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Advanced Strategies to Achieve ROI in Implementing HIPAASeptember 14, 2003: 

Advanced Strategies to Achieve ROI in Implementing HIPAA September 14, 2003 Keith Olenik, Chief Privacy Officer St. Luke’s Health System, Kansas City , MO Paul E. Zeltwanger, Director PricewaterhouseCoopers Healthcare Consulting

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Agenda A. Introduction Executive Endorsement, Leadership & Commitment So Where Do the Gains Actually Come From? HIPAA Enabled Clinical Opportunities Q & A

A. Introduction: 

A. Introduction Analyzing the Original Intent & Vision

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“Biggest Change in American Healthcare Since Creation of Medicare” Department of Health And Human Services HIPAA - The Original Vision Standardization & Simplification = SAVING$ One estimate of total savings net of all implementation costs over ten years is over $42 billion. “The Pessimist sees difficulty in every opportunity. The Optimist sees opportunity in every difficulty.”

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Improve efficiency and effectiveness of the healthcare system by standardizing the electronic exchange of administrative and financial data Increase timeliness of reimbursement/claims processing Increasing the quality of health care Lower cost of administrative transactions by eliminating time and expense of handling paper Reduce healthcare fraud and abuse Protect security and privacy of individually identifiable health information Drivers Behind HIPAA SAVINGS will not be realized without a process improvement mindset!

The Opportunity: 

The Opportunity Standardize and consolidate processes & procedures Significantly reduce days in A/R (BELOW 30 days or more) Standardize & automate certifications, authorizations, referrals, claims status, claims payment & etc…. Rethink FTE staffing requirements & process flows for patient accounts & claims adjudication – A NEW MODEL is required. Utilize the HIPAA EDI standardization and simplification rules as a catalyst to streamline, standardize and automate processes across the entire organization “Do not follow where the path may lead, go instead where there is no path and leave a trail.” -- Ralph Waldo Emerson All Producing Bottom-Line

B. Executive Endorsement, Leadership and Commitment: 

B. Executive Endorsement, Leadership and Commitment The Key to Leveraging HIPAA as a Strategic Catalyst for Change St. Luke’s Health System

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8 Hospitals 1,213 licensed beds 36,844 annual discharges 400,682 outpatient visits Medical Group 352,548 patient visits Home Care Agency 12,491 clients Medical Staff 839 active Employees 6,500 Organization Overview

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Executive Endorsement “From the beginning, we viewed HIPAA as a strategic driver of our system-wide improvement initiatives. All of our executive leadership and management understand the importance of using HIPAA as a catalyst for process improvement change.” SLHS CEO “While some of the regulations will require us to make investments in changing the way we deliver care, we believe the majority of the changes will be beneficial for our patients.” SLHS CFO

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More Common Executive Mindset “Just make sure I don’t go to jail.” “Just tell me we will be compliant” “Oh yeah, and don’t spend any money doing this!” CFO of Large Hospital System

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Keys to Obtaining Executive Buy-in Package and Present the Vision! Change the Executive Mindset Identify and Quantify Real Financial Savings (ROI) Have a Detailed Plan Be Proactive

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I. Package & Present the Vision HIPAA intersects with three key industry drivers identified in healthcare futurists thinking: E-Health - transformation in health care to private, personalized, interactive and secure use of Internet Genomics - breakthroughs will shift system from cure to prevention while placing an even higher premium on security and privacy Consumerism - empowered consumers create impatient patients demanding information and access HIPAA endorses exchanges of PHI via the internet with appropriate privacy & security controls.

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CPOE/EMR Data for Quality Clinical Safety Cost Savings Satisfaction Privacy Security EDI Trust Connectivity Better Information Efficiency E-Health Mgt. Decisions HIPAA as a Catalyst for Change I. Package & Present the Vision (cont.)

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II. Change the Executive Mindset Compliance Mind Set One more regulatory barrier; Objective to just be compliant; Internal headache Process Improvement Mind Set Catalyst for change; Strategically driven; Opportunity to standardize and drive best practice To face tomorrow with the thought of using the methods of yesterday is to envision life at a standstill. Each one of us, no matter what our task, must search for new and better methods for even that which we now do well must be done better tomorrow.” --James F. Bell (from the Forbes Scrapbook of Thoughts on the Business of Life, Book, II)

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III. Identify Real Financial Savings System Wide Standardization

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III. Identify Real Financial Savings (cont.) Procedure Standardization

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Standardization III. Identify Real Financial Savings (cont.) System Wide Standardization

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Four contracts identified for consolidation Reduced preventive maintenance fees & equipment maintenance management restructuring Reduced per unit cost Elimination of additional service contracts Improved negotiation System-wide vendor consolidation III. Identify Real Financial Savings (cont.) Vendor Contract Management Consolidation

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Financial Opportunity** $.25M $.5M $2M $3M+ 4 3 2 1 Combined Scheduling & Pre-Registration Standardize Referral Authorizations Ease of Implementation** Batch & Real Time Eligibility Verification Contract Consolidation Zero Pay & Denial Management Automation Timely Follow-up B2B All Payers Difficult Easier Sample Opportunity Prioritization Matrix ** Prioritization of opportunities and actual bottom-line financial opportunity is dependent on each organization’s size & current state strengths and weaknesses. Bottom-line impact incorporates cost savings and revenue enhancement estimations based on actual client experiences. Cumulative Bottom-Line Impact** III. Identify Real Financial Savings (cont.)

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IV. Have a Detailed Plan Implement Project Management Office Determine Current State Facilitate collaboration of IT & Revenue Cycle departments Develop Guiding Principles Obtain unified buy-in regarding goals & objectives Develop initial project charters Identify specific areas of opportunity to derive benefits for all parties involved Establish project champions Develop project workplan & detailed work steps Establish initial schedule Unified agreement on objectives and benefits Guiding Principles Future State Value/Benefits documentation Established PMO Customize and prepare work-session pre-reading materials Conduct Accelerated Collaborative Design Sessions Identify critical barriers and timelines (including regulatory timeline drivers and Vendor constraints) Consider emerging technologies and the potential impact(s Document initial future state workflows Document initial future state performance indicators and metrics Develop technical/technology issues and opportunities Develop implementation workplan Develop initial implementation plan budget Future state workflows Regulatory Compliance Assessment Emerging technology considerations Potential Barriers Implementation Plan & Timeline Draft project budget Implemented work plans, budget management and coordinated approach Re-engineered business processes Realization of FINANCIAL SAVING$ Project Organization VISIONING/ WORKFLOW DESIGN IMPLEMENTATION ACTIVITIES DELIVERABLES Driven by Project Management Office: Project assignments Workplans Budgets Regulatory Requirements Implementation Steps: Vendor Capabilities Assessment including integrated interface testing & validation EDI Readiness Analysis Business Process Re-engineering Implementation P& P Revisions Training & Education Development & Roll-out Continuous Improvement Plan - Process Refinement On-going User acceptance & training EMR Potential Support & Issue Resolution Apply HIPAA Sniffer Interview key staff Review data, days in A/R, denials, FTE’s etc. Identify barriers and facilitators for implementation Determine Opportunity Estimation of HIPAA re-engineering cost savings and revenue improvements Identification of key issues

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V. Be Proactive Great things are not done by impulse, but by a series of small things brought together by someone of action. -- Vincent Van Gogh

C. So where Do the Gains Actually Come From?: 

C. So where Do the Gains Actually Come From? “Value Props” Do Not Pay Bills

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Contract Management Opportunities Automating Processes Reduction in Clearinghouse Charges Reduced Working Capital Requirements Managed Care Negotiations Additional incremental returns from Clinical Transformation/Automation Staffing Realignment So Where Do The Gains Actually Come From?

Sample The Financial Opportunity (Case Study): 

Sample The Financial Opportunity (Case Study) Current State Days in A/R = Net 45 % of electronic authorizations Personnel – Total =95 Coders Registrars Collections Specialist Billers Cashiers Financial Counselors Telecommunications # of phone lines =45 # of fax machines = 20 Space – budgeted cost per sq ft. Paper Products – Claim & Attmts Future State Days in A/R = Net 20 % of electronic Personnel – Total = 61 Coders –3 Registrars –7 Collections Specialist –16 Billers -1 Cashiers -2 Financial Counselors -2 Telecommunications # of phone lines –23 # of fax lines -10 Space Reduction in space Reduction paper required Sample Hospital: -Beds – 550 -Pat. Revs. $500,000,000 -Avg min on each eligibility = 12 min -Region – Midwest -95 FTEs in Bus Office -Avg min each claims status = 10 min -Avg Daily Census – 2,540 -Avg min on each pre-cert = 20 -Avg min posting pymts = 2 min Financial Impact* One-time cash infusion -$7,850,000 Annual Savings % of electronic Personnel – Total = 61 Coders $90,000 Registrars 210,000 Collections Specialist 480,000 Billers 30,000 Cashiers 60,000 Financial Counselors 60,000 Telecommunications Red in phone lines 15,000 Red in fax machines 5,000 Space 45,000 Reduction in Paper Products 15,000 Other ?? Total Annual Savings=$1,010,000 * Financial Impact based upon reductions in A.R. from 45 to 20 days and reductions in A/R over 90 days from 30% to 18%. Other assumptions include a 6% cost of capital. Assumed avg. pay (incl benefits) = $30K. Total Bottom-line Impact = $8,860,000

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“ My clients would like greater EDI capabilities, but I’ve got em right where I want them. They are so afraid of conversions and changing vendors that they will rarely leave us and seek another solution. Besides with quarterly earnings pressures, we make more money repackaging and modifying existing architecture than investing in new solutions. R&D is just too expensive and our competitors aren’t investing. Besides we will make more money forcing providers to use our clearinghouse than allowing them to have direct transaction capabilities.” Anonymous Software Billionaire Current Barriers: Software Motivation

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The Workflow Automation Potential Time Sustainable ROI Advanced Workflow Automation & Integrated Rules Logic-LEAP™ Leading Workflow & Work List Strategies Traditional Re-engineering $75M - $100M+ $30M - $45M $15M - $30M Health System Bottom-Line Opportunity ROBUST PROCESS OPTIMIZATION Customized Automated Workflows including: Best-Practice Processes Integrated Rules Logic Real-time Performance & Metric Monitoring Producing Truly Differentiated RESULTS! SEAMLESS INTEGRATION Disparate System Data Integration Enterprise-wide Process Automation Capabilities Leverages Existing IT Investments DYNAMIC B2B CONNECTIVITY End-to-End to eBusiness Integration Platform Leverages HIPAA Standardization Opportunities

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Potential Provider Revenue Cycle Results Processes that minimize end-user interaction Real-time performance monitoring capabilities Upfront screening for Medicaid, Grants, Charity Care & Self-Pay Capabilities for self pay arrangements up-front Reduced non-covered services Denial Minimization Automated Processes Intangible Benefit Summary Process Automation and Advanced Workflow Solutions Provides Capabilities to Achieve Previously Unattainable Results

D. HIPAA Enabled Clinical Opportunities: 

D. HIPAA Enabled Clinical Opportunities Accelerating the ROI from Clinical Transformation/Automation

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Issues: Paper medical records are difficult to secure Physician hand writing illegible Availability of information is poor Lost records and information Inefficiency Duplication of efforts Human error (4th leading cause of death) Lack of checks and balances Difficulty doing studies for Quality Improvement Clinical Automation

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Automation can provide: Secure and Private Patient Records User Authentication Audit logs of activity Back up procedures High Availability at point of care Efficiency in charting/documentation Checks on human errors (adverse drug interactions) AI used to support MD decision making Interface with various diagnostic machines (HL-7) Clinical Automation

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Automation can provide: Ability to analyze 100% of charts Research data without human error Better treatment planning Standardization of treatment plans (w. MD override) Faster Quality Improvement Better data = Better Care Real time intervention Better emergency care through high availability Significant Financial Opportunities Clinical Automation (cont.)

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CPT Coding ICD-9 coding Demographics LOS Complications & Comorbities Patient Bed Chart Test Results Office Notes Medical Record Repository CPOE Functions Providers Functions Functions Payer Length of Stay Procedures performed Drug interactions 275 (Claims Attachment)* Test and Monitoring Outpatient Activity These are not contained in the initial Transactions and Code Sets Final Rule* Prior History and Demographics All data health elements Orders and Procedures 837 (Claims Submission) Clinical Flow’s Impact on Cash

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Online registration Secure and Private Individual Medical Records Online Communication with Physician View and request corrections to MR on-line Order services on-line (drugs, DME, supplies) Receive education on line (Cancer, Diabetics, Etc.) Pay bills on-line View payment status on-line View benefits on-line Receive care on-line (Army robotics, online consults) Patient monitoring of lifestyle impacts and interventions E-commerce post HIPAA is a Catalyst for: Consumerism - empowered consumers create impatient patients demanding information and access

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Leveraging Compliance Into Opportunity “Sounds like consultant speak to me. How can we really implement this? Integrate process improvement identifiers into compliance check-up process Maintain executive buy-in and support Integrate process improvement questioning into compliance check-up process. Develop action plan for implementation of identified opportunities Document results and savings/ROI.

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Leveraging Compliance Into Opportunity(cont.) “We want to use the HIPAA compliance requirements as a catalyst to improve the quality of care throughout our 9 hospital health system, through strategic process improvement, best practice standardization information technology opportunities.” CEO of Health System P.S. Now we can get around all the politics and the barriers to change, blame it on the government and truly reap the returns of a larger health system!

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Ensure business goals drive HIPAA Secure executive buy-in & commitment Build HIPAA into existing change initiatives (do it once) Capitalize on savings and benefits via HIPAA EDI and greater risk mgt. Controls Develop on-going validation, compliance & process improvement 3-5 year plan. Integrate HIPAA into your day-to-day operations Consider constituency impacts (groups, members, providers) Develop Value scorecard for all financial opportunities realized Summary - Critical Success Factors

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“It is funny about life: if you refuse to accept anything but the very best you will very often get it.” W. Somerset Maugham It Takes Initiative! Keith Olenik, CPO, St. Lukes Health System Kolenik@saint-lukes.org 816 932-3222 Paul Zeltwanger, Director, PricewaterhouseCoopers Paul.e.zeltwanger@us.pwc.com 513 850-3476 Questions & Answers

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Your world Our people The vessel is a symbol for people from many different worlds working together and sharing knowledge. The shape of each vessel is formed by the classic optical illusion of two facing profiles. Visitors to our organization’s worldwide offices will see vessels crafted in various materials and styles representing the traditions of many cultures. Their diversity reflects the many worlds in which PricewaterhouseCoopers people and our clients work together, share knowledge, and worlds are the fundamentals underpinning our organization. The vessel is a symbol for people from many different worlds working together and sharing knowledge. The shape of each vessel is formed by the classic optical illusion of two facing profiles. Visitors to our organization’s worldwide offices will see vessels crafted in various materials and styles representing the traditions of many cultures. Their diversity reflects the many worlds in which PricewaterhouseCoopers people and our clients work together, share knowledge, and worlds are the fundamentals underpinning our organization.