Y drain extends several inches above the concrete floor. I have read that need to cut the pipe off level to the floor. Then clear the concrete around the drain pipe to make room for the drain flange. So what is the easiest way to break up and clear concrete around the drain pipe? What tools should used?

sledge hammer.. bust out plenty around the pipe. you will need to put a good base of mortar under the shower so it doesn't matter if the hole is 12 or 16 inches wide. its going to get filled to overflowing with mortar mix to support the shower.

YOU need to cut the pipe off, WHEREVER it has to be for your drain to end up where it has to be for your shower. IF the "flange" is going to be even with the floor, then you will cut the pipe below the floor line. All that is necessary that the opening be as large as the flange, and that can be done with a hammer.

if the concrete is very thick, you would be time, effort, and headache ahead by using either a concrete saw, angle grinder with masonry blade, and/or a chipping hammer. Trying to bust a 4" thick concrete floor with a sledge is just gonna beat you up, cause frustration, or damage something. Hit up a tool rental and just rent the proper tool for a couple hours and pay a few bucks; it is time and money well spent in workmanship and in clean up and repair of the area.