D e v e l o p i n g a C o m p e t i t i v e N A P A p p l i c a t i o n : Y o u r B u d g e t a n d F i n a n c i a l M e a s u r e s

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1 D e v e l o p i n g a C o m p e t i t i v e N A P A p p l i c a t i o n : Y o u r B u d g e t a n d F i n a n c i a l M e a s u r e s

2 G O A L S A N D O B J E C T I V E S The goals of this webinar include the following: 1. Understand how to prepare a budget aligned with the operational model proposed in the Response section of the program narrative 2. Determine how to allocate expenses between Federal and Non Federal resources 3. Review Program Specific Forms and importance of having all documents tie back to the Budget Justification 4. Review HRSA Financial Performance Measures and industry benchmarks for New York State providers 5. Discuss the review criteria for Support Requested section 1

3 H O W T O D E V E L O P T H E B U D G E T J U S T I F C A T I O N

4 D E V E L O P I N G T H E B U D G E T J U S T I F I C A T I O N Keys for budget development 1. Finance and Operations should meet to develop assumptions for the proposed project which will later be used for the RESPONSE section of the narrative and preparation of budget. Assumptions include the following: Review clinical schedule for new site(s) and develop Staffing Profile (Position Type, FTEs, Baseline Annual Salaries/Hourly Rate) Make sure the staffing profile is aligned with the proposed hours of operation Determine number of providers to be hired and support staff List out other professional fees and purchased services (e.g., housekeeping, security, 24 hours answering service, etc ) required to support new site Utilize historical cost information to project variable costs (e.g., supplies and utilities) Determine fixed costs (e.g., rent or other lease arrangements) Discuss if any services for the uninsured will be paid by the grantee, and how. For example, will the applicant pay for ancillary services (labs and radiology). This would be at a cost to the applicant. Consider cost of living adjustments (COLA) for Year 2 and changes to Fringe Benefits (i.e. health insurance increases) 3

5 D E V E L O P I N G T H E B U D G E T J U S T I F I C A T I O N Projecting the expenditures for the following expense categories will be based on different variables: Salaries = Staffing Plan (FTEs) from the Salary List Fringe Benefits = Percent of Salaries and Wages Supplies = Based on Visits Ancillary Cost = Based on Visits by Site and Department Facility = Based on Current Leases Interest = Based on Current Loan Payments 4

6 D E V E L O P I N G T H E B U D G E T J U S T I F I C A T I O N Keys for budget development 2. Determine if you need to include one time capital expenditures (up to $150,000) for Year 1 only. Good use of funds as you ramp-up operations 3. Deprecation is not included in the budget 4. Principal payments of capital loans / leases should be included 5

7 D E V E L O P I N G T H E B U D G E T J U S T I F I C A T I O N Keys for budget development For Revenue Projections 1. Determine the number of billable visits (face to face encounters with billable providers) and anticipated payer mix that will result in patient service revenue. Payer mix for the site should be consistent with the profile of the target population and service area Existing grantees should use historical reimbursement rates for payers to model patient revenue New Starts should estimate reimbursement rates based on Medicaid and Medicare rate setting methodologies and commercial/managed care market data 2. Be conservative when projecting program income (patient revenue) Make sure to ramp-up your provider productivity and visit volume Don t expect that if you build it, they will come HRSA will compare Year 2 volume projections to 2016 UDS report SO MAKE SURE YOU CAN MEET TARGETS!!! 6

8 D E V E L O P I N G T H E B U D G E T J U S T I F I C A T I O N Keys for budget development 3. If you do not have enough revenue to balance the expenses, try to reduce expenses. Projecting other revenue like Patient Centered Medical Home, Bad Debt Charity Care, Meaningful Use to cover expenses are variable and may be subject to payment lags 4. Make certain the Budget Balances (Revenues = Expenses) 7

9 D E V E L O P I N G T H E B U D G E T J U S T I F I C A T I O N Guidelines for the Budget Justification A detailed budget justification in line-item format must be completed for each 12-month period of the 2 year project period. Please refer to the HRSA s Sample Budget Justification for exact format. If there are budget items for which costs are shared with other programs (e.g., other HRSA programs or an out-of-scope site), the basis for the allocation of costs between federally supported programs and other independent programs must be explained. The budget justification must clearly describe each cost element Be careful to indicate which item you categorize as other under the Object Class category is justified to your project. The budget justification MUST be concise. Do NOT use the justification to expand the program narrative. Any year to year variances greater than 5% should be explained 8

10 D E V E L O P I N G T H E B U D G E T J U S T I F I C A T I O N Guidelines for the Budget Justification Budget Justification must contain sufficient detail and calculations explaining how each line-item expense is derived (e.g. number of visits, cost per unit) Office Supplies ($X per visit x Y visits) Provider Training: 2 trainings in $X per person x 2 FTEs X 5 hotel $X per night x 2 FTEs x 2 trainings Rent ($X per month x 12 months) Must include Budget Justification for Staff that will be supported by Federal dollars (the HRSA grant). Name Position Title % of FTE Base Salary $150,000 C. Moore CEO 50 $225,000 J. Smith Physician 50 Federal Amount Requested $75,000 $112,500 R. Doe Nurse Practitioner 100 $ 75,950 $75,950 H. Black Outreach Director 50 $ 65,000 $ 32,000 B. White Referral Specialist 100 $ 40,000 $ 40,000 Note: Executive Level Salary II Limitations are Not Applicable for FY 2015 NAP Grant 9

11 D E V E L O P I N G T H E B U D G J E T J U S T I F I C A T I O N Only the first year of the budget justification should itemize revenues and expenses between Federal and Non-Federal Resources Note that Federal in this context refers to Section 330 dollars only So, what should we do? Step 1 - Start with your total costs and then allocate to appropriate revenue sources. Step 2 - Remove unallowable costs (to be covered by other non-grant funds) including salaries over the Federal salary cap. Step 3 - Remove costs that are restricted and covered by other restricted grants/contracts from other Federal, State, Local, and other non-government sources. Step 4 Following steps 1-3, the total costs remaining will be a pool of dollars to be allocated between Section 330 and Other Non-Grant Funds Within this pool, allocate those cost that may be 100% covered by Section 330 funds (e.g., Outreach &Enrollment or enabling services). The balance can then be allocated to the Section 330 grant based on a reasonable and justifiable basis. 10

12 S A M P L E F U N D I N G S O U R C E S Funding Sources for 330(e) General Scope of Project September 19,

13 S A M P L E F U N D I N G S O U R C E S Funding Sources for 330(h) Homeless Scope of Project September 19,

14 B U D G E T P R E S E N T A T I O N - P R O G R A M S P E C I F I C F O R M S

15 P R O G R A M S P E C I F I C F O R M S Budget presentation should include the following forms Application for Federal Assistance SF 424 Part of grants.gov submission ) Includes breakdown of revenue (Section 18) Revisions to budget allowable for Electronic Handbook (EHB) submission Form 424A: Budget Information Budget Justification Additional Budget Justification Personnel supported by Federal dollars Form 1B: Funding Request Summary Form 2: Staffing Profile Form 3: Income Analysis As applicable: Equipment List Alteration/Renovation (A/R) Budget Justification 14

16 P R O G R A M S P E C I F I C F O R M S Form SF 424A Budget Information Year 1 only Section A Budget Summary For each FQHC program function (general, homeless, migrant and public housing) the applicant must report revenue by federal and non-federal category Section B Object Class Categories Report expenses by Object Class Categories (Personnel, Fringe Benefits, Travel, Equipment, Supplies, Contractual, Construction, Other and Indirect Charges) Section C Non Federal Resources Report Non-Federal sources of revenue by type (Applicant, State, Local, Other and Program Income) for each program function Section D Forecasted Cash Needs (optional) Section E Budget Estimates of Federal Funds Needed for Balance of Project Indicate the distribution of federal funding request by program function for Year 2 Section F Other Budget Information If there is an approved indirect rate ) 15

17 P R O G R A M S P E C I F I C F O R M S Form 1 B Funding Request Summary Federal Funding Request for each year during the project period Federal funds will be allocated by program function for each year Percent distribution will be auto-calculated One-time funding request will be verified on this form Auto-populates based on other forms within EHB Form 2 Staffing Profile Report the following information by position for Year 1 only FTEs Average Annual Salary by Position Total Salary Costs by Position Total Federal Support Requested by Position line DO NOT INCLUDED CONTRACTED PROVIDERS/VOLUNTEERS Total salary costs and Federal Support Requested should tie to Personnel line under the Budget Justification This is also a good opportunity to evaluate staffing ratios for admin and clinical support to confirm operations are staffed well for proposed project Refer to 2012 NYS UDS Roll Up Report Table 5 for benchmarks or use historical information for your organization 16

18 P R O G R A M S P E C I F I C F O R M S Form 3 Income Analysis Must provide the following information for Year 1 only Patients by payer type (need some assumptions about utilization patterns) Billable visits by payer type (based on assumptions of productivity by provider) Income per visit (net reimbursement rate after collections) Total Projected Income (patient service revenue) Prior FY Income Month / Year (income data from the most recent fiscal year) MUST tie to Program Income category under Budget Justification Report Other Income for Year 1 only (Other Federal, Local, State, etc ) Equipment List (one time funding for capital purchases) Loose, Moveable Equipment Must report each item that is greater than the organization s capitalization threshold or $5,000 (whichever is less) Provide the following information for each item Indicate if item is Clinical or Non Clinical Description of Item Cost per Unit Quantity purchased Total Costs for Item Type 17

19 P R O G R A M S P E C I F I C F O R M S A/R Budget Justification Must provide if Alteration/Renovation (A/R) one time funding is requested Can only be requested if total project cost does not exceed $500,000 (excluding the cost of moveable equipment) The following fields must be completed for allowable costs: Line 1 Administrative and legal expenses Line 2 Land, structures, right-of-way, appraisals Line 3 Relocation expenses and payments Line 4 Architectural and engineering fees Line 5 Other architectural and engineering fees Line 6 Project inspection fees Line 7 Site work Line 8 Demolition and removal Line 9 Construction Line 10 Equipment Line 11 Miscellaneous Line 13 Contingencies 18

20 F I N A N C I A L P E R F O R M A N C E M E A S U R E S

21 F i n a n c i a l P e r f o r m a n c e M e a s u r e s Applicants are required to complete five (5) mandatory financial viability and cost measures. These include: 1. Total Cost Per Patient 2. Medical Cost Per Medical Visit 3. Change in Net Assets to Expense Ratio 4. Working Capital to Monthly Expense Ratio 5. Long Term Debt to Equity Ratio For each financial performance measure: Time-framed and realistic goals that are responsive to the organization s financial needs If baselines are not yet available, state when data will be available. Goals should be limited to the two-year proposed project period and be reflective of the target population and service area characteristics Specifically include: Goals for improving the organization s status in terms of costs and financial viability. Measures (numerator and denominator) and data collection methodology for all goals. A summary of at least one key factor anticipated to contribute to and one key factor anticipated to restrict progress toward the stated performance measure goals, and action steps planned for addressing described factors. 20

22 F i n a n c i a l P e r f o r m a n c e M e a s u r e s Applicants are required to complete five (5) mandatory financial viability and cost measures. These include the following: Total cost per patient Numerator: Total accrued cost before donations and after allocation of overhead Denominator: Total number of patients Source Data: UDS Lines: T8AL17CC/T4L6A (for existing grantees) Benchmark = $796 per patient (NYS UDS 2012) HRSA Expectation: Maintain a rate of increase of X%. This can be based on MEI or another economic index (i.e. COLA or CPI) Medical cost per medical visit Numerator: Total accrued medical staff and medical other cost after allocation of overhead (excludes lab and x-ray cost) Denominator: Non-nursing medical visits (excludes nursing (RN) and psychiatrist visits) Source Data: UDS Lines: T8AL1CC + T8AL3CC/T5L15CB TT5L11CB for existing grantees Benchmark = $158 per med visit (NYS UDS 2012) HRSA Expectation: Maintain a rate of increase of X%. This can be based on MEI or another economic index (i.e. COLA or CPI) 21

23 F i n a n c i a l P e r f o r m a n c e M e a s u r e s Applicants are required to complete five (5) mandatory financial viability and cost measures. These include the following: Change in net assets to expense ratio Numerator: Ending Net Assets Beginning Net Assets Denominator: Total Expense Note: Net Assets = Total Assets Total Liabilities HRSA Expectation: Maintain a ratio > 0 Working capital to monthly expense ratio Numerator: Current Assets Current Liabilities Denominator: Total Expense / Number of Months in Audit HRSA Expectation: Maintain a ratio > 1 month of expenses Long term debt to equity ratio Numerator: Long Term Liabilities Denominator: Net Assets HRSA Expectation: Maintain long term debt at < to ½ net assets (Ratio < 0.5) 22

24 F i n a n c i a l P e r f o r m a n c e M e a s u r e s HELPFUL TIPS & INFORMATION New Starts: Complete the performance measures based on the entire proposed scope of project Satellites : Complete the performance measures based on the proposed new access point(s) only Organizational level audit data should be used for Financial Viability ratios If brand new entity that is not operational, enter 0 and use a combination of budget and cash flow projections for the new site to determine goals 23

25 S U P P P O R T R E Q U E S T E D S E C T I O N O F P R O G R A M N A R R A T I V E

26 S U P P O R T R E Q U E S T E D R E V I E W HELPFUL WRITING TIPS & INFORMATION Discuss the assumptions and process utilized to support how the budget is realistic (e.g. historical data, industry benchmarks, other source data) How does the payer environment in New York State affect the budget? Why are the patient and visit volume assumptions realistic and adequate for the proposed project? Space may dictate your volume assumptions (what would be patient capacity in your facility?) Productivity and target population characteristics would impact volume Discuss how reimbursement will be maximized from third party payers How is the proportion of requested Federal grant funds appropriate given other sources of non-federal income? Discuss how the total cost per patient and federal cost per patient is appropriate and reasonable for the scope of project. Interplay among Support Requested and Financial Performance Measure 25

27 S U M M A R Y The budget, financial performance measures and business sections of the narrative must add up to: This health center is well run (cost effective) This health center is fiscally viable This health center is a good risk for funding 26

28 R E S O U R C E S CHCANYS Resources Available for Applicants 1. Data Support: CHCANYS can provide assistance with Form 4 (Community Characteristics) and Form 9 (Need for Assistance Worksheet). 2. Health Care Environmental Scan: CHCANYS can provide an overview of the State environment. Applicants can have the most accurate and up-todate information on the New York State health care environment and any significant statewide changes that have affected health centers ability to provide services. 3. PCA Letter of Support: If you would like to request a letter of support from CHCANYS, please read updated Policy Regarding Requests for Letters of Support and complete CHCANYS Letter of Support Request Form. 4. Emergency Preparedness: CHCANYS has developed a number of templates and resources to help you communicate this in your application narrative. AP%20Resource%20Center[chcanys.org] 27

29 U p c o m i n g N A P W e b i n a r Developing a Competitive NAP Application: Quality Improvement / Quality Assurance Plan Presented by: David Adams President, Health Care and Management Strategies, LLC Friday, August 15, :00 11:00 a.m. Click here to register. September 19,

30 Q U E S T I O N S??? 29

31 C O N T A C T I N F O R M A T I O N C O N T A C T I N F O R M A T I O N Scott Morgan, MBA Scott.Morgan@cohnreznick.com Aparna Mekala, MPH Aparna.Mekala@cohnreznick.com