Utilizing Six Sigma Methodologies

to Progress From Reactive to

Proactive Management in Healthcare

Six Sigma Definition

What Six Sigma is NOT:

•A magic mathematical formula that will solve all
problems
•A manufacturing science that does not work on
anything but a factory environment
•A complex system that requires a heavy math and
statistical background
•TQM, ISO or other similar quality certification standard
•A system to introduce more bureaucracy

Six Sigma Definition

What Six Sigma IS:

•A statistical term that measures how far a process
deviates from perfection
•A systematic, data-driven approach to measuring
defects and establishing process fixes & modifications
•A set of tools and techniques that will help staff re-think
whether a step is necessary or redundant
•Establishing triggers and metrics within a process to
proactively illustrate the health of a system

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Current Six Sigma Efforts are Concentrated
in the Acute Care Setting…

…But the Outpatient Care Market is

Becoming Increasingly Aware of the
Benefits of Six Sigma.

Six Sigma in Healthcare

Perceived Advantages Perceived Disadvantages

• Larger Capital Spending Budget • Large and Complicated Environment

Acute Case

• Bigger Payrolls • Management Is Usually Tied up in

Setting

Bureaucracy
• Greater Breath of Clinical Offerings
• Slow to Make Process or Technology
• Availability to Add Additional Resources
Changes
• Time for 4-6 Month Engagements

• Higher Margins in Outpatient Setting • Smaller Capital Spending Budgets

Outpatient

• Bottom Line Driven Organizations • Lower Revenue Base

Setting

• Business Efficiency in Driving Decisions • Less Resources to Spare for Additional

Projects
• Quick to Adopt New Technology
• Lack of Interest in Six Sigma
• Lean Staff Leads to Less Bureaucracy

Six Sigma Focus Areas

Controllership VOC Tool

Assessment 9 1 Usage

Cash Flow Customer

Testing 8 2 Data Mining
SALES &
FINANCE MARKETING

6σ
Income & Client Value
Cost Drivers 7 3 Drivers

OPERATIONS

Collections 6 4 Scheduling
5
ƒ CPT & Payor Correlations ƒ Gage R&R of Schedulers
ƒ Measurement Dashboards Billing ƒ Throughput Optimization
ƒ Establish Process Metrics ƒ Establish Process Metrics
ƒ Defect Drivers
ƒ Unbilled Claims

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 The Scheduling
Department

The Scheduling Department

The Questions
• How is Our Scheduling Department Doing?
• How Do You Determine Your Top Performers?
• How Many Schedulers Do We Need?
• When Do We Need Them?
• What is The Impact of Scheduling On Our
Business?
• What Kind of Training Do My Schedulers
Need?

The Solution
• A Detailed Analysis by Scheduler

Scheduling Breakdown

Conducted Detailed Review of Total Calls by Scheduler for 5 Months

Low Volume <600
Med. Volume 601-700
High Volume >701
December January February March April

Sally Smith 840 820 810 830 850

Mary Jones 785 700 790 790 815

Rachel Byrd 779 701 674 643 615

Joel Smith 403 350 410 390 318

• Sally Smith and Mary Jones have the first and • Although consistent, Mr. Smith has sub-par
second highest call volume production
• Ms. Byrd’s production has decreased every • Mr. Smith has the highest average time on
month for the last five months calls.

Calls by Scheduler…to be Correlated With Downstream Impact

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 Scheduling / Registration Process

Drill Down of Total Calls by Scheduler

2920 2939
2795
2635 1200

1000
2025
800

600

400

200

Monday Tuesday Wednesday Thursday Friday

Sally Smith Mary Jones Rachel Byrd Joel Smith

• Mr. Smith consistently improves as the week • Mr. Smith’s performance remains level,
progresses regardless of total potential calls
• Ms. Jones’ performance fluctuates with the • Mr. Smith’s defect rate is lower than that of all
daily volume other schedulers

Calls by Scheduler…to be Correlated With Downstream Impact

Scheduling / Registration Process

Total Defects by Scheduler Analyzed…

Total Patients Scheduled Total Defects Total Clean Claims

Sally Smith Mary Jones

4150
3880
32% 43%
2822 Defect Defect
Rate 2212 Rate
1668
1328

Rachel Byrd Joel Smith

3412
13% 5%
2968
Defect Defect
Rate Rate
1871 1777

444
94

Volume as Key Indicator of Effectiveness was Misleading

The Unbilled
Claims Challenge

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 The Unbilled Claims Challenge

The Questions
• Why is My Unbilled Claims Bucket Growing?
• Where and Why are These Claims Sitting?
• Who Is Working on this Issue?
• How Do I Focus on the Held Claims?
• How Do We Prevent Them in the First Place?

The Solution
• Find the “Hidden Factory” of Lost Dollars
by Analyzing Your Unbilled Claims

Unbilled Claims

$206K in Unbilled Claims Driven by Missing Data Categories

Accident Date

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Defects 125 36 24 17 22 12 5 5 5 5 53 309
Dollar Impact
$85k $26k $23k $14k $15k $5k $2k $2k $1k $2k $31k $206,000
of Defects

Accident Date Account for Over 40% of All Unbilled Claims Dollars

Unbilled Claims

$206K in Unbilled Claims Driven by Missing Data Categories

Missing Accident Dates by Facility

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Accident Date

Drill Down on
Accident Date
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$( for 52% of Unbilled Claims
Total Defects 309 Total $ Impact $206,000

Site A & B Account for Over 80% of All Unbilled Claims

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 Site “A” Analysis

Missing & Inconsistent Processes Across Registrars Driving Defects

Missing Accident Dates by Facility Registration Data and Defects
81 Total Patients 99
Registered
Defects
Drill Down
on Site A 63 64

45

24
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1 1

Registrar 1 Registrar 2 Registrar 3

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Sit Sit Sit Sit Sit

• Site A Accounts for 65% of Missing • Defects Driven by Missing Workman’s

Accident Dates Comp Data
• Site D & E Capture Accident Dates
• Registrar 3 Had 65% Defect Rate
Consistently

Training & Reporting Metrics Required to Address Registration Defects

Rejected Claims
Analysis

Rejected Claims Analysis

The Questions
• Why is There a Difference Between My
Expected and Actual Net Revenue?
• What are the Drivers of This Difference?
• Who Has Impact on the Drivers?
• How Do I Begin to Reverse the Trend and
Where Do I look?

The Solution
• Rejected Claims Drivers Analysis

»6
 Rejected Claims Analysis

Leakage Analysis Highlights Controllable and Uncontrollable Defect Drivers

5)
0,77
($87

Uncontrollable Due
to Pre-Established
Fee Schedule

Gross Expected Net

Charges Revenue Collected
$2,246,985 $1,376,210 $922,413

P
Sc er
he Fe
du e
le

$870,775 Written off Due to Contract Fee Schedule

Rejected Claims Analysis

Controllable Defect Drivers Totaling $454,000 Identified for Further Analysis

$80,000
5)
0,77
($87 $60,000

$40,000

$20,000

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Gross Expected Net

Charges Revenue Collected
$2,246,985 $1,376,210 $922,413

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Further Education and Training Needed to Reduce Leakage

Rejected Claims Analysis

Missing Patient Info Inconsistently Gathered by Staff Personnel

$80,000 $ Impact of
Defects
$70,000

$60,000

$50,000

$40,000

$30,000

$20,000

$10,000

-
8a 9a 10 11 12 1p 2p 3p 4p 5p
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$236,000 of Controllable Leakage Needs to be Addressed

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 Sales and
Marketing

Sales and Marketing

The Questions
• Who Are Our Target Doctors and Why?
• Why Are They Our Target Doctors?
• What Separates Them From Their Peers?
• What Are Our Best Procedures and Why?
• What Kind of Business Do We Want to
Avoid?

The Solution
• Contractual, Physician, CPT and Payor Drill
Down Analysis

Customer’s 4Q Charges

Evaluated Total 4th Quarter Charges to Assess Drivers of Billing Activity

October November December
$624,000
$614,000
$537,000

$252,000
$202,000
$116,000 $164,000
$92,000 $75,000
$5,000 $8,000 $5,000
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• Amount Billed Fluctuates from Month to Month • Write-offs Decreased by 15% as a

• Both Payments and Write-offs Decreased – Percentage of Billed During the 4th Quarter
Regardless of Billing Activity • Collection Percentage Decreased by 7%

Pinpointed Three Primary Variables Driving Revenue:

CPT Codes, Financial Class and Referring Physician

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 Charges by Referring Doctor

Assessed Site #1 Billing Activity by Referring Doctor

Total charges
Write Off Amount

Doc A Doc B Doc C Doc D Doc E Doc F Doc G Doc H Doc I Doc J Doc K Doc L Doc M

Charges $818k $616k $594k $344k $225k $208k $207k $183k $178k $144k $138k $131k $130k

Write-Offs $340k $179k $214k $64k $70k $74k $68k $73k N/A $70k $52k $56k $35k

Write-Offs 42% 29% 36% 19% 31% 36% 33% 40% N/A 49% 38% 43% 27%
%

Observations Marketing Opportunities

• Physician A Referred the Most Patients • Build and Sustain Solid Relationships with
• Claims for Patients Referred From Physicians Physicians B, D and E
B, D and E have a Higher Collection • Communicate the Results Back to
Percentage Referring Doctors

Additional Marketing Efforts Needed to Enhance Overall

“Quality of Referrals”

Charges by CPT Codes

Top 11 CPT Codes Driving 75% of 4th Quarter Charges

Top 6 CPT Codes
Analysis by CPT Code
• 72148 MRI-Lumbar Spine wo contrast
72148 $304,000
$107,000 • 73721 MRI-Any Joint Lower Extremity, wo
73721 $236,000 Contrast
$90,000
• 72141 MRI-Cervical Spine, wo Contrast
72141 $220,000
$78,000 • 73221 MRI-Any Joint Upper Extremity, wo
73221 $178,000 Contrast
$48,000
• 70553 MRI-Brain, wo Contrast, Followed by
70553 $109,000 Contrast
$46,000
70551 $101,000 • 70551 MRI-Brain wo Contrast
$33,000
72158 $44,000
$13,000
74170 $36,000
• For All CPT Charges Over $100,000 only
$16,000 73221 and 70551 had Write-offs that
71020 $30,000
Totaled Less than 35% of Charges.
$11,000
76092 $28,000 • 73221 is the “Big-Hitter” with High
$13,000 Total Charges Production Opportunities and Write-offs
72146 $27,000 Write Off Amount that Totaled Less than 27% of Charges.
$8,000

Further Analysis Required to Understand Which CPT Codes and

Payor Relationships Help/Hinder Collection Efforts

Charges by Financial Class

Top 12 Financial Classes Account for 70% of 4th Quarter Charges

Top Financial Classes
By Financial Class
WC Work Comp
WC $239,000 AT Attorney Patients
$83,000 UN Commercial Payor 1
AT $172,000 MC Medicare
$4,000 IN Commercial Payor 2
UN $136,000 A2 Commercial Payor 3
$82,000 HH Commercial Payor 4
MC $128,000 BP Commercial Payor 5
$33,000 C Cash No Insurance
IN $117,000 PH Commercial Payor 6
$32,000 MD Medicaid
A2 $95,000 AM Americaid
$69,000
HH $78,000
$27,000 • AT - Lowest Write-Off Percentage Due to
BP $67,000 Timing Delay of Payments.
$17,000
C $53,000 • For all Charges Over $100,000, MC and
$28,000
IN had Write-off Rates of 26% and 27%
PH $52,000
$9,000 Respectively
$51,000 Total Charges
MD
$29,000 • UN and A2 - High Write-off Percentages
Write Off Amount
AM $48,000 Tied Back to High Volumes of CPT 70553
$17,000

Understanding of Negotiated Contract Rates Required to Accurately

Forecast Contractual Write-Offs and Bad Debt

»9
 Six Sigma Books

Books Range From Basic Overviews to Heavy Statistics:

1) Power of Six Sigma
• Appropriate for those just beginning in Six Sigma
2) Six Sigma Revolution by Eckes
• Great for audiences at all levels
3) The Six Sigma Way
• Best for a more strategic application of Six Sigma
4) Six Sigma Pocket Guide by Rath and Strong
• Great reference for tools and how to use them; not an introductory work
5) Six Sigma Handbook by Pyzdek
• A reference meant for trained Six Sigma readers - designed for an in-depth
understanding and use of the tools
6) Implementing Six Sigma by Breyfogle
• A detailed and stats-oriented reference meant for trained Six Sigma readers
7) Six Sigma by Mikel Harry

SourceSigma and SourceRad

are Source Medical Solutions
www.sourcemed.net

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