One of the last national conferences held before the weight of the novel coronavirus became apparent in the United States, the Medical Group Management Association brought together a robust itinerary of speakers for MGMA20:The Financial Conference in Nashville.
With COVID-19 continuing to cross the country and many residents still sheltering in place, it can be difficult to turn attention to any other topic right now. Yet, the financial lessons learned at the conference take on heightened importance as practices, clinics and health systems will have to grapple with the financial aftermath of weeks of disruption.
The three-day conference armed attendees with insights into transforming primary care, the journey from data to delivery on a value proposition, revenue cycle management in the value-based era, expert tips on negotiating payer contracts, alternatives to funding growth initiatives, managing risk and putting predictive analytics to work among other topics.
"By bringing together some of the brightest financial minds in the field, we are able to spark conversations and innovation to help practices strengthen their financial foundations and, further, improve patient outcomes," said MGMA President and CEO Halee Fischer-Wright, MD, MMM, FAAP, FACMPE.
The importance of having a strong financial foundation was at the heart of the presentation "Too Big to Fail: Lessons from a Large Healthcare Provider's Journey into Chapter 11." Florida-based Daszkal Bolton experts Kevin Reynolds, CPA, a tax partner, and David Light, PT, MBA, a senior manager in Healthcare Advisory Services, shared insights gained after their firm was called in to try to salvage a large behavioral healthcare provider in Palm Beach County.
Reynolds said the nonprofit had been in operation for nearly 50 years, had seven properties total and an 11-acre main campus. Accredited by the Joint Commission, the comprehensive mental health provider had 44 licensed inpatient beds, 50 residential beds and more than 350 employees. "This was a big player in the behavioral health community," said Reynolds. "They serviced 8,000-9,000 clients a year."
A tipping point survey in 2016 cited stagnate Medicaid rates that only covered about 60 percent of the actual cost of care. In the meantime, infrastructure repair had been put off as cash reserves dwindled. By late April 2019, the provider had brought in $13.3 million but had budgeted for $14.7 and was therefore operating with a variance of $1.4 million. By the time Daszkal Bolton arrived in July, things had deteriorated even further with the CFO abruptly resigning and the variance ballooning to over $3 million.
Four days in on his interim assignment, Light knew things were more dire than had been presented to his company. An executive had loaned the provider entity $24,000 just to meet payroll, and $175,000 insurance premium was due in a matter of days with less than $20,000 in the bank. "Naively, at this point we still thought it was fixable," said Light. "By two weeks, our confidence was shaken."
Years of shrinking revenues without cutting expenses, taking out high-interest cash advances and loans, and a disconnect between financial and operational teams led to the downfall. While it will ultimately take a team of forensic accountants to determine the cumulative financial mistakes, the saddest part for the community was that the care being delivered was never called into question and served a much-needed purpose.
For Light, the take-away message is that prior to his firm's arrival, the board had been fed snapshots of the financial situation without being presented with trends over time, which would have clearly shown an unsustainable gap between receivables and payables. "Don't ever look at one month or one year. Respect the fact that trends are so much more important than a snapshot," he cautioned.
One way to keep receivables up is to effectively negotiate contracts. Speaker Doral Jacobsen, MBA, FACMPE, who is CEO of Prosper Beyond, discussed developing a game plan for payer contracting. She encouraged administrators to create a value proposition and devise a renegotiation strategy long before speaking with a payer representative.
To create the value proposition, she said, it was important to articulate the practice's vital stats, understand how the practice compares to the competition, how the practice aligns with the payer's market position and goals, and then tell the practice's story. Be brief but highlight what differentiates the practice and quantify the work in a written format.
The second step is to do an assessment of the market and payer. Where is your practice included, excluded, and why? For example, one of her clients, a retina practice, was left off by a payer. In comparing her client to the market, the payer benchmarked against ophthalmologists. Not surprisingly, the retina specialist looked like an outlier when it came to charges. "They were comparing them to the wrong peer group," said Jacobsen. "If you get a 'no' from a payer, ask them for their data and question it."
Before stepping into negotiations, she said practices need to do their homework. "What you really want to try to get your arms around is total cost of care," she said. "What does it cost the plan when they send a member to your practice?" To get a true picture, it requires a complete contract inventory and top code analysis. She said it's important to have the most current version of your fee schedule. "What's in your contract is likely not what you're being paid," Jacobson noted of changing fee schedules and the impact of modifiers.
Recognizing 80 percent of revenue is driven by usually less than 30 CPT codes, she said pay attention to which ones are most important to your practice but also take a global view. Jacobsen said a physician might be fixated on specific CPT code, when in fact, more of the business is born out of the evaluation and management world. In that case, negotiating a higher E&M rate might be more beneficial than drawing a line in the sand on the one CPT code.
Before setting a payer meeting, be sure you know when your negotiation window occurs and get it in writing. "Make sure that you back into how long you're going to need to negotiate," she advised, noting it can take a full year to get through the process.
When it comes to figuring out your reimbursement target, Jacobsen suggested looking at all your payer aggregate Medicare percentages, try to raise it to the highest one and add a buffer. "Always ask for more than what you think you're going to receive because that's the essence of negotiation. You always have to go a little bit higher."
She added that if you can't get your actual target increase in the first year, see if you might be able to negotiate incremental increases. "One of the things that I recommend for folks to consider is a multi-year agreement with a payer. If you can't get 15 percent year one, ask if you can stretch it over two or three years and get another bump in year two and a bump in year three," she suggested. While terminating a contract is sometimes powerful, Jacobsen cautioned, "I never recommend terminating unless you're really ready to walk away."
Once an agreement is reached, she said it's critical to understand the fee schedule language, terms and termination mechanisms to ensure there is a way out if necessary. The work doesn't end with a signed contract. Monitor performance and devise a 'go-forward' strategy so if you outperform, go back and ask for a little more. When Jacobsen previously worked for a payer, she noted she had about 5 percent she could give someone if they asked ... but most didn't.
These two presentations were a small sampling of the actionable information presented at the recent MGMA conference. For more information on financial and operational tools, analytics and upcoming educational events through the national association, go online to mgma.org.