Long term interfund loans 100 100 100 Unrestricted investments 1,542 1,625 453

Total assets limited as to use 15,942 10,617 6,862 Land and investment property 4,952 4,952 4,952 Depreciable assets 210,282 214,205 216,284 Current year acquisitions 1,029 548 97 Construction in progress 1,638 1,343 1,262

217,901 221,048 222,595 Accumulated depreciation (154,406) (161,283) (168,100) Net property, plant and equipment 63,495 59,765 54,495

Debt issuance costs 280 238 339 Deferred compensation deposits 61 0 0 Total Assets 113,729 105,588 89,884



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LIABILITIES AND NET ASSETS 2008 2009 2010

Current liabilities:Current portion of capital leases and long term debt 5,804 4,324 5,498 Accounts payable 22,270 22,628 23,073 Accrued salary and benefits 3,725 4,080 1,967 Accrued vacation and sick pay 3,864 4,041 3,659 Accrued interest payable 0 0 0 Prior year settlements 927 1,747 1,876 Other accrued liabilities 11,875 9,791 4,959 Total Current Liabilities 48,465 46,611 41,032

Total Liabilities 89,126 78,551 70,889

Net Assets: Unrestricted net assets 19,154 21,499 22,263 Restricted temporarily net assets 3,275 194 (504) Restricted permanently net assets 5,361 6,031 5,033 Current earnings (3,187) (687) (7,797) Total Net Assets 24,603 27,037 18,995 Total Liabilities and Net Assets 113,729 105,588 89,884

• Leadership• Employee Relations• Physician Resources• Financial Condition• Labor Cost and Productivity• Patient Safety and Quality• Facility Utilization• Current Market Position/Competition• Service-Line Utilization• Communications and Public Relations• Community Wellness• Board Structure

Areas Reviewed During Organizational Assessment

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• Lack of strategic direction

• Insufficient accountability

• Declining cash balance

• Ineffective revenue capture

• Increasing market competition

• Rising operating expenses

• Lack of cost-containment

• Outdated Third-Party Payment Contracts

• Lack of Physician Support

OVHS&E Original Findings

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Key Interventions

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Revenue Interventions Impact Upside Total

Renegotiate Third-Party Payments $2,200,000 $2,275,000 $4,475,000

Revenue Cycle Improvements $1,885,000 $375,000 $2,260,000

Expense Interventions Impact Upside Total

Productivity ($3,400,000) ($1,900,000) ($5,300,000)

Supply Chain ($2,100,000) ($240,000) ($2,340,000)

Physician-Practice Management ($1,000,000) ($1,000,000) ($2,000,000)

Total Interventions $10,585,000 $5,790,000 $16,375,000

• Depleted investments• Major losses• No bidding out of vendor items• No staffing model• Old third-party contracts• Non-productive employed doctors• STARK violations• Poor banking, management and auditor communication• Low automation• Costly debt structure• No cash on hand• Considering bankruptcy

2010 – Where we were…

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• Operating profit margins• Depleted investments• Lower CSR cost and three-bid protocol• Staffing model; 200 less FTEs• Updated contracts (with continual opportunity)• Non-productive employed doctors• Stellar compliance program & IRO reports (30 mos. remain)• Restructured board with much better board, auditor and management

oversight• Moderate automation• Bridge financing; but restructure on the table• No cash on hand• Improved wages

• Actively pursuing strategic partner• Expanded service lines and physician support

2013 – Where we are now…

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• OVHS&E Consolidated Income Statement 2010 - 2012


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ACTUAL ACTUAL ACTUAL2010 2011 2012 - Draft


Inpatient Revenue $ 188,102 $ 182,486 $ 195,880 Outpatient Revenue $ 215,697 $ 220,991 $ 225,653 Skilled Care Revenue $ 9,249 $ 4,770 $ 4,095 Physician Revenue $ 21,417 $ 14,949 $ 16,524 Total Patient Revenue $ 434,465 $ 423,196 $ 442,152

Revenue Deductions: Hospital Contractual Allowances $ 244,513 $ 234,495 $ 247,698 Physician Contractual Allowances $ 10,113 $ 8,161 $ 9,707 Charity $ 5,326 $ 5,171 $ 3,994 Total Revenue Deductions $ 259,952 $ 247,827 $ 261,399 Net Patient Revenue, net of Allowances & Charity $ 174,513 $ 175,369 $ 180,753 Bad Debt $ 24,083 $ 22,966 $ 20,144 Net Patient Revenue $ 150,430 $ 152,403 $ 160,609

Other Operating Revenue $ 5,699 $ 5,963 $ 3,649

Funds Released from Restriction $ 2,124 $ 60 $ 548 Total Operating Revenue $ 158,253 $ 158,426 $ 164,806

• OVHS&E Consolidated Income Statement 2010 - 2012


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ACTUAL ACTUAL ACTUAL

2010 2011 2012 - Draft


Operating Expenses: Salaries and Wages $ 59,189 54,841 58,192 Physician Salaries and Wages $ 10,106 9,583 9,879 Fringe Benefits $ 16,680 14,915 14,928 Professional/Purchased Services $ 15,602 15,665 17,290 Supplies $ 22,764 23,321 24,276 Pharmaceuticals $ 10,296 8,100 10,023 Utilities $ 3,243 3,378 3,301 Repairs/Rent/Other $ 18,574 13,220 14,365 Insurance $ 2,100 1,533 1,865 Depreciation/Amortization $ 7,153 7,088 6,857 Interest Expense $ 1,555 1,625 1,807

Total Operating Expenses $ 167,262 153,269 162,783

Income (Loss) from operations $ (9,009) 5,157 2,023 Nonoperating revenue $ 390 522 6,135 Excess (deficit) of revenue over expenses $ (8,619) 5,679 8,158



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December December December ASSETS 2010 2011 2012 – Draft

Total Current Assets 30,207 36,057 32,459

Total assets limited as to use 6,278 3,424 3,762 Net property, plant and equipment 58,087 57,022 58,854

Other assets 642 881 464 Total Assets 95,213 97,384 95,539



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LIABILITIES AND NET ASSETS 2010 2011 2012 - Draft

Total Current Liabilities 41,018 38,804 31,694

Total Liabilities 72,964 74,015 68,060

Total Net Assets 22,249 23,369 27,479

Total Liabilities and Net Assets 95,213 97,384 95,539

• Improvements Continue

• Accountability is Key

Key Balance Sheet Data

2010 2011 2012 2013

Current Ratio 0.71 0.91 1.01 1.15

Accounts Payable (Millions)

$23,072 $21,046 $15,548 $11,465

Unfunded Health Claims

5.9M 4.1M 1.5M 0M

Debt to Net Asset Ratio

3.72 3.69 2.79 2.49

Net Revenue per FTE

$99,656 $111,098 $115,330 $114,450

• Develop a consensus understanding of the current situation

• Determine a clear vision of future opportunities/alternate scenarios

• Understand the potential benefits/risks of partner(s)

• Determine different approaches to partners

• Identify and approach potential partners

Strategic Partner Objectives

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• Evaluate Partnering Options

• Determine Next Steps

Strategic Partner Objectives and Process (continued)

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• Executive Summary

• Introduction

• Mission and Values

• Vision for the Future

• Current Position and Challenges

• Critical Success Factors

• Key Partner Attributes

• List of Potential Partners

• Next Steps

Prospectus of the Company

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• Contact Potential Partners

• Review Other Transactions/Formats

• Enter into NDAs

• Due Diligence/Letter of Intent

• Due Diligence Process (on site visits/VDR)

Contact Potential Partners/Due Diligence Process

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• Are we sustainable on our own?

• If so, what do we need to achieve this and for how long?

• Is it likely that we can find a capital partner?

• If not, what are our other options?

• How do they differ?

• Is the local option always the best option?

• Play one, as to play two?

Some Questions That You Might Ask

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Denial Management

FGH Denial Facts

• FGH average charges for the year

2011 $15,794,526

• FGH average denial amount for the

year 2011 was $1,817,672- 12% of

the average charges

• Average recovery rate $1,388,245-

76%

• FGH average charges for the

year 2012 $15,793,512

• FGH average denial amount for

the year 2012 was $1,015,742-

6.4% of the average charges

• Average recovery rate

$899,917- 89%

• 2011 to 2012 denials were

decreased by an average rate

of 56%

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FGH 2011-2012

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• Denial spreadsheet– Contains denials by month

– Controllable and Uncontrollable breakdown with continuous totals

– Comparison of the last 5 years

• Remittance Code Report

- Daily report for Follow up

- Daily report for Registration

FGH Denial Reports

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• No process for tracking for Registration denials

• No process for checking medical necessity at the time of service

• No process for catching procedural changes in surgery

FGH Denials

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• Created a team with members from multiple departments

• Develop an action plan

• Education/Ongoing Training

• Meet on monthly or bi-monthly depending on the denial issue(s)

• Report to Corporate Compliance a summary of denial issues

• Report to Physicians a quarterly summary of inpatient denials

FGH Action Plan

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Denials Issue Action ResponsibleNo auth—Outpatient No authorization obtained prior

to serviceIncludes MRI, CT, CTA, MRA, Surgery, Genetic Testing PT/OT/ST, Endo, WC, Pulmonary Rehab, Cardiac Incorrect code authorized for surgeries

Require all tests to scheduled through Centralized Scheduling unless STAT ordered Add a flag to the OOCP for authorization on genetic lab testing Require a range of codes to be reviewed for outpatient surgeries for authorization

Registration SupervisorDirector of Lab

Non participating physicians

Physician is not in network with the payer

Create a quick guide for each employee station for all payers- completed and distributed to the staff on 1/1/11

Registration Supervisor

Authorization needs updated for surgery

changes

Authorization was not obtained or changed 24 hours after surgery was performed

Change in procedure form was created to be filled out by surgery staff and provided to FICO to notifythe physician offices of changes to obtain authorization 12/2011

Registration SupervisorFICO Surgery Department

Claim lacks adjudication Request for medical records on ER claimsNDC codes invalid or missing

Follow up to work these issues timelyand to create a list of any other issuesthat may need addressed

Registration SupervisorPFS Director

No auth—(Acute) Inpatient

Carve outsDelay in service

Case Management communicates with physician advisor involvementWorking with physicians on LOSAppeals Coordinator to report denials to Case Mgt to use for education

Case ManagementPhysician Advisor

FGH Action Plan

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• Pull the important players together and get their buy in

• Develop a tracking report

• Develop a working action plan

• Educate/train

Closing

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Questions? Thank you

General Session – Watch List for 2013 – Roundtable – May 17, 2013 Current State of Our Industry; Strategic Partner Process and Options; Denial Management.

Documents

physician revenue

net patient revenue

total patient revenue

outpatient revenue

total operating revenue

total revenue deductions

skilled care revenue

ovhse facts turnaround