Clinical delivery models Supply costs Pharmaceutical costs Staffing patterns

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1 AN OVERVIEW Improving your Hospice Service Bottom Line: Cost Efficiency in Tighter Reimbursement David Berman, CPA, CVA Principal Simione Healthcare Consultants Andrea L. Devoti President & Chief Executive Officer Neighborhood Health NEED TO ASSESS ALL ASPECTS OF YOUR HOSPICE Clinical delivery models Supply costs Pharmaceutical costs Staffing patterns DME Medical providers 2 1

2 START WITH DELIVERY OF CARE: Clinical models for teams Geographic Regions Territories Clinical staff utilized 3 POSITIVE EFFECTS FOR: Continuity of care Decreased mileage Decreased travel time Staff satisfaction 4 2

3 SUPPLY COSTS: What benefits you? Drop ship Supply room Quality of supplies Competitive bidding 5 PHARMACEUTICAL COSTS: Your biggest expense other than staff Shop around at least once per year Set your formulary with your physician then stick to it Supply only what is covered by hospice 6 3

4 STAFFING PATTERNS: RN LPN Case loads Direct effect on efficiencies 7 MEDICAL DIRECTORS: How many are needed? MDs vs. CRNPs Roles job descriptions and evaluations Functions Documentation 8 4

5 QUALITY INITIATIVES: QAPI Coding HIS to come 9 ARE YOU USING TECHNOLOGY? EMR Telehealth Phones Air cards encryption 10 5

6 FUNDRAISING Grateful patients Events outings, etc.; pros and cons Support groups Be unique Need strong volunteer base 11 MARKETING Earlier referrals to allow patient full benefit of fhospice Market to: MDs ACOs Hospitals Other post acute care providers 12 6

7 FINANCIAL MANAGEMENT 13 THE KEY TO FINANCIAL SUCCESS Clinical and Financial both must be committed to the financial i goals of the agency Data must be shared and understood by everyone Data must be timely and accurate 14 7

8 USE OF DATA Financial Statements Tells the Big Picture of where the agency is Key Indicators Explain the financial results of the agency 15 USE OF DATA Budgeting Metrics Define how you will achieve your strategic goals Costing of Other Services Provides an ROI on new services 16 8

9 AGENCY FINANCIAL REPORTING Income Statement Should show gross vs. net margin Compare month and YTD vs. budget, as well as prior year Managers should understand what it means 17 AGENCY FINANCIAL REPORTING XYZ Home Health Care Consolidated Statement of Revenue & Expenses For the Four Months Ended October 31, 2010 Currnt Month YTD YTD Actual Budget Variance Actual Budget Variance Prior OPERATING REVENUE Net Patient Revenue $ 1,506,903 $ 1,579,301 $ (72,398) $ 6,172,446 $ 6,243,638 $ (71,192) $ 5,786,894 Other Operating Revenue - 7,636 (7,636) 25,905 30,544 (4,639) 47,141 Total Net Operating Revenue 1,506,903 1,586,937 (80,034) 6,198,351 6,274,183 (75,831) 5,834,035 DIRECT EXPENSE Salaries & Benefits 827, ,913 70,651 3,214,490 3,009, ,174 2,955,254 Contracted Services 34,117 17,000 17, ,811 68,000 41,811 59,272 Worker's Comp 34,921 34, , , ,715 Supplies 127, ,297 26, , , , ,016 Travel 45,733 36,002 9, , ,194 (6,693) 138,899 Total Direct Expense 1,070, , ,906 4,091,384 3,739, ,436 3,707,156 % of revenue 71.0% 59.6% % 66.0% 59.6% 63.5% GROSS PROFIT 436, ,805 (203,941) 2,106,967 2,534,235 (427,267) 2,126,879 % of revenue 29% 40% 34% 40% 36% 18 9

10 AGENCY FINANCIAL REPORTING GENERAL & ADMINISTRATIVE EXPENSE Salaries & Benefits 302, ,144 (13,438) 1,182,168 1,255,881 (73,713) 1,166,645 Purchased Services 21,538 28,178 (6,640) 75, ,712 (37,645) 131,052 MIS 33,940 38,486 (4,546) 138, ,945 (15,493) 119,942 Supplies 7,373 7,700 (327) 33,222 30,800 2,422 26,840 Rent 76,774 76,775 (0) 307, ,098 (1) 300,146 Building Maintenance 9,829 9, ,026 36,000 5,026 38,830 Utilities 8,166 10,105 (1,939) 38,576 40,420 (1,844) 42,761 Printing 3, ,800 (1,361) 11,060 19,200 (8,140) 6,533 Travel 10,681 5,250 5,431 17,278 21,000 (3,722) 19,411 Recruitment 1,898 2,250 (352) 6,395 9,000 (2,605) 10,143 Telephone A&G 17,209 19,000 (1,791) 81,068 76,000 5,068 60,968 Answering Service 1,666 1, ,146 6, ,835 Postage & Shipping 1,999 2,500 (501) 10,148 10, ,431 Insurance-General-A&G 1,387 7,250 (5,863) 22,186 29,000 (6,814) 29,225 Marketing 66 5,750 (5,684) 11,604 23,000 (11,396) 16,121 Bank Charges (56) 965 1,000 (36) 1,179 Miscellaneous Expense 213 1,167 (954) 2,130 4,667 (2,537) 1,176 Conference & Seminars-A&G 776 2,750 (1,974) ,000 (10,620) 6,199 Dues & Subs 4,080 5,000 (920) 18,318 20,000 (1,682) 12,148 Equipment Maintenance 7,455 9,000 (1,545) 26,472 36,000 (9,528) 41,369 Security 3,541 3, ,808 12,564 1,245 13,229 Depreciation 30,346 31,473 (1,127) 121, , ,834 Bad Debt 18,135 18,989 (854) 75,678 75,678 (0) 30,000 Total General & Administrative Expense 563, ,516 (43,105) 2,241,684 2,291,364 (49,680) 2,204,017 % of revenue 37.4% 38.2% 53.9% 36.2% 36.5% 65.5% 37.8% NET OPERATING INCOME / (LOSS) (126,548) 34,289 (160,836) (134,716) 242,870 (377,587) (77,139) NON OPERATING REVENUE 25,807 35,833 (10,026) 92, ,833 (13,547) 117,771 NON OPERATING EXPENSE NET INCOME / (LOSS) $ (100,741) $ 70,122 $ (170,863) $ (42,430) $ 348,704 $ (391,134) $ 40, AGENCY FINANCIAL REPORTING How to interpret gross v. net margins All front line staff can control gross margin Productivity/Case Load/Visits per Day Scheduling Mileage Worker s Comp Senior Team controls both direct and indirect costs 20 10

11 KEY INDICATORS As reimbursement rates remain flat or decrease we must learn to do more with less Will it be U-Shaped, Tiered or Short Stay Add on? Controls and metrics become vital to ensuring a cost effective and efficient delivery of care 21 KEY INDICATORS Key Indictors should be simple and straight forward yet provide the detail needed to support the financial position of the hospice 22 11

12 KEY INDICATORS-IN HOME Routine Continuous Inpatient Respite General Inpatient Month Jul-13 3, Aug-13 3, Total 7, Month Actual Days Budgeted Days Variance Prior Year Jul-13 3,544 4,092 (548) 4,134 Aug-13 3,698 4,030 (332) 3,950 Total 7,242 8,122 (880) 8,084 Length of Stay(for patients discharged in the month) August 2013 July 2013 June 2013 May 2013 Apr 2013 Mar 2013 Average Median Budget Average KEY INDICATORS-IN HOME Average Daily Census Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Actual Budget Supply Cost Per Day YTD Jul-13 Jul-13 Drugs & Biologicals $ 7.91 $ 8.47 $ 7.70 DME & Other All Supplies $ $ $ Budget $

13 KEY INDICATORS-IPU Days All Payors Routine & R&B Continuous Inpatient Respite General Inpatient Month Jul Aug Total Length of Stay Month Actual Days Budgeted Days Variance Prior Year Jul Aug Total Aug-13 Jul-13 Jun-13 May-13 Apr-13 Average Median KEY INDICATORS-IPU Average Daily Census Aug-13 YTD Actual Budget Actual Budget Inpatient Respite Room & Board(including routine) Total Supply Cost Per Day YTD Jul-13 Jul-13 Drugs & Biologicals $ $ $ Other All Supplies $ $ $ Budget $

14 KEY INDICATORS-IPU Aug-13 YTD Actual Budget Actual Budget RN C.N.A MSW Supervisor Pastoral KEY METRICS-OTHER Other key indicators to report Admissions by month Should know admissions by referral source Visits by month Including by service type Visits/Day Watch the trend as census either increases or decreases DSOs by Payor Write Offs by Reason 28 14

15 BUDGETING Budget should be driven by metrics The simplified method of budgeting does not provide the data you need Input should be sought from Hospice managers and directors 29 BUDGETING Admission Average Length of Stay Average Daily Census» Days Visits per Day Productivity Average Case Load 30 15

16 BUDGETING Miles/Visit Supply and Drug Cost per Day Meal Cost/Day (IPU) Overhead should be based on current contracts and experience rate 31 COSTING OF OTHER SERVICES Before you implement a new service, i.e. Pet Therapy, an ROI should be performed Can you receive contributions to offset the cost? Is the new service really a differentiator in the market? 32 16

17 REMEMBER Metrics!!!! Metrics!!!! Metrics!!!!! 33 THANK YOU 34 17

18 SIMIONE.COM Simione Healthcare Consultants provides solutions for your core home care and hospice challenges organizational, financial, sales & marketing, technology, and mergers & acquisitions. Over 1000 organizations use our practical insight and tools to reduce costs, mitigate risk and improve efficiencies to steward the way they conduct business. David Berman 4130 Whitney Avenue Hamden, CT Andrea L. Devoti 795 East Marshall Street, Suite 204 West Chester, PA