Financial and Operational Benchmarking Trends & Techniques

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1 Financial and Operational Benchmarking Trends & Techniques Susan Petrie Chief Operating Officer October 31,

2 Capital Link - Overview Launched in 1995, nonprofit, HRSA national cooperative agreement partner Offices in CA, CO, MA, FL, LA, MO, and WV Over $1.1 billion in financing for over 231 health center capital projects Metrics and analytical toolkits, trainings, and assistance in measuring, evaluating, and implementing performance improvement With HRSA support, have created the Capital Link Benchmarking Toolkit: 2

3 Capital Link Benchmarking Toolkit 3

4 Capital Link Data Sources Proprietary database that merges financial and operational information for national FQHCs: Over 80% of annual FQHC financial audits for 10+ years 100% of UDS reports for 10+ years With HRSA support, have developed the National Trends Report HRSA is also supporting an updated National Trends Report: Expected publication date: early calendar

5 National Trends Report 5

6 Data Included in Charts/Trends National FQHCs Data Financial Audits 1,022 1,112 1, UDS Data 1,278 1,342 1,320 1,348 6

7 Staffing Financial Operations Productivity Improved Access, Quality Care, & Financial Sustainability Patient Satisfaction Utilization Clinical Outcomes 7

8 Why Metrics Matter You can t manage what you don t know and You can t know what you don t measure Given insight, becomes Given meaning, becomes Given context, becomes 8

9 Data 9

10 Data by Itself Is Not Always Helpful But, using metrics to show the relationship between various pieces of data to reveal trends and/or indicators for deeper analysis provides more useful information. 10

11 Performance Benchmarking Benchmarking/Questions to Ask WHAT do I want to track? WHERE do I find the data? WHICH metrics do I need? WHO do I compare to? WHAT does it mean? 11

12 Creating Performance Dashboards Building Performance Dashboards Dashboards should be customized Identify your target audience Board members vs. executive management vs clinic managers Choose your financial and operational metrics Limit what you are tracking (5-10 metrics) Stay consistent with your ratio definitions & calculations Match your reporting objectives to your available data sources Annual data often most reliable: Audits, UDS, OSHPD, etc. Monthly/quarterly data better support real-time decision making: PMS systems, interim financials, etc. Explore your available reporting tools Look to Excel as a simple tool for charting performance Time intensive to set up, then efficient for routine reporting 12

13 Patient Access, Service and Patient Mix, Revenue & Expense Trends 13

14 National Patient and Visit Trends Millions Patient Visits 14

15 Patient and Visit Growth: National Median 8% 7% 6% 5% 5% 5% 5% 7% 5% 5% 6% 4% 3% 3% 3% 3% 2% 1% 0% Patient Growth Rate Visit Growth Rate 15

16 Services Provided by Health Centers Number of Health Centers One Two Three Four Five Six or more 16

17 Annual Growth in Visits by Service: National Median 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2% 16% 14% 14% 7% 7% 5% 5% 6% 4% 4% 3% Medical Dental Mental Health 17

18 Number of Patients by Service: National Total Millions Medical Dental Mental Health Substance Use Other Professional Vision Enabling 18

19 Patient Mix: National Median Percentage of Patients by Payer Source 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 15% 16% 17% 18% 8% 9% 9% 9% 40% 43% 45% 45% 26% 22% 21% 20% Uninsured Medicaid Medicare Public Insurance Private Insurance 19

20 Payer Mix: National Median Percentage of Collections by Payer 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 11% 11% 13% 13% 9% 9% 10% 10% 61% 62% 62% 62% 9% 8% 7% 7% Uninsured Medicaid Medicare Public Insurance Private Insurance 20

21 Operating Revenue and Expense Growth: National Median 16% 14% 12% 10% 8% 8% 9% 10% 13% 13% 13% 11% 10% 6% 4% 2% 0% Operating Expense Growth Rate Operating Revenue Growth Rate 21

22 Financial and Operational Metrics 22

23 Financial and Operational Metrics Metric 1 Operating Margin 2 Bottom Line Margin 3 Personnel-Related Expense 4 Days Net Patient A/R 5 Days Cash on Hand Why This Is Important Measuring stick of your business model; margins typically small but need to be positive Is performance dependent upon large capital grants and/or other sources of non-operating revenue? Consumes 70-75% of budget; key driver of financial performance Financial management starts with collecting your money efficiently Is there enough liquidity to keep operations running smoothly? 6 Physician Productivity (visits) Productivity is the basis for revenue generation 7 Mid-Level Productivity (visits) Productivity is the basis for revenue generation 8 Dental Provider Productivity (visits) *Capital Link Performance Benchmarking Toolkit Productivity is the basis for revenue generation 23

24 Financial Health: Important Metrics Operating Margin = Change in Net Operating Assets / Total Operating Revenue Personnel-Related Expenses as a % of Total Revenues = Salaries & Related Expenses + Fringes & Payroll Taxes + Professional/Contracted/Consultant Fees Total Operating Revenues Days Cash on Hand = Unrestricted Cash (Total Operating Expenses Depreciation) / 360 days) 24

25 Operating Margin 12% 10% 9.2% 10.1% 9.2% 8% 6% 4% 2% 0% -2% -4% 6.8% 4.3% 3.7% 3.6% 1.9% -2.2% -0.2% 0.5% th Quartile Median 25th Quartile Benchmark -0.2% 25

26 Bottom Line Margin 12% 10% 9.9% 10.9% 11.4% 10.3% 8% 6% 4% 3.3% 5.1% 5.5% 4.4% 2% 0% -2% -0.4% 1.3% 0.8% 0.9% th Quartile Median 25th Quartile Benchmark 26

27 Personnel-Related Expenses as a Percent of Operating Revenue 80.0% 75.0% 70.0% 65.0% 78.1% 72.4% 65.3% 76.6% 75.4% 70.9% 70.2% 64.0% 63.2% 76.6% 71.8% 65.0% 60.0% 55.0% 50.0% th Quartile Median 25th Quartile Benchmark 27

28 Days in Patient Accounts Receivables th Quartile Median 25th Quartile Benchmark 28

29 Days Cash on Hand th Quartile Median 25th Quartile Benchmark 29

30 Provider Productivity Visits per FTE: National Median 12,000 10,000 8,000 6,000 4,000 1, ,927 1,904 1,819 1,762 2,535 2,443 2,439 2,401 3,035 2,933 2,859 2,780 2, ,817 2,704 2,650 2, Total Mental Health Visits per Mental Health FTE Total Dental Visits per Dental FTE Total Advanced Practice Visits per Advanced Practice FTE Total Physician Visits per Physician FTE Total Medical Visits per Medical FTE 30

31 Percentage Change in Productivity: 2014 to 2017: National Median Total Medical Visits per Medical FTE Total Physician Visits per Physician FTE -9% -8% Total Advanced Practice Visits per Advanced Practice FTE -5% Total Dental Visits per Dental FTE -9% Total Mental Health Visits per Mental Health FTE -8% 31

32 Additional Critical Operational Metrics in FFS Model 32

33 Revenue per Patient and Visit: National Median $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $- $900 $931 $834 $772 $206 $224 $238 $246 Operating Revenue per Patient Operating Revenue per Patient Visit

34 Visits Per Patient Per Year th Quartile Median 25th Quartile 34

35 Evolving Business Models 35

36 Transition from FFS to Value-Based Reimbursement 36

37 Value Transition Based from Transition FFS to Value-Based Reimbursement 37

38 Transition from FFS to Value-Based Reimbursement Fee for Service Volume Individual Health Quality is a concern Stand-alone systems can thrive Little financial risk Manage revenues Value-Based Outcomes Population Health Quality is financial driver Collaboration is essential Increased financial risk Manage costs 38

39 Transition from FFS to Value-Based Reimbursement Redesigned Incentives 39

40 Transition from FFS to Value-Based Reimbursement Metric Why This Is Important 9 Medical Provider Productivity (patients) Becomes more important in transition to team-based care 10 Medical Team Productivity Who are your teams? How do they perform? 11 Cost (Revenue) Per Visit How are your visit costs changing over time? 12 Cost (Revenue) per Patient With the move to PCMH, how are patient costs changing? 13 Medical Support Staff Ratio How strategic is the staffing the medical teams? 14 Non-Clinical Staff Ratio Non-clinical employees are not revenue drivers *Capital Link Performance Benchmarking Toolkit 40

41 Medical Patients per Medical Provider 1,150 1,100 1,050 1, ,108 1,082 1,054 1, th Quartile Median 25th Quartile 41

42 Medical Patients per Medical Team Member th Quartile Median 25th Quartile 42

43 Cost Per Patient and Visit: National Median $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $- $843 $874 $755 $788 $200 $211 $224 $234 Operating Expense per Patient Operating Expense per Patient Visit

44 Medical Support Staff Ratio th Quartile Median 25th Quartile 44

45 Non-Clinical Staff Ratio 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 43% 42% 42% 41% 38% 38% 37% 37% 33% 33% 33% 32% th Quartile Median 25th Quartile 45

46 How Does Your Health Center Compare: Dashboard Sample 46

47 Capital Link Performance Evaluation Profile 47

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52 Benchmarking Benefits Productive Teams Stable Operations High Staff and Patient Satisfaction Quality Outcomes/Access/Depth of Care Financial Sustainability 52

53 Questions? Contact Susan Petrie Chief Operating Officer Jonathan Chapman Director of CHC Advisory Services Visit us Online: Learn more about our products and services Download our free publications and resources Register for upcoming webinars Sign up for our e-newsletter, Capital Ink Subscribe to our blog at capitallinksblog.blogspot.com 53