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DECEMBER 3, 2012
Accretive Health Revenue Cycle Management
Driving Growth Through Measured Results
Driving Growth Through Measured Results
Certain statements contained in this presentation may be considered forward-looking as
defined by the Private Securities Litigation Reform Act of 1995. In particular, any statements
made about Accretive Health’s expectations for future financial and operational performance,
expected growth, new services, profitability or business outlook are forward-looking
statements. Investors are cautioned not to place undue reliance on such forward-looking
statements. There is no assurance that the matters contained in such statements will occur
since these statements involve various risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking statements. These
risks and uncertainties include those listed under the heading Risk Factors in the company’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, which is available
on the SEC’s website as well as in the investor relations portion of Accretive Health’s website
at www.accretivehealth.com. The forward-looking statements made in this presentation are
based on the company’s beliefs and expectations as of December 3, 2012 only and should
not be relied upon as representing the company’s views as of any subsequent date. While the
company may elect to update these forward-looking statements at some point in the future,
Accretive Health specifically disclaims any obligation to do so, even if its views change.
Safe Harbor
2
Driving Growth Through Measured Results
Use of Non-GAAP Financial Measures
*Reconciliations of non-GAAP measures to their most directly comparable GAAP measures are presented, where possible in the Appendix, as well as in the
Company’s financial press releases and related Form 8-K filings with the Securities and Exchange Commission. This information can be accessed for free in
the Investor Relations section of the Company’s website at www.accretivehealth.com
We believe adjusted EBITDA is useful to stockholders in evaluating our
operating performance for the following reasons:
• these and similar non-GAAP measures are widely used by investors to
measure a company’s operating performance without regard to items that
can vary substantially from company to company depending upon financing
and accounting methods, book values of assets, capital structures and the
methods by which assets were acquired;
• securities analysts often use adjusted EBITDA and similar non-GAAP
measures as supplemental measures to evaluate the overall operating
performance of companies; and
• by comparing our adjusted EBITDA in different historical periods, our
stockholders can evaluate our operating results without the additional
variations of interest income (expense), income tax expense (benefit),
depreciation and amortization expense and share-based compensation
expense.
We understand that, although measures similar to adjusted EBITDA are
frequently used by investors and securities analysts in their evaluation of
companies, these measures have limitations as analytical tools, and you
should not consider it in isolation or as a substitute for analysis of our
results of operations as reported under GAAP. To properly and prudently
evaluate our business, we encourage you to review the GAAP financial
statements included elsewhere in our regulatory filings, including the
Preliminary Prospectus, Form 8-K, and Form 10-K, and not to rely on any
single financial measure to evaluate our business.
In order to provide stockholders with greater insight and to
allow for better understanding of how our management and
board of directors analyze our financial performance and
make operational decisions, we supplement our condensed
consolidated financial statements presented on a GAAP
basis with the adjusted EBITDA and adjusted net income
measures *.
Adjusted EBITDA measure has limitations, as noted below,
and should not be considered in isolation or in substitute for
analysis of our results as reported under GAAP.
Our management uses adjusted EBITDA:
• as a measure of operating performance, because it does not
include the impact of items that we do not consider indicative
of our core operating performance;
• for planning purposes, including the preparation of our
annual operating budget;
• to allocate resources to enhance the financial performance
of our business;
• to evaluate the effectiveness of our business strategies; and
• in communications with our board of directors and investors
concerning our financial performance.
3
Driving Growth Through Measured Results
ACCRETIVE HEALTH OVERVIEW
Driving Growth Through Measured Results
• Our primary goal is to help our healthcare clients strengthen their financial
stability and deliver better care to the communities they serve
• We use technology to drive best practices and best outcomes
• We work collaboratively with clients to create solutions to existing challenges
• We promote an entrepreneurial culture to encourage innovation and
continuously upgrade our functionality with a focus on value creation
Our Guiding Principles
5
Driving Growth Through Measured Results
Founded in 2003, headquartered in Chicago
Win – Win Proposition with our Client Partners
• We are paid based on our results; no upfront costs for Quality or Revenue Cycle Services
• We have partnered with some of the most well-respected health systems in the U.S.
We Drive Measured Results for our Partners
• Since inception we have delivered $1.5 billion in cash benefits to clients
Innovation and Operational Excellence is at the Core of What We Do
• Success of our RCM offering is driven by applying technology and innovative process
improvements to drive measurable results
• Seeded Physician Advisory Services in 2009, now a $60 million run-rate business
• Developed unique offerings to improve care quality at lower costs – Intra-Stay Quality and
Population Health Management Infrastructure
Accretive Health Snapshot
6
Driving Growth Through Measured Results 7
Three Distinct Offerings
Proven end-to-end solution that lowers collection costs and
reduces yield leakage
Utilize physician-driven best practices to
improve care quality at a lower cost
Compliance services that maintain detailed audit trails for claims
Physician Advisory Services
Quality and Care Coordination
Revenue Cycle Management
Driving Growth Through Measured Results
Revenue Cycle Management
• Large market opportunity, low current penetration
• Proven end-to-end solution with a win-win proposition
• Margin expansion by driving further efficiency and reducing reimbursement leakage
Quality and Care Coordination
• Population Health Management is developing as the next frontier of healthcare
• Lack of provider infrastructure for population health management
• Intra-Stay Quality has broad appeal and could create beachhead into new hospitals
Physician Advisory Services
• Increasing frequency of audits
• Opportunity for continued market share gains
• Expansion into compliance and workflow advisory services
Multiple Growth Drivers in Each Business
8
Driving Growth Through Measured Results 9
Providers are Getting Squeezed
• Capital constraints
• Significant variance in provision and quality of care
• Declining
reimbursement
• Rising bad debt
• Rising costs
from medical innovation
• Value-based payment models
• Medicaid expansion/State budget constraints
• Insurance exchanges
• ICD-10
• RAC Audits
• Patient satisfaction scores
• Higher out-of-pocket costs
• Aging population
• Personalized medicine
Patients
Compliance
Health
Reform
Economic
Insufficient
Resources
Driving Growth Through Measured Results
Market Size
% to AH Revenue
Revenue Opportunity
Sources: CMS National Healthcare Expenditures, September 2011 and Definitive Healthcare
RCM market scope includes net patient revenue at all hospitals based on CMS 2014 projected expenditures
Quality market scope includes all hospital and physician expenditures
PAS market scope includes all hospitals with >$250 million in net patient revenue
10
Market Opportunity
$50 Billion
$100 Billion
$850 Million
0.12% 6.25% 5.0%
$1.0 Trillion $1.6 Trillion $ 710 billion
PAS Quality RCM
Driving Growth Through Measured Results
Revenue Cycle and Quality Require No Upfront Investment from Clients
• Accretive Health is compensated based on Measured Value delivered to clients
Our End-to-End Solution Delivers Superior Results by Combining People,
Process and Technology
• People: Well-trained professionals who work directly with the client
• Process: Market-leading best practices to allow seamless workflow at all stages of the
revenue collection process
• Technology: Comprehensive tools to measure and improve efficiency for clinical and financial
outcomes
Value Proposition
11
Driving Growth Through Measured Results
Pay for measured results
Unparalleled form of collaboration
End-to-end scope
AH makes significant investment of resources
Pay for results not input
12
A Differentiated Offering
We create operating partnerships that result in distinctly
different outcomes than other models
NOT
a consulting firm
Accretive Health
Operating Partnership
NOT
a software provider
NOT
an outsourcing model
Driving Growth Through Measured Results
SaaS /
Technology- Supported RCM
Consulting
IT Outsourcing /
Non-HC BPO
Payor Follow-Up
Patient Advocacy
Patient Share
Lost Charges
Compliance
4-6% (Measured)
Value Proposition
(% revenue lift)
Est. 0.5-1% (Not Measured)
Est. 0.5-1% (Measured)
Est. 0.5-1.5% (Not Measured)
Note: Based on Accretive Health’s estimates
13
End-to-End RCM Solution Provides Competitive Advantages
Driving Growth Through Measured Results 14
Partnering with Innovative Leaders
Driving Growth Through Measured Results
REVENUE CYCLE MANAGEMENT
Driving Growth Through Measured Results 16
Market Drivers for RCM Solutions
• Declining
reimbursement
• Increasing
patient
responsibility
• Poor collection
rates
• ICD-10
• Health
Reform
• Old-generation
financial systems
still in use
• Fragmented
solutions
• No upfront
investment
with Accretive
Health
We compete with numerous vendors who approach the
market with incomplete solutions
Financial Pressures
Increasing Complexity
Obsolete Technology
Investment Risk
Driving Growth Through Measured Results 17
Collection Yield: Uncovering Hidden Leakage
Less: Payor write-offs
Less: Bad debt Less: Hidden leakage
Cash collected
Opacity in the revenue cycle process hides leakage
$435
Less: Accurate contractual adjustments
Less: Hidden leakage disguised as contractual adjustments
- 500
- 35
Typical hospital
calculation
Calculation after
AH analysis
$1,000 $1,000 Gross charges
- 500
0
Gross charges less contractuals (collectable cash) $465 $500
-5
-25 0
$435
Yield (cash collected/collectable cash): = 94% $435
$465 = 87% $435
$500
We uncover hidden leakage to derive a real picture of collection yield
-5
-25 -35
Areas for AH
to drive improvement
Driving Growth Through Measured Results
12-month period
All contracts
All patient visits and charge information
Best Possible Revenue
18
How do we Uncover Hidden Leakage?
AHtoContract Tool
Our proprietary AHtoContract tool is vital in calculating Best Possible revenue
Driving Growth Through Measured Results 19
Understanding Leakage: Illustrative Example
88.2%
7.7%
4.1%
2.3% 30% Insured patient responsibility
5% 0.2% Uninsured
87.0% Overall Collection Rate:
84.5% 95.8% Payors
Yield % of Total
Revenue Mix
4.1% x 5.0% = 0.2%
7.7% x 30% = 2.3%
88.2% x 95.8% = 84.5%
In an industry where operating margins average ~2%,
13% revenue leakage is significant
100%
75%
50%
25%
0% Payor reimbursement
Insured patients residual responsibility
Uninsured patients
Note: Based on Accretive Health’s estimates
Driving Growth Through Measured Results
Payor yield: 2%
Insured
patient yield: 1%
Patient self-pay
conversion: 1%
Increase to
“Best Possible”: 1%
• Pre-registration
• Automated insurance verification
• Automated plan code correction
• Prior authorizations
• Continuous denials review/fix
• Automated denial resolution
• Automated underpayment trolling
• Proper contractualization of receivables
• Specialized physicians to appeal denials
• Real-time patient responsibility estimation
• Simplified billing statements
• Prior balance visibility
• Patient education
• Alternate sources of coverage
• Expeditious charity care application
• Manage secondary coverage as backup
• Identification of missing or unbilled charges
• Pricing initiatives
• Post-coding, pre-bill quality review
We retain a portion of the revenue lift as our Incentive Fee
20
RCM Win-Win Proposition I: Improved Revenue Lift
5%
0%
1%
2%
3%
4%
Driving Growth Through Measured Results
Middle
Transcription
Coding
Case coordination
Records storage
Clinical documentation
Release of information
Medical records
Charge capture
Back-End
Billing
Claim follow–up
Cash posting
Pre-collect
Underpayments
Denial management
Contract compliance
Front-End
Scheduling
Pre–registration
Registration
Eligibility
Insurance verification
Pre–authorization
Financial counseling
Admitting
We help our clients reduce costs through:
What services are included?
21
Reducing Collection Costs: Methodology
• Process efficiency – eliminate
redundant effort
• Technology-driven productivity improvements – automation
• Vendor cost management
• Demand-driven staffing and scheduling
• Use of Shared Service Centers to drive economies of scale
Driving Growth Through Measured Results
Cost Baseline: Hospitals spend about 4.0-4.5% of NPR on their collection effort
• This baseline serves as the initial basis of our Base Fee
15-30% expense
reduction after engaging with AH
Cost Baseline
22
RCM Win-Win Proposition II: Reducing Collection Costs
Reducing collection costs:
• Accretive Health aims to reduce cost to collect by 15-20%, or 20-30% if services are migrated to Shared
Service Centers
• Cost savings are shared with clients, providing a mutual incentive
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
$0
$20
$40
$60
$80
$100
$120
Driving Growth Through Measured Results
We operate 10 Shared Service Centers domestically and offshore
89% of revenue cycle management customers utilize at least one shared
service; 55% of customers utilize at least three shared services
Shared services deliver enhanced benefits – more cost savings than
processing on-site
Services delivered via Shared Service Centers:
• Financial Clearance
• Customer Service
• Pre-collect
• Medicaid Eligibility
• Patient Financial Services
• Underpayments
• Transcription
• Coding
Shared Service Centers
23
Driving Growth Through Measured Results
MIDDLE FRONT BACK Patient
Information
(input)
Cash
Collected
(output)
Competitors with
limited scope
Accretive Health Oversight
Superior results through complete oversight of the revenue cycle
• Fragmented solutions are sub-optimal, with no complete view of data
• Competitors with limited scope can only deliver limited value
• Root cause analysis shows significant problems are caused by poor inputs
• Garbage in…garbage out!
• Effective revenue cycle must capture all inputs and outputs at the front, middle
and back end
Why Our End-to-End Solution is Better
24
Driving Growth Through Measured Results
Accretive Health technology integrates with client patient accounting,
scheduling, and electronic health record systems
• Existing patient accounting system remains
“System of Truth”
• Industry-standard protocols (HL7, EDI, etc)
• Seamless interfacing, NOT a system conversion
• Experienced implementation teams
• No local hardware or software installation
• Hosted in world-class SAS-70 compliant data center
Our Technology is a Critical Piece of our Offering
25
Driving Growth Through Measured Results
Our technology…
Detects accounts that have financial risk
Streamlines the Execution of resolving the risk
Measures the efficiency and effectiveness of our process and outcomes
Technology Model
26
Driving Growth Through Measured Results
AHtoAnalytics™
Operational reporting and analytics with drill-through to account level detail
Yield-Based Follow Up™
Follow up for un-billed and billed claims with payors
AHtoCharge™
Charge integrity and compliance
AHtoAccess™
Patient pre-registration and registration, insurance eligibility checking
AHtoContract™
Best payment calculation, contract modeling, insurance payer follow up
AHtoAnalytics™
Operational reporting and analytics with drill-through to account level detail
Yield-Based Follow Up™
Follow up for un-billed and billed claims with payors
AHtoCharge™
Charge integrity and compliance
AHtoAccess™
Patient pre-registration and registration, insurance eligibility checking
AHtoContract™
Best payment calculation, contract modeling, insurance payer follow up
27
Core Revenue Cycle Technology
Proprietary & Confidential
AHtoAnalytics™
Operational reporting and analytics with drill-through to account level detail
Yield-Based Follow Up™
Follow up for un-billed and billed claims with payors
AHtoCharge™
Charge integrity and compliance
AHtoAccess™
Patient pre-registration and registration, insurance eligibility checking
AHtoContract™
Best payment calculation, contract modeling, insurance payer follow up
AHtoAnalytics™
Operational reporting and analytics with drill-through to account level detail
Yield-Based Follow-Up™
Follow-up for un-billed and billed claims with payors
AHtoCharge™
Charge integrity and compliance
AHtoAccess™
Patient pre-registration and registration, insurance eligibility checking
AHtoContract™
Best Possible calculation, contract modeling, insurance payer follow up
Driving Growth Through Measured Results
Potential Sources of Leakage Throughout End-to-End Process Actual Leakage
Realized
Hidden Leakage in
• Contractuals
(Underpayments,
misclassified denials)
Uncompensated Care
• Bad debt
• Charity care
• Denial write-offs
Hidden Leakage Due to
• Missing charges
• Documentation and
coding errors
28
Eliminating Leakage Drives Returns
FRONT-END
• Incomplete patient data
• Incomplete insurance
verification
• Incorrect payor code
• Failure to obtain
pre-authorization
• Incorrect residual
estimate
• Failure to discuss patient
share/ prior balance
• Failure to find
secondary insurance
• Coordination of benefits
• Insufficient follow up
with payer/patient
• Failure to appeal
denial
• Billing errors
• Discharge not final
billed (DNFB)
• Cash posting errors
• Failure to bill
secondary
• Delays in timely filing
• Third-party take
backs
• Insufficient or
incomplete
documentation
• Coding errors
• Missed charges
Registration and Financial Clearance
MIDDLE BACK-END
Health Information Management
Billing and Follow-up
Driving Growth Through Measured Results 29
AHtoCharge
Metrics Manual Internal Audit* AHtoCharge
Total Registered Visits 1,000,000 1,000,000
Reviewed Accounts 1,000 1,000,000
% Reviewed 0.1% 100%
Worked Accounts 1,000 30,000
Reconciled Revenue Leakage (# of accounts) 100 8,000
Gross $'s Reconciled $50,000 $4,000,000
*Based on Accretive Health’s estimates
Driving Growth Through Measured Results 30
Lifecycle of a Claim
Thorough analysis of claims
Balance (BAL) Compare to:
Charges
Payments
Patient Payments
Insurance Payments
Adjustments
Exp Reimbursement
Aug.15,2012 – Nov 13, 2012 BAL $0 CHR $9423.75 PMT $4642.01 ADJ $4781.74 REI $4642.01
8000.00
6000.00
4000.00
2000.00
0
Aug 20 Aug 27 Sep Sep 20 Sep 17 Sep 24 Oct Oct 8 Oct 15 Oct 22 Oct 29 Nov
L
S
R
P
E
L L
R
C
A U
U
T B 2 8 C
Y
Z 8 Y 2 8 $ B 2 8 $ $
Pre-Registration 8/15/2012 Insurance
plan info added
Insurance
Payment 10/11/2012 Insurance
payment
Admitted 8/18/2012
Discharged 8/22/2012
Patient Payment 11/7/2012
Contractual
Allowance 11/7/2012 Insurance
adjustment
Driving Growth Through Measured Results
Workflow Management
• Grouping of accounts into risk levels
• Campaigns focused on specific claim types
Advanced Prioritization Algorithms
• Customizable business rules engine utilizing 30+
variables for each account
• Insights from predictive models based on analysis of
historical data
Prioritized claims for each follow-up representative
31
Yield-Based Follow-up
Initial Prioritization based on factors including:
• Payor type and plan code
• Current insurance balance
• Expected reimbursement
• Denial type (if any)
• Days from discharge
• Days before filing appeals deadline
• Most recent activity on the account
• Recommended follow-up date
The Yield-Based Follow-up Tool utilizes proprietary algorithms and business
logic to assign accounts to appropriate risk categories.
Driving Growth Through Measured Results
• Technology is integrated into all key steps in the revenue cycle process
• Industry knowledge, reporting, and analytics capabilities are integrated into
management of the operations
• Embedded management teams are integral to execution of revenue
cycle processes
• Utilization of Shared Service Centers delivers additional cost savings
• Operational excellence and a focus on continuous improvement, combined
with consistent financial results, generates loyalty
Factors that Contribute to Long-Term Client Partnerships
32