Jf R,}1/O)~ Iuty ·

FRANK T. MARTINEZ TY OF LOS ANGEL. Office of the City Clerk CALIFORNIA CITY CLERK Council and Public Services KAREN E. KALFAYAN Room 395, City Hall Executive Officer Los Angeles, CA 90012 Council File Information - (213) 978-1043 General Information - (213) 978-1133 When malting inquiries Fax: (213) 978-1040 relative to this matter refer to File No. HELEN GINSBURG ANTONIO R. VILLARAIGOSA Chief', Council and Public Services Division MAYOR 03-0814

November 9, 2005

City Administrative Officer Chief Legislative Analyst Information Technology Agency Fire Department

RE: LOS ANGELES FIRE DEPARTMENT AMBULANCE BILLING PROCESS REVIEW AND OUTSOURCING ASSESSMENT BY BEARINGPOINT INC.

At the meeting of the Council held October 26, 2005, the following action was taken:

Attached reports adopted...... X Attached motion adopted() ...... ············------Attached resolution adopted() ...... ______Ordinance adopted ...... ______Motion adopted to approve attached report ...... ______Motion adopted to approve attached communication ...... ______To the Mayor FORTHWITH...... X Ordinance Number ...... ------Publication date ...... ·---~-- Effective date ...... ______Mayor concurred...... 11-0 7 - O5 Mayor failed to act - deemed approved ...... ______Findings adopted ...... ______Negative Declaration adopted ...... ______Categorically exempt ...... ·······························------

PLACE IN riLES

~~y Clerk NOV~005 Jf r,}1/o)~ iUTY ·. ~ ~\U\\%\"> { AN~~L EMPLOYMENT OPPORTUN

·SUBJECT TO MAYOR'S APPROVAL

COUNCIL FILE NO. 03-0814 COUNCIL DISTRICT NO.

COUNCIL APPROVAL DATE October 26, 2005

RE: LOS ANGELES FIRE DEPARTMENT AMBULANCE BILLING PROCESS REVIEW AND

OUTSOURCING ASSESSMENT BY BEARINGPOINT INC

NOV O7 2005

LAST DAY FOR MAYOR TO ACT (10 Day Charter requirement as per LAAC 4.133)

DO NOT WRITE BELOW THIS LINE - FOR MAYOR OFFICE USE ONLY

*DISAPPROVED

CP. 8 0 *Transmit obj eidons iW"wrifilng pursuant to C 9.i2.1385 O :ro -l -:=: c:: rn -< I '+-:\0 Nov O7 2005 o -.J :\; S? 0 DATE OF MAYOR APPROVAL OR DISAPPROVAL · 1 C.. n""i ------·- ol g:l ~ ~o , rn ~ - .,.., v .. -- c w O ~ o-- rn

MAYOR

NOV Oij 2005 File No. 03-0814 2-b THE COUNCIL OF THE CITY OF LOS ANGELES

Your

PUBLIC SAFETY COMMITTEE · and PERSONNEL COMMITTEE report as follows:

Public Comments

PUBLIC SAFETY and PERSONNEL COMMITTEES REPORT relative to Los Angeles Fire Department (LAFD) ambulance billing process review and outsourcing assessment by BearingPoint Inc.

Recommendations for Council action:

1. INSTRUCT the LAFD, with the assistance of the City Administrative Officer (CAO) and the Information Technology Agency, to prepare and release a Request for Proposal (RFP) for the billing process and technology improvements as identified in the CAO report dated November 17, 2004.

2. DIRECT the LAFD and the CAO to report back with results of the RFP process and recommend~tions concerning how to proceed.

3. RESOLVE that Employment Authority for one Senior Systems Analyst II within the LAFD is APPROVED.

Fiscal Impact Statement: The CAO reports that the adoption of the recommendations contained in its report will have no fiscal impact on the General Fund. However, the CAO notes that once a strategy for improvement of the· ambulance billing process has been selected, a significant investment in ambulance billing technology improvements may be required, which would, in turn, yield an increase in billing collections. The CAO reports that the amount of the increased investment and billing collections cannot be accurately determined until the results of the RFP process have been received and reviewed. ·

(Information Technology and General Services Committee waived consideration of the above matter.)

Summary:

In a report dated November 17, 2004, the CAO states the LAFD responds to all 9-1-1 emergency medical services requests within the City. In instances where paramedics provide sufficient medical care at the scene, the patient is not transported to the hospital and there is no charge for the services provided. Fees are applied to patients transported to the hospital via an LAFD ambulance.

The CAO further notes that on July 9, 2003, the Council adopted a recommendation instructing the initiation of an outside review of the LAFD ambulance billing process by BearingPoint Inc. Included as part of the review was an assessment of ambulance billing costs including an analysis of the fee schedule and benchmarking of the LAFD billing practices and fee schedule against similar agencies. The BearingPoint study also included an assessment of the feasibility and payback associated with outsourcing the LAFD ambulance billing unit operations, and recommendations concerning how the City should proceed to streamline the LAFD ambulance billing processes.

The CAO reports that the LAFD has already initiated some of the ambulance billing process improvements recommended by the BearingPoint study, however, there are improvements yet to be accomplished. Finally, the CAO states that because of the significant potential for streamlining the ambulance billing process and the potential for an increased revenue flow, the City should explore the costs and the options for implementing an automated field data capture capability in-house. The CAO recommends issuing a RFP for the acquisition of the necessary technology upgrades such as hand held devices and software to permit electronic field data capture of billing information utilizing a system integrator.

The Audits and Governmental Efficiency Committee approved the recommendations contained in the CAO report on December 13, 2004. At a regular meeting on June 13, 2005, the Public Safety Committee amended the CAO's recommendations to include the approval of a position authority for one Senior Systems Analyst II within the LAFD. On August 3, 2005, the Personnel Committee concurred with the Public Safety Committee. This matter is now being forwarded to Council for consideration.

Respectfully submitted,

PUBLIC SAFETY COMMITTEE

MEMBER VOTE MEMBER VOTE MISCIKOWSKI YES ZINE YES REYES YES GARCETTI YES WEISS ABSENT ZINE ABSENT PARKS YES fZ6fT ADOPTED SG 10/11/05 OCT 2-6 2005 #030814d."'."pd ,qs ANGELES CITY com,r· _ro_nm M.AYOR FORfflYlfI'Ji

MAYOR WITH flLE! -4-, l ~:> ,·J

"' t_'} ·r· ;,_ r ·t _ ~.... -~

TO THE COUNCIL OF THE File No. 03-0814 OIJY OF LOS ANGELES

Your AUDITS AND GOVERNMENTAL EFFICIENCY Committee

reports as follows:

Public Comments

AUDITS AND GOVERNMENTAL EFFICIENCY COMMITTEE REPORT relative to the Los Angeles Fire Department (LAFD) ambulance billing process review and outsourcing assessment by BearingPoint, Inc. ,

Recommendations for Council action:

1. INSTRUCT the LAFD, with the assistance of the City Administrative Officer (CAO) and the information Technology Agency, to prepare and release a Request for Proposals (RFP) for the billing process and technology improvements identified in the CAO report (contained on the Council File).

2. INSTRUCT the LAFD and the CAO to report back to the City Council with the results of the RFP process and recommendations concerning how to proceed.

Fiscal Impact Statement: The CAO reports that adoption of the recommendations contained in its report dated November 17, 2004, will have no fiscal impact on the General Fund. However, once a strategy for improvement of the ambulance billing process has been selected, a significant investment in ambulance billing technology improvements may be required, which would, in turn, yield an increase in billing collections. The amount of the increased investment and billing collections cannot be accurately determined until the results of the RFP process recommended by the CAO have been received and reviewed.

(Information Technology and General Services Committee waived consideration of the above . matter)

Summary:

On July 9, 2003, Council adopted a Public Safety Committee recommendation to initiate a review of the LAFD ambulc;Jnce billing process. The review was conducted by BearingPoint, Inc., and included a review of the efficiency of the ambulance billing process, an analysis of the cost assessment and fee schedule, and an assessment of outsourcing opportunities. " . The BearingPoint study presented recommendations for improvements to the LAFD ambulance billing process, which included: increasing ambulance billing fees to cover actual costs of service; reducing the time to generate an invoice; implementation of strategies for managing accounts receivables and collections; develop~ent of additional performance measures and reporting to track ambulance related processes, receivables, collections and revenue; development of a communication strategy and management reporting tools; and a review of City policy on collecting delinquent self pay accounts. In addition, the BearingPoint study recommended that the City consider the development of a Request for Information (RFI) and/or a Request for Proposals (RFP) for: 1) full outsourcing (an end-to-end solution involving data capture, billing and collection services); and, 2) implementation of a "Hosted Early Out" program (a type of partial outsourcing for a selected portion of accounts such as aged or self pay accounts). I.

Page 1 of 2 I a - I -, ,.:JI, .

At its meeting of December 3, 2004, the Audits and Governmental Efficiency Committee considered LAFD and CAO reports relative to the BearingPoint study. The CAO report identifies the BearingPoint recommendations that have already been implemented by the LAFD, as well as improvements that are yet to be accomplished by LAFD. The CAO report recommends that due to the significant potential for streamlining the ambulance billing process and the potential for an increased revenue flow, the costs and the options for implementing an automated field data capture capability in-house should be explored. In addition, the CAO recommends that a RFP including the acquisition of the necessary technology upgrades such as hand held devices and software to permit electronic field data capture of billing information utilizing a system integrator should be prepared and released.

After some discussion of this item, the Committee recommended to approve the CAO's recommendations. This matter is now forwarded to the Council for its consideration.

Respectfully submitted,

AUDITS AND GOVERNMENTAL EFFICIENCY COMMITTEE

MEMBER VOTE GREUEL YES WEISS YES HAHN ABSENT ?Gf'f· ADOPTED OCT 2 6 2005 PYL 10/07/05 'QS ANGELES CITY COUM«'" #030814c.wpd - FORTHWITH

;

Page 2 of 2 File No. 03-0814 TO THE COUNCIL OF THE CITY OF LOS ANGELES

Your BUDGET AND FINANCE Committee reports as follows: Yes No Public Comments: _x_

BUDGET AND FINANCE COMMITTEE REPORT relative to the Los Angeles Fire Department (LAFD) ambulance billing process review and. outsourcing assessment by BearingPoint Inc.

Recommendations for Council action:

1. CONCUR with the recommendations of the Public Safety Committee relative to LAFD ambulance billing process review and outsourcing assessment by BearingPoint Inc.

2. INSTRUCT the LAFD to add the Information Technology Agency to the Committee, already to include the LAFD, City Administrative Officer (CAO), and the Chief Legislative Analyst, which will assist in the development of the Request for Proposal (RFP) for the billing process and technology improvements to enhance data capture through field data entry, as well as the review of the RFP results.

3. INSTRUCT the CAO to identify a funding source for the RFP, which may include existing LAFD funds.

Fiscal Impact Statement: The CAO reports that adoption of the recommendations contained in the CAO's report dated November 17, 2004, will have no fiscal impact on the General Fund. However, once a strategy for improvement of the ambulance billing process has been selected, a significant investment in ambulance billing technology improvements may be required, which would, in turn, yield an increase in billing collections. The amount of the increased investment and billing collections cannot be accurately determined until the results of the RFP process recommended by the CAO have been received and reviewed. ·

(Information Technology and General Services Committee waived consideration of the above matter)

SUMMARY

At its meeting of September 13, 2005, the Budget and Finance Committee considered LAFD and CAO reports relative to the ambulance billing process review and outsourcing assessment by BearingPoint Inc. On July 9, 2003, the Council adopted a recommendation of the Public Safety Committee instructing the initiation of an outside review of the LAFD ambulance billing process by BearingPoint Inc. Included as part of this review was an assessment of ambulance billing costs including an analysis of the fee schedule and benchmarking of the LAFD billing practices and fee schedule against similar agencies. The BearingPoint study also included an assessment of the feasibility and payback associated with outsourcing the LAFD ambulance billing unit operations, and recommendations concerning how the City should proceed to streamline the LAFD ambulance billing processes.

Recommendations based on the BearingPoint study included strategies for improvement of the LAFD ambulance billing processes including increasing ambulance billing fees to cover the actual costs of service; reducing the time to generate an invoice; implementation of strategies for managing accounts receivables and collections; use of an electronic field data capture system and an updated account management system; aggressive maximization of electronic billing; and, evaluation of electronic sharing of patient billing information with hospitals.

1 ...... '• The BearingPoint study aaoiuonally recommended the City consider me development of a Request For Information (RFI) and/or an RFP for: (1) full outsourcing (an end-to-end solution involving data capture,· billing and collection services); (2) implementation of a "Hosted Early Out" program (a type of partial outsourcing for a selected portion of accounts such as aged or self pay accounts).

Estimates obtained by BearingPoint indicate that the cost of fully outsourcing ambulance billing and collections would be approximately 12 to 15 percent of gross receipts (a contingency fee that would allow a vendor to keep 12 to 15 cents of every dollar collected). Based upon this estimated rate, collections of between $3 and $5 million above what the City currently collects would be required for the City to break even. BearingPoint also recommends that the LAFD gather information, through the RFI and RFP process, to assess the costs, benefits and feasibility of implementing an in-house field data capture capability which can be compared to the full outsourcing alternative, or combined with the partial outsourcing alternative. The CAO reports, however, that the burdened labor cost of the LAFD internal billing and collection operations for ambulance services is approximately $3.27 million annually. Based upon annual collections of $45.6 million, the burdened labor cost represents approximately seven (7) percent of fees collected compared to approximately 12-15 percent for full outsourcing.

The CAO report identifies improvements that have already been made by the LAFD as well as improvements yet to be accomplished, and recommends that the City proceed with remaining improvements utilizing an RFP process. The CAO reports that because of the significant potential for streamlining the ambulance billing process and the potential for an increased revenue flow, the City should explore the costs and the options for implementing an automated field data capture capability in-house and recommends the preparation and release of an RFP including the acquisition of the necessary technology upgrades such as hand held devices and software to permit electronic field data capture of billing information utilizing a system integrator.

The Budget and Finance Committee concurred with the recommendations of the Public Safety Committee to approve the CAO recommendations and to approve Position Authority for one Senior Systems Analyst 11 in the LAFD. The Budget and Finance Committee added recommendations relative to including the Information Technology Agency in the Committee, with the LAFD, CAO and the Chief Legislative Analyst, which will assist in the development of the RFP for the billing process and · technology improvements to enhance data capture through field data entry, as well as the review of the RFP results. The Committee additionally recommended that the CAO identify a funding source for the RFP, which may include existing LAFD funds. This matter is now forwarded to the Council for its consideration.

Respectfully submitted,

MEMBER VOTE PARKS: YES CARDENAS: YES SMITH: YES GREUEL: YES ROSENDAHL: YES ~· ADOPTED

LB OCT 2 6 2005 · #030814b 9/28/05 ~ «\S AtlGELlS CllY cou~r" TO THE MAYOR FORTH\VID1

2 MAYOR W\1H fl~~ COUNCIL VOTE

Oct 26, 2005 10:37:37 AM, #1

Items for Which Public Hearings Have Been Held - Items 1- 26 Voting on Item(s): 1-13,15-16,18-26, Roll Call

CARDENAS Yes GARCETTI Absent GREUEL Absent HAHN Yes LABONGE Yes PARKS Absent PERRY Yes REYES Yes ROSENDAHL Yes SMITH Yes WEISS Yes ZINE Yes *PADILLA Yes VACANT Absent VACANT Absent Present: 10, Yes: 10 No: 0 •

BUDGET AND FINANCE COMMITTEE NOTIFICATION SHEET

Council File No. D ~ - {) ~ f L(.

Council Districts: . , Mayor (with file/without) (Mail Stop 370) v· (./ City Administrative Officer (Mail Stop 130) v v---Chief Legislative ·Analyst (Mail Stop 136) ·city Attorney (with blue slip/without) (Mail Stop 140) Controller (Mail Stop 183) Treasurer (Mail Stop 750) ,_.,/" ----Information Technology Agency (Mail Stop 232) Department of Building and Safety (Mail Stop 115) Office of Finance - Attn:· Robert Lee (Mail Stop 170)

~ ~ire Commission I ~artm~ (Mail Stop 250) Department of General Services · (Mail Stop 508) Personnel Department (Mail Stop 391) City Clerk- Police Commission I Department (Mail Stop 400) Board of Public Works . (Mail Stop 465) Public Works -. Bureau of Engineering . (Mail Stop 490)

Department of Transportation .. (Mail Stop 725) Department of Recreation and Parks (Mail Stop 625)

...... ( -- . .,)

·--· l,.. •. ,/ b r--,) '- '. '7'fM-J ! PERSONNEL COMMITTEE ' /J--/;jl ~ y i Report/Communication for Signature

I Council File Number: <5,1_--of";tf r j

~ Committee Meeting Date: i - "3 ..-<::> .),.,-, Council Date: IO /"U (ors-

COMMITTEE MEMBER YES NO ABSENT Councilmember Dennis P. Zine, Chair ,/ .. J Councilmember , G-4-,1.e~- t/ .

Remarks

Ilene Shapiro, Legislative Assistant ------Telephone 978-1077 ,,,-,--- ' ---- ') .•.- , , ------~ AUDITS AND GOVERNMENTAL EFFICIENCY COMMITTEE .~o~mu_:ic_atio,r for Signature Council File Number: ------,=-----~------.~------0 ..J 0 X 19 Committee Meeting Date: ____/ _2- __------'J'-----ti_Cf_.______

Council Date:------

COMMITTEE MEMBER NO ABSENT Councilmember Wendy Greuel, Chair Councilmember Jack Weiss Councilmember Janice Hahn

Remarks ~

.. , ILENE SHAPIRO, Legislative Assistant ______.:_.:_~=------~:-~----- Telephone 978-1077

""' -·-- •••• t ,or,•• .'fl ...... ~,, _____ ... _ .. -:;~-,.-·-_,.•< ... _ ... ,,.··------·---~-·-·---·· - . -. .. ~-~ . IC SAFETY COMMI'ITEE ort/ ommunication for Signature --- - o I,

COMMITTEE MEMBER YES NO ABSENT Councilmember Cindy Miscikowski, Chair v Councilmember. R€.. ~ CouncilniemberWeis:s---o-_...;.--~---j----=---f--:__--~L~...:....-..:__J

Councilmember. . · Councilmember Zine

.. Remarks t) ~ ~ ~ ~· ~ ~ LA-o /\.9.--c_,,:i "'--) ~ tlk-s ,~ .o@ S't:. S::~k ~ - .~ ~-xr:-~rV',-...., . f ·· · · ·. - --: . .- .. , Legislati~ Assistant------~------Telephone9 lg--/ C) 1 ;> AUDITS AND ~-~ ·:}ERNMENTAL EFFICI.~Y COMMITTEE SUGGESTED NOTIFICATION OF ~OUNCIL ACTION

Council File No. 0 ~ -0 fl Y

D Council Member(s)------ E(Interested pepartment CJ r ·&11 1 cLe., t-::JCf f)p)t ~ ur'MayorGwitb®tlioutf~---~~~~~---,-~---.~~~~~~~~ li'YChief Legislative Ai;ialyst ______~ty Administrative· Officer ______IE"Controller ______,.. ______

· D City Clerk------O City Clerk, Chief Achninistrative Services------

O Treasurer __-.------ i;<{cjty Attorney (with bhie ~thout blue sheeQ:;>------ d Department of Transportation------

D Los Angeles Housing Department ______

D City Pla~g Department __------O Community Redevelopment Agency.______

D Board of Public Works· ------c;r'~. r (~ ~I 0 . . . . . D~------~ O.~------~------~ •=ORM GEN. 160 (Rev. 6/80) CITY OF LOS ANGELES lf\ .~-DEPARTMENTAL CORRESPONDENL

Date: June 6, 2005

Council File No. 03-0814

To: The Mayor The Council ) From: William R. Bamattre, Fire Chief Fire Department

Reference: Communication from Public Safety Committee, Council, and Mayor relative to the Los Angeles Fire Department (LAFD) ambulance billing process review (C.F. 03- 0814).

November 2003 Motion (Greuel-Zine-LaBonge) to investigate the policy, budgetary, and implementation aspects of immediately referring delinquent ambulance billing accounts to the Office of Finance for collection (C.F. 03-2469)

Subject: LOS ANGELES FIRE DEPARTMENT AMBULANCE BILLING PROCESS REVIEW AND OUTSOURCING ASSESSMENT BY BEARINGPOINT INC.

Summary . On July 9, 2003, the Council adopted a recommendation of the Public Safety Committee instructing an outside review of the LAFD ambulance billing process by BearingPoint Inc. (C.F. 03-0814). The review of the ambulance billing process was to determine projected revenue enhancement and cost savings projections associated with the reengineering of the ambulance billing process and a recommendation from BearingPoint on how to proceed.

The City Administrative Officer has reviewed and submitted to the Mayor and the Council an extensive report dated November 17, 2004 regarding the BearingPoint report. The Fire Department is submitting this report to concur with the recommendation made by the CAO and request resources to prepare, release, evaluate, select, and administer the Request for . Pro.posals _(RFP).

Recommendations

That the Council: 1. Instruct the Fire Department, with the assistance of the Office of the City Administrative Officer and the Information Technology Agency, to prepare and release a RFP for the billing process and technology to enhance data capture through field data entry; and · - - .• fl.~ I\ t ... , 2. Allocate one Sr. Systems Analyst II, Class Code 1597-2 and one Sr. Systems Analyst I, Class Code 1597-1 to the Fire Department for the development and administration of the RFP, assessm~nt of vendor capabilities, analysis of the AUDITS &GQVERNMEN)~t'ecominendations; and . . PUBLIC SAFETY ( ~~- EFFf Cl ENCY . Information lechnology ano General Services JUN 1 0 2005 .. ... - . . , .: .. •' .. ,. . .. . RECEIVED · · · : .- · • GITY QL~8K'S OFFICE \...... ' . 2[15 JUN - 7 AM 10: 3 8 CITY CLERK ffiY_ _..,\11-LLrc:...... _,__,,~ DEPUTY Mayor and Council June 6, 2005 Page 2 ·

3. Allocate the following resources for the two positions for the Fire Department for the development and administration of the RFP, assessment of vendor capabilities, analysis of the proposals and to prepare recommendations; and

Account Amount 1010 Salaries, General $182,949 6010 Salaries, Office and Administrative 2,652 6020 Operating Supplies 5,556 7300 Furniture, Office & Tech. Equip. 3,200 Total $194,357

4. Instruct the Fire Department and the CAO to report back to the Council with the results of the RFP process c;1nd recommendations concerning how'to proceed.

Findings

1. Basis for Report

On July 9, 2003, the Council adopted a recommendation of the Public Safety Committee instructing an outside review of the LAFD ambulance billing process by BearingPoint Inc. (C.F. 03-0814).

BearingPoint submitted their final report on April 12, 2004. A detailed report reviewing the BearingPoint Report was submitted by the CAO on November 17, 2004 to the Mayor and the Council.

The BearingPoint report recommended that LAFD investigate the use of technology to enhance data capture and improve the billing process. It was recommended that a RFP be released to vendors that can supply and implement the technology to enhance data capture. The best opportunity to enhance data capture as suggested in the BearingPoint report is through an automated field data capture system that would provide information to the billing system daily. In the report it is suggested that automated data capture will collect additional patient symptom data, eliminate duplicate data entry, improve tracking of incident information and transport information! improve tracking of supplies and usage by incident, and improve patient care.

2. BearingPoint's identified Strategy for Improvement - Technology Enhancements

Technology Enhancements is an identified Strategy for Improvement in the BearingPoint report. Specifically identified were technologies to enhance data capture. This would be achieved through an automated field data capture system that would provide information to the billing system immediately. Mayor and Council June 6, 2005 Page 3 -

The benefits listed in the BearingPoint Report that could be achieved through an ( automated field data capture system include:

• Collect additional patient symptom data to reduce denials from insurance carriers.

• Eliminate the need for duplicate data entry. Entering the data electronically will allow data to be downloaded directly to LAFD's mainframe system.

• Improve tracking of incident and transport information. Patient information will be entered at the time of incident and downloaded to LAFD's mainframe system. The LAFD can access transport data to ensure that billable incidents are billed in a timely manner. The automated field capture system will also allow for immediate quantification of transports and reconciliation against billed accounts.

• Improve trackin'g of supplies and usage by incident. An automated field data capture system will assist LAFD in tracking, ordering, and management of supplies used in incidents and transport.

• Improve patient care during an incident. The laptops/Personal Data Assistants (PDAs) will allow access to software programs that will allow paramedics/EMTs to check and validate what level and type of patient care to provide during an incident. This will allow the paramedic/EMT to deliver more appropriate patient care.

3. LAFD Identified Improvements through Technology t~ Enhance data collection The Fire Department concurs with the anticipated improvements identified by the BearingPoint Report with the use of an Automated Field Data Capture System. Additional benefits from this system include: • Develop deployment strategies and make resource management decisions - A field data entry system will allow the Department to continue its aggressive stance on prospective, concurrent, and retrospective review of each and every EMS incident. Management will use this data to evaluate the EMS needs of the community, response time standards, and patient care protocols. This ensures an optimum level of service to residents and visitors of the City of Los Angeles.

• Improved accuracy in the emergency response report- Most field data capture systems quickly and accurately document patient assessment results utilizing the interactive assessment information. Body images are displayed that are appropriate for patient gender and age. Each body area is color coded when assessed and assessment protocols are listed that are appropriate for condition and body area. A single keystroke is used for assessment findings that are within normal limits. All systems allow patient-care providers to' quickly and easily timestamp various activities with a single keystroke in order to log patient interventions real-time resulting in a more accurate report. Mayor and Council June 6, 2005 Page4

• Electronic submission of Patient Information to Hospitals - The patient's data captured by the field personnel will be immediately available to the hospital through electronic transfer or a printer. Currently a copy of the handwritten form is given to the hospital and the medical teams must assess the situation and begin treatment. _ The electronic download of information will provide an immediate and more complete picture of the patient's medical status.

• Tracking of Emergency Response Forms - The Fire Department would like to track all Emergency Response Forms to ensure that all eligible transports were billed. The current systems do not allow for this type of tracking. The Department will rely on the field data capture system to track and reconcile the invoicing of all eligible transports.

• Customized management reports - The various data capture systems are capable of developing standard reports, which Department managers can customize. Some of the more common reports currently in use include: ·

• Administration reports • Medic skills reports • Performance and On-Scene reports • · Statistics reports • Treatments and outcome reports • Medical Supplies tracking reports • Biosurveillance reports • General and HIPAA reports • Dispatch and Billing reports

• Paperless Process - Currently field personnel must complete a paper report and submit this to the Billing Unit after review by an EMS Battalion Captain. The data capture system would eliminate the need for most paper reports and because the protocols for emergency medical treatment would be incorporated into the system there would be a significant reduction in the time spent by EMS Battalion Captains reviewing medical reports.

• Biosurveillance and early warning for possible bioterrorist attacks - Most systems allow integration with computer programs that perform biosurveillance. This would provide an early warning for disease outbreaks and possible bioterrorist attacks. The necessary data is currently inaccessible and unavailable from paper-based reports until the data is captured in a database that under the current system can take weeks or even months. A fully automated surveillance system reviews real-time information from 9-1-1 calls for trends indicating the possible outbreak of disease, illness, or patterns of injury, either from natural causes or acts of terrorism. The synchronization of data captured by an electronic data capture system with a biosurveillance program can be instantaneous. ; Mayor and Council June 6, 2005 Page 5

4. Resources identified for the Fire Department to prepare, release, evaluate, select, and administer the RFP

The Fire Department will require two new positions to meet the demands of preparing, releasing, evaluating, selecting, and administering the RFP. The complexity of the systems for the automated field data capture system and the billing requirements calls . for a team of skilled and experienced members to ensure the product meets the diverse needs of the field personnel providing emergency medical services, accountants, administrators, and management. The Fire Department is limited in systems support and requires the recommended positions to fully focus on the requirements of this project.

The automated field data capture of patient and treatment information will be utilized by over 3, 100 field personnel at 103 fire stations on various resources including ambulances, fire engines, rescue helicopter, fireboats, and the medic cycle teams. The data will then be transferred to the EMS Captains and also to Accounts Receivable for billing and collections.

The Senior Systems Analyst II and the Senior Systems Analyst I positions are required to ensure that the highly technica_l and complex issues associated with this massive project are carefully planned and incorporated.

Both the Sr. Systems Analyst I and II will perform the critical analyses to develop the RFP and solutions for all systems related aspects of the field data capture system and ensure that the technical criteria from emergency medical service providers and accounting/billing aspects are addressed. Th_is includes systems planning and development, identifying potential problems, and evaluating long-range impact. The Sr. · Systems Analysts will develop long-range plans and performance monitoring criteria for the project. These positions will also be responsible for the analysis of the RFP, assessing vendor capabilities, making recommendations to the Department and other City entities, and negotiating the contract with the vendors for services related to the development of the hardware and software as well as the interface with existing systems. The Systems Analysts would also coordinate with personnel from the Fire Department, City Administrative Officer, Information Technology Agency, City Attorney, Office of Finance, Mayor, and Chief Legislative Analyst. These positions will keep both Fire Department management and City management appraised of the development of fuep~ect ·

The Sr. Systems Analyst I and II will also be involved in developing and coordinating a committee of experts for the medical billing process as well as the administrative aspects. This will ensure that the final product will meet the current and future needs of the billing process, which incorporates the City's policies regarding billing and collections to enhance revenue. ~ ·

A total of $194,357 is required for salaries, expenses, and equipment for the two positions. Mayor and Council June 6, 2005 Page 6

Conclusion

Field data capture will provide the means for medical treatment protocols, maximization of revenue, early warning for disease outbreaks and possible bioterrorist attacks, inventory control of medical supplies, and the development of management strategies to improve response to emergency medical situations. The RFP will enable vendors to provide the necessary information for the City to evaluate the best system th.at will meet the needs of the Fire Department to continue to provide the best service possible. The resources to develop and administer an RFP for the technology to enhance data capture through field data entry, are required to determine the best possible means of capturing and utilizing data from the field to provide the highest quality of service possible. Sincerely,w~ WILLIAM BAMATTRE FIRE CHIEF REPORT FROM

OFFICE OF THE CITY ADMINISTRATIVE OFFICER

Date: November 17, 2004 CAO File No.0220-01069-0000 Council File No. 03-0814 Council District: All

To: The Mayor The Council

From: William T Fujioka, City Administrative Officer {)~

Reference: Communication from Public Safety Committee, Council and Mayor relative to the Los Angeles Fire Department (LAFD) ambulance billing process review (C.F. 03-0814).

Subject: LOS ANGELES FIRE DEPARTMENT AMBULANCE BILLING PROCESS REVIEW AND OUTSOURCING ASSESSMENT BY BEARINGPOINT INC.

SUMMARY

The Los Angeles Fire Department (LAFD) responds to all 9-1-1 emergency medical services requests within the City. In instances where paramedics provide sufficient medical care at the scene, the patient is not transported to the hospital. Under such circumstances there is no charge for the services provided. Fees only apply to patients transported to the hospital via an LAFD ambulance.

On December 18, 2002, the Mayor directed the Office of the City Administrative Officer (CAO) to assemble teams of Department heads and CAO staff to perform various functional studies to identify ways to promote efficiencies that will result in savings that can be used to improve City service delivery. The LAFD ambulance billing process was one of the functions selected for study.

On July 9, 2003, the Council adopted a recommendation of the Public Safety Committee instructing the initiation of an outside review of the LAFD ambulance billing process by BearingPoint Inc. (C.F. 03-0814). Included as part of this review was an assessment of ambulance billing costs including an analysis of the fee schedule and benchmarking of the LAFD billing practices and fee schedule against similar agencies. The Be~tingPoint study also included an assessment of the feasibility and payback associated with outsourcing the LAFD ambulance AUDITS 8t GOVERNM~NTAL. BUDGET AND Flt!PiNCE ,,,,• I ·-,.•,"",'\_( Er r i ·... .-1.: ... i ·,j • .;, l'l0 \j 1 9 2004 PUBLIC S1\FETY · ~.... y.

· ,. RECEIVED . CITY CLERK'S OFFICE zmq NOV I 8 PM q: 28

DEPUTY

..; CAO File No. PAGE 0220-01069-0000 2

billing unit operations, and recommendations concerning how the City should proceed to streamline the LAFD ambulance billing processes. A copy of the BearingPoint report is attached.

BEARING POINT RECOMMENDATIONS

Recommendations based on the BearingPoint study included strategies for improvement of the LAFD ambulance billing processes grouped into the following categories:

• Ambulance Billing Process Improvements

Recommended improvements included: (1) increasing ambulance billing fees to cover the actual costs of service; (2) reducing the time to generate an invoice; (3) implementation of strategies for managing accounts receivables and collections; (4) development of additional performance measures and reporting to track ambulance related processes, receivables, collections and revenue; (5) development of a communication strategy and management reporting tool; and, (6) a review of City policy on collecting delinquent self pay accounts.

• Technology Enhancements

Recommended enhancements included: (1) use of an electronic field data capture system and an updated account management system; (2) initiation of the use of predictive dialers (which dial phone numbers and prompt staff with account information to assist in tracking collection follow-up progress); (3) aggressive maximization of electronic billing; and, (4) evaluation of electronic sharing of patient billing information with hospitals.

• Identified Options for Implementation of Process Improvements and Technology Enhancements

> Full or Partial Outsourcing of Ambulance Billing

BearingPoint recommends the City consider the development of a Request for Information (RFI) and/or a Request for Proposals (RFP) for: (1) full outsourcing (an end to-end solution involving data capture, billing and collection services); and, (2) implementation of a "Hosted Early Out" program (a type of partial outsourcing for a selected portion of accounts such as aged or self pay accounts).

Additionally, any potential financial benefits of outsourcing must be balanced against established ~ity policy considerations regarding retention of work that can be performed CAO File No. PAGE 0220-01069-0000 3

by City employees in-house, further development of in-house expertise and financial control.

> In-house Process and Technology Improvements

BearingPoint also recommends that the LAFD gather information, through the RFI and RFP process, to assess the costs, benefits and feasibility of implementing an in-house field data capture capability which can be compared to the full outsourcing alternative, or combined with the partial outsourcing alternative identified above. The burdened labor cost of the LAFD internal billing and collection operations for ambulance services is approximately $3.27 million annually. Based upon annual collections of $45.6 million, the burdened labor cost represents approximately seven percent of fees collected compared to approximately 12-15 percent for full outsourcing.

IMPROVEMENTS ALREADY MADE BY LAFD

The LAFD has already initiated some of the ambulance billing process improvements recommended in the BearingPoint study, including:

• Recommending an increase in the ambulance service rate for Advanced Life Support (ALS) and Basic Life Support (BLS) transports commensurate with the County of Los Angeles rates, resulting in a 23 percent increase in the ALS transport rate, from $565 to $692, and a 35 percent increase in the BLS transport rate, from $332 to $449; • Reducing the amount of time from date of service to date of billing by over two months, from 90 days to 17 days; and, • Implementing measures to reduce the number of misplaced or illegible Record of Service (F902M) forms and improving the quality of patient billing information, by assigning staff in select geographic locations to collect, review and conduct quality assurance of the F902M forms each day and transmit the forms to Ambulance Billing on a daily basis.

IMPROVEMENTS YET TO BE ACCOMPLISHED

The BearingPoint study included a number of other possibilities for improvement of the LAFD ambulance billing process which consist of process and technology Improvements.

• Process Improvements

The significant ambulance billing process improvements yet to be accomplished include developing strategies for managing accounts receivables and collections; developing additional performance measures and a reporting package to track ambulance related processes, receivables, collections and revenue; developing a communication strategy and management reporting tool; and, reviewing City policy on collecting delinquent self pay accounts. CAO File No. PAGE 0220-01069-0000 4

According to the BearingPoint study, of the $87 million billed annually, $19 million is not collected as a result of Medicare/Medi-Cal reimbursement limits and adjustments for other government-sponsored programs. Another $19 million which is also not collected reflects uncollectible accounts from uninsured individuals ($17.2 million) and uncollected co-payment/deductible amounts from insured individuals ($1.8 million). A concurrent City study investigating the policy, budgetary and implementation aspects of immediately referring delinquent ambulance billing accounts for collection (C.F. 03-2469) has recommended two measures to address these adjusted or uncollectible amounts:

o Sponsor and support a Resolution in the 2005-06 State legislative program for full cost recovery for City ambulance services from Medicare and Medi-Cal; and, o Include emergency ambulance billing accounts among those accounts eligible for referral through existing City collection efforts.

The first measure, if successful, would eliminate or reduce the $19 million annual Medicare/Medi-Cal adjustment the City incurs which is the result of existing reimbursement limits. The second recommendation addresses $19 million annually that is not collected from individuals that are either uninsured and/or who are responsible for co payment/deductible amounts. It is important to point out that analysis has revealed that a large number of outstanding billings of both types are concentrated in the lowest income areas of the City.

• Technology is the Key to Process Improvement

A technology-based improvement identified in the BearingPoint report that has not yet been explored by the City is the implementation of an in-house electronic field data capture system whereby Paramedics would enter billing information directly into the system. The economic benefits of an electronic field data capture system could include:

o Elimination of approximately three percent lost or misrouted documents between paramedics and the LAFD Ambulance Billing Unit that do not result in a billing under the paper based system. Elimination of these lost documents could increase revenue to the City by up to $1.5 million annually. o A substantial reduction of the data entry costs associated with manually inputting the necessary information to initially generate a bill, thereby allowing reassignment of a number of the 48 positions currently assigned to the LAFD Ambulance Billing Unit.

Automating the collection of patient data in the field by using a handheld electronic computing device would also improve both the quality and quantity of patient data obtained by EMS personnel and the LAFD Billing Unit by: ·

o Complete elimination of billing paperwork by Paramedics in the field; '"'-,_ o Elimination of lost ambulance billing documents; o Enabling real-time transmission of data to hospital emergency rooms and the LAFD Billing Unit via wireless technology; CAO File No. PAGE 0220-01069-0000 5

o Immediate, consistent, access to appropriate treatment protocols by Paramedics; o Ready access to prior patient information in the field; o Immediate update of LAFD medical supply inventory management system; and o Institutionalizing into the automated system all improvements made in the manual processes.

> In-house Technology Development and Implementation

In-house customization of commercially-available software using standard handheld devices for field data capture of ambulance billing information would allow the City to: o Keep start-up costs to a minimum; o Customize the application software to exactly fit our needs; o Utilize the technical and administrative skills and abilities of existing City staff; o Further develop in-house expertise in and knowledge of state of the art automated billing collection processes and technology applicable elsewhere in the City; o Pilot test in one geographic area of the City the implementation of an automated field data capture system, as it represents a cultural change for the Fire Department, and evaluate the new technology before implementing the system department wide; o Leverage the existing in-house experience of the Police Department with field data capture and the design expertise derived from the use of the PureEdge electronic forms software; and, o Implement a state of the art paperless solution to ambulance billing requirements at a cost of approximately half that estimated for full outsourcing.

> Outsourcing Ambulance Billing & Collections

Outsourcing the entire ambulance billing and collections operation would require eliminating a significant number of the current LAFD ambulance billing administrative and accounting staff, minimize City involvement in logistics and daily billing and collection problems and possibly eliminate capital expenditures by the City for equipment (e.g., hand held devices). Although through outsourcing we would be paying for this equipment over the life of the contract. While outsourcing ambulance billing offers some advantages to the City, they must be balanced against the following disadvantages: o Forfeiture of significant future ambulance billing revenue; o A likely delay in the implementation of a solution; o Failure to leverage the technical expertise that is available within the City applicable to this problem; o A missed opportunity to address other Fire Department process improvement issues (e.g., EMS medical supply inventory management and treatment protocol) at the same time; o Limitation of the City's flexibility to change the software and system as appropriate without incurring additional costs; and, CAO File No. PAGE 0220-01069-0000 6

o Payment of a significant ongoing fee for a billing service which can be provided internally by the City utilizing off-the-shelf or moderately customized software already in use by other public and private providers of this service.

HOW TO PROCEED WITH REMAINING IMPROVEMENTS

The City should proceed with remaining improvements utilizing a Request for Proposals process. During the course of the study, BearingPoint was unable to determine with certainty what the true cost of outsourcing would be. Preliminary discussions with outsourcing vendors appear to indicate that the cost of fully outsourcing ambulance billing and collections would entail a contingency fee of 12 to 15 percent of gross receipts. The City burdened labor cost of the LAFD internal billing and collection operations for ambulance services appears to be approximately seven percent of fees collected.

Because of the significant potential for streamlining the ambulance billing process and the potential for an increased revenue flow, the City should explore the costs and the options for implementing an automated field data capture capability in-house. A Request for Proposals (RFP) including the acquisition of the necessary technology upgrades such as hand held devices and software to permit electronic field data capture of billing information utilizing a system integrator should be prepared and released. Additional detail is provided in the Findings Section of this report.

RECOMMENDATIONS

That the Council:

1. Instruct the Fire Department, with the assistance of the Office of the City Administrative Officer (CAO) and the Information Technology Agency, to prepare and release a Request for Proposals (RFP) for the billing process and technology improvements identified in this report; and,

2. Instruct the Fire Department and the CAO to report back to the Council with the results of the RFP process and recommendations concerning how to proceed.

FISCAL IMPACT STATEMENT

The adoption of the recommendations contained in this report will have no fiscal impact on the General Fund. However, once a strategy for improvement of the ambulance billing process has been selected, a significant investment in ambulance billing technology improvements may be required, which would, in turn, yield an increase in billing collections. The amount of the increased investment and billing collections cannot be accurately determined until the results of the RFP process recommended herein have been received and reviewed.

WTF:RNC:11050014 Attachment CAO File No. PAGE 0220-01069-0000 7

FINDINGS 1. Background and Basis for Report

For some years, the rate of collection for ambulance transportation billings has been a cause for concern. Over the past fifteen years, the City has conducted a number of studies aimed at improving ambulance billing collection rates. The greatest improvement has been realized in the collection rate for insured individuals.

A study conducted by Health Management Services (HMS) in 1997-98 relative to possibly outsourcing that portion of collection accounts due from insurance companies, concluded that it was unable to identify any significant billable coverage beyond which the City had already identified. Nevertheless, we believe that opportunities still exist to streamline the ambulance billing process through the use of technology and other improvements in the billing processes, especially related to collection from self-pay accounts. -

On July 9, 2003, a review of the Los Angeles Fire Department (LAFD) ambulance billing process and an assessment of outsourcing opportunities for ambulance billing was authorized by the Council (C.F. 03-0814). BearingPoint was selected as the consultant. The primary objectives of the review were to assess the efficiency of the current ambulance billing process, to perform a cost assessment and fee schedule analysis (benchmarked against similar agencies), and to assess outsourcing opportunities.

The study methodology followed by BearingPoint was consistent with best practices for business process analysis and included personal interviews with staff associated with all aspects of the LAFD ambulance billing and field paramedic operations. The study used a sampling of 372 ambulance billing accounts from a one-month period in 2002-03 extrapolated to the total population and annualized. BearingPoint also compiled and reviewed cost and billing documentation and conducted comparisons of their findings with agencies performing similar ambulance billing functions.

Relevant statistics regarding ambulance transports and billings that were used by BearingPoint in arriving at their recommendations are as follows:

Annual number of ambulance transports: 185,000 transports Annual amount billed: $87 million Annual amount collected (includes $1.3 mil. unposted Medicare/Medi-Cal Crossover)* $45.6 million (53 pe.rcent) Annual amount adjusted (Medicare/Medi-Cal & other government sponsored programs) $19 million (22 percent) Gross collection rate: 75 percent

* To accurately portray the actual receipts, it was necessary to add in the $1.3 million unpasted Medicare/Medi-Ca/ crossover amount. This amount had actually been received but not posted to the CAO File No. PAGE 0220-01069-0000 8

appropriate accounts. This change by staff will cause our numbers to be slightly different from those used by BearingPoint (i.e.; collections of $44,285,846 are shown as $44 million by BearingPoint; this report uses $44,285,846 plus $1,284,892 unpasted Medicare/Medical crossover for a total of $45, 570, 738 or $45.6 million). This also raises the gross collection rate from 73 percent to 75 percent.

Amount not collected: $22 million (25 percent) From uninsured individuals: $17.2 million Co-payment from insured individuals: $1.8 million Other miscellaneous adjustments, underpayments, or in process:* $3 million

* The $1.3 million discussed above was previously included in this category, where it would have overstated the Accounts Receivable.

Average time from date of service to billing: 90 days Lost, misplaced or illegible forms: 2-3 percent L.A. City transport rates: Advanced Life Support (ALS): $565 Basic Life Support (BLS): $332

L.A. County transport rates: ALS rate: $671.75 BLS rate: $438

2. BearingPoint Findings Regarding Ambulance Billing Collections

The LAFD Emergency Medical Services (EMS) Billing Unit bills individuals, insurance companies and government programs such as Medicare and Medi-Cal approximately $87 million per year for emergency medical services involving approximately 185,000 ambulance transports annually. Of the $87 million billed annually, the City is able to collect approximately $45.6 million, or 53 percent of invoices issued. Approximately $1.3 million of the $45.6 million represents unpasted Medicare/Medi-Cal crossover amounts (in the case of patients covered by both Medicare and Medi-Cal, Medicare covers a portion of the balance and the remaining balance is paid by Medi-Cal. This $1.3 million has been received but not posted to the accounts due to system tracking and posting issues).·

An approximate $19 million, or 22 percent, is adjusted or written-off because of Medicare/Medi cal payment limits and adjustments for other government-sponsored programs such as those for veterans and victims of crime and verified low-income adjustments. This $19 million adjustment, combined with the $45.6 million collected, reflects a City collection and government program adjustments gross rate of 75 percent, a rate well within the range of collections reported by other cities surveyed. CAO File No. PAGE 0220-01069-0000 9

The City does not collect $22 million, or 25 percent, of annual billings. Of this amount:

• $17.2 million is uncollectible from uninsured individuals;

• $1.8 million is the uncollectible co-payment or deductible amounts from insured individuals; and

• $3 million in adjustments for miscellaneous underpayments of usually very small dollar amounts, and accounts still in process with insurance companies.

3. BearingPoint Identified Strategies for Improvement

BearingPoint determined that the LAFD has performed the ambulance billing and collection functions in an exemplary fashion. This finding is confirmed by previous analyses aimed at increasing ambulance collections. Remaining areas for possible improvements in collection efforts include legislative changes to recoverable amounts allowed under Medicare/Medi-Cal reimbursements (currently representing approximately $19 million, or 22 percent, of uncollectible, billed amounts), more aggressive pursuit of uncollectible co-payment and deductible amounts from insured individuals representing approximately $1.8 million, and more aggressive r~covery of approximately $17.2 million uncollectible from uninsured individuals.

The BearingPoint report provides a number of strategies for improving the ambulance billing and collections processes in the following areas: ambulance billing process improvements, technology enhancements, and outsourcing alternatives.

~ Ambulance Billing Process Improvements

• Increase ambulance billing fees to cover the actual costs of service. This recommendation was acted upon by the City Council on June 29, 2004. The ambulance transport rates were increased to be commensurate with the Los Angeles County rates effective August 10, 2004, as follows:

Table 1 Los Angeles L. A. City Rate L.A. City Rate Service Provided County Rate Pre-Aug. 10, 2004 Effective 8/10/04 Basic Life Support $438.00 $332.00 $449.00 (35% increase) Advanced Life Support $671.75 $565.00 $692.00 (22% increase) Mileage $ 13.25 $ 11.25 $ 13.25 (18% increase)

The next table shows the Medicare and Medi-Cal reimbursement amounts as compared to the City's new ambulance fees (effective 8/10/04): CAO File No. PAGE 0220-01069-0000 10

Table 2 Service Provided Ci Fee Medicare Pa ment Medi-Cal Pa ment $449 $264.54 $118.20 $692 $316.21 $118.20

Comment: While the increase in ambulance transport fees will proportionately increase the value of the 53 percent collection rate, it will invariably also proportionately increase the dollar value of uncollectible accounts not only because of the existing, unchanged Medicare and Medi-Cal reimbursement rates but also because of the uncollectible amounts due from uninsured individuals and co-payment and deductible amounts from insured individuals. The net effect of the rate increase cannot be estimated with certainty at this time. One of the recommendations in another study relative to improving ambulance billing revenue collections (C.F. 03-2469) is to sponsor and support an initiative to increase the reimbursement rates from Medi-Cal and Medicare for ambulance transport services.

• Reduce amount of time required to generate a bill, implement measures to reduce the number of lost Record of Service (F902M) forms, and improve the quality of patient billing information. LAFD has taken several steps to address these recommendations including assignment of staff in select geographic locations to collect 902M forms, review and conduct quality assurance each day, and scan and fax the 902M forms to Ambulance Billing Unit on a daily basis. More recently, the 902M forms have been hand-delivered to the Ambulance Billing Unit on a daily basis to further improve the billing cycle. These improvements have reduced the amount of time from date of service to date of billing from an average of approximately 90 days to approximately 17 days.

Comment: According to the BearingPoint report, a one-time cash flow improvement of approximately $7 million may be attained by reducing the billing cycle from 90 days to less than 30 days. It is anticipated that much of this amount has been recovered over the past year with the reduction in billing cycle reported above.

• Review City policy on collecting delinquent self-pay accounts. Delinquent self-pay or insurance co-payment and deductible accounts represent approximately $19 million or 86 percent of uncollected ambulance billings. The BearingPoint study was unable to conclude with certainty the possibility of collections from uninsured individuals (approximately $17.2 million) or the co-payment or deductible amounts from insured individuals (approximately $1.8 million). It is important to point out that the City provides emergency medical services regardless of an individual's ability to pay.

Comment: As pointed out in the concurrent City study regarding ambulance billing revenue collections (C.F. 03-2469), many of these uncollectible accounts are for individuals belonging to predominantly low-income communities; i.e., 51 percent with average household incomes ranging from $11,399 to $30,908 and 28 percent with average household incomes ranging from $31, 107 to $36,509. While collection of the $17.2 million from uninsured individuals would constitute additional revenue to the City, CAO File No. PAGE 0220-01069-0000 11

achieving a higher collection rate from this group may be difficult as a majority of the value of these delinquent accounts -- 79 percent -- is concentrated in the poorest and second poorest community income quartiles of the City.

The City's net collection rate of 53 percent and/or the gross collection rate of 75 percent are within the range of collections reported by other cities:

Table 3 Collection Data Collection and City Rate Entry Method Austin, Texas 55%* Paper forms/manual entry Dallas, Texas 44%* Paper forms/manual entry Houston, Texas 32%* Paper forms/electronic entrv Phoenix, Arizona 70%* Paper forms/manual entrv PDAs, Mobile Computers, San Antonio, Texas 66%* Electronic Data Transfer 53% net Los Angeles City 75% gross Paper forms/manual entry

* BearingPoint defined "collection rate" as the percentage of revenue collected against the total charges billed for emergency transports. The rates for other cities were se/f reported and it is unknown whether the rates reflect net or gross collection. However, both LAFD's net and gross collection rates are within the range of collections reported by other cities' fire departments.

A further action to reduce the number of uncollectible accounts includes consulting with the City contracted collection firms to determine their willingness to expand the scope of their existing City contracts to include collection of emergency ambulance transport accounts, on a contingency fee basis. The City must also determine the mechanism to effect such a change, and amendments to the Administrative Code required to include emergency ambulance transport accounts among those accounts to be referred for collection.

BearingPoint also recommended that the City investigate the feasibility of the following additional process improvements:

• Develop strategies for managing accounts receivable and collections.

• Develop additional performance goals and measures for ambulance related processes, status of receivables, cash collections, and revenue.

• Develop a communication strategy and management reporting tool. CAO File No. PAGE 0220-01069-0000 12

Comment: All of these recommendations should be considered and incorporated, where appropriate, with any process and technology improvements to the ambulance billing and collection process implemented by the City.

~ Technology Enhancements

• Implement an electronic field data capture system. BearingPoint recommends the implementation of an electronic field data capture system to address a number of the recommended ambulance billing process improvements. Automating field data collection using hand-held devices and wireless communications would improve the accuracy of patient information and provide overall efficiencies in the ambulance billing and collection processes by reducing the ambulance billing cycle, eliminating lost reports and improving the quality of patient billing information.

Other benefits of implementing an electronic field data capture system include:

o Improving the quality of data obtained; o Reducing, or even eliminating, lost EMS documents; o Expediting transmission of information to the receiving hospitals and Billing Unit; o Ease of input; o Real-time data acquisition by the EMS Billing Unit; o Instant access to treatment protocols for responders; o Wireless transmission of information; o Ready access to stored or transmitted patient information; o Instant updating of an inventory management system; and, o Institutionalizing into the automated system all improvements made in the manual processes.

The BearingPoint study also recommended the City investigate the feasibility of the following technology improvements to the ambulance billing process:

• Evaluate the cost of replacing the current billing system. The current billing system requires replacement with an account management system containing functionality such as workload management tools to assist staff in distributing and managing workload.

• Use of predictive dialers. The use of predictive dialers, which dial phone numbers and prompt staff with appropriate account information, are used to track the progress of collection follow up.

• Maximize the use of electronic billing. The LAFD continues to pursue and maximize elec;:tronic billing whenever possible.

• Electronic sharing of patient billing information. Explore opportunities for electronic sharing of patient billing information with hospitals. CAO File No. PAGE 0220-01069-0000 13

Comment: These technology and process improvements recommended by BearingPoint should be evaluated and incorporated, as appropriate, into any ambulance billing solution implemented by the City.

~ Identified Options for Implementation of Process Improvements and Technology Enhancements

• Full or Partial Outsourcing of Ambulance Billing: BearingPoint recommends the City consider the development of a Request for Information (RFI) and/or a Request for Proposals (RFP) for: (1) full outsourcing, an end-to-end solution involving data capture, billing and collection services; and, (2) implementation of a "Hosted Early Out" program, a type of partial outsourcing for specific categories of invoices such as self pay accounts or aged accounts to liquidate Accounts Receivables.

Outsourcing the entire ambulance billing and collections operation would require eliminating a significant amount of the current LAFD ambulance billing administrative and accounting staff, minimize City involvement in logistics and daily billing and collection problems and possibly eliminate capital expenditures by the City for equipment (e.g., handheld devices), although through outsourcing we would be paying for this equipment over the life of the contract. While outsourcing ambulance billing offers some advantages to the City, they must be balanced against the following disadvantages:

o Forfeiture of considerable future City ambulance billing revenue; o Likely delay rather than expedite implementation of a solution; o Failure to leverage the technical expertise that is available within the City applicable to this problem; o A missed opportunity to address other Fire Department process improvement issues (e.g., EMS medical supply inventory management and medical treatment protocol) at the same time; o Limitation of the City's flexibility to change the software and system as appropriate without incurring additional costs; and, o Payment of a significant ongoing fee for a billing service which can be provided internally by the City utilizing commercial off-the-shelf or moderately customized software already in use by other public and private providers of this service.

Comment: Outsourcing vendors approached by BearingPoint were reluctant to share proprietary cost models. Estimates obtained by BearingPoint indicate that the cost offully outsourcing ambulance billing and collections would be approximately 12 to 15 percent of gross receipts (a contingency fee that would allow a vendor to keep 12 to 15 cents of every dollar collected). Based upon this estimated rate, collections between $3 and $5 million above what the City currently collects would be required for the City to break even.

• In-house Process and Technology Improvements: BearingPoint also recommends that the LAFD gather information, through the RFI and RFP process, to assess the costs, benefits and feasibility of implementing an in-house field data capture capability. In-house CAO File No. PAGE 0220-01069-0000 14

customization of commercially-available software using standard handheld devices for field data capture of ambulance billing information will allow the City to:

o Keep start-up costs to a minimum; o Customize the application software to exactly fit our needs; o Utilize the technical and administrative skills and abilities of existing City staff; o Further develop in-house expertise in and knowledge of state of the art automated billing collection processes and technology applicable elsewhere in the City; o Pilot testing, evaluation and implementation of technology involving a cultural change within the Fire Department rather than a simultaneous rollout of such technology as hand held devices department wide; o Leverage the existing in-house experience of the Police Department with field data capture and the design expertise derived from the use and capabilities of the PureEdge electronic forms software; and, o Implement a state of the art paperless solution to ambulance billing requirements at a cost of approximately half that estimated for full outsourcing.

The economic benefits of an electronic field data capture system include:

Comment: The burdened labor cost of the LAFD internal billing and collection operations for ambulance services is approximately $3.27 million annually. Based upon annual collections of $45.6 million, the burdened labor cost represents approximately seven percent of fees collected, compared to approximately 12-15 percent for full outsourcing.

4. How To Proceed with Remaining Improvements

Because of the significant potential for streamlining the ambulance billing process and the potential for an increased revenue flow, the City should implement an automated field data capture capability in-house. A Request for Proposals (RFP) including the acquisition of the necessary technology upgrades such as hand held devices and software to permit electronic field data capture of billing information utilizing a system integrator should be prepared and released.

~L[.~4£~ Rosa N. Cepeda/ Senior Administrative Analyst II '· 1- l.

BearingPoint

Los ANGELES FIRE DEPARTMENT FINAL REPORT

'- Review of the Ambulance Billing Process and Outsourcing Assessment

April 12, 2004

Business and Systems Aligned. Business Empowered.™ ~ BearingPoint

355 S. Grand Avenue Suite 2000 Los Angeles, CA 90071-1568 Tel: +1.213.593.7900 Fax: +1.213.622.1217

www.bearlngpoint.com

April 12, 2004

Mr. Dennis Bloemhof Director of Management Information Systems Los Angeles Fire Department City Hall East 200 N. Main St-Suite 1608 Los Angeles, CA 90012

Dear Mr. Bloemhof:

BearingPoint is pleased to provide our final report for the ambulance billing process review and an assessment of the outsourcing opportunities for the Los Angeles Fire Department (LAFD). The objectives of this review were threefold:

• Review the Efficiency of the Ambulance Billing Process - Review the current billing and collection process and identify significant process gaps, control weaknesses or procedures that do not appear consistently performed. • Perform a Cost Assessment and Fee Schedule Analysis - Compare the fees the LAFD charges to the actual cost of providing these services. • Assess Outsourcing Opportunities - Determine whether outsourcing some or all of the LAFD ambulance billing activities is a sensible business decision for the City based on the potential for increasing the net amounts collected through outsourcing. The scope of work was designed to provide high-level data gathering, analysis and recommendations in a range of areas. In several areas, including benchmark data from other municipalities, market costs for outsourcing providers and factors affecting collectability of individual accounts, data was not readily available or comparable. In these areas, we worked with the LAFD to obtain additional data and to identify how these data gaps affect the findings. No auditing of underlying information or representations of City or other personnel was performed. This report was prepared solely for the internal use of the City Mr. Dennis Bloemhof Apri_l 12, 2004 Page 1-2

of Los Angeles and BearingPoint is not-responsible for the use of this report or its contents in any way by an outside party.

We appreciate the opportunity to work with the Los Angeles Fire Department and the City of Los Angeles ~n this project.

Yours truly,

Kurt Ramey Managing Director BearingPoint State and Local Government Practice .....

LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12.... 2_00_4______earzngrozn.

Table of Contents

1. Executive Summary ...... 1-1 1.1 Key Findings ...... : ...... 1-1 1.2 Strategies for Improvement ...... 1-3 · 2. Ambulance Billing Assessment ...... 2-1 2.1 LAFD Ambulance Billing and Collections Process Summary ...... 2-1 2.2 Ambulance Billing and Collections Process Evaluation ...... 2-1 2.2.1 C~llection of Billing Information ...... 2-3 2.2.2 Transport Fees ...... 2-4 2.2.3 Bill Issuance ...... 2-5 2.2.4 Collection Follow-Up ...... 2-6 3. Cost Assessment and Fee Schedule Analysis ...... 3-1 4. Outsourcing Assessment ...... 4-1 4.1 Our Approach ...... 4-1 4.2 Outsourcing Options ... ., ...... 4-2 4.2.1 Comprehensive Outsourcing of Billing and Collections ...... 4-2 4.2.2 "Hosted Early Out" ...... :...... 4-5 5. Agency Benchmarks and Comparative Analysis ...... 5-1 6. Strategies for lmprovement ...... 6-1 6.1 Ambulance Billing Process Improvements ...... 6-1 6.2 Technology Enhancements ...... 6-7 6.3 Outsourcing ...... :...... 6-10 Appendix A- As-Is Process Description ...... A-1

Appendix B- Approach and Methodology...... B-1 Phase 1-:0ata Gathering and As-Is Process Development ...... B-1 Phase 2-Development of a Cost of Service Model ...... B-2 Phase 3-Comparative Analysis ...... :.. B-3 Phase 4--Development of Findings and Strategies for Improving Collections ...... B-3 Appendix C- Glossary of Terms ...... C-1

Appendix D- Outsourcing Questionnaire ...... D-1

Appendix E- Benchmarking Responses ...... E-1

Pagei ,•

LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . .D . t _AP_R_1L_12..... 2_00_4______earzngrozn .

1. Executive Summary

The Los Angeles Fire Department (LAFD) provides ambulance services for the residents of Los Angeles and its visitors and has a long history of providing the public with emergency response services. Ap~roximately, 185,000 people are transported annually. Each transport1 is a billable service for the City. In fiscal year 2003, LAFD billed more than $87 million and collected approximately $44 million for ambulance related services, a collection rate of 51 %.

The City of Los Angeles retained BearingPoint to review the LAFD billing and collections processes and identify possible areas for improvement. To meet the objectives of the review, a tailored approach was developed with the City and LAFD staff to conduct a high level analysis of several key areas and develop recommendations for improvement. The scope of the review included:

• Review the Efficiency of the Ambulance Billing Process - Review the current billing and ..• collection process and identify significant process gaps, control weaknesses or procedures that do not appear consistently performed. • . Perform a Cost Assessment and Fee Schedule Analysis - Compare the fees the LAFD charges to the actual cost of providing these services. . . • ··· Assess Outsourcing Opportunities - Determine whether outsourcing some or all of the LAFD ambulance billing activities is a sensible business decision for the City based on the potential for increasing the net amounts collected through outsourcing.

1.1 Key Findings

The City provides emergency services to all, independent of ability to pay. For these services, LAFD bills approximately $87 million per year to a combination of government programs (Medicare and Medi-Cal) private insurance companies and individuals. The LAFD collects almost all amounts reimbursed by government programs and insurance. Uncollected amounts are largely from primarily uninsured individuals. Of the amounts billed, the LAFD:

• Collects $44 million (51 % of bills issued) • Adjusts (writes-off) $19 million (22%) because bills amounts exceed Medicare/Medi-Cal payment limits

I Based on the Administrative Code, patients transported in the custody of the Los Angeles police Department are not to be billed.

Page 1-1 LOS ANGEL.ES FIRE DEPARTMENT ~ FINAL REPORT B . --R -. t - AP_R_,L_12..... 2.... earing vzn. 111111 00_4______

• Does not collect $23 million (27%). Of this amount, $17 million (20%) is froin uninsured individuals. $1.7 million is co-pays that are not collected from individuals. $4.3 million are various adjustments. LAFD's collection rate of 51% is consistent with the benchmark agencies that were reviewed as part of this project. It is unclear whether additional funds can be collected from individuals, as a significant portion of these individuals are uninsured. This study did not attempt to ascertain whether additional amounts in the third category could be collected as this is highly affected by the ability of people to pay, as well as the fact that the service is provided by the City independent of ability to pay.

Components of the billing and collection processes are manual. Data is collected manually in th~ field and . transferred to the Ambulance Billing unit. The Ambulance Billing unit has a data entry backlog that is contributing to delays in generating a bill. It takes the billing unit on average eight to ten weeks to process a 902M form and generate a bill. As a result, it takes an average of 90 days to produce a bill from the time of incident. Automated field ,data capture tools would improve processes and accelerate billing. Reducing the billing cycle time from 90 days to under 30 days would result is a one-time cash flow improvement of approximately $7 million.

The reimbursable rates for ambulance transports do not cover the cost of services being delivered. .The City should increase its rates to be commensurate with its costs, however this will only impact those paying with private insurance as reimbursem~nt amounts from government sponsored programs are fixed.

There are two potential approaches to outsourcing; Hosted Early Out and Full Outsourcing. The City's primary collection issues are related to individuals. Hosted Early Out partial outsourcing would allow LAFD to outsource a specific body of accounts (i.e., self-pay). The outsourcing agency will perform all billing and collections activities on accounts. The agency charges no up-front fee, but retains a percentage of the dollars they collect. The amount depends upon the type of accounts outsourced and the agency's work standards. Due to the difficulty (and expected cost) in collecting from uninsured individuals, it is unclear at this time how much, if any, net financial benefit there would be to the City of such an arrangement. Additional detailed vendor discussions should be held by the City to determine interest levels prior to proceeding with this course of action.

Outsourcing vendors did express interest in full outsourcing of all billing and collections. In initial discussions, vendors quoted a contingency rate of between 12 and 15 percent (they would keep 12 to 15 cents of each dollar collected from all sources). Based solely on the contingency rate, an outsourcing vendor would have to collect between $3 and $5 million above what LAFD is currently collecting in order for the City to break-even. This represents 15% to 25% of the uncollected uninsured accounts. At least one vendor expressed confidence in their ability to increase such collections. The net collections to the City at this time from ambulance billing are approximately $41 million ($44 million collected and $3 million in internal collection costs.) While there are many non-financial factors affecting outsourcing,

Page 1-2 LOS ANGELES FIRE DEPARTMENT ~ · FINAL REPORT B · .n · t _AP_R_1L_12_.2_0_04______earzngr'ozn.

the City should only consider an outsourcing financial arrangement if it is performance based. In a performance-based contract, the vendor would be required to guarantee the floor ( current amount the City is collecting after its costs) and to remit a percentage of any additional amounts collected to the City. The financial element .of the procurement decision would then be based on which company could guarantee the best performance or sharing structure while protecting the current cash flow level of the City. A byproduct of outsourcing will also be the provision of field data capture tools that will generate the cash flow acceleration benefit identified earlier without the internal capital costs.

Based on the outsourcing analysis, it appears that there are companies that would guarantee the current net financial collections and share any increased collections with the City. Solely balancing risks and financial,.. opportunities, this appears to be a viable business approach for the City.

1.2 Strategies for Improvement

. T~e strategies for improvement presented below are grouped into three categories.

• Ambulance Billing Process Improvements • Technology Enhancements • Outsourcing BearingPoint recommends that the Los Angeles Fire Department approach these strategies in the order presented below as they allow for near term internal improvements to move forward while longer term technology or outsourcing initiatives progress.

Ambulance Billing Process Improvements . . . The following changes should be implemented this fiscal year and monitored for their impact on net collections and cash flow.

• Increase ambulance billing fees to cover the actual costs of service (estimated at $50 to $150). This will not impact amounts collected under government-sponsored programs, which have set fee limits. • Implement a short-term approach for reducing time required to generate a bill. Reduction in the number of days between the ti~e of incident and billing will create a one-time cash flow acceleration. Eliminating the current data entry backlog of 902M forms is a critical step in reducing the days required to generate a bill. This may require refocusing of staff and/or addition of temporary staff to reduce the backlog.

Page 1-3 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · · ,n · t _AP_R_1L_12.... 2_00_4______earzngrozn.

• Implement additional performance goals and metrics for the billing and collection processes to provide management guidance and support budgeting and communication processes. Examples are provided later in this report. • The City should review its policy on collecting delinquent self-pay accounts. On a trial basis, the City should expand delinquent self-pay processes and monitor the costs and results of its efforts.

Technology Enhancements • At a· minimum, the City should implement a field data capture capability that transfers data accurately and quickly to the billing system each night. This approach is similar to the PODDS application being implemented by the Los Angeles Police Department for field data capture. The City's experience with PODDS should be used as a basis for cost estimating for LAFD. Costs are expected to be 2 to 3 million dollars.2 The benefit of field data capture is the reduction of the billing cycle that is expected to create a one-time savings. As an outsourcing vendor will provide field data capture capabilities as part of its solution, the City should determine if it will pursue outsourcing first (see below.) If it determines not to, an internal field data capture solution should be procured and implemented.

Outsourcing Alternatives • LAFD should develop a Request for Information (RFI) to obtain specific statements of interest from companies interested in full outsourcing. The RFI should state that the contract the LAFD seeks must be performance based which guarantees the minimum net collections to the City and provides for participation in increased collections. Based on the responses to the RFI, the City should determine if the financial benefits balanced against other policy considerations warrant a full RFP. • Should the LAFD determine that full outsourcing is not warranted, it should evaluate implementation of the "Hosted Early Out" Outsourcing for Self Pay Accounts. Discussions with potential vendors should be held and, if sufficient interest is generated, an RFP _should be issued. In summary, the LAFD should initiate immediate changes in the process improvement areas identified above. The LAFD should simultaneously gather information on implementing an in-house field data capture capability and assess the specific interest and potential terms of full outsourcing. If outsourcing companies are able to provide a set of financial guarantees that warrant full outsourcing, a procurement

2 This estimate is based on the total cost to the Los Angeles Police Department of$4.2 million for their field data capture initiative. These costs consist of approximately $2.2 million for 1500 handheld devices ($1450 per device), plus $2 million for services.

Page 1-4 · LOS ANGELES FIRE DEPARTMENT ~· . FINAL REPORT B . .D . t _AP_R_1L_12_.2_00_4______earzngrozn. should be initiated. If not, the LAFD should move to implement its own field data capture capability and evaluate the ability. to outsource the hard to collect accounts only .

Page 1-5 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ·.n · t .A..... PR.,L .... 12_. 2... 00_4______earzngrozn .

2. Ambulance Billing Assessment

2.1 LAFD Ambulance Billing and Collections Process Summary

The Los Angeles Fire Department (LAFD) transports approximately 185,000 people annually to local area hospitals. Each transport is a billable service for the City, except for individuals in custody ofLAPD. A detailed As-Is process description is provided in Appendix A. The following information is a high level summary of the ambulance billing and collections process.

A dispatch call is received by the LAFD. When paramedics/Emergency Medical Technicians (EMTs) arrive at an incident, they fill out a 902M form for each patient. This form collects patient information including, but not limited to, patient name, age, vitals, insurance information, incident location, and medical treatment rendered. All forms are sent through the LAFD mail system to the billing unit. According to staff, this process talces an average of two to four weeks from the time of incident to reach the billing unit.

The billing unit supervisors sort the forms into different categories based upon information provided on the 902M. For those occurrences that fall into a billable category, the billing staff enters the information captured in the Fire Incident Reporting System (FIRS) and the 902M form into the Ambulance Billing System. If the information is already captured in FIRS, billing staff does not need to re-enter the data.

Once the data is captured in the Ambulance Billing System, a bill is generated. The Ambulance Billing System generates a file that is submitted electronically and processed by the Standard Register Company each week. For all bills sent to individuals without insurance or with co-pay/deductible amounts due, Standard Register prints and mails invoices. The Ambulance Billing System schedules the generation of paper invoices, so no manual trigger is required. Billing to Medicare, Medi-Cal, and some insurance companies is electronic. Billing to other insurance companies is done via hard copy.

LAFD provides many types of payment options (e.g., credit card, cash, money order, check, payment plans). Additionally, select insurance providers, Medicare and Medi-Cal, also provide electronic fund transfers (EFT). LAFD Accounts Receivable staff receives and posts payments into the Ambulance Billing System daily.

2.2 Ambulance Billing and Collections Process Evaluation

This section discusses the findings regarding the LAFD's ambulance billing process. The project used four key indicators to assess the effectiveness of an organization's billing and collection process. The four key indicators are outlined and discussed below:

Page 2-1 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t _AP_R_1L_12..... 2_00_4______earzngrozn.

1. Determining the effectiveness of collected patient, incident, and demographic information necessary to issue a bill. Without correct billing information, issuing bills is significantly more challenging. Lack of accurate information also increases the cost to the LAFD to issue bills and decreases the likelihood of collecting for services. The following measures were used to review the effectiveness of the billing data collection process: • Collection of relevant billing information at the time of service . • Costs and supplies related to ambulance transports captured and tracked . • Bill gene~ation process efficiency after the service is provided . 2. Timeliness and Efficiency of the Billing Process. The process for issuing bills varies widely depending upon the entity being billed. Each provider can require varying types of information and codes to be used to issue a bill. The issuance of correct bills in a timely manner has a direct impact on the cost of collection and may impact the LAFD's collection rate. Key measures used to evaluate how effective LAFD is at issuing bills include the .,:.,.::· following: • Appropriateness of tools provided to the ambulance billing staff to issue bills and follow-up efficiently. • Time to issue a bill from the time of incident. 3. Ambulance billing transport fees charged commensurate with the level of service provided. The City uses established rates set by Los Angeles County Department of Health Services (DHS). DHS conducts a statewide survey to assess ambulance transport costs. Based upon the results of the survey, DHS publishes rate guidelines. Fees for ambulance services are charged at two rates: Advanced Life Support (ALS) and Basic Life Support (BLS), plus a mileage cost. The City has adopted those rates over the years, however, there has been no recent analysis conducted to assess current costs. ~ey measures include: • Costs as compared to fees charged. • Peer department fees charging for other items not included in LAFD's fee structure. 4. Account Follow-up. When bills are not paid after an initial billing, follow-up is required in order to investigate and pursue payment. Consistent, aggressive, and timely follow-up on unpaid accounts can have a positive impact on collections. Some key measures used to assess the effectiveness of the follow-up process include: • Using consistent and established policies and proc.edures .

Page 2-2 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t _AP_R_1L_12...... 2_00_4______ea,:zngrozn .

• Using sufficient management reporting to track and manage accounts and resources. • Staff and management provided the tools necessary to conduct follow-up. • Appropriate cycle time and frequency for follow-up on delinquent accounts. • Bills issued correctly. The findings have been organized into the following sections:

1. Collection of Billing Information. 2. Transport Fees. 3. Bill Issuance. 4. Collection Follow-Up.

2.2.1 Collection of Billing Information

Paramedics/EMTs are diligent at collecting incident and patient billing information but it is time consuming and often difficult to obtain all of the required information. Based upon the information obtained during the ride-alongs with paramedic/EMT staff, the BearingPoint team noted that paramedics/EMTs were diligent in their attempts to collect billing information and document incident details. Data collection efforts were made ;with the patient, family members, co workers, and other caretakers. The paramedic/EMT staff attempted to collect all relevant billing information at the time of service. However, data was frequently difficult to obtain due to patients being reluctant to show insurance cards to the paramedics/EMTs. Paramedics/EMTs also frequently remain at the hospitals, waiting for hospital administrators to obtain information from the patient or pull the data from the hospital records.

The process for capturing incident and patient information is paper based, causing delays in the billing process. Below are some findings related to the collection of incident and patient information, and communication efforts of this information to the billing department:

• Approximately 2% of the 902M forms are incomplete, inaccurate, or illegible. The process for obtaining accurate data is time consuming and may suspend or delay the billing process. • Approximately 2% of the 902M forms are misplaced or lost. This delays billing and can impede collections. Without the 902M form the billing unit cannot issue a bill. If a form cannot be located, the LAFD will attempt to obtain a copy from the hospital in order to issue a bill. • On average it takes two to four weeks from the time of the incident to obtain the 902M form from the field.

Page 2-3 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12_.2_00_4______earzngrozn _.

• Data entry of event history occurs in multiple systems within the LAFD. Throughout the review, most challenges the LAFD encountered were related to the ability to collect accu.rate and complete information.

2.2.2 Transport Fees

The LAFD does not capture all data related to, and bill for, all medical supplies used by patients. Historically, the LAFD captured and billed for medical supplies used during an ambulance transport. Changes in Medicare and Medi-Cal reimbursement rates require a fixed rate for transport rather than an itemized bill. Because of these changes, the LAFD no longer tracks all items used during a transport (excluding narcotics) or issues itemized bills (a fee for mileage is still itemized on statements).3 The LAFD can, however, review the Advanced Life Support (ALS) and Basic Life Support (BLS) rates being charged and determine an increase in the rates to include additional supplies and medications not currently included in the rate.4 While Medicare and Med-Cal will not reimburse above fixed rates, private insurance companies and self-pay patients have no fixed fee schedules and can be billed for these amounts.~··,.

·" - LAFD's internal policy is to transport all individuals wishing to be transported. :According'·-to its staff, the LAFD's transport policy is to provide transport services to anyone wishing to J • go to a hospital. This policy was adopted as a strategy to reduce litigation and has resulted in increased invoicing. Most insurance companies and government-sponsored agencies will only reimburse for medically necessary transports. Since the LAFD cannot tum patients away for lack of ability to pay, not all transports requiring invoicing will be collected upon. The scope of this study did not include investigation as to whether there has been a significant increase in insurance claim denials as a result of this policy.

There is no automated way to track and determine the number of ambulance transports that should generate an invoice and the number of ambulance transports that do not generate an invoice.5 For example, not all transports result in the generation of a bill, as in the case of patients transported in the custody of the Los Angeles Police Department.

3 The Ambulance Billing System is able to identify if certain medical supplies were used, such as dressings, ice packs, and splints. 4 Current rates are factored with the cost of supplies. 5 A planned upgrade to FIRS in July 2004 will eliminate this tracking problem.

Page 2-4 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t ...AP.. R.... 1L .... 12..... 2.... 00_4______earzngroin .

2.2.3 Bill Issuance

Overall, LAFD's Ambulance Billing unit is diligent and detailed in billing for ambulance services. The billing and collections staff uses a structured process for issuing more than 185,000 bills annually. LAFD's annual collection rate of 51 % is in the range of other departments that were interviewed during the benchmarking phase of the project.

Staff members visit hospitals to collect patient demographic and insurance information when the information is missing from the 902M. This process is highly manual and requires special permission from the hospitals. Ambulance billing staff travel to hospitals and conduct research on the hospital's billing system.

Staff is required to undergo a three-month on-the-job training program. The program is designed to ensure that the staff understands the complexities of the billing process and that data entry is accurate and efficient.

LAFD's Ambulance Billing Unit is comprised of 48 full time positions. Approximately 43 clerks spend multiple hours each day performing data entry. This equates to more than $700, 000 annually for data entry activities. The Ambulance Billing unit has a data entry backlog that is contributing to delays in generating a bill. According to LAFD billing supervisors, clerk typists spend three hours per day entering 902M data into the Ambulance Billing System. This is required because of the lack of technology and automation of capturing field data.

It takes the billing unit an average of eight to ten weeks to process a 902M form and generate a bill. As a result, it takes an average of 90 days6 to produce a bill from the time of incident. Based upon worklo.ad statistics, it was estimated at the time of the study that the data entry backlog of 902M forms was more than 46,000, equating to over $14 million in unbilled transport services. Based upon research and comparative analysis, fire departments with automated field data capture can generate a bill within seven days of incident.

Automated field data capture tools would improve processes and accelerate billing. Reducing the billing cycle time from 90 days to under 30 days would result is a one-time cash flow improvement of approximately $7 million.

6 September 2002 EMS billing accounts downloaded September 2003.

Page 2-5 LOS ANGELES FIRE DEPARTMENT . ~ FINAL REPORT B · ,n · t' _AP_R_1L_12.... 2_0_04_· ------earzngrozn .

Ambulance Billing staff continue to expand their use of technology to make the billing and collections process more efficient. Billing patients and a selective set of insurance companies that will not accept electronic billing are therefore done through paper-based invoices. However, the Ambulance Billing System generates paper billing automatically. Industry billing7 costs associated with submitting electronic bills are shown below and are substantially lower.

Exhibit Paper vs. Electronic Transactions

Paper/manual transaction costs for providers: Eligibility verification $2.81 per claim Claims submission $8.50 per claim Claim status $2.81 per claim

Electronic transaction fees for providers: Eligibility verification $0.25 per claim Claims submission $0.25 per claim Claim status $0.25 per claim

2.2.4 Collection Follow-Up

Non-payment for ambulance transport services. In order to identify possible causes for non-payment, the BearingPoint team conducted a high-level revenue analysis, exploring the reasons for the large delta between total billed and total collected amounts. A sample of 372 accounts covering a one-month period was reviewed as part of this analysis. The 3 72 accounts were grouped into one of following categories:

1. Aged Patient Liability After Insurance-Approximately 2% or $1.7 million went uncollected from patients that had insurance but did not pay the co-payment or deductible amount. The amount of the balance varies based on the patient's insurance plan and deductible payment to date.

7 C. Crowley, Understanding Patient Financial Services (Aspen Publishers, 1998); Hospital Accounts Receivable Analysis.

Page 2-6 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t c _AP_R_1L_12_.2_00_4______earzngrozn.

2. No Insurance Documented/Self-Pay-Approximately 20% or $17 million went uncollected from patients who had no insurance documented and are considered self-pay. This category may include patients who have insurance, but the insurance was not documented at the time of incident. This category may also contain Medi-Cal patients with a share-of-cost liability due. 3. Appropriate Adjustments-LAFD wrote-off more than $19 million, or 22%, due to government sponsored adjustments. Adjustments are for Medi-Cal and Medicare and other government sponsored agencies. These agencies pay on a pre-determined fee schedule and in most cases the balance remaining after payment is adjusted. For Medicare patients, the balance after payment cannot be billed to patients. 4. Miscellaneous-Approximately $1.2 million that were still in process with insurance companies, or underpayments occurred and were usually very small dollar amounts. In most cases, the bill had been submitted to the insurance company and was under review by the insurance company. 5. Payments-LAFD collected more than $44 million for FY 2003. This equated to a 51 % collection rate. i 6. Medicare/Medi-Cal Crossover Unposted Balance--Medicare and Medi-Cal Crossover patients are covered by both Medicare and Medi-Cal. Medicare covers a portion of their balance and the remaining balance is then paid by Medi-Cal. In this category of accounts, the Medi-Cal payments had not been posted to the accounts due to system tracking and posting issues. The revenue from these accounts has been realized but the balance is remaining on the account, which is overstating the Accounts Receivable (AR).

Below are some additional findings from the revenue analysis:

• Collection and government program adjustments account for 73% of bills. • Of the~ amounts remaining, the largest category is the No Insurance Documented/self-pay Category. This category represents approximately $17 million annualized or 20%. The sample was extrapolated to the total population and then annualized. A factor of approximately 38.1 was calculated by dividing the total population invoice amounts ($7,217,471) by the sample invoice amounts ($189,681).8

The details of the analysis are presented below.

8 This analysis was performed at a single point in time and is not a statistical sample. In some cases, the data itself was difficult to categorize as it continued to move through the process. However, the results are very consistent with the other qualitative findings of the study and warrant review.

Page 2-7 ~ LOS ANGELES FIRE DEPARTMENT ,,,,,,,--- ~ FINAL REPORT B . .D . t _AP_R_1L_12_.2 ...00_4______earzngrozn.

372 189,681 14,149 7,217,471 38.1

Qi!Cf!:Ol'Y . -";;: - I ,•'t,:•i' ::\':i,._.j_:]~> ,- ;-,,,, :,1,f,,;.Samnle Anwunt ,_ /{.\ :, ,Extia:noiated ·· . ,· A11n.iulllzed:',:) t\,il:>erqcijt,\-:;;,:

Ar,ed Patient Liabilitv After Insurance $3 846 $146 343 $1,756,110 2.0% No Insurance Documented/Straight Self-Pay $37 651 $1,432,642 $17,191,706 19.8% Miscellaneous - Uncollectibles $6 582 $250,449 $3,005,387 3.5% Medi/Medi Crossover Unoosted $2 814 $107,074 $1,284,892 1.5% Payments $96 989 $3.690,487 $44285 846 51.1% Annrooriate Adiustments $41,799 $1.590 476 $19,085,712 22.0% Total $189,681 $7,217,471 $86,609,652 100%

,. Samvle' Poo1.11atiitit -"1 ,, ,--\?/· :[.,'_',~•'' ,, :, r :;·,,.,,i:;;:Sanlnle~ount ,_,· ,:~:2, J,~nolated · AnnuiilifM ' : .· Perunt ,; Total Billed tR\ $189 681 $7.217 471 586,609,652 100% Total Pavments $96,989 $3,690 487 $44,285,846 51.1% Total Aoorooriate Adiustrnents $41,799 $1,590,476 $19,085,712 22.0% Sum of Pavments and Adiustments $138,788 $5,280,963 $63,371,557 73.2% Uncollected/Unoosted $50,654 $1,927,414 $23, 128,966 26.7%

Note: Due to rounding, some ofthe numbers do not add to 100%

The City Attorney's involvement in delinquent accounts is limited to insurance companies and does not extend to self-pay accounts. As a policy, the LAFD historically does not send self-pay patients to collections or garnish wages for non-payment. However, two other occurrences where more aggressive techniques were being used throughout the City for collections were noted. One was within LAFD related to brush clearance. If a fine is issued to a resident for failing to clear brush and the fine goes unpaid, the fine is added to the entity's tax bill. Second, in the Department of Finance, delinquent accounts under $1,000 were sent to one of three outside collection agencies.

The Department does not have a clear bad debt and write-off policy. Ambulance Billing staff continue collection efforts for up to two years after initial invoicing. Exceptions are for accounts in bankruptcy or litigation, which may be pursued for up to five years. Currently, the LAFD's total outstanding AR within the system includes more than 780,000 accounts and more than $120 million aged from zero to five years. The collectability of these accounts was not evaluated.

Page 2-8 ~ LOS ANGELES FIRE DEPARTMENT ~ ~ FINAL REPORT B · ,n · t _AP_R_1L... 12_. 2... 00_4______earzngrozn .

Credit card payments require additional processing time by AR staff. The Accounts Receivables Department provides many types of payment options (e.g., credit card, cash, money order, check, payment plans). For all credit card payments received through the mail and lockbox, staff must contact the credit card holder to obtain additional security information. This includes credit card billing address, expiration date, and three-digit verification code. This issue is being resolved _with a contractual agreement with Bank of America.

Page 2-9 · LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . .D • _A_PR_1L_12.... 2_00_4 ______. earzngrozn.t

3. Cost Assessment and Fee Schedule Analysis

The objective of conducting a cost and fee schedule assessment was to determine whether the cost of service was commensurate with the fees charged. The findings are summarized below.

It does not appear that ambulance transport services fees are commensurate with the services provided. The LAFD employs two sets of service-based fees for ambulances transport, plus a rate for mileage. The City has adopted a policy of using the Los Angeles County Department of Health Services (DHS) ambulance transport fees. DHS surveys statewide ambulance carriers, develops an average cost of services, and develops a reimbursable rate. The rates are as follows:

• Advanced Life Support (ALS}-$565.00 • Basic Life Support (BLS}-$332.00 • Mileage-$11.25 (per mile) Medicare and Medi-Cal reimburse at lower rates for ambulance services. The breakdown for Medicare and Medi-Cal reimbursement is as follows:

• Medicare reimbursement is: ALS-$410.30 BLS-$341.34 • Medi-Cal reimbursement is: ALS-$118.20 BLS-$118.20 The table below provides a high-level estimate of the cost of service for ambulance transports.

Exhibit Cost of Service Estimates

LAFD Department and Cost Descriptions Expenses Average cost per transport $610 Average cost per billing and collections $17 Average cost for transport, billing, and collecting $627 Average invoice amount for FY 03 $511

Page 3-1 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t _AP_R_1L_12..... 2_00_4______earzngrozn .

Due to the fact that costs are not tracked by incident or transport type (ALS and ~LS), an average cost of services was developed. BearingPoint relied on LAFD to assist in the gathering of the documentation, inventory, and all pertinent financial information. In the course of information gathering:

• The estimates presented were not audited. • The estimates do not include any cost for the Communication Center. • The estimates do not include any cost for fire stations (infrastructure). • The estimates do not include the cost of service for fire rescue deployed to an incident. • The estimates do not contain communication costs. • The estimates do not include any city attorney time related to collection of bad debt. • The estimates do not include helicopter costs. The table below is a summary of the cost of service model. Some highlights of the cost model include:

• There are approximately 705 paramedic/EMTs that constitute the bulk of the cost of providing ambulance transport services. • The ambulance billing and collections and the Accounts Receivable Unit contains 60 staff. • ITA staff time was included in the cost model although charge-backs do not actually occur . Three staff (one full-time and two part time) provide support to the ambulance billing team. • LAFD Executive Ma11:agement time was added at a variety of perce~tages depending upon staff.

Page~2 LOS ANGELES FIRE DEPARTMENT ~ _AP_R_1L_12_.2_00_4FINAL REPORT ______Bearzng~ozn. · .n · t

Exhibit LAFD Cost of Service Model

LAFD Department and Cost Descriptions Expenses Comments/Source of Information Ambulance Services (EMS): . Paramedic Salaries $63,945,935 705 positions-LAFD 2003 Budget . Related and Indirect Costs $25,396, 156 Distribution of 2002-2003 Total Cost of Program Report . Support Program Allocation $15,936,307 Distribution of 2002-2003 Total Cost of Program Report . Maintenance and Supplies $6,149,870 See ambulance main cost sheet for details . Fleet Costs $2,542,893 173 ambulances 20 EMS sedans . Oxygen $3,985 Sub Total $113,975, 146

Ambulance Billing Services: Billing Unit 48 fulltime staff . Salaries $2,415,290 LAFD internal report 2002-2003 Fiscal Year . Expenses $145,450 LAFD internal report 2002-2003 Fiscal Year Accounts Receivables 6 fulltime staff . Salaries $293,105 LAFD internal report 2002-2003 Fiscal Year Other Costs: . Executive Management $33,585 LAFD internal report 2002-2003 Fiscal Year . Office Space $151,983 LAFD internal report 2002-2003 Fiscal Year . IT Support $227,610 No charge back to LAFD Sub Total $3,267,023

Totals $117,242, 169 Average number of annual transports 186,880 Average cost per transport $610 Average cost per billing and collection $17 Average cost for transported and billing $627 and collecting

Page 3-3 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12.... 2_00 .... 4______earzngrozn .

4. Outsourcing Assessment

The objective of the assessment of outsourcing opportunities focused specifically on the reasonableness of outsourcing from a business perspective. In this business analysis, the driving criteria was whether outsourcing could potentially increase the net cash available to the City (i.e., total collected less the cost of collection.) The study did not evaluate any other aspect of the outsourcing decision that can be quite complex for government organizations. In developing our assessment of potential outsourcing opportunities, BearingPoint:

• Drew from the results of the first two efforts by integrating findings from the ambulance billing process and cost assessment and fee schedule analysis to define the cost of procuring services and areas of potential business process improvement. • Reviewed information from vendors to outsource some or all of the Ambulance Billing process functions. Although the number of outsourcing agencies9 that responded to BearingPoint was limited, three key areas were ex_amined to determine alternatives and possible courses of action. In order to provide the LAFD with information that will facilitate the development of outsourcing strategies, the key assessment areas were: 1. Types. of ambulance billing services offered by outsourcing vendors. 2. The costs for those services. 3. Services and cost of outsourcing justifications.

This was a high-level assessment, and as such, further study is required before a determination of the best approach to outsourcing can be made. The analysis and findings are presented below.

4.1 Our Approach

In examining the services offered by outsourcing companies, several companies were selected to participate in the survey. These companies were selected based upon work being performed for other fire departments or health organizations.

BearingPoint conducted phone interviews with the selected outsourcing firms. These firms were asked to provide the following information:

• Scope of services provided by the company.

9 Information on outsourcing opportunities was provided by two vendors, ACS and Accordis.

Page 4-1 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12..... 2_0_04------earingroin.

• Processes involved in outsourcing. • High-level solutions and methodologies. • Anticipated timelines to achieve outsourcill:g, • Cost of services. In collaboration with the LAFD, BearingPoint defined the levels of outsourcing that could be provided, ranging from full outsourcing of the ambulance billing process, to various levels of partial outsourcing. Questionnaires that were returned to BearingPoint are included in Appendix D.

4.2 . Outsourcing Options

Based on the interviews with the companies that provide outsourcing services, as well as the review of the ambulance billing process, there are two outsourcing options that align with LAFD's business needs. These options are:

• Complete outsourcing: This option would offer an end-to-end solution providing technology to a·ssist in capturing patient information and providing billing and collection services. • "Hosted Early Out," a type of partial outsourcing: This option can be structured in several ways, depending on how the LAFD is currently managing its Accounts Receivables (AR), and where the greatest opportunities to increase collections lie. This approach should be structured around the most difficult collection areas which are collections from individuals The outsourcing vendors interviewed fell into two categories, comprehensive outsourcing and partial outsourcing. The sections below provide a description of the range of services provided by each type.

4.2.1 Comprehensive Outsourcing of Billing and Collections

Scope of Services Comprehensive outsourcing of billing and collections encompasses the entire billing and collections process, from the point of incident and field data capture, to collection of receivables. The outsourcing vendor will design, develop, and deploy an automated field data capture system for the LAFD.

The vendor provides all necessary hardware and software to implement both the front and back-end solutions. The vendor will generate and submit invoices for payment, monitor payment and resolution, and perform necessary follow-up on unresolved accounts. Additionally, the vendor provides the records management solution that reports and monitors quality.

The services provided by these companies include, but are not limited to, the following:

Page 4-2 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · ·t _AP_R_1L_12.... 2_00_4______earzngrozn .

• Front-end solution: - Handheld computers for each ambulance. - Integration to outsourcing agency's billing and collections system. - Management and ongoing maintenance of mobile software/hardware solution. - Online access to standard and ad-hoc reports and records management system . ..:.... Integration to CAD/AVL/GIS. • Back-end solution: - Account Management. - Notice Generation (electronic and paper). - Payment Processing ( electronic and paper), through a "lock-box" service. - Telephone Customer Service. - Correspondence Processing Service. - Account Follow-up. - Accounts Receivable Management and Collections Services. • Provision of Financial and Management Reports. • Records Management solution: - Records Storage and Retrieval. - Management reporting. - Quality Assurance Program support. - Confidentiality and Data Security.

Anticipated Timeframe to Implement Outsourcing Based upon implementations at other fire departments, it is estimated that a timeframe of nine to 12 months from contract award to implementation of the ambulance billing process is required. The activities during this time include, designing, developing, and deploying the automated billing process and training staff.

Cost Estimates A break-even calculation was done in order to determine whether outsourcing could result in increased revenues and cost savings during the year. Specific increases in collections as a result of outsourcing

Page 4-3

/ LOS ANGELES FIRE DEPARTMENT . ~ FINAL REPORT B · ,n · t _AP_R_1L_12...... 2_00_4______earzngrozn w cannot be quantified with certainty, but it is possible to ascertain the target improvement that would be required to warrant outsourcing ..

The cost of internal billing operations for LAFD were reviewed, and using estimates provided by the LAFD (burdened labor), it was determined that approximately $3.27 million dollars are spent annually to bill and collect for ambulance services. With respect to ambulance billing collections of $44 million dollars (using data from fiscal year 2002-2003), this is about 7.4 percent of the fees collected.

The outsourcing vendors interviewed indicated that they would assume a contingency rate of between 12 and 15 percent - though fees may vary widely. Depending upon the contingency rate, an outsourcing vendor would have to collect between $3 and $5 million above what LAFD is currently collecting in order to break-even. What is unknown at this time is what cash flow increase could be expected by improving data capture and decreasing process times. In doing t~e calculation, the following assumptions were made:

• The outsourcing comp~ny would provide an end-to-end processing solution, including implementation of a hand-h~ld field data capture system. • The department is considering a hand-held field data capture system; however, the cost of such an implementation, as well as the annual recurring costs, were not included in LAFD's operational cost estimates. • The total amount billed in FY 2002-2003 was $87 million, collection was $44 million. • There is a potential reduction of $3 million dollars due to staff reductions and reassignments. • $270,000 would be all_ocated for managing and administering an outsourcing company. At least one vendor expressed confidence in their ability to increase such collections. The net collections to the City at this time from ambulance billing are approximately $41 million ($44 million collected and $3 million in internal collection costs.) While there are many non-financial factors affecting outsourcing, the City should only consider an outsourcing financial arrangement if it is performance. based. In a performance-based contract, the vendor would be required to guarantee the floor ( current amount the City is collecting after its costs) and to remit a percentage of any additional amounts collected to the City. The financial element of the procurement decision would then be based on which company could guarantee the best performance or sharing structure while protecting the current cash flow level of the City. A byproduct of outsourcing will also be the provision of field data capture tools that will generate the cash flow acceleration benefit identified earlier without the internal capital costs.

The outsourcing vendors interviewed have each had successful implementations. However, the increase in collections varied significantly. In large part the variance was due to how effective the individual fire department or health organization billing units were, and the level of process automation at the agencies.

Page 4-4 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t .,.AP,...R-IL-12..,,2_00 111114------earzngrOln . Although the outsourcing vendors pointed out specific benefits that could be achieved at the LAFD, they could not, with certainty, quantify the direct increase in revenue through the use of an outsourcing agency. Due to the nature of the data and lack of vendor due diligence at this time, this lack of uncertainty is not unexpected. Based on the outsourcing analysis, it appears that there are interested companies that would consider a guarantee of the current net financial collections and a sharing of any increased collections with the City. Solely balancing risks and financial opportunities, this approach to outsourcing appears to be a viable business approach for the City.

4.2.2 "Hosted Early Out"

Scope of Service Hosted Early Out, a type of partial outsourcing, would turn over an agreed upon portion of accounts based on status of accounts and the AR management strategy. The services fell into the three strategies:

• Hosted Early Out Outsourcing • Outsourcing Following Initial Billing by the LAFD • Outsourcing Aged Accounts to Liquidate AR These strategies are further described below.

1. Hosted Early Out Outsourcing Hosted Early Out outsourcing would allow the LAFD to turn over a specific body of accounts (i.e., self-pay) to the outsourcing agency imm~diately following an incident. The outsourcing agency would perform all billing and collections activities on accounts, and the outsourcing agency would assume all risks. When the outsourcing agency assumes risk, it charges no up-front fees for implementing the business solutions and processes, but retains a percentage of the monies collected, or a contingency fee. The amount of the contingency fee varies among agencies and depends upon the type of accounts outsourced and the agencies' work standards. Work standards represent the number and frequency of bills and phone calls performed to collect on an account. Most agencies have established work standards, but will customize these to best fit the client. Changing or increasing frequency of contact with patients may affect the contingency fee charged by the outsourcing agency.

2. Outsourcing Following Initial Billing by LAFD This strategy would allow the LAFD to outsource accounts that have gone through its internal billing and collections process, but are not resolved after a specified number of days. The accounts would be outsourced at an agreed upon point in the billing and collections cycle, at which point the outsourcing

Page 4-5 LOS ANGELES FIRE DEPARTMENT ~ _AP_R_1L_12_.2_00_4FINAL REPORT ______B·earzngr:ozn. · ,n · t

agency would pursue the collections. Contingency fees will vary based upon the age and type of account.

3. Outsourcing of Aged Accounts to Liquidate AR Outsourcing vendors also offer billing and invoicing services that would allow a one-time attempt to work aged accounts. If this option is used, the LAFD would be billed on a per-invoice basis, or flat fee, and all recoveries would go directly to LAFD. The fee and costs associated with these types of transactions will vary depending on the nature of the accounts. A list of services offered by such outsourcing vendors includes, but is not limited to:

• Contingency Fee Early Out (with respect to self-pay). • Insurance Conclusion. • Bad Debt Collections. • Collection Letter Services. • Temporary Staffing. • Backlog Elimination. • Process Assessment. • Business Office Benchmarking and Scorecards. The partial outsourcing vendor would assist the LAFD in:

• Immediate elimination of backlogs of self-pay AR. • Deployment of current technology to work accounts. • Development of work standards to be used by outsourcing agency and LAFD staff. • Recruitment and training. • Consistent business practices developed and deployed. • Cost-effective methods to acquire progressive revenue cycle technology.

Vendors' Methodology and Approach Partial outsourcing vendors use a frequent follow-up approach to collect as many d~llars as possible. Outsourcers use a variety of management tools to prioritize accounts; manage the follow-up of each account; and use automated dialers. Collecting missing patient information is an onerous task, but can be accomplished through Internet searches of financial, tax, and DMV records, along with contacting

Page 4-6 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t. _AP_R_1L_12..... 2_00_4______earzngrozn _ hospitals. In performance based contracts, outsourcing vendors are motivated to collect information and monies due to the fact that fees are generated for their companies when collections are successful.

Anticipated Timeframe to Implement Outsourcing Even without implementation of front-end technology, and the billing functions still residing with LAFD, outsourcing requires specific procedures to be developed. Development of these procedures would take place during any contract negotiations. Once a contract is awarded, an agency can begin collection activities within weeks.

Cost Estimates Cost and contingency fees associated with partial outsourcing are dependent upon a number of factors including:

• Outsourcing agency's access to LAFD's data collection and billing systems. • Age and balance of accounts outsourced. • Types of account outsourced. • Specific work standards developed between the LAFD and the outsourcing agency. The fees to pursue self-pay patients can range from a flat fee plus contingency, to only a contingency, depending upon the type and age of the liability. In order to provide an estimate of costs and fees, the outsourcing agency would require an Account Trial Balance (ATB) file of the prior three months. The file would be reviewed and an appropriate pricing strategy would be determined. If the LAFD selects to issue an Request For Information (RFI), outsourcing agencies would most likely request that the RFI include the ATB file. When specific costs and fees are determined, a thorough break-even analysis can be conducted.

Next Steps As this document suggests, there are significant uncertainties related to Outsourcing with regard to costs, specific benefits or savings, and cash flow increases. Therefore, further investigation of the alternatives presented will be critical in the LAFD's decision process. While the data identifies areas of opportunity, they also do not suggest substantial windfalls. Given the nature of the information, the next step is detailed discussions and due diligence with vendors to determine what type of performance commitments they are will to actually make. Further discussion of specific strategies on outsourcing are detailed in Section 6 - Strategies for Improvement.

Page 4-7 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12_.2_0_04------earzngr'ozn.

5. Agency Benchmarks and Comparative Analysis

Through a combination of phone calls and emails, BearingPoint attempted to collect benchmark data :from comparable city fire departments. The following data points were requested :from cities: net collection rates, cycle times, technology, and fees for ambulance transport. Unfortunately, only two of the fire departments responded, Houston and San Diego. Further information regarding· our approach, and specific agency responses can be found in Appendix E. Other comparable cities did not respond or did not track requested data. Through research and interviews with other fire departments and outsourcing agencies, additional comparisons were obtained. Findings and data based on the questionnaires, interviews, and research are summarized in the tables below.

The table below provides a comparison of the fees charged for ambulance services by cities throughout California. The analysis reveals the average ALS charge among the cities being compared is $570. LAFD charges $565 for an ALS transport, which is slightly below the average charge. The average BLS charge among the cities being compared is $419. LAFD charges $332 for a BLS transport, which is also below the average charge.

1 '.QJfy}::.~~\:~~:f (:,~::~~kiJ·~~r~. :~1~ -~~:;s~ ~tsJJase~E:a:t~! iT BL$. .l{ase· Rate /: .:: . San Bernardino City $200 $100 Arcadia $562 $367 Burbank $562 $367 Los Angeles County $562 $367 Pasadena $562 $367 Los Angeles City $565 $332 Sacramento Fire $599 $550 San Francisco $605 $414 Palo Alto $650 $450 Sacramento (Private) $678 $678 Huntington Beach $729 $624 ;. -. {· : ,• .~· ...... :: 4~·. •.• ~· ., . .:_ '.';,~·-- .~~ / _1;:; .'.$5:70 ·: . :Av.erage·· '·; '· /,/ ' :.. ·- . ... $419

Note: Data provided for LAFD is based upon our fee review FY 03.

Page 5-1 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT, B - · ,n · t ....AP_R_1L_12 ..... 2_00_4_· ------earzng.rozn.

LAFD collection rates, approximately 50% net and 70% gross, are within th~ range of collections reported by other cities. Collection rate is defined as the percentage of revenue collected against the total charges billed for emergency transports. Due to the fact that these rates are self-reported, it is difficult to truly assess the performance ofLAFD in comparison to its peers. However, both LAFD's net and gross collection rates are within the range of collection rates reported by other departments.

Austin 55% Dallas 44% Houston 32% Phoenix 70% San Antonio 66%

The collection rate of Phoenix is significantly higher than its peers. Contributing to its high rate may 10 11 include: keeping fees low , a state requirement using a "prudent layperson" standard , and the statewide Arizona Health ·cost Containment System. San Antonio's rate may be partly attributable to electronic field data capture that streamlines the patient bill processing. Of particular note is the fact that demographics of a city play a large role in collection rates. Houston, for example, processes its bills quickly but has a high rate of uninsured clients. This situation contributes to a collection rate that is lower than other cities evaluated.

The process time required to generate a bill is dramatically higher at LAFD when compared to selected cities. This process time is measured from the date of incident to the date a bill is generated. The times listed below are' averages. LAFD experiences delays in the transfer of incident forms to the ambulance billing department and has extensive backlogs in data entry of incident forms. Time to generate bills provided in number of days.

~ity'. ·.:.:- ·., :· ~:_\ i ·;:;:·Jr, '. Nµ)nb,etJ>t.Pay_s!' _-r:·,: Houston 7 San Diego 5 LAFD 90

1°For example, if cities keep billing fees aligned with the allowable amounts by Medi-Cal & Medicare, the percentage collected is higher. 11 The "prudent lay person" standard means that if a person with an average knowledge of healthcare i~sues believes he I she has a medical emergency then they indeed have one. Healthcare insurance carriers cannot review a claim for a specific illness or injury, well after the fact, and use a discharge diagnosis as a means of denying the claim.

Page 5-2 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12.... 2_0_04------earzng.rozn _

LAFD, like many other cities, does not yet have technology for electronic data transfer and entry. This results in a great deal of manual data entry and contributes to delays in the billing and collections processes. The table below indicates how each city enters incident information at the site and how the incident information is entered and transmitted to the ambulance billing unit. San Antonio is the most advanced city in the comparison and also shows a significantly higher net collection rate ( 66%) than LAFD.

-~itY?!i::tf"j:~::~ - Paper Incident Forms Austin - Manual Data Entry & Transfer - Paper Incident Forms Dallas - Manual Data Entry & Transfer - Paper Incident Forms LAFD - Manual Data Entry & Transfer - Paper Incident Forms Houston - Electronic Data Entry & Transfer - Paper Incident Forms Phoenix - Manual Data Entry & Transfer - PDAs - Mobile Compute rs San Antonio - Electronic Data Transfer - PDAs - Electronic Data Transfer San Diego - Some Manual/Paper Processes

Page 5-3 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . R . t -_AP_R_1L_12_.2... 00_4______earing vzn.

6. Strategies for Improvement

This section presents both short-term and long-term strategies for improving the ambulance billing and collections processes. The recommendations relate to the overall strategies of the organization to improve its billing and collections processes thereby reducing time to invoicing and collecting of fees.

The strategies for improvement presented below are grouped into three categories.

• Ambulance Billing Process Improvements • Technology Enhancements • Outsourcing BearingPoint recommends that the Los Angeles Fire Department approach these strategies in the order presented below as they allow for near term internal process improvements, while pursuing longer term technology or outsourcing initiatives.

6.1 Ambulance Billing Process Improvements

Strategy 1: The department should revise its fee schedule to be commensurate with costs. Although Medi-Cal and Medicare reimburse based on a fixed-fee schedule, insurance companies and self pay patients do not reimburse according to fee schedules and should pay according to the amount billed by LAFD. LAFD should consider reviewing expenses associated with ambulance transports and increasing the standard ALS and BLS rates charged. Through discussions with other departments and outsourcing agencies that provide billing and collection services for ambulance transports, standard ALS and BLS rates do not include expenses for Narcotics, Oxygen and Medical Supplies (e.g., intravenous fluids, bandage). Rather, fees for such items are charged in addition to the standard ALS and BLS rates.

Key Activities Required for Implementation of Increased Charges In order to increase charges for ambulance transports, the following key activities should be considered:

I. Develop and track a list of supplies and associated costs used regularly during ambulance transport. 2. Perform and document a formal cost and rate analysis that can be updated annually. This should incorporate stringent financial analysis suitable for public review. 3. Revise fees for ambulance transports to be commensurate with true cost of service.

Page 6-1 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . R . t _AP_R_1L_12..... 2_00_4______earing vzn.

Strategy 2: Develop a short-term strategy for reducing time required to generate a bill. This strategy should include eliminating the current data entry backlog of paper 902M forms. - Reduction in the number of days between time of incident and generating a bill is critical to cash flow and will most likely improve the collection rate. Eliminating the current data entry backlog of 902M forms is a critical step to increasing revenue. This n,iay require refocusing of staff and/or addition of temporary staff to reduce the backlog. Until the backlog is eliminated, bills for these incidents cannot be generated.

Key Activities Required for Implementation for Backlog Elimination: The strategy could include redesign of the existing ambulance service processes. Redesign efforts should focus on the following categories:

• Collection of complete and accurate patient demographic and insurance information at the point of incident. • Transport and delivery of 902M forms to the Billing Unit. • Entry of902M data into LAFD's mainframe. • Processing of data required to generate a bill. LAFD has field-tested the use of fax machines and scanners in the field to transmit 902M forms to the Ambulance Billing unit following the time of incident. While fax machines are expedient, the 902M forms are illegible when faxed. The LAFD is currently in the process of testing scanners that yield legible 902M forms immediately. While scanning would reduce the time required to transmit a 902M form to the billing unit, the billing unit would have to spend additional time ensuring all fields within the 902M form are complete and that all forms are received. This initiative is still under review.

Strategy 3: LAFD should develop short-term and long-term strategies for managing accounts receivable and collections. Overall, the ambulance billing staff is extremely capable of performing day-to-day tasks and activities. The LAFD lacks some tools and automation that could assist in managing, executing, and communicating results from the billing unit discussed throughout this document. As noted, there are a variety of challenges related to billing and collections. In order to properly address and redesign any process, the LAFD should develop both a short-term and long-term strategy for managing and collecting data for ambulance transports.

Page 6-2 ~· LOS ANGELES FIRE DEPARTMENT ~ ~ FINAL REPORT B · ,n · · t _AP_R_1L_12_.2_00_4______. earzngrozn.

Key Activities Required for Implementation for Managing Accounts Receivable and Collections

Short-Term Strategies • Establishment of an urgent cash-focused approach to liquidation of outstanding/backlogged accounts receivable and prioritize resolution of backlogged accounts. • Development of a "Root Cause" analysis for outstanding receivables. Root cause analysis will allow the LAFD to identify and address problematic processes. • Development of a strategy for eliminating the cash posting backlog for Medicare and Medi-Cal crossover account.

Phase I-Process steps include: 1. Obtain complete data download of Accounts Receivable data. 2. Perform analysis on data. 3. Create strategy for liquidating Accounts Receivable. 4. Create work lists of accounts to be worked in-house. 5. Develop training material for staff. 6. Develop and implement outsourcing strategy. 7. Develop and implement write-off strategy consistent ·with collectibility of the debt. 8. Review cash posting process and identify cash posting bottlenecks and backlogs.

Phase II-Process steps include: 1. Provide training to staff. 2. Assign work lists to staff. 3. Implement follow-up schedules for all accounts (payer specific). 4. Develop performance measures. 5. Evaluate weekly progress on cash and backlogged Accounts Receivable. 6. Identify individual responsible for working cash-posting backlog for Medicare Medi-Cal crossover accounts and provide training.

Phase Ill-Process steps include: 1. Perform detailed account analysis. 2. Implement bad-debt write off according to agreed upon strategy.

Page 6-3 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12.... 2_00_4______. earzngrozn .

3 .. Analyze progress on work lists by individual billers/collectors. 4. Perform final account write-offs. 5. Eliminate backlogs in cash posting.

Long-Term Strategies Long-term strategies should include a methodology for ongoing Accounts Receivable management and increased cash collections. The strategy should include making process changes and improvements to the billing and collections process as well as developing an ongoing strategy for hard-to-collect accounts. These strategies should include:

• Creation and implementation of a process for systemic approach to tracking denials and rejections • Determination oflong-term infrastructure needs (staffing, space, terminals, telephones, etc.) • Identification of team leads to be responsible for categories of Accounts Receivable • Development of a long-term Accounts Receivable management strategy and analysis. This may include review and stratification of Accounts Receivable downloads by payer mix and aging and account balances every two weeks (or as appropriate). Review stratification for problem payers and opportunities for more aggressive follow-up. Current opportunities lie in the following categories: True self-pay Self-pay after insurance Avoidable adjustments Accounts in progress with insurance companies • Development of work standards, goals, and performance metrics • Establishment of benchmarks and set goals by age • Establishrpent of benchmarks and set goals by payer • Development of follow-up timelines • Develop outsourcing strategies for aging accounts and other categories of accounts that have been difficult to collect (self-pay or self-pay after insurance).

Page 6-4 -~ LOS ANGELES FIRE DEPARTMENT_ _,,,,,,,-- ~ FINAL REPORT B · .n · t _AP_R_1L_12..... 2_00_4______earzngrozn .

Strategy 4: As part of the overall strategy, the LAFD should develop additional performance metrics and a reporting package to track and measure performance of ambulance related processes, status of receivables, cash collections, and revenue. The LAFD should improve cycle time tracking. Examples of sub-processes to be tracked:

• Time from generating 902M to data entry of 902M • Time from data entry of 902M to creation of invoice • Time from creation of invoice to bill drop • Time from bill drop to receipt of payment • If payment denied or no response, time in which to follow up on account • Time from receipt of payment to payment posting • Time from payment posting to reconciliation The LAFD should set specific measurement goals and metrics around each process in the billing and collections processes. Some industry benchmarks which may serve as guidelines for establishing metrics:

• Billing Bills are sent within four days from the date of incident. Payers are billed electronically to the extent possible. Claims returned from the payer with errors are worked within 24 hours. Secondary bills are prepared and sent within 24 hours of primary payer payment. - Patient responsibility bills are prepared and sent within 24 hours of primary and secondary · payment. • Collections Insurance accounts not paid within 30 days are immediately followed up. Self-pay accounts with no response within 30 days are immediately followed up. • Cash Posting and Adjustments Posting Accuracy-99.7 5%. - Posting timeliness-same day. Daily deposit-before 2:00 PM same day. Cash drawer balance--100% daily.

Page 6-5 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . R . t _AP_R_1L_12..... 2_00_4______earing vzn .

Reconciliation-100% daily. - Accounts Receivable and General Ledger balance 100% at end of the month. Contractual adjustments are computed and posted to the account at the time of billing for all payers. Denial reasons are standardized for all payers and posted to the patient account. Payments are directed to a bank lockbox for immediate deposit.

Strategy 5: The LAFD should develop a communication strategy. and a reporting package that could be presented to management on a weekly or as-needed basis. Reports should be the responsibility of the team lead(s) and should contain necessary statistics to provide a detailed picture of the ambulance billing and collections. Reporting may include the following reports:

• Daily cash report • Performance compared to established goals • Accounts Receivable total and aging compared to established goals • Productivity reports • Accounts Receivable summary report • Weekly outsourcing tracking report • Weekly issues and barriers These management reports may be structured as a hospital performance scorecard shown below. This performance scorecard could also be rolled out as an effective communication tool in conjunction with the LA STAT program.

Page 6-6 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t ...AP... R... 1L .... 12..... 2... 00_4______earingroin.

Exhibit Example of Performance Scorecard

Perfonnance Scorecard

1 Cash Receipts/Gross Revenue

3 Unbilled AIR

9 Total Inpatient A/$ > 90 days

Performance Measure- Days Tar et LAFD 11 Total Da inNR 12 Unbilled AIR 15 BilledNR

Performance Measure - Benchmarks 18 Total Days inNR 10:iOaVs'o'ischaf!ie·to ail11.~:1%t..i~.f~';;;.~~r,:-;::,~;:;}'f'f~t,~;t~r::.:ZJf-d;il;;~~~~·i:?~.:~ 20 Percent Billed Receivable over 90 Days

6.2 Technology Enhancements

Strategy 6: The LAFD should investigate the implementation of technologies to enhance data capture and improve overall efficiencies of the ambulance billing and collection process. While this study did not evaluate whether additional funds could be collected from individuals, the LAFD has a good opportunity to shorten its billing cycle. A decrease in the billing cycle will create a one-time cash flow improvement. Assuming collections of approximately $3.5 million per month and an average billing period of 90 days, the LAFD should be able to achieve a $3.5 to $7 million one time cash flow improvement by decreasing the time to bill by 30 to 60 days.

We recommend the LAFD complete a technology requirements analysis that will be used to understand and quantify the up-front costs. In addition, an RFP should be prepared and submitted to potential vendors who can supply and implement such technology. The following types of technologies can be used to enhance the overall process.

Automated Field Data Capture System The best opportunity for reducing the billing cycle will be through an automated field data capture system that provides information to the billing system each day. The benefits of an automated data capture process are discussed below. Automated data capture will decrease cycle times required to generate a bill,

Page 6-7 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . .D . t _AP_R_1L_12..... 2_00_4______earzngrozn. improve inventory tracking, and increase the potential to collect additional revenue. Specifically, an automated field data capture process will:

• Collect additional patient symptom data can be collected which would reduce denials from insurance carriers. ' ·- • Elim~nate the need for duplicate data entry. Entering the data electronically will allow data to be downloaded directly to LAFD's mainframe system. This will eliminate the time consuming manual data entry process required for each 902M form prior to initial billing, thus reducing the cycle time from incident to initial bill. • Improve tracking of incident a~q transport information. Patient information will be entered at the time of incident and downloaded to LAFD's mainframe system. The LAFD can access data immediately to ensure that incidents resulting in transport are billed in a timely manner. The automated field capture system will also allow for immediate quantification of transports and reconciliation against billed accounts. System reports can be run in place of manual data entry and review of the 902M forms to allow the LAFD to conduct trend analysis and identify process problems. .. Improve tracking of supplies and usage by incident. Ao automated field data capture system will assist LAFD in tracking, ordering, and management of supplies used in incidents and transport. This will help the LAFD monitor and regulate tp.e cost of service. • Improve patient care during an incident. The laptops/Personal Data Assistants (PDAs) will allow access to software programs that will allow paramedics/EMTs to check and validate what level and type of patient care to provide during an incident. While this improvement is not directly related to collecting better patient data or reducing time required to generate a bill, it will allow the paramedic/EMT to deliver more appropriate patient care.

Account Management System LAFD's homegrown billing system has worked well for the LAFD for more than 15 years. ITA has been able to maintain the system, and core functions of the application work well for the LAFD. However, with continued increases in billings, limited reporting capabilities, and automated field data capture, integration may require more than a replacement of the existing system. A replacement of the billing system to an account management system would have numerous benefits and assist the LAFD in managing the overall operations of billing and collections. The cost of such a system will vary and should be evaluated by LAFD.

Many of the account management systems in the marketplace include functionality such as workload management tools used to assist, distribute, and manage the workload.~ With approximately 48 Ambulan~e

Page 6-8 ~ LOS ANGELES FIRE DEPARTMENT ,,,-,,,,,-- ~ FINAL REPORT B · .n · t _AP_R_1L_12..... 2_00_4______earzngroin.

Billing Unit staff and 6 Accounts Receivables Unit staff dedicated to the billing and collections functions, management ofresources is critical to the success of the group.

Predictive Dialers In order to efficiently make follow-up phone calls on past due accounts, predictive dialers are used to dial phone numbers and prompt collection staff with appropriate account information. Many of the systems also allow some pre-population of data in to the back-end system to assist tracking of collection follow-up progress.

Key Activities Required for Implementation of an Account Management System LAFD has several options for obtaining and implementing an end-to-end billing and collection system. These options range from outsourcing the entire front-end data capture portion to an outsourcing agency . . . to purchasing and maintaining the technology in-house. Options for outsourcing are further discussed in Section 4. Purchasing, implementing; and maintaining the technology in-house will require an initial cost outlay for the technology and implementation as well as ongoing maintenance costs. These costs should be offset by the improvements in data collection, cycle times, and billing and collections processes.

Strategy 7: The LAFD should continue to aggressively maximize the use of electronic billing. Although the LAFD has little ability to require insurance providers to accept electronic billing or make payments through EFT, the cost savings are substantial. While some insurance companies are unable to receive electronic bills and require hard copy billing, the LAFD is continuing to pursue and maximize electronic billing whenever possible.

Key Activities Required for Implementation for Electronic Billing: The LAFD should examine its volume of activity with each provider in order to develop a priority of where the greatest opportunity for savings could occur. Once this is accomplished, the LAFD should hold executive meetings with those providers to discuss the benefits of the electronic billing initiative.

Strategy 8: The LAFD should evaluate electronic sharing of patient billing information with hospitals. Ambulance billing staff spends a significant amount of time traveling to hospitals to obtain missing or incomplete patient information for billing and collections. A solution allowing electronic sharing of patient demographic and insurance information would eliminate the need for travel and allow remote hospital research. It is essential, however, that any implementation of electronic data sharing follows HIP AA privacy standards and regulations. Several outsourcing agencies described the feasibility and

Page 6-9 -~ LOS ANGELES FIRE DEPARTMENT ~ ~ FINAL REPORT B · .n · t _AP_R_1L ....12.... 2_00_4______earzngrozn w practicality of implementing electronic data sharing. However, given that this approach is critical to the services provided by such vendors, more detailed information was difficult to obtain. LAFD should continue to evaluate the feasibility of electronic sharing of patient billing information, both on its own and as part of the outsourcing options available to them. ,

Key Activities Required for Implementation for Electronic Data Sharing BearingPoint would anticipate the following key activities required to implemen~ an automated approach to sharing patient billing information. The activities include:

• Review HIP AA guidelines and develop a proposed automated solution document for hospitals and executives. • Conduct executive meetings between City staff and Hospital Administrators. • Conduct executive meetings between City· and County staff. A number of hospitals in the area ··• . ... are county run hospitals, which should allow a greater ability to improve sharing of information. ; ·:. • Create security protocols for staff access of information . • Create and test automated approach to accessing hospital records.

6.3 Outsourcing

Strategy 9: LAFD should pursue detailed discussions and due diligence with outsourcing vendors to explore outsourcing options and assess interest of vendors to provide performance based commitments. LAFD should develop a Request for Information (RFI) to obtain specific statements of interest from companies interested in full outsourcing. The RFI should state that the contract the LAFD seeks must be performance based which guarantees the minimum net collections to the City and provides for participation in increased collections. Based on the responses to the RFI, the City should determine if the financial benefits balanced against other policy considerations warrant a full RFP.

Should the LAFD determine that full outsourcing is not warranted, it should evaluate implementation of the "Hosted Early Out" Outsourcing for Self Pay Accounts. Discussions with potential vendors should be held and, if sufficient interest is generated, an RFP should be issued.

Page 6-10 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12..... 2_00_4______earzngrozn.

Appendix A-As-ls Process Description

LAFD Ambulance Services (Field Operations) A call is received in the Communication Center and an assessment is made as to the nature of the caller's . . situation. An ambulance or paramedic crew is dispatched to the site. The ambulance staff completes a 902M form. This form is paper based and is comprised of five color-coded copies. The five copies of the 902M each get routed to different places as follows:

White-to Ambulance Billing Yellow-to QIS Green-Shredded (was sent to base hospital, but HIPPA laws prevents this from happening) Pink-Patient (or to hospital for patient) Blue-Shred unless controlled medications are used, then it is sent to pharmacy for restocking

A 902M form is completed for each patient. The 902M captures many details including the patient's name, address, medical history, other vital data, insurance, and treatment details. The patient is treated and transported if necessary. The LAFD crew and the patient will make the decision together as to whether transport is required. If the patient is not transported, the paramedic will complete the 902M as a non-transport call and a bill will not be generated. If the patient is transported (approximately 70% of all calls), the paramedic will complete the 902M at the hospital. While at the hospital the paramedic will attempt to gather any further information required for the form and a file number if necessary (this number is only ne~ded if patient name/address is not available). If the file number is not available while the paramedics are at the hospital, they must follow-up with the hospital at a later time (usually two to three hours) to obtain the number.

The paramedic/EMT returns to the station house after the call and logs the call in the station logbook. By this time, FIRS has been updated via the FCCS data transmission with the dispatch incident information, which would include incident date and number. The 902M is then separated, FIRS is updated (incident type added to screen) and the FIRS cover" page is printed. The 902M forms for the day are batch_ed, reviewed by the captain on duty, and placed in the interoffice mailbox for routing. The forms are picked up and routed to the Battalion Office, Division Office, and Headquarters. From Headquarters the forms are routed to Ambulance Billing, QIS, and the pharmacy if required.

PageA-1 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT D • _AP_R_1L_12_.2_00_4 ______Bearzngr'ozn. . . t

Process Map: A high-level process map for Ambulance Services is shown below:

Ambulance Services

Transport EMT's Arrive on Patient to F-902M Started Site Appropriate Hospital

F-902M Completed

F-902M Patient is Completed at providea a copy Hospital, Copy of the form Left at Hos pita I

FIRS system F-902M _____, Reb.JmHouse to Station update with Gal(Logged incident type Separated White Ye low Pink Blue Green Forms are routed F-902M Batched Forms are picked Forms are routed Forms are routed to Ambulance and Attached to 1------.i up and routed to to the Division Biling, QIS and to Headquarters Cover Sheet the Batalllon Office Office Pharmacy, If required

End

LAFD Ambulance Billing and Collections The LAFD Ambulance Billing Unit enters data, bills for ambulance services, and makes follow-up phone calls as required. There are 48 employees assigned to the Ambulance Billing Unit.

The receipt of the 9~2M form generally triggers the billing process. The forms are picked up from the LAFD Headquarters. The Ambulance Billing unit receives between 1,000 to 2,000 of these forms each day, depending on the day of the week.

The 902M forms are sorted by information on the form. The' IO categories include:

• Medi-Cal

PageA-2 LOS ANGELES FIRE DEPARTMENT ~, FINAL REPORT B · .n · t _AP_R_1L_12.... 2_00_4______earingroin .

• Medicare • Medicare + 2nd • Private Insurance • No Insurance Data • Kaiser • Unknown • SSN Only to Verify • In Custody • Sworn LAPD/LAFD The Billing staff will pick up the forms daily from the sorting area.

Each Clerk Typist in the unit works to enter a minimum of 15 forms per hour into the billing system for three hours a day. The processing time for each bill depends on the insurance the patient has. An exception occurs for trainees. The new hires are trained for three months. During this time they will process from four to five forms each hour until the required 15 per hour is reached. New hires have their data entry quality checked daily, while experienced staff is only quality checked at intermittent intervals.

Once the 902M data is entered into the system, the account is created. Information for invoices to be sent directly to patients is captured in an electronic file that is submitted to an outsourcing vendor (Standard Register Company). The invoices are generated weekly. At the time of this report, the Ambulance Billing staff estimates they are not behind schedule in entering the form information and invoicing insurances and patients for ambulance transports.

If the patient has Medicare or Medi-Cal, billing is done electronically. If the patient has other insurance, the billing can be done via hard copy or electronically, depending on the requirements of the insurance company. The staff verifies eligibility with insurance companies to reduce the number of denials received. The unit makes approximately 1,600 calls during a month as well as accepting approximately 2,100 calls per month from the Automatic Call Distributor system.

I If the 902M does not contain a Social Security Number or another form of insurance, it will be billed directly to the patient. The 902M is picked up and processed by the No Insurance Document section of Ambulance Billing. If the patient is over 65 the section will check to see if the patient has ever been transported before. If so, the staff will pull the data from the previous ambulatory call and bill the appropriate insurance. If the 902M form has a Social Security Number, this section will check for Medi Cal and/or Medicare eligibility. If eligibility is determined, the 902M will be sent to either the Medi-Cal or Medicare section for processing.

PageA-3 LOS ANGELES FIRE DEPARTMENT ~- FINAL REPORT B . R . t _AP_R_1L_12_.2_00_4 ______earing vzn.

If the patient's insurance company remits payment, Accounts Receivable will process the payment. If payment is not received within 90 days, the insurance company and the patient will be sent another invoice.

The Ambulance Billing Unit performs hospital research for accounts m1ssmg essential billing information. Ambulance Billing staff looks for new insurance information and new address information. If new insurance information is available, the insurance company is invoiced as appropriate. If new insurance information is not available, the account is transferred to the City Attorney12 for follow up. If new address information is available, the patient is invoiced for the claim.

If no response is received to the City Attorney's letter requesting payment, a second notice is sent. If payment is received, Accounts Receivable processes the payment. If no response or payment is received, the process and follow up efforts are returned to the Ambulance Billing unit.

1rthe 902M form is not billable, the form is sent to Data Update (an outsourcing company for data entry). Data Update staff enters the limited data that the Department of Health Services (DHS) requires, transmits · the electronic data to the LAFD mainframe, ITA performs data formatting and regrouping of the data, and LAFD transmits the data to DHS. The hard copy 902M is sent back to Ambulance Billing where it is ~~ored for one year, then sent to storage. It was noted that the data sent from Data Update is not edited for · validity. For this reason the staff of Ambulance Billing does not want to place this data into their system.

Process Map: A high-level process map for Ambulance Billing is shown below:

12 The City Attorney referral only applies to insurance billing.

PageA-4 LOS ANGELES FIRE DEPARTMENT FINAL REPORT ~ APRIL 12, 2004 BearingPoint

"Ambulance Billing

902M

City's Data by No En1ly EntelJ)rlse OUtslde Vendor Se,ver

Yes

No No No Hospital Research 2

Yes Yes BID PaUent ~o 1

Bii lnslnnce Co. No No Hospital Research 2

Yes Yes Yes BiDMediCal EJ BIIPaUent

PageA-5 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12_.2_00_4______earzngrozn.

System rebins No No Hospital Research 2 after 90 days 1-----

Yes Yes l

Accoll'lts Accotrts Receivable Receivable

PageA-6 LOS ANGELES FIRE DEPARTMENT FINAL REPORT ~ APRIL 12, 2004 BeatingPoint

No No No~

Yes Yes Yes

City Attorney Bii lns,..nco Co. Bii Patient Notice 1

No No No _L

Vos Yes~

Accoll'lts Receivable Bil Insurance Co.

Yes

Accounts Receivable Bii Patient

PageA-7 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12_.2_0_04------earing.roin.

City Attorney Notice2

>----No~

Yes

Bill Patient

Yes

Accounts Receivable

LAFD Accounts Receivable for Ambulance Billing The LAFD Accounts Receivable unit receives payments for various services including ambulance services, fire prevention permits, brush clearance, negotiated contracts for fire service, and subpoenas. There are ten employees with one vacancy in this unit, six of which are assigned to Accounts Receivables.

PageA-8 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t _AP_R_1L_12...... 2_00_4______earzngrozn.

Receipt of Payments Ambulance payments are received through four sources:

• US Mail • Lockbox • EFT (from VA and Medicare) • Accounts Receivable public counter US Mail Process: The US Mail usually arrives in the Accounts Receivable unit by 14:00 hours. Accounts Receivable clerks sort and open the mail. The undeliverable ambulance invoices are removed and sent to the Ambulance Billing unit. Payments are removed from the envelopes and processed in the Accounts Receivable unit. The undeliverable ambulance invoices and other Ambulance Billing mail, including insurance information attached to payments, are sent to the Ambulance Billing unit.

Lockbox Pro~ess: Insurance company payments and direct patient payments are received through the lockbox. Lockbox payments received are deposited immediately. A report with a copy of each check is delivered to Accounts Receivable the following day for posting.

EFT Process: Medicare and the Veteran's Administration make their payments through Electronic Fund Transfer (EFT). EFTs are received directly though the banking agency for the City of Los Angeles and the Office of the Treasurer is notified. The Office of the Treasurer notifies the Accounts Receivable unit the following day.

Public Counter Process: Patients and law office representatives are the main users of the public counter. The public counter is open from 7:30 a.m. to 4:30 p.m. to accept ambulance billing related inquiries and payments in the form _of cash, credit cards, or checks.

Law office representatives may request subpoenas and authorizations for a copy of the 902M. A process fee is assessed and the request is forwarded to EMS Billing Legal Section. A copy of the 902M is forwarded to Accounts Receivable from Ambulance Billing. The requestor can have the records faxed, mailed, or held for pick-up. In the case of a subpoena, they may also be dropped of at the courthouse.

Processing o~ Payments There are four different forms of payments:

• EFT • Checks

PageA-9 LOS ANGELES FIRE DEPARTMENT · ~ FINAL REPORT B · .n · t _A_PR_1L_12~,2_0_04------eqrzng~ozn.

• Credit Cards • Cash

Payment Posting Timelines The EFT payments received from Medicare and the VA are credited to the City of Los Angeles the same day of receipt. The Medicare payments are posted to the individual accounts electronically within one week from payment date. The VA payments are manually posted after Accounts Receivable receives the itemized report from the Office of the Treasurer.

Checks received at the public counter and through the US Mail are posted to the individual accounts and then deposited through the Office of the Treasurer.

Credit card payments received through the public counter can be processed immediately. Credit card. payments received through the US Mail and the lockbox as of August 2003 require additional processing. This additional processing was recommended by the Office of the Treasurer to minimize fraudulent ,'. transactions. The invoices are being modified to capture this information, but until this occurs the cardholder must be contacted for three items for verification purposes; the 3-digit verification code, the street number, and the ZIP code. The credit card payments are posted after the funds are credited to the q~_ of Los Angeles, which is verified through the Office of the Treasurer.

Cash payments are posted immediately after receipt.

Incoming Telephone Calls Process The Accounts Receivable unit receives many telephone calls from patients owing the LAFD for ambulance services. The reason for the calls may be:

• Low income/inability to pay • Payment arrangements • Refund requests If the caller claims low income a form letter is mailed explaining the documentation that is required to verify one's low-income status. Once the information is received, it is reviewed for qualification. If approved, the account is written off. If not approved, the patient will be encouraged to make payment arrangements.

Arrangements can be made for the patient to pay LAFD monthly. No interest or penalties are applied to the bill.

Page A-10 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . 'D • t _AP_R_1L_12.... 2_00_4______earzngrozn .

If a refund is requested, a form is sent to the patient for completion. The patient provides insurance information and the information is forwarded to Ambulance Billing Unit. The information is entered into a refund log. The refund claim form is sent to the Office of the City Clerk. A claim number is assigned and sent to LAFD. The refund is processed through the FMIS. The City Controller then issues a refund check.

Payment Posting Process Posting of the payments is done through the mainframe-based Ambul~nce Billing System,application. A retrieval option is provided for users to retrieve an account by patient name, invoice number, or incident date/number. To allow flexibility on the search, ITA developed a search engine in the Intranet environment. Payment posting is a separate independent function from the account information , display/update screen, and account information should not be made available by the system at the time payment posting is taking place.

EFT payments and insurance payments are multiples (several accounts on one check). The Receivables staff must balance the amounts on the payment with the report of payments. In the case of Medi-Cal, ITA receives the report of payments in tape form and loads the report. The accounts are automatically credited based on the read-out of the tape. If errors occur due to missing account numbers, an Accounts Receivables staff member manually resolves any problems with the read-outs. Accounts Receivable is two years behind schedule in posting and crediting the Medi-Cal payments due to shortage of staff in the past. The staff, however, is now fully staffed, working overtime, and intends to be back on schedule within the next few months.

Posting of Medicare~edi-Cal crossover accounts can be problematic for Accounts Receivables staff. For Medicare/Medi-Cal crossover accounts, the City bills Medicare. Medicare then forwards the bill to Medi cal using the internal Medicare account number. When Medi-Cal sends in payment for these bills, they provide EMS with only the Medicare account numbers, not the Fire Department invoice numbers. As a result, these payments were not being appropriately posted. A change was made to Ambulance Billing System in 2003 to capture the Medicare internal account numbers in the system during the Medicare payment remittance process. The account number in the Medi-Cal payment remittance file could contain either the LAFD account number or the Medicare account number (for the crossover account). Ambulance Billing System is now processing payments by performing a match using both account numbers.

Invoicing Process The payments are then invoiced. During this process, information regarding the account is written on the check (account number, revenue source, etc.). Next, the accounts are credited. The checks are then copied and imaged to CD. The CD is stored in the unit's safe.

PageA-11 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t _AP_R_1L_12_.2_00_4 ______earzngr'ozn.

On the third day of the process, the payments are readied for deposit. An Excel spreadsheet is completed with the payment information and the checks and spreadsheet are delivered to the LA City Treasurer by 12:00 hours.

Reconciliation Process The amount deposited and the amount credited to accounts then must be reconciled. The Accounts Receivable unit is approximately 10 months behind schedule in this process, but plan to catch up in the next few months now that they are fully staffed and working overtime. The staff is limited to nine hours overtime per week, per person.

If a check is returned to the Treasurer as NSF, the Treasurer will send the check to Accounts Receivable where the check is copied, revenue source documented, incident logged, and an adjustment is made to the account. The check is then sent to Accounts Payable for further follow-up and processing.

Posting· Unidentifiable Accounts If a pay,::nent is received and determined unidentifiable (usually from lack of information), the insurance company remitting the payment is contacted. This contact usually resolves the issue. If the unidentifiable payment was received via EFT, it is logged, the insurance company contacted and the patient account is updateionce resolved. The unidentifiable accounts do not hold up the depositing of funds.

Ambulance Billing System Write-Offs If an account has not been resolved after two years, the Ambulance Billing System (on July 1 of each year) generates a file of the outstanding balances. A recommendation is made for writing off the account. During the archive process accounts that have been in the system for two years are stored to tape. The archive tape is stored for future use.

Process Maps: High-level process maps for Accounts Receivable are shown below:

Page A-12 LOS ANGELES FIRE DEPARTMENT FINAL REPORT ~ APRIL 12, 2004 BearingPoint.

Incoming Telephone Calls

Patients provide Telephonic No Insurance lnfonnatlon lnfonnatlon

Yes Yes ''-<$>-"Yes Yes ! !

Mall form to Provide Provide Forward patient If Information on the 6 lnfonnatlon on the lnfonnatlon to requested procedure procedure EMS Billing

Semi refurnl form to requester

PageA-13 LOS ANGELES FIRE DEPARTMENT ~ ~AfP~Rl~L~1~2,~2~00~4;._FINAL REPORT ______,..... Bearingroint

Over-The-Counter Transactions

Patients provide OTC No No No Insurance - Information

Yes Yes Yes l

Forward Process fee for information to 6 902Mcopies 6 EMS Billing

Forward request to EMS Billing Legal Section

Copy of the 902M is forwarded to AIR

Copy is picked up by requester

PageA 14 LOS ANGELES FIRE DEPARTMENT FINAL REPORT ~ APRIL 12, 2004 BearingPoint

U.S. Mall Received

us MaH Received

Process Tax Payer No No No No No NO _, ID (W-9) Requests

Yes Yes Yes Yes Yes Yes !

EMSBIHJng cb Processes 6 6 Information

.. fnsuranca Information -Request for Reports -Liens AddiUonal lnfonnatlon Reconcile deposits -Undeffverable ambulance No with accounts bills requested -Itemized statement requests by Insurance Co. -Victim of Violent Crime verfflcatlon form -Bankruptcy fonns -Death certlficates -Newsletters AIR IOIWllrdS -Complaints Account Is Medicare EOB's to -Creditor Claims No-, Denial letter sent adjusted to zero to pallent EMSBIIHng balance I EMS Billing EMS Billing forwards Invoices pallent or applicable adjustments to secondary AIR insurance

AIR processes Patient Account adjustments

Page A-15 LOS ANGELES FIRE DEPARTMENT FINAL REPORT ~ APRIL 12, 2004 BearingPoint.

Cash or Check No No No Payment

Yes Yes

Record payment In Process Credit _, Can! Peyment No Write-Off Log Book

Yes l Deposit with the Post Payments to Post Payments to EMS EMS Office of the Treasurer

Post Payments to EMS and Deposit with tho Office of Payment Process the Treasurer

No~

Yes

B of A notifies PrOCheckto Adjust PaUent's pursue payment Account and EMS Issues en Invoice

Request check for the Office of the Adjust Revenue Treasurer to Source Account reimburse fund

PageA-16 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t _AP_R_1L_12_.2 ...00_4·------earzngrozn.

Refund Process

Forward to Send refund claim Assign a claim AIR Process Enter lnfom,ation Process tho refund Generel fom,s to Office of number and send refund request Into a refund log through FMIS AceounUng the City Clerk back to LAFD

Controller Issues refund cheek

PageA-17 LOS ANGELES FIRE DEPARTMENT FINAL REPORT ~ APRIL 12, 2004 BearingPoint

Posting Unidentifiable Accounts

Deposit poymont Contact Ins. Co. Log unldenllnable Update PaUent's 5 through the Office -> _, for Account 1---t amount Account ~y~ -- of tha Treasurer lnlonnaUon

Yes

! Yes Contact patlenU Ins. Co. for Account 1 lnlonnaUon Log unidentifiable l amount Deposit Payment and update Account 1 Contact Ins. Co. for Account Information l

Update Patient's Account

Page A-18 LOS ANGELl:S FIRE DEPARTMENT -~ FINAL REPORT APRIL 12, 2004 BearingPoint.

EMS Billing Write-Off Flow Chart

Emergency Medical No ,C,ccount remain~ Services acUve Billing System

Yes

On July 1 the EMS System generates a file of pattenrs outstanding balances

Recommend to the Board of review forwnte- off

Write-off approved

Archive Patient's account

Page A-19 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t · _AP_R_1L_12~.2_0_04______earzng.rozn.

Appendix 8-Approach and Methodology

BearingPoint used a four-phased approach to assess the LAFD's "current billing and collections process and develop strategies for improvement. The four phases are as follows: ·

Phase I-Data gathering and as-is process development Phase 2-Development of a cost of service model Phase 3-Comparative analysis Phase 4--Development of findings and strategies for improving collections

Phase 1-Data Gathering and As-ls Process Development

The objective of this phase was to gain an understanding of the Ambulance Billing process through interviews, focus groups, data gathering and review, and identification of issues impeding the LAFD's ability to collect for ambulance services. Data gathering was done through a review of documents, interviews, and focus groups.

Some of the documents reviewed are highlighted below:

• Summary and financial reports for fiscal years 2002 and 2003 • Departmental policies and procedures • Departmental organizational structure • Downloads of incident data • Ambulance Transport Fee Analysis • LAFD budget • LAFD maintenance and supply costs BearingPoint conducted a review of these materials to provide the team a basic framework of understanding of the LAFD ambulance billing and collections process, organization, and history. Based upon this review, the team developed questionnaires to serve as guidelines for further fact-finding activities.

Using these questionnaires, the BearingPoint team conducted a series of interviews and focus groups with the following City and LAFD representatives:

• LAFD staff including executives, paramedics/EMTs, billing, finance, IT and management personnel

Page 8-1 ~ LOS ANGELES FIRE DEPARTMENT ,,,-,,,,,-· ~ _~_::_,t_~_;_~~-~_: ______/Jearingl'oint

• Chief Administrative Office staff • Information Technology executive team and staff In order to assess the overall process, as-is process maps were developed. The approach used to document the process is described in the diagram below:

Questions were asked regarding the input of data, the activity that occurs related to processing the data and forms, and the output of the data and forms.

In addition to conducting interviews and focus groups, the BearingPoint team participated in three days of ambulance ride-alongs. The two main objectives were to:

• Gain a first-hand perspective of the data-capture process • Gain an understanding of the environment in which paramedics and EMTs work The BearingPoint team then developed detailed process maps documenting the billing and collections processes. These process maps were created and validated through additional interviews and focus groups with the key individuals previously identified.

At the completion of this five-week phase, BearingPoint presented preliminary findings and draft as-is process maps to the LAFD working group. The findings provided a validation point and focused the team's efforts for the remaining phases.

Phase 2-Development of a Cost of Service Model

Phase 2 focused on assessing whether the LAFD's fee structure is in line with the costs of providing ambulance services. While completing the data-gathering activities of Phase 1, the BearingPoint team commenced activities for Phase 2. During this three-week effort, the team collected financial data from the LAFD and the CAO's budget staff in order to assess cost drivers. Based on this assessment, observations were developed and validated with the LAFD.

The cost model was used as a basis for evaluating findings, evaluating outsourcing alternatives, and to assess whether the LAFD's fee structure was in line with the fees charged.

PageB-2 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L_12_.2_00_4 ______earingroin.

Phase 3-Comparative Analysis

Phase 3 compared LAFD ambulance transport services with other fire departments in order to:

• Compare ambulance billing and collection processes • Compare collection rates • Assess technology used throughout the process • Identify if outsourcing agencies had been used and the affect on collection rates • Obtain any lessons learned that could be applied to the LAFD process During this four-week phase, the BearingPoint team's initial task was to create a questionnaire and data request sheet that would serve as the basis for capturing benchmark information from other fire departments. The team conducted meetings with LAFD and City staff to pinpoint this data and used it to develop a specific data request sheet and interview questionnaires . . The BearingPoint team also met with LAFD and City staff to identify the cities or agencies against which the benchmarking process should be performed. Based on key selection criteria such as city geographic and population size, use of .new technology (i.e. PDA, etc.) and use of an outsourcing agency, the following fire departments were selected for comparison:

•.-. San Antonio Fire Department • Houston Fire Department • Cleveland Fire Department • San Diego Fire Department • San Francisco Fire Department • Chicago Fire Department • New York Fire Department Through a combination of phone calls and emails, BearingPoint attempted to collect benchmark data from all seven agencies. Only the Houston and San Diego fire departments responded.

Phase 4-Development of Findings and Strategies for Improving Collections

This phase developed findings and strategies based upon data gathered in the prior three phases. Using the criteria established at the initiation of the project, preliminary findings were developed and presented to

Page B-3 .. LOS ANGELES FIRE DEPARTMENT ~- FINAL REPORT B · .n · t _AP_R_1L_12.... 2_00_4______earzngrozn .

the working LAFD group within four weeks of the project start. During the remainder of the project, these findings were validated with staff and short and long-term strategies were developed.

The strategies were developed with input from the LAFD working group. Additionally, the team researched healthcare industry benchmarks ,and best practices to provide points of reference and comparison to LAFD's billing and collections data processes and metrics.

To further assess the billing and collections process and identify opportunities for increased cash collections and revenue enhancement, BearingPoint reviewed a data download of a portion of LAFD's accounts receivable. This data download was used to perform the following:

Account sampling: A sample of 3?2 accounts was selected from the total population of 14,149 accounts. These accounts were reviewed for account aging, invoice date, expected payment, actual payment, date of payment, adjustment amounts, and account comments. The sample population was categorized into distinct categories with associated dollar values. The dollar values were then extrapolated to the entire sample and annualized. Some categories indicated an opportunity for increased cash collections and revealed process issues.

Cycle times: The account sample was used to evaluate processes within the LAFD Billing and Collections department. Specific process areas reviewed were:

• Days to "drop a bill" ( days from date of incident to date of invoice) • Days in AR ( days until account is resolved) • Follow up processes for zero payments • Follow up processes for partial payments • Cash posting Outsourcing agencies were also interviewed to determine types and level of service. No official costs were provided during the interviews but the team was unable to determine ranges of costs, which are presented under separate cover.

Page B-4 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t _AP_R_1L_12.... 2_00_4______earzng.rozn.

Appendix C-Glossary of Terms

Term Definition ALS Advanced Life Support · BLS Basic Life Support CHP California Highway Patrol OHS Department of Health Services DVS Digitized Voice Dispatching EFT Electronic Funds Transfer EMS Emergency Medical Services EMT Emergency Medical Technician FIRS Fire Incident Reporting System IT Information Technology LAFD Los Angeles Fire Department LAPD Los Angeles Police Department NFIRS National Fire Incident Reporting System NSF Non Sufficient Funds PSAP Primary Safety Answering Point SSAP Secondary Safety Answering Point SSN Social Security Number

Page C-1. LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . R . t. _AP_R_1L_12..... 2_00_4______earing vzn.

Appendix D-Outsourcing Questionnaire

BearingPoint developed and distributed a questionnaire designed to retrieve information regarding the outsourcing of !he ambulance billing functions. The objective was to determine reasonable expectations for services provided, service costs and quantifiable benefits.

Two responses were received--one from ACS, the other from Accordis. These responses are provided on the following pages.

Page D-1 (

LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . R . t _A_PR_,L_12_.2_0_04------earing vzn.

Company Name: ACS, Inc. (State and Local Solutions)

Number of years servicing Fire Departments: Since 1982

Where are your solutions currently implemented? We created the electronic field data collection system for our clients in 1995. We have since offered it to:

• Houston, TX (1995) • Philadelphia, PA (1999) • Columbus, OH (2002) • New Orleans, LA (2002) What types of "packages" are offered; do clients have the option of choosing individual functions they want to outsource? ACS offers EMS Information Management and Billing Services as part of a combined service contract. It is a "tum-key" solution and we believe this is the best business model to provide our clients with the greatest revenue returns. Our services are part of a complete package and not sold as separated parts.

What types of technology can be used for particular solutions? What are typical costs? Our technology solution has three parts. They are as follows:

• Front-end electronic field data collection system • An EMS billing system • A robust data warehouse system There is no up-front cost for this solution. ACS provides all of these systems as part of a service contract. We are paid a contingency fee on net collections received on behalf of the Client for EMS transportation.

What is the timeline for implementation of a chosen solution? It typically takes 6 month.

What are the typical billing cycle times for comprehensive outsourcing? What about other "packages?" In our system, we can send out claims for reimbursement is less than a week. Most of the time it takes two days - from date of service to filing of the claim. Consequently, we receive payments from third party healthcare reimbursement programs in 45 day or less in most situations.

Page D-2 · )

LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t ...A .....PR ... 1L_12_. 2... 00_4______earzngrozn.

What are the demonstrated benefits to outsourcing with your company? Do you have reference contacts? · We know our system creates the ability to completely reconcile all transport records - this eliminates· "paper slippage" or lost transport revenue. The system improves revenue cycle management by reducing the total AR "DSO" or days-of-sales-outstanding - as explained above. The system dramatically improved documentation, which has a whole host of benefits; i.e. ·1ess claims denials for lack of "medical necessity" and the Patient Care Reports are more legible, with correct spelling of words. We have improved revenue for our clients by implementing an electronic field data collection system.

What are the standard metrics used by your company, and how are they translated to reportable/verifiable increased revenues, cash flows or cost savings for Fire Departments? We focus on ''year-to-year" revenue increases. Most agencies use "collection rates" -which are important but can vary greatly from region to region. For example - Medicare sets its fee schedule based on the geographic practice cost index or GCPI. If this number is larger, (like in San Francisco) the amount reimbursed for the total allowable is greater than the national average. If the number is smaller, (like in Ohio) the amount reimbursed is less than the national average. I have attached the final rule for the new Medicare Ambulance Fee Schedule !egarding the issue to this document.

What are the costs for services provided? When and how are your fees collected? Our fees involve the provision of both a technical solution and billing services for EMS transportation. They are higher than a "plain" paper billing service, which does not provide a technical solution. The fees are typically based on a set contingency and calculated off of net revenues to the client.

Who are your competitors? Wittman Enterprises, Allied Information Services, ADP, and Accui-Med are a few of the ones that I know of in the market place.

Page D-3 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT D • _AP_R_1L_12_.2_0_04 ______Bearzng.roin. . . t

Company Name: Accordis Inc.

Number of years servicing Fire Departments:

Accordis has been providing billing and collection services to Fire Departments since 1996, although we have been processing EMS claims for other providers as far back as 1993. Fire Departments have been outsourcing their entire business office to Accordis since 2000.

Accordis has been partnering with municipal and private healthcare providers for the past 30 years.

Where are your solutions currently implemented? The following municipalities have outsourced all billing and collection activity to Accordis by selecting our EMS billing solution through a competitive procurement process:

• . Chicago, IL

.• New York City, NY

• Phoenix, AZ

In addition, the following hospital-based EMS providers have outsourced to Accordis the billing and collections activity on their transport accounts:

• Lutheran Medical Center (Brooklyn, NY)

• Victory Memorial Hospital (Brooklyn, NY)

• Williamsburg Regional Hospital (Kingstree, SC)

What types of "packages" are offered; do clients have the option of choosing individual functions they want to outsource? Accordis provides a wide range of services to each of our EMS transport providers. We customize our solution to meet the needs of each of our clients. While most EMS providers who consider outsourcing generally rely on one vendor to perform all-payer billing and collection activity for every billable transport, others may opt to refer groups of unliquidated accounts that have aged a certain time period from date of transport. Additionally, the services provided are based upon the client's requirements. Some client would like only soft collections, but others may also include Bad Debt collections as well as legal services.

Page D-4 LOS ANGELES FIRE DEPARTMENT · ~ FINAL REPORT B · ,n · t _AP_R_1L_12.... 2_00_4______earzngrozn.

What types of technology can be used for particular solutions? What are typical costs? The Accordis solution is tailored to the desires of the client. Our proprietary billing and collections system was developed and continues to be maintained internally. Aside from billing and collection software, the method EMS providers utilize to gather field data varies from a manual process to electronic technology that utilizes field-based handheld computers and software to capture patient, demographic, insurance, and clinical treatment data subsequently used to facilitate the reporting, billing and collection processes. Our proprietary billing and collections software currently interfaces with this type of field data software and hardware to provide a seamless transition of data. Our solution also accommodates the manual collection of this data through a manual call report completed by the EMS provider in the field.

Costs for these services vary· widely depending on minimum requirements, including software license fees, hardware requirements, receiving hospital printing requirements, number of EMTs utilizing the hardware, maintenance agreement packages, training costs, docking station requirements and other data transmission requirements (wireless and otherwise), etc.

What is the timeline for implementation of a chosen solution? The implementation timeline will vary by EMS provider depending on the client's specific requirements. Among some of the variables that must be accounted for and scheduled appropriately are the following:

• Is the field data capture process electronic or paper-based? • Is electronic field data capture part of the requested solution? • Are there special city, county, or state reporting requirements that must be met? • What are the training requirements of city personnel for navigating within Accordis' billing system? • What are the training requirements of field EMTs for working with handheld field technology (if applicable)? Generally, for a standard billing and collections engagement, Accordis' typical implementation timeframe is 30 to 90 days.

If an EMS provider is also looking for an electronic data capture solution, the implementation timetable can be much longer depending on the software package selected, the hardware specifics, and training associated with their use and application throughout the organization.

What are the typical billing cycle times for comprehensive outsourcing? What about other "packages?" Accordis is able to issue a claim or a patient statement within 24 hours from the time we receive EMS transport data that has undergone the appropriate medical coding/medical necessity determination.

Page D-5 LOS ANGELES FIRE DEPARTMENT ~ _AP_R_1L_12_.2_0_04FINAL REPORT ______Bearzng.rozn. · .n · t

Subsequent follow-up on submitted claims and additional patient statements are performed at regular intervals until the account is denied and not able to be pursued, or until the patient-responsible balance becomes delinquent. In these cases and if the client desires, Accordis has a wholly-owned subsidiary bad debt collection agency to_ facilitate bad debt collections according to the Fair Debt Collections Practices Act (FDCPA).

What are the demonstrated benefits to outsourcing with your company? Do you have reference contacts? There are a variety of benefits associated with partnering with Accord is for delivery of these services, including:

• 30 years of experience processing healthcare claims to governmental and commercial payers, as well as patients themselves (including 11 years processing EMS transport claims). • Proprietary billing system software that is customized for EMS and healthcare billing.

f ,,. • 700,000 annual EMS transports processed, with a near unlimited volume capacity to accommodate additional volumes. • . Proprietary technology to locate valid third party insurance on accounts misclassified as self pay prior to patient billing. • :An in-place, proven flexible model, allowing for small, medium and large volume; municipal and private EMS billing and collection engagements. • Flexible reporting capabilities, including a report package customized for municipal and private EMS provider use. -~· • A history of increasing EMS transport collections by at least 30 percent over client performance in the first year of the engagement. • . A Web-based account inquiry capability where client staff are able to review and audit Accordis' patient billing activity and payment history in real-time. • Customized written standard operating procedures designed to meet each client's requirements. Accordis has several current client contacts that we use as references. Los Angeles Fire Department management representatives may contact the following individuals who have worked with Accordis for EMS billing and collections and can address our ongoing performance levels:

• New York City Fire Department - Richard Brennan, Deputy Director - Bureau of Revenue Management, 718.999.0106 • Victory Memorial Hospital- Joseph Mazzella, Director of Patient Accounts, 718.567.1006

PageD-6 ~ LOS ANGELES FIRE DEPARTMENT _,,,,--- ~ FINAL REPORT B · .n · t _AP_R_1L_12_.2_00_4_. ------earzngrozn ..

What are the standard metrics used by your company, and how are they translated to reportable/verifiable increased revenues, cash flows or cost savings for Fire Departments? Accordis approaches each engagement having performed an in-depth analysis of the staffing models, costs, and prior liquidation rates that a Fire Department and/or municipality is able to attain. At the same time, this assessment also affords Accordis the opportunity to identify potential shortfalls in process or staffing expertise to which we may be able to correct and apply our best practices approach in order to accelerate and improve cash collections.

Accordis billing and collection service centers utilize performance metrics designed to supplement a quality assurance program. Examples of these metrics include volume and hold time associated with incoming calls, and claim volume per Accordis Customer Service Representative.

Externally, Accordis monitors best practice statistics to monitor accounts receivable performance. These may include: percentage of accounts receivable aged greater than 90 days, transport to initial bill time, and transport claim denial rates.

What are the costs for services provided? When and how are your fees collected? Fees for services provided vary widely depending on several municipality-specific variables, including:

• Services desired by client (e.g., soft collections, bad debt collections, legal collections, frequency of mailed statements and/or letters, and outbound call series • Integrity of demographic and clinical information gathered in the field • .epayer mix • Volume of billable transports • Medical necessity determination and medical diagnosis coding • Medicaid reimbursement rates • Use and application of handheld data capture technology in the field (and if such software and hardware is the vendor's responsibility to provide) Regardless, the Accordis EMS Billing and Collections solution affords the client with several pricing models based upon the requests of our clients as well as state regulations. Our most frequently used pricing models include: a no-risk contingency fee model where we are paid a percentage based only on what we are able to collect, a flat fee model to cover all costs associated with processing transport claims either monthly or on a per-transport basis, or a combination of both.

PageD-7 .. ,

LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B . R . t _AP_R_1L_12.... 2_00_4______earing vzn.

In addition, within some jurisdictions, the Medicaid oversight agencies prohibit charging a contingency fee on.Medicaid recoveries; in these cases, Accordis will charge a per Medicaid claim fee in addition to a contingency fee for all other revenues.

Who are your competitors? Accordis has no direct competitors that offer our proprietary functionality.

Page D-8 l''

LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t ....AP_R_1L_12_.2_00_4______earzng.rotn.

Appendix E-Benchmarking Responses

As part of this study, the LAFD and BearingPoint compiled a list of fire departments that LAFD wanted to contact for benchmarking efforts. The first task was to determine which cities shared ambulatory experiences similar to those of the City of Los Angeles. After some research, San Antonio, Houston, Cleveland, San Diego, San Francisco, and New York were jointly selected for benchmarking. The selection criteria for these cities were based on size, use of new technology (e.g., PDAs) and use of outsourcing.

The fire departments chosen were in the following cities:

(1) San Antonio (2) Houston (3) Cleveland (4) San Francisco (5) San Diego (6) New York

The California cities contacted to provide fee comparison information were:

(1) Huntington Beach (2) Sacramento Private (3) Palo Alto (4) San Francisco (5) Sacramento Fire (6) Los Angeles City (7) Pasadena (8) Los Angeles County (9) Burbank (10) Arcadia (11) San Bernardino City Fire (12) San Diego (13) Oakland Administrative Offices

Page E-1 ~ LOS ANGELES FIRE DEPARTMENT ,,,,,.,.-- ~ FINAL REPORT B · .n · t _A_PR_1L_12_.2_0_04------earzng.rozn.

Once the Cities and Fire Departments were identified, BearingPoint and LAFD developed a questionnaire to capture information pertinent to the effort. Several meetings were held with LAFD officials to pinpoint which data was most important to them. This information was merged with questionnaires from similar efforts and a document was created to capture the necessary information. Through a combination of phone calls and emails, each of the cities listed above reviewed a copy of the questionnaire.

Six departments were contacted, two responded formally. The responses provided by Houston and San Diego is provided on the following pages. Additionally, several California cities were also contacted in order to collect and' compare additional ambulance billing data.

Page E-2 · LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · · t _AP_R_1L_12..... 2_00 .... 4------earzngrozn .

· San Diego Fire Department Information

Date: 10/13/03 City Fire Dept: San Diego Fire -Rescue Contact Name: Perry Peake, Return Fax#: $*213.955.8744 Contact Title: Deputy Chief, EMS Attn: Rachel Wagner Contact Phone #:619-533-4306 The following data request sheet supplements our phone interview. As we discussed, please complete each question to the best of your ability and return to the Fax number listed above in the next three days. Thank you in advance for your time and efforts. Ref.# Question Response Overview 1. Annual budget for your Fire Department (2002)? SDFD $124 Million SDMSE $40 Million 2. Number of fire stations within your Department? 44 EMS 3. What is the cost to patients for ambulance transport? APC $673.00 4. How was this transport cost derived? 5. What is the percentage of calls responded to vs. the actual 72% transports? 6. Ambulance Billing 7. Number of staff in Ambulance Billing? 25 8. Approximately how many forms (or data transfers) are processed 150 each day? How many invoices are issued daily? 9. What is the average time from the acceptance of the emergency call 24 hours to the receipt of the data from ttie field into Billing? 10. What is the average time from the receipt of data in Billing to the 5 days invoicing of the patient? 11. What is the average time from billing of the patient to the time the 50 days remittance of payment? Accounts Receivable 12. Percent of Accounts Receivable over 30 days? 13. Percent of Accounts Receivable over 60 days? 14. Percent of Accounts Receivable over 90 days? 15. Percent of Accounts Receivable over 120 days? 16. Account Management 17. What is the total amount billed each year for ambulance services? Not available 18. What is the total revenue collected each year for ambulance $43 Million services? Technology 19. If not in use, does the Fire Dept. plan on implementing electronic YES field data in the near future (1 to 3 years)?

Page E-3 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · ,n · t _AP_R_1L_12_.2_00_4______earingroin .

20. How does the Fire Dept. transmit data to the Ambulance Billing Some Electronic some department, if not electronically (using handheld or other portable paper, in transition devices) (i:e., hard copy form, call in, field entry)? Electronic Data Entry 21. What was.the cost to implement the electronic data entry $300K technology? 22. How many handheld devices are owned by the department, if any? LLC&Dept 100+ Outsourcing 23. What is the annual fixed cost for using the outsourcing company? N/A 24. What percentage of revenue collected goes to the outsourcing NIA company?_ 25. Does the outsourcing company provide the hardware and software N/A for data capture? 26. If the outsourcing company provides hardware and software, how is N/A the data captured in the database? 27. If the outsourcing company provides the hardware and software, are N/A . ,.,. " these costs factored into the annual costs?

.' .... •; . ~

PageE-4 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT · B · .n · t. _AP_R_1L_12..... 2_00_4_·------earzng.rozn ~

Houston Fire Department Information

Date: 9/29/2003 City Fire Dept: Houston Finance & Admin. Dept Contact Name: Gary Gray Return Fax#: $*213.955.8744 Contact Title: Assistant Director Attn: Rachel Wagner Contact Phone#: 713-837-9660 The following data request sheet supplements our phone interview. As we discussed, please complete each question to the best of your ability and return to the Fax number listed above in the next three days. Thank you in advance for your time and efforts. Ref.# Question Response Overview 28. Annual budget for your Fire Department (2002)? Budget was $258.37 million 29. Number of fire stations within your Department? 88 EMS 30. What is the cost to patients for ambulance transport? Avg Bill is $540 31. How was this transport cost derived? EMS Annual Cost Study 32. What is the percentage of calls responded to vs. the actual Approx 58% of the calls transports? result in a transport. Houston responds to approx 244,000 annually, about 58% of these calls turning into a transport. 33. Ambulance Billing 34. Number of staff in Ambulance Billing? Billing is Outsourced 35. Approximately how many forms (or data transfers) are processed Avg Transports billed per each day? How many invoices are issued daily? day is 396 36. What is the average time from the acceptance of the emergency call 2 to 5 business days to the receipt of the data from the field into Billing?

Page E-5 LOS ANGELES FIRE DEPARTMENT ~ FINAL REPORT B · .n · t _AP_R_1L... 12_. 2_00_4______earzngrozn.

37. What is the average time from the receipt of data in Billing to the We make phone calls to invoicing of the patient? all accounts within 5 days after transport. Purpose of . call is to confirm or receive patient insurance ..... , info so we can bill patient insurance accurately. We bill insurance as soon as it is confirmed. For accounts without insurance, 1st billing .. notice goes out to patient 7 days after receipt of file. Under Chapter 241 of the Texas Health and Safety Code, we also receive a "flat" format file from the hospitals that contain HIPAA compliant patient records, name, address, phone, insurance, etc. 38. "i!• What is the average time from billing of the patient to the time the 60 to 90 days for

- • • l ~ remittance of payment? Medicare, Medicaid and Insurance. Self pay accounts typically take a concerted collection effort consisting of phone calls and notices. Of those that pay, they pay within 6 ., ;,,... ,,: months of transport. .. However, 90% of those without insurance, never pay. Accounts Receivable 39. Percent of Accounts Receivable over 30 days? Approx 98% 40. Percent ofAccounts Receivable over 60 days? Approx95% 41. Percent of Accounts Receivable over 90 days? Approx92% 42. Percent of Accounts Receivable over 120 days? Approx89% 43. Account Management 44. What is the total amount billed each year for ambulance services? $74 million gross 45. What is the total revenue collected each year for ambulance $23.5 million gross services? Technology 46. If not in use, does the Fire Dept. plan on implementing electronic We are currently in the field data in the near future (1 to 3 years)? process of updating a system that has been in use since 1997. All 101 ambulance units will receive laptop computer unitl? for entry of the patient care report.

Page E-6 ., " , ;;.., •f, \ \ .t

47. How does the Fire Dept. transmit data to the Ambulance Billing Daily FTP file department, if not electronically (using handheld or other portable devices) (i.e., hard copy form, call in, field entry)? Electronic Data Entry 48. What was the cost to implement the electronic data entry $0 - the billing contractor technology? provided it at no extra charge as part of their proposal to the City for billing and collections 49. How many handheld devices are owned by the department, if any? Houston will own 101 units when the system is fully implemented Outsourcing 50. What is the annual fixed cost for using the outsourcing company? There are no fixed costs - they only get paid a percentage of what they collect. · 51. What percentage of revenue collected goes to the outsourcing 14% company? 52. Does the outsourcing company provide the hardware and software Yes for data capture? 53. If the outsourcing company provides hardware and software, how is 2 ways - dial up or the data captured in the database? transmitted over the cellular network 54. If the outsourcing company provides the hardware and software, are It is part of their 14% fee these costs factored into the annual costs?

PageE-7 J. MICHAEL CAREY ..,(TY OF Los ANGELL ~' Office of the City Clerk CALIFORNIA CITY CLERK Council and Public Services FRANK T. MARTINEZ Room 395, City Hall Executive Officer Los Angeles, CA 90012 Council File Information - (213) 978-1043 General Information - (213) 978-1133 When making inquiries Fax: (213) 978-1040 relative to this matter refer to File No. HELEN GINSBURG ·JAMES K. HAHN Chief, Council and Public Services Division 03-0814 MAYOR

PLACE IN FILES JUL 2 9 ?OD3r.,v' July 24, 2003 DEPUTY ""0

City Administrative Officer Controller, Room 300 Chief Legislative Analyst Accounting Division, F & A Fire Department Disbursement Division Information Technology Agency

RE: LOS ANGELES FIRE DEPARTM~NT AMBULANCE BILLING PROCESS REVIEW

; . + ~ ,,.. +' ·,./ t. At the meeting of the Council held July 9, 2003, the following action was taken:

Attached report adopted ...... ·--~X~-- Attached motion ( - ) adopted ...... ______Attached resolution adopted ...... ______Mayo:r- approved ...... ·------FORTHWITH ...... ------Ma yo :r- concurred ...... --=0'-'7_--=2=-=l=---0=3"'-- To the Mayor FORTHWITH ...... ·------Motion adopted to approve committee report recommeridation(s). ··------Motion adopted to approve communication recommendation(s) .... ··--~X~-- Generally exempt ...... ______Negative Declaration adopted ...... ------EIR certified ...... ·...... ------Mayor failed to act - deemed app:r-oved ...... ------Mayor vetoed ...... d~~~ --

City Clerk bs

@l!)u• a;::,, AN EQUAL EMPLOYMENT OPPORTUNITY - AFFIRMATIVE ACTION EMPLOYER Recyclable ard made ~om recycled waste. w RECEIVED Mayor's Time Stamp City Cle~T,YsC~.fn.i~S~f~ ZffiJ JUL I I AM 9: q6 ,;-;::-nc;·,,::.. r .?· . ,. I • \ f - I .. - CITY CLERK ··03 JUL 11 A9 :48 BY___ --,::::-,~,,,..., DEPUTY

SUBJECT TO MAYOR'S APPROVAL

COUNCIL FILE NO. 03-0814 COUNCIL DISTRICT NO.

COUNCIL APPROVAL DATE July 9, 2003

RE: LOS ANGELES FIRE DEPARTMENT AMBULANCE BILLING PROCESS REVIEW

LAST DAY FOR MAYOR TO ACT . p.·11 2 12003 (10 Day Charter requirement as per Charte ~ction 341)

DO NOT WRITE BELOW THIS LINE - FOR MAYOR OFFICE USE ONLY

*DISAPPROVED

*Transmit objections in writing pursuant to Charter Section 341

.DATE OF MAYOR APPROVAL OR DISAPPROVAL ~-J1U~l_2~1-~~~ ,....., 0 ~ e...... c_ =< 0 c:= -l ... o:r.J ; Fi; f"T'l f --< N 0 .:o~:;;<,: r ' rn -0 u5

JULJvU 2 2'_20((1' IS

COMMITTEE MEMBER YES NO ABSENT Councilmember Cindy Miscikowski, Chair C~uncilmember Perry Councilmember Weiss Councilmember Pacheco Councilmember Zine

Remarks b .'f('..• :e_t--.A

Maria L. E~pinoza, Legislative Assist_ant ------:--:------,,.------==--.,.~-----i. __ Tel~phone 9?8-l 078 -~ ' -4------: -~ B~AND lifflANelfr-€0MMI'rTEE-' _:J - -- J•. eporti. ommunication for Signature . 1 Council File Number: '(jJ- 0 ff i_ . Committee Meeting Date: b-,,, 03 Council Date: -

COMMITTEE MEMBER YES NO ABSENT Councilmember Nick Pacheco, Chair ~ ,, / I Councilmember Weiss ,,,-.- ' Councilmember Hahn \/"' Councilmember Miscikowski v Councilmember Garcetti ,./"' Q:) ' Remarks A0-=>(1" M-~c-nd,,

Adrienne Bass, Legislative Assistant ------Telephone 978-1073 File No. 03-0814 TO THE COUNCIL OF THE CITY OF LOS ANGELES

Your BUDGET AND FINANCE Committee reports as follows: Yes No Public Comments: _x_ _

BUDGET AND FINANCE COMMITTEE REPORT relative to the Los Angeles Fire Department (LAFD) ambulance billing process review.

Recommendations for Council action, SUBJECT TO THE APPROVAL OF THE MAYOR:

1. CONCUR in the recommendations of the Chair and Member, Public Safety Committee, in their report dated June 30, 2003.

2. INSTRUCT the Fire Department to report back in 6 months on the status of the ambulance billing process.

Fiscal Impact Statement: The CAO reports that the Fiscal Year 2002-03 General Fund impact of proceeding with the Bearing Point proposal will be $106,665. The cost to implemer:1t Bearing Point's recommendations cannot be determined at this time. Reduced ambulance bill generation costs and revenue enhancements of up to $1.5 million annually are projected from reengineering of the ambulance billing processes.

Summary:

In a report dated March 27, 2003, the CAO states that the LAFD responds to all 9-1-1 emergency medical service requests within the City. In instances when paramedics provide sufficient medical care at the scene, the patient is not transported to the hospital. Under such circumstances, there is no charge for the services rendered. Fees apply only to patients who are transported to a hospital via an LAFD ambulance.

Currently the LAFD completes a County prescribed paper emergency medical form (F902M) documenting any and all treatment performed on a patient. Using this information, the LAFD Emergency Medical Services Billing Unit manually enters the F902M data into the mainframe based ambulance billing system to generate the required bill.

The CAO reports that, on December 18, 2002, the Mayor directed the CAO to assemble teams of Department heads and CAO staff to perform various functional studies to identify ways to promote efficiencies that will result in savings that can be used to improve City service delivery. The LAFD ambulance billing process was one of the functions selected for study.

A team comprised of the ITA General Manager and various CAO systems and budget staff, supported by LAFD and ITA staff, concluded that significant revenue enhancement and cost savings would result from a targeted assessment of the ambulance billing process and application of best practices utilized in other jurisdictions. The study team recommends the selection of Bearing Point (formerly KMPG Consulting) from that list to perform a rapid assessment of the ambulance billing process under the direction of the CAO and departmental staff.

In its March 27, 2003 report, the CAO concludes that since the current ambulance billing system is paper-based, it has become apparent that there is an opportunity to reengineer the process using advanced, state-of-the-art technologies. Such an approach will streamline the billing process dramatically, reduce billing support costs, improve and simplify service provided to the public and increase ambulance billing revenue to the City.

On June 2, 2003, the Chair and Member of the Public Safety Committee approved the CAO recommendations with an amendmentto include the CLA under recommendation number one. On June 11, 2003, the Budget and Finance Committee concurred with the Chair and Member of the Public Safety Committee and added one recommendation for the Fire Department to report back in 6 months on the status of this new ambulance billing process.

This matter is now being forwarded to Council for its consideration.

Respectfully submitted,

BUDGET AND FINANCE COMMITIEE

MEMBER VOTE PACHECO YES WEISS ABSENT HAHN YES MISCIKOWSKI YES GARCETII YES

f2.GiFr.< AB 6-30-2003 ADOPTED #030814a JUL O9 2003 LOS ANGELES CITY COUNCIL COMMUNICATION

TO: LOS ANGELES CITY COUNCIL File No. 03-0814

FROM: COUNCILMEMBER CINDY MISCIKOWSKI, CHAIR COUNCILMEMBER DENNIS P. ZINE, MEMBER PUBLIC SAFETY COMMITTEE

Public Comments

COMMUNICATION FROM CHAIR AND MEMBER, PUBLIC SAFETY COMMITTEE relative to the Los Angeles Fire Department (LAFD) ambulance billing process review.

Recommendations for Council action, SUBJECT TO THE APPROVAL OF THE MAYOR:

1. INSTRUCT the Office of the City Administrative Officer (CAO), with the assistance of the Chief Legislative Analyst (CLA), the LAFD and the Information Technology Agency (ITA), to immediately initiate the Bearing Point review at a cost not to exceed $106,665 and to report back to the Mayor and Council within 90 days with projected revenue enhancement and cost savings projections associated with reengineering of the ambulance billing process and a recommendation concerning how to proceed.

2. TRANSFER $106,665 from the Reserve Fund to the Unappropriated Balance and APPROPRIATE therefrom to the CAO Fund No. 100/10, Contractual Services Account No. 3040 to finance the cost of the Bearing Point review.

3. INSTRUCT the 3-1-1/E-Government Steering Committee to consider the findings and recommendations of the Bearing Point Study and proceed to explore the use of electronic payment options for ambulance bills should Bearing Point indicate that this is feasible or desirable.

Fiscal Impact Statement: The CAO reports that the Fiscal Year 2002-03 General Fund impact of proceeding with the Bearing Point proposal will be $106,665. The cost to implement Bearing Point's recommendations cannot be determined at this time. Reduced ambulance bill generation costs and revenue enhancements of up to $1.5 million annually are projected from reengineering of the ambulance billing processes.

Summary:

The LAFD responds to all 9-1-1 emergency medical service requests within the City. In instances when paramedics provide sufficient medical care at the scene, the patient is not transported to the hospital. Under such circumstances, there is no charge for the services rendered. Fees apply only to patients who are transported to a hospital via an LAFD ambulance.

Page 1 of 2 Currently the LAFD completes a County prescribed paper emergency medical form (F902M) documenting any and all treatment performed on a patient. Using this information, the LAFD Emergency Medical Services Billing Unit manually enters the F902M data into the mainframe-based ambulance billing system to generate the required bill.

In a report dated March 27, 2003 (attached to the Council file), the CAO states that on December 18, 2002, the Mayor directed the Office of the City Administrative Officer to assemble teams of Department heads and CAO staff to perform various functional studies to identify ways to promote efficiencies that will result in savings that can be used to improve City service delivery. The LAFD ambulance billing process was one of the functions selected for study.

In its March 27, 2003 report, the CAO concludes that since the current ambulance billing system is paper-based, it has become apparent that there is an opportunity to reengineer the process using advanced, stat~-of-the-art technologies. Such an approach will streamline the billing process dramatically, reduce billing support costs, improve and simplify service provided to the public and increase ambulance billing revenue to the City.

On June 2, 2003, the Chair and Member of the Public Safety Committee approved the CAO recommendations with an amendment to include the CLA under_ recommendation number one. This matter is now being forwarded to Council for its consideration.

Respectfully submitted, '

MEMBER VOTE MISCIKOWSKI: YES t:OTION ADOPTED rt\99Pcl~ATION11 RECOMMENDATION PACHECO: ABSENT PERRY: ABSENT ' fuL O9 2003 WEISS: ABSENT ZINE: YES LOS ANGELES CITY COUNCI! MLE #030814 6/30/03

Page 2 of 2 COUNCIL VOTE Jul 9, 2003 10:26:4.S AM, #2 Items For Which Public Hearings Have Been Held - Items 4-16 Voting on Item(s): 9-11,13,15 Roll Call CARDENAS Yes GARCETTI Absent GREUEL Absent HAHN Absent LABONGE Yes LUDLOW Yes MISCIKOWSKI Yes PARKS Absent PERRY Yes REYES Absent SMITH Yes VILLARAIGOSA Yes WEISS Yes ZINE Yes *PADILLA Yes Present: 10, Yes: 10 No: O .··, ) .

POBLJ:C SAFETY COMMJ:'rl'EE . SOGGESTED NOTIFICATXON OF COONCl:L ACTION ·council File No. () J -O?J Y· D Cou.nc:il Member(s) D Mayor (with/without ~ile) (Mail Stop 370) 0 City Administratiye Officer (Mail Stop ·130) D Cil:Jr Al:torney /c, Tf A-r-r7 oJ/u1.- "E S t\15::', (Mail $top L40) [2f Chie~ Legislative Analyst (Mail· Stop 13_6) [2l c~ntroller · (Mail Stop l.8 3) D Personn~l. Deoartment.. . (Mail ~top 391) Police Department (Mail Stop 4 oo) .D I D Board of Po~ice Com.missioners ·IZ1 · Fir.e Department (Mail Stop 250) Board .of Fire ~omm.issioners (Mail Stop 250) ·o· ·.. D "Department of Animal. Re~lation (Mail S:top 10S) ·.. o Board of Animal -R.egUl.atiot\· -<:o~ssioners · . (Mail Stop l.OS) .o Dept. of Building and· Safety · (Mail stop 115) eo~rd of Building and ~~f~_ty Commiss ,ioners (M~il Stop llS) .D Buil.c:ling · Advis·ofy Appeal Board . ·.·o O~partment of s~~ial se~ice ... (Mai~ _Stc;,p .100) , . . Board of Social. s·ervice Co~is~i-oners (Mail St-op 7-0 0) D . . ··c~r ... Tl\fnv~'o10 J:ec_j_~lo9,z: ~* D /' ) lTY OF ANGELE, J. MICHAEL CAREY Los Office of the City Clerk CALIFORNIA CITY CLERK Council and Public Services FRANK T. MARTINEZ Room 395, City Hall Executive Officer Los Angeles, CA 90012 Council File Information - (213) 978-1043 General Information - (213) 978-1133 When making inquiries Fax: (213) 978-1040 relative to this matter ~efer to File No. HELEN GINSBURG JAMES K. HAHN Chief, Council and Public Services Division MAYOR

03-0814

April 25, 2003

PUBLIC SAFETY COMMITTEE BUDGET & FINANCE COMMITTEE ..-

In accordance with Council Rules, . communication from the CAO

relative to initiating the Bearing Point review with projects

revenue enhancement and cost savings projections association with

reengineering the Fire Department Ambulance Billing Process, was

referred on April 25, 2003; to the PUBLIC SAFETY COMMITTEE and

BUDGET & FINANCE COMMITTEE. c)''ITl~~ City Clerk amm

AN EQUAL EMPLOYMENT OPPORTUNITY - AFFIRMATIVE ACTION EMPLOYER Aec),:lable ard made ll!lm recycled waste. @ ..

0 e ~ ~ \,JJ -< 0 ~ 0-:.o :=1 :;,... r-ro -< ,...., r.110 ..t= 5KC!l- ,,,..- 0 (.{)?,i -0..,.,....-. otJ s:D -n 7' r:-? -no .. ..i::: rn .i::

0220-01069-0000 TRANSMITTAL TO DATE COUNCIL FILE NO. The Council APR 2 2 2003

FROM COUNCIL DISTRICT The Mayor

Transmitted for your consideration. See attached report from the City Administrative Officer.

~Jame.'Hahn Mayor

CAO 649-d

l ;, , . I

REPORT FROM

OFFICE OF THE CITY ADMINISTRATIVE OFFICER

Date: March 27, 2003 CAO File No. 0220-01069-0000 Council File No. Council District: · To: The Mayor .

From: William T Fujioka, City Administrative Officer

Reference: Correspondence regarding Departmental Functional Studies from the Mayor to General Managers Dated December 18, 2002

SUBJECT: Fire Department Ambulance Billing Process Review

SUMMARY

The Los Angeles Fire Department (LAFD) responds to all 9-1-1 emergency medical service requests within the City. In instances when paramedics provide sufficient medical care at the scene, the patient is not transported to the hospital. Under such circumstances, there is no charge for the services rendered. Fees apply only to patients who are transported to a hospital via an LAFD ambulance.

The LAFD issues approximately 14,000 ambulance billing invoices per month to individuals and insurance companies for transporting patients to a hospital. In Fiscal Year 2001-02, the total amount billed was $85,303,236 and the total amount collected was $40,910,532 or approximately 48 percent of billings.

While the 52 percent difference between billings and revenue seems unusually large, it is due to numerous factors including: 1) LAFD billings exceeding allowable reimbursements by insurance carriers, Medicare or MediCal, 2) denial of billings entirely by insurance carriers, 3) inaccurate or incomplete patient address or insurance information, and 4) approximately 3 percent lost or misrouted documents between paramedics and the LAFD EMS Billing Unit. Some, but not all, of this difference can be eliminated by reengineering or automating some or all of the data capture process; however, the majority will exist no matter what form of ambulance billing system is utilized.

Currently the LAFD completes a County prescribed paper emergency medical form (F902M) documenting any and all treatment performed on a patient. Using this information, the LAFD EMS Billing Unit manually enters the F902M data into the mainframe-based ambulance billing system to generate the required bill.

A team comprised of the General Manager of the Information Technology Agency (ITA) .and various systems and budget staff from this Office, supported by ITA and LAFD staff, concluded that significant revenue enhancement and costs savings would result from a targeted assessment of the ambulance billing process and application of best practices utilized in other jurisdictions. The ITA has a competitively bid, pre-screened list of qualified vendors (C.F. 99-2433) which can be utilized to support the performance of this type of short duration, specifically focused, assessment when, in accordance with Charter Section 1p22, appropriate City resources are not available to conduct the study.

The study team recommends the selection of Bearing Point (formerly KMPG Consulting) from that list to perform a rapid assessment of the ambulance billing process under the direction of CAO and departmental staff. Attached is Bearing Point's proposal which includes 1) an assessment of the ambulance billing process, 2) benchmarking against similar agencies, 3) an assessment of the feasibility and payback associated with outsourcing, and 4) recommendations concerning how the City should proceed, at a cost not to exceed $106,665. Bearing Point's proposed team has an excellent track record with the City in providing the type of assessment proposed herein.

In addition, a 3-1-1/E-Government Strategy Report by PriceWaterhouseCoopers (PWC) completed in January of.2000 also recommended that the City include an Internet ambulance bill payment capability within the City's E-Government strategy. Since the Bearing Point Study will include recommendations regarding electronic payments, the study team recommends that copies of the Bearing Point study, once completed, be provided to the 3-1-1-E-Government Steering Committee for their consideration.

Since the current ambulance billing system is paper-based, it has become apparent that there is an opportunity to reengineer the process using advanced, state-of-the-art technologies. Such an approach will streamline the billing process dramatically, reduce billing. support costs, improve and simplify service provided to the public and increase ambulance billing revenue to the City.

It is projected that by reengineering the ambulance billing process and applying automated field data capture technology, the following benefits are possible to obtain:

• Expediting transmission of F902M data to the receiving hospitals, the LAFD Billing Unit and the patient or insurance provider, thereby eliminating most disputes over timely submission of billings.

• Elimination of the three percent of patient transports that do not result in a billing under the paper based system, thereby increasing revenue to the City by up to $1.5 million annually through the elimination of lost documents.

• A substantial reduction of the data entry costs associated with manually inputting the F902M information to initially generate a bill, thereby allowing reassignment of a number of the 47 positions currently assigned to the LAFD EMS Billing Unit. . . • Greater convenience to the public by providing a 24/7 Internet ambulance bill payment service, further reducing the EMS Billing Unit workload and increasing the potential for further revenue enhancement.

• Phasing in of a medical protocol identification system and a medical consumables inventory management function system with field data capture to assist paramedics in the patient treatment process, thereby reducing exposure to civil liability and reducing support costs. CAO File No. PAGE . 0220-01069-0000 3

Bearing Point estimates eight weeks will be required to perform the proposed assessment of the LAFD ambulance billing process. We, therefore, believe the study can be completed by June 1, 2003. Bearing Point's findings and recommendations should be considered by the 3-1-1/E-Government Steering Committee following completion of the study. '

In view of the significant potential for streamlining the ambulance billing process and the potential for up to $1.5 million additional revenue, the expenditure of $106,665 for this assessment, which will provide a guideline on how best to proceed to maximize efficiencies and revenue, is warranted.

RECOMMENDATIONS

1. Instruct the Office of the City Administrative Officer, with the assistance of the Fire Department and the Information Technology Agency, to immediately initiate the Bearing Point review at a cost not to exceed $106,665 and to report back to the Mayor and Council within 90 days with projected revenue enhancement and cost savings projections associated with reengineering of the ambulance billing process and a recommendation concerning how to proceed.

2. Transfer $106,665 from the Reserve Fund to the Unappropriated Balance and appropriate therefrom to City Administrative Officer Fund No. 100/10, Contractual Services Account No. 3040 to finance the cost of the Bearing Point review.

3. Instruct the 3-1-1/E-Government Steering Committee to consider the findings and recommendations of the Bearing Point Study and proceed to explore the use of electronic payment options for ambulance bills should Bearing Point indicate that this is feasible or desirable.

FISCAL IMPACT STATEMENT

The fiscal year 2002-03 General Fund impact of proceeding with Bearing Point proposal will be $106,665. The cost to implement Bearing Point's recommendations cannot be determined at this time. Reduced ambulance bill generation costs and revenue enhancements of up to $1.5 million annually are projected from reengineering of the billing processes.

Attachment ,.,

Formerly KPMG Consulting

Public Services

LOS ANGELES FIRE DEPARTMENT Review of the Ambulance Billing Process, Ambulance Services Cost Assessment, Fees Schedule Analysis and Outsourcing As~essment ·

March 2003

January 13, 2003 Public Services

Table of Contents

TABLE OF CONTENTS ...... 2

! · BACKGROUND ...... :...... : ...... ~ ...... ~ ...... 3

.6. AMBULATORY BILLING ASSESSMENT ...... 3 2.1 ENGAGEMENT OBJECTIVES AND SCOPE ...... 3 2.2 PROPOSED APPROACH ...... 4 2.2.1 Phase 0- Pro;ect Initiation ...... 4 2.2.2 Phase 1- Conduct Interviews and collect data ...... 5 2.2.3 Phase 2 - Conduct process analysis (billing process) ...... 5 2.2.4 Phase 3 -- Identification of cost recove,y findings and prelimina1J1 recommendations ...... 5 2.2.5 Phase 4-Present findings. recommendations and potential next steps ...... 6 2.3 ASSUMPTIONS ...... : ...... 6 J AMBULANCE SERVICES COST ASSESSMENT AND FEES SCHEDULE ANALYSIS ...... 7 l,l ENGAGEMENT OBJECTIVES AND SCOPE ...... 7 3.2 PROPOSED APPROACH ...... 7 3.2.1 Phase 0-Pro;ect Initiation ...... 7 3.2.2 Phase 1 - Develop cost ,node/ ...... :...... 7 3.2.3 Phase 2 -Assess current fees schedule based upon actual costs ...... 9 Deliverable -Cost Model and supporting documentation ...... 10 3.3 ASSUMPTIONS ...... 10 1 OUTSOURCING ASSESSMENT ...... 11 4.1 ENGAGEMENT OBJECTIVES AND SCOPE ...... 11 4.2 PROPOSED APPROACH ...... 11 4.2.1 Phase 1 -Integrate Billing Process Review and CostingModel...... 11 4.2.2 Phase 2-Review and Benchmark ...... 12 Deliverable- Outsourcing Draft and Final Findings and Recommendations Report ...... :...... 12 4.3 ASSUMPTIONS ...... 12

~ PROJECT STAFFING AND GOVERNANCE ...... , ...... 13 ll STAFFING MODEL AND KEY INDIVIDUALS ...... 13 5.2 PROPOSED WORK SCHEDULE ...... 13 5.3 PROFESSIONAL FEES AND EXPENSES ...... 15 Exhibit A - Deliverable Payment Schedule ...... 17

1 Background

One of the problems that the Los Angeles Fire Department staff has identified in the area of ambulance billing is the uncertainty of cost recovery. The Department's staff is unsure whether or not the fees charged for ambulance services provided are sufficient to cover the cost of providing them.

Additionally, the LAFD has received offers from outside vendors to outsource a portion of the ambulance billing activities. To date, the City has not been able to analyze whether or not outsourcing would be a viable option.

As part of our proposal to conduct a Review of the Los Angeles Fire Department's Ambulance Billing Process, BearingPoint offered to perform an assessment of the current fees schedule for each activity to determine their overall profitability as well as an assessment of the outsourcing possibilities. This document describes our proposed approach to carry out each of these three projects.

2 Ambulance Billing Assessment

2.1 Engagement Objectives And Scope

BearingPoint proposes to conduct a short 4-week assessment of LAFD's ambulance billing process. Our team will map out the department's current billing and collection process creating a baseline. We will then review the baseline and identify significant process gaps, control weaknesses or procedures, which do not appear to be consistently performed. The purpose of this assessment and evaluation is to identify key areas of improvement that can be focused on in more detail for reengineering. This is a short study intended to review processes, identify major issues and prioritize key areas and opportunities for improvement. This study is not intended to provide the detailed procedures necessary for implementation but rather to identify where that detailed work should be performed. ·

Areas for consideration will include, but are not limited to:

• Patient registration • Insurance verification • Billing and collection • Use of technology including clinical systems, patient accounting and other information technology (IT) functions

2.2 Proposed Approach

BearingPoint will perform the following tasks Phase 0: Project Initiation Phase 1: Interviews and data collection Phase 2: Conduct analysis of key strengths and weaknesses (billing process) Phase 3: Identification of revenue and cash flow management strategies Phase 4: Present findings, recommend_ations, and potential next steps

Throughout this process we will consistently interact with the various project stakeholders. Based on our experience, we believe that we can arrive at a consistent set of general hypotheses relatively early in the process. This series of high-level hypotheses is then constantly refined throughout the engagement, as more data is gathered and analyzed and various individuals are being asked to provide feedback on the current set of hypotheses.

2.2.1 Phase O- Project Initiation This phase'will help refine and communicate the objectives, scope and logistics of the project. The activities to be performed by the team in this phase are:

• Prepare and finalize the interview approach and questionnaire • 1. Assistant Chief Mack- Emergency Medical Services Division

2. Capt. Thompson - Emergency Medical Services Division

3. Steve Kawashima - Chief Accountant

4. Mariana Rivera - Revenue Management Unit

5. Ed Chua - Accounting Services

6. Annabelle Nuno - EMS Billing Chief Clerk

7. Judy Chu - ITA, Fire Programming Support

2.2.2 Phase 1 - Conduct Interviews and collect data Data will be gathered through various activities including:

• Current Documentation Review: The team will review the existing documentation to understand the current billing processes, including: required documentation, volumes, call types, management and reporting tracking tools, staffing levels and organization structure.

• Interviews and Workshops: The team will perform interviews with up to 10 key individuals within the City (schedules permitting). The principal goal of the interviews is to understand the current billing process and discuss potential cost savings and revenue recovery approaches.

• Validation Workshop of Baseline Process(es)-The team will conduct a workshop of key personnel to review and validate the initial baseline process(es). Upon completion of the workshop, the team will finalize the baseline process( es).

• Sampling - Once the team has completed the interviews, the team may conduct sampling of the billing process to validate assumptions and findings.

2.2.3 Phase 2 - Conduct process analysis (billing process) BearingPoint team will also conduct up to 4 phone interviews with mutually agreed upon emergency medical services (EMS) billing organizations. The interviews will attempt to obtain information regarding the billing arid collection process. Completion of this task is contingent on the cooperation and responsiveness of the outside EMS billing organizations. Questions will focus on the following areas:

1. Understanding of billing process

2. Management tools and techniques used to manage the process

3. Days outstanding for billing and collecting

4. · Fees schedule(s)

5. Technology used (including any lessons learned)

2.2.4 Phase 3 -- Identification of cost recovery findings and preliminary recommendations.

The BearingPoint team will develop a PowerPoint presentation within 3 weeks of project initiation. The presentation will contain the following: .

February 26, 2003 Public Services

I. Project status 2. Current state (As-is process map(s)) 3. Preliminary findings 4. A prioritized list ofrecommendations (Quick strike items and largest revenue recovery items) Deliverables:

1. Draft Report

2.2.5 Phase 4 -Present findings, recommendations and potential next steps The BearingPoint team will complete the analysis during the final phase of the project. LAFD will have the opportunity to review the draft report and provide feedback. Based upon the department's feedback the BearingPoint team will complete and refine the analysis and deliver a final report one week after presenting the Draft report.

Deliverables: 1. Ambulance Billing Assessment Final Report

2.3 Assumptions

Our proposal for services has been developed with a series of assumptions in mind. These assumptions include the following:

• LAFD will assign a Project Manager responsible for facilitating all communications and meetings between BearingPoint and City personnel. This person will have decision-making capabilities for LAFD to help facilitate the timely resolution of issues that may arise throughout the duration of the project. This person will be full-time on the project.

• Although a detailed workshop schedule will be developed as part of the first week's planning effort, experience dictates that it is often necessary to hold additional ad-hoc sessions in order to more effectively address issues that arise. Consequently, it is assumed that LAFD's personnel participating in this project will focus on this on a priority basis. Our proposed pricing is based on the ability to complete within 4 weeks. Should additional time be required, we will discuss the impact on project cost with the City of Los Angeles;

• BearingPoint will rely on LAFD to assist in the gathering of the documentation, inventory and all pertinent financial information, and providing it to BearingPoint's Engagement Team before the deadline agreed upon during project initiation;

3 Ambulance Services Cost Assessment and Fees Schedule Analysis

3.1 Engagement Objectives And Scope

The primary objective of this fees schedule assessment is to compare the fees the LAFD charges for ambulance services to the actual cost of providing these-services, and recommend any necessary adjustments to the fees in an effort to obtain cost recovery. The analysis of fees in consideration will include all billed ambulance services.

3.2 Proposed Approach

The BearingPoint team - which is very experienced in cost of services and fee assessment studies - will use Activity Based Costing to determine the fully burdened cost ofLAFD's services. Activity Based Costing is a proven business methodology that measures the cost and performance of process related activities. It assigns costs to work activities based on their use ofresources and assigns costs to cost objects, such as products and services, based upon their use of activities.

As part of this effort, BearingPoint will perform the following:

Phase 0: Project Initiation

Phase I : Develop cost model

Phase 2: Assess current fees schedule based upon actual costs

Phase 3: Develop supporting documentation

3.2.1 Phase O- Project Initiation At the onset of the project the BearingPoint team will work with LAFD to further refine and communicate the objectives, scope, deliverables and logistics of this study. This will include a kick-off meeting with LAFD management to identify key staff from each Division and Unit that will work with us during the data gathering and model design phase.

3.2.2 Phase 1 - Develop cost model The objective of this phase is to baseline the cost of services of the organization. This phase will include the following tasks:

Data collection and design sessions The BearingPoint team will need access to the following data:

• Organization chart

• General ledger and latest financial statement

• Latest LAFD budget with breakdown of all expenses including real estate and lease agreements

• Payroll registers for uniformed and civilian personnel associated with ambulance services

• Inventory and cost of all ambulances and equipment including depreciation schedul~s

• Staff position descriptions

• Workload data

Additionally, we will conduct design sessions with key LAFD staff from all pertinent divisions to understand, at a high level, the Department's ambulance operations. Our objective is to understand the following key elements:

• What are the services being provided?

• What are the main work activities associated with these services?

• How much·ofthe resources does each activity consume?

• How much of each activity does each service consume?

Perform workload analysis We may additionally gain considerable insight into the LAFD by touring the facilities and working in the same spaces as the Department's personnel. We will participate - if permitted - in three days of ride-alongs with ambulances to observe operations, gather workload and frequency information. By using this approach, we will be able to learn the LAFD's operations and develop an accurate costing model.

Develop the costing model framework The BearingPoint team will use Activity Based Costing and the information obtained during the data gathering task to construct a costing framework of LAFD operations. Activity Based Costing, or ABC, is a powerful analytical tool for assessing fee schedules because it allows the fully burdened cost of an organization's services to be determined. Through its complete audit trail, easily understandable terms and full costing methodology, ABC will serve as the principal tool to meet the objectives of this project.

The LAFD ABC model will consist of five components:

• Resources - The personnel, equipment, apparatus, facilities, contract and supplies that are used to provide services. LAFD has both direct (e.g. firefighters) and indirect resources (e.g. IT staff) and these are consumed every time work ( an activity) is performed. We will identify both the direct and indirect resources and then map them to the activities that use them to begin building the relationship between costs and services. ·

• Resource Drivers - The amount of the resources that are consumed by each activity. For example, in a year a paramedic spends 10% of her time responding to traffic accidents. This represents 10 % of the paramedic's cost. By establishing a relationship between the resource performing the work (i.e. the paramedic and the length of time it takes to complete an activity), the cost of each individual activity can be determined.

• Activities - The work that is performed both directly ( e.g. emergency medical care) and indirectly (e.g. IT support) to provide each service.

• Activity Drivers -The :frequency of the work being performed. For example, the number of traffic accidents that are responded to in a year. These drivers serve as the link between the work that is being performed and the results of that work (the cost objects or services). We will gather the activity driver data by ex_amining historical records and observing the overall operations. .

• Cost Objects - The services provided 'ror which fees are charged or recovered.

In this phase we will employ a flexible and functional Activity Based Cost management software.

Model validation Once the ABC model is complete and all costs are mapped, we will conduct a workshop with key LAFD personnel to review and validate the model and cost allocations. Upon completion of the workshop the team will finalize the fees schedule assessment.

3;2.3 Phase 2 - Assess current fees schedule based upon actual costs The overall focus of this study is to identify where imbalances exist between the fees that are charged for services and the actual cost of providing these services. Through our ABC modeling process, the BearingPoint team will have an accurate breakdown of the fully burdened cost ~f each service provided or cost object. We will then match existing revenue stream with the cost objects to determine whether there are shortfalls or overages in the fees currently assessed. By comparing this cost against the fees that are recovered, we will be able to determine if any adjustments to the fee structure should be considered.

Deliverable - Cost Model and supporting documentation The ABC software that we plan to use for this project has very detailed reporting capabilities. We will extract this information out of the ABC model and develop conventional reports that highlight the study's assumptions, methodology, findings and recommendations. '"Our final deliverable will include the following: ·

• Modeling assumptions and methodology

• The variables that drive revenue and cost within the LAFD ambulance services

• How much of LAFD resources are expended in ambulance services and what is their total cost

• The fully burdened cost to the Department for performing each work activity

• The fully burdened cost of the ambulance services provided by the LAFD

• Comparison of cost and revenue collected

• Recommendations of any necessary adjustments and justifications

3.3 Assumptions

Our proposal for services has been developed with a series of assumptions in mind. These assumptions include the following:

• BearingPoint will rely on LAFD to assist in the gatheri~g of the documentation, inventory and all pertinent financial information, and to provide it to BearingPoint's Engagement Team before the deadline agreed upon during project initiation.

• Because of the short duration of this project the BearingPoint team will rely heavily on data that already exists in the Department. To the extent that data is unavailable, the engagement team will make modeling assumptions based on subject matter and industry expertise.

• LAFD will assign a Project Manager responsible to facilitate all communications and meetings between BearingPoint and Department personnel. The Project Manager will have decision-making capabilities for LAFD to help facilitate the timely resolution of issues th~t may arise throughout the duration of the project. This person will be full-time on the project for its duration.

• Although detailed design workshops will be scheduled during phase 1 of the project, experience dictates that it is often necessary to hold additional ad-hoc sessions in order to more effectively address issues that arise. Consequently, it is assumed that LAFD's personnel participating in this project will focus on

February 26, 2003 Public Services

this on a priority basis. Our proposed pricing is based on the ability to complete within 4 weeks. Should additional time be required, we will discuss the impact on project cost with the LAFD.

4 Outsourcing Assessment

4.1 Engagement Objectives And Scope

The primary objective of this project is to determine whether or not outsourcing some or all of the Los Angeles Fire Department ambulance billing activities is a sensible business decision for the City. Upon completion of the Review of the Ambulance Billing Process and Cost Assessment & Fee Schedule Analysis projects, BearingPoint will have all the data and costing structure necessary to complete this outsourcing assessment swiftly and proficiently. This outsourcing assessment will include all ambulance service billing activities.

4.2 Proposed Approach

The BearingPoint team will make use of the knowledge gained in the Review of Ambulance Billing Process project to add another level of detail to the Activity Based Costing model built during the Cost Assessment and Fee Analysis engagement to determine the fully burdened cost of all ambulance billing processes. This will serve as a point of reference in order to determine the viability of the outsourcing options.

We will review the vendor outsourcing propositions that the LAFD has received to date and work with the City to identify two other comparable cities that have outsourced similar processes in order to obtain information regarding their results. Finally, we will make an independent recommendation and present our findings to LAFD management. Our approach will be divided into the following phases:

Phase 1: futegrate Ambulance Billing Process Review and ABC model

Phase 2: Review and Benchmark

Develop deliverable: Findings and Recommendations

4.2.1 Phase 1 - Integrate Billing Process Review and Costing Model The Ambulance Billing Process Review will yield detailed data regarding the baseline processes of LAFD 's ambulance billing. We will use this data to add another level of granularity to the Activity Based Costing model built for the Cost Assessment and Fees Schedule Analysis project in order to determine a cost savings threshold for outsourcing. fu this phase we will complete the following tasks:

• Analyze Process Data

• Update ABC model and allocations

• Determine outsourcing cost savings threshold

4.2.2 Phase 2 - Review and Benchmark For this phase we will perform the following tasks:

Review existing vendor offers We will review up to two existing offers that the LAFD has received regarding the outsourcing some of the ambulance billing activities and determine - based on our findings in phase 1 - whether or not pursuing these opportunities are in the City's best interest.

Benchmark other cities outsourcing results The BearingPoint team will work with LAFD staff to identify two other cities with a similar workload that have outsourced some of their billing activities to learn from their experiences. Completion of this task is contingent on the cooperation and responsiveness of the cities. Our benchmarking questionnaires will focus on the following areas:

• Activities outsourced • Method of outsourcing • Results • Lessons learned

Deliverable - Outsourcing Draft and Final Findings and Recommendations Report Upon completion of the study we will present our findings and recommendations to LAFD management. If our recommendation is to pursue outsourcing we will also provide.the LAFD with the evaluation criteria for ambulance billing outsourcing vendors.

The draft report will be presented 2 weeks after the completion of the finalization of the cost model

The final report will be update based upon feedback from City staff and submitted one week after presenting the draft report

4.3 Assumptions

Our proposal for services has been developed with a series of assumptions in mind. These assumptions include the following:

February 26, 2003 Public Services

• This project depends entirely on the results of the two previous engagements; the Ambulance Billing Process Review and the Cost Assessment and Fees Schedule Analysis projects, and will begin after these two have been completed. ·

• LAFD will assign a Project Manager responsible to facilitate all communications and meetings between BearingPoint and Department personnel. The Project Manager will have decision-making capabilities for LAFD to help facilitate the timely resolution of issues that may arise throughout the duration of the project. This person will be full-time on the project for its duration.

• LAFD's personnel participating in this project will focus on this on a priority basis. Our proposed pricing is based on the ability to complete all three tasks (ambulance billing review, fee assessment and outsourcing assessment) within 8 weeks. Should additional time be required, we will discuss the impact on project cost with the LAFD

5 Project Staffing And Governance

5.1 Staffing Model and Key Individuals

Our core engagement team will be:

Engagement Manager - Josh Flynn: The Engagement Manager, will have overall delivery responsibility and day-to-day management responsibilities, with a specific focus on project planning, project control, quality assurance, and project commupication.

Project Team Members - Cecilia Mansilla, Karyn Lasch and a billing specialist (to be identified): The team members will be responsible for the data analysis, model and deliverable development. The skills most required during the project include data analysis, business process mapping and reengineering, Activity Based Costing, cost analysis, revenue recovery and health care processes. This team will be able to leverage the required skills with knowledge and understanding of the business topics.

Additionally, Kurt Ramey will provide quality assurance and engagement oversight. This engagement team will be able to leverage the required skills with knowledge and understanding of the business topics.

5.2 Proposed Work Schedule

BearingPoint anticipates conducting the Ambulance Billing Assessment over an estimated 4 week period with a targeted completion date of May 6, 2003. This assumes a start date ofno later than April 7, 2003.

We anticipate conducting the Cost Assessment and Fee Schedule Analysis over an estimated 4 week period with a targeted completion date of May 6, 2003. This assumes a start date ofno later than April 7, 2003.

We anticipate conducting the Outsourcing Assessment over an estimated 4 week period with a targeted completion date of June 6, 2003. This assumes a start date ofno later than May 6, 2003.

Timing is highly dependent on LAFD's ability to collect and provide the information required for the completion of the project, as well as the availability of key City and LAFD management representatives and engagement resources. ·

. February 26, 2003 Public Services

5.3 Professional Fees And Expenses

BearingPoint will bill LAFD based upon Exhibit A and provide the services for a firm fixed bid. Our rates and estimated hours are provided below.

Staff Member Rate Hours Totals

Ambulance Billing Assessment

IK. Ramey $325 1 $325

lJ. Flynn $240 16 $3,840

!Billing Specialist $160 60 $9,600

IK. Lasch $125 120 $15,000

Sub Total 197 $28,765

I Cost Assessment and Fee Schedule Analysis

IK. Ramey $325 4 $1,300

lJ. Flynn < $240 52 $12,480

J Steadley $240 16 . $3,840

IC. Mansilla $125 184 $23,000

IK. Lasch $125 64 $8,000

Sub Total 30~ $48,620

011tso11rci11g Assess111e11t

K.Ramey, $325 8 $2,60C

.J Steadley $240 8 $1,920

J. Flynn $240 2LI $5,76C

K::. Mansilla $125 112 $14,000

Sub Total 144 $24,280

Expenses $5,000

ifotal 64: $106,665

Exhibit A - Deliverable Payment Schedule

# Deliverable Cost Estimated Delivery Date

1 Ambulance Billing Assessment Draft $24,765 April 30, 2003 Report

2 Ambulance Billing Assessment Final $4,000 May 6, 2003 Report·

3 Cost Model and Supporting $48,620 May 6, 2003 Documentation

4 Outsourcing Draft Findings and $24,280 May 22, 2003 R.ecommendations Report

5 Outsourcing Final Findings and $5,000 May 29, 2003 Recommendations Report