Cracking the Code on Managing Costs and Forecasting Revenue in a PPS Environment

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1 Cracking the Code on Managing Costs and Forecasting Revenue in a PPS Environment January 18, 2018 Peter R. Epp, CPA CohnReznick LLP

2 Todays Moderator Nicole Cadovius, MBA, CAPS, FAAIDD Director, Practice Improvement, National Council CCBHC Project Director 20+ years in healthcare administration

3 Webinar Login Directions Recommend calling in on your telephone. Enter your unique Audio PIN so we can mute/unmute your line when necessary. Audio PIN: Will be displayed after you log into GoToWebinar. Technical difficulties? Call Citrix tech support at This button should be clicked if you re calling in by telephone. Here s where your unique audio PIN number will appear.

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5 Todays Presenter Peter R. Epp, CPA Partner, CohnReznick LLP Practice Leader Community Health Centers FQHC PPS Reimbursement Expert Medicaid Value-Based Payment Experience

6 Learning Objectives Understand the significance of costing clinical and non-clinical interventions in a PPS environment Develop a systematic approach to monitor service costs and comparison with revenue to maximize margins Utilize population health management approach to develop lean operational practices and drive financial decision-making to thrive in a PPS arrangement

7 Overview Living within the PPS rate Rebasing No-rebasing, just MEI trending Year 1 PPS financial projections Costs Volume Managing financial performance

8 Living within the PPS Rate If the PPS rate will be rebased in Year 2 Analyze current costs and volume versus the base year cost report Project cost and volume for the balance of Year 1 Project Year 2 performance Estimate re-basing of the PPS rate and additional concerns Timing of anticipated costs Adjustments to Year 1 cost report to annualize expenses incurred mid-year 1

9 Living within the PPS Rate Projecting the rebasing of the PPS rate Actual Forecasted Reforecast Budget 7/1-12/31/2017 1/1-6/30/2018 FYE 6/30/2018 Year 2 Direct CCBHC Expenses: CCBHC Staff Costs 2,186,250 2,427,500 4,613,750 4,895,000 CCBHC Costs Under Agreement Other Direct CCBHC Costs 235, , , ,000 Total Direct CCBHC Expenses 2,421,250 2,750,000 5,171,250 5,490,000 Indirect Costs: Site Costs 150, , , ,000 Administrative Costs 350, , , ,000 Total Indirect Costs 500, ,000 1,150,000 1,300,000 Direct Costs for non-ccbhc Services: Direct Costs for Services Other Than CCBHC 337, , ,000 1,175,000 Non-reimbursable Costs 162, , , ,000 Total Non-CCBHC Direct Expenses 500, ,000 1,250,000 1,500,000 TOTAL EXPENSES 3,421,250 4,150,000 7,571,250 8,290,000 Visits 12,431 13,400 25,831 26,800

10 Living within the PPS Rate Projecting the rebasing of the PPS rate (cont d) Actual Forecasted Reforecast Budget 7/1-12/31/2017 1/1-6/30/2018 FYE 6/30/2018 Year 2 Direct CCBHC Costs 2,421,250 2,750,000 5,171,250 5,490,000 Direct non-ccbhc Costs 500, ,000 1,250,000 1,500,000 Total Direct Costs 2,921,250 3,500,000 6,421,250 6,990,000 Total Indirect Costs 500, ,000 1,150,000 1,300,000 Indirect Rate 17.12% 18.57% 17.91% 18.60% Allocation of Indirect Costs 414, , ,134 1,021,030 Total Reimburseable CCBHC Costs 2,835,670 3,260,714 6,097,384 6,511,030 Total Visits 12,431 13,400 25,831 26,800 CCBHC Cost per Visit $ $ $ $242.95

11 Living within the PPS Rate If the PPS rate will be NOT be rebased in Year 2 Analyze current costs and volume versus the base year cost report Project cost and volume for the balance of Year 1 Project Year 2 performance Comparison to PPS rate Medicare Economic Index for 2018 = 1.8% Analyze key drivers of performance improve bottom-line

12 Living within the PPS Rate Living within the PPS rate, not rebased Reforecast Budget CCBHC FYE 6/30/2018 Year 2 Cost Report Direct CCBHC Expenses: CCBHC Staff Costs 4,613,750 4,895,000 5,000,000 CCBHC Costs Under Agreement Other Direct CCBHC Costs 557, , ,000 Total Direct CCBHC Expenses 5,171,250 5,490,000 5,620,000 Indirect Costs: Site Costs 312, , ,000 Administrative Costs 837, , ,000 Total Indirect Costs 1,150,000 1,300,000 1,100,000 Direct Costs for non-ccbhc Services: Direct Costs for Services Other Than CCBHC 925,000 1,175, ,000 Non-reimbursable Costs 325, , ,000 Total Non-CCBHC Direct Expenses 1,250,000 1,500,000 1,000,000 TOTAL EXPENSES 7,571,250 8,290,000 7,720,000 Visits 25,831 26,800 29,532

13 Living within the PPS Rate Living within the PPS rate, not rebased (cont d) Reforecast Budget CCBHC FYE 6/30/2018 Year 2 Cost Report Direct CCBHC Costs 5,171,250 5,490,000 5,620,000 Direct non-ccbhc Costs 1,250,000 1,500,000 1,000,000 Total Direct Costs 6,421,250 6,990,000 6,620,000 Total Indirect Costs 1,150,000 1,300,000 1,100,000 Indirect Rate 17.91% 18.60% 16.62% Allocation of Indirect Costs 926,134 1,021, ,837 Total Reimburseable CCBHC Costs 6,097,384 6,511,030 6,553,837 Total Visits 25,831 26,800 29,532 CCBHC Cost per Visit $ $ $ NOTE: When comparing to the CCBHC cost report, remember to apply the MEI!

14 Living within the PPS Rate Rehash of key drivers of success in an allinclusive PPS rate model (from last webinar) Salary levels, benefit packages and staffing mix Support staff ratios (direct care versus patient support) Amount of enabling and ancillary services Administrative/overhead infrastructure Provider productivity/clinician capacity Remember, CCBHCs have flexibility to design their care delivery model as long as it is managed within the PPS rate system!

15 Year 1 PPS Projection During the mid-point of Year 1 of the CCBHC demonstration, clinics must analyze costs and visits in preparation for Year 2 Comparison to current PPS rate to evaluate potential adjustments to operations Prepare for rebasing, if applicable Cost, visit and cost/visit analyses Reforecast of Year 1 Analyze actual activity to-date Projection of activity through the end of Year 1 Projection of Year 2 based on trends in Year 1

16 Year 1 Cost Projection Cost analysis Must analyze both direct CCBHC costs and direct non-ccbhc costs Must analyze indirect costs and their allocation Must review trends in costs, especially the timing of anticipated costs For personnel costs, analyze staffing profiles versus originally anticipated when preparing the initial cost report

17 Year 1 Cost Projection Analyzing personnel costs Analyze the staffing profile and salary costs included in the initial CCBHC cost report Review FTEs by staff level for the most recent interim period as compared to the cost report Forecast FTEs based on the most recent payroll period taking into account vacancies to be filled Prepare a staffing profile for Year 2 based on anticipated staffing levels at the end of Year 1 Apply salary levels and fringe benefits to the staffing profile

18 Year 1 Cost Projection Cost report personnel profile Focus on existing staff and new hires anticipated, as well as salary levels FTEs Salary Cost Position Title Base Year Anticipated Total Base Year Anticipated Total Psychiatrist , ,000 Psychiatric nurse , , ,000 Substance abuse specialist ,000 50, ,000 Case manager ,000 40, ,000 Peer specialist , ,000 Licensed clinical social worker , , ,000 Licensed mental health counselor ,000 75,000 General practice (CCBHC services) ,500, ,000 1,650,000 Other Staff , , ,000 TOTALS ,795,000 1,205,000 5,000,000

19 Year 1 Cost Projection Projecting the personnel profile Cost Report Actual Forecast Forecast Yr 1 Budget Yr 2 Position Title Base Year Anticipated Total FTEs FTEs FTEs FTEs Psychiatrist Psychiatric nurse Substance abuse specialist Case manager Peer specialist Licensed clinical social worker Licensed mental health counselor General practice (CCBHC services) Other Staff TOTALS

20 Year 1 Cost Projection Projecting the personnel profile (cont d) Review the last payroll period when forecasting staffing through the balance of Year 1 Last Payroll Period Actual # of Pay Forecasted Forecast Forecast Yr 1 Budget Yr 2 Licensed Clinical Social Workers: Hire Date Salary FTE Hours Paid Periods Hours FTE FTE FTE Jane Doe 10/1/ , Jim Ray 9/13/ , Doug Me 11/1/ , Joan Fah 9/1/ , Kim So 9/1/ , Janet La 10/1/ , Tim Tee 10/1/ , John Doe 10/1/ , Tom Brady 11/1/ , Jessica Simple 12/1/ , TOTALS

21 Year 1 Cost Projection Projecting the personnel profile (cont d) When forecasting the balance of Year 1 and budgeting Year 2, evaluate the filling of vacant positions Last Payroll Period Actual # of Pay Forecasted Forecast Forecast Yr 1 Budget Yr 2 Other Staff: Hire Date Salary FTE Hours Paid Periods Hours FTE FTE FTE Jim Bo 7/1/ , Harry Potter 7/1/ , Babe Ruth 1/1/ , Michael Bubble 1/1/ , Shirley Temple 10/1/ , Ron McDonald 12/1/ , Gene Jean 7/1/ , Arthur 7/1/ , Vacant 1/1/ , Vacant 4/1/ , Vacant 4/1/ , TOTALS

22 Year 1 Cost Projection Applying salary levels and fringe benefits to the personnel profile Perform a similar analysis for both non-ccbhc and indirect salary costs Cost Report Actual Forecast Forecast Yr 1 Budget YR 2 Position Title Base Year Anticipated Total Salary Salary Salary Salary Psychiatrist 285, , , , , ,000 Psychiatric nurse 610, , , , , , ,000 Substance abuse specialist 100,000 50, ,000 75,000 75, , ,000 Case manager 375,000 40, , , , , ,000 Peer specialist - 140, ,000 70,000 70, , ,000 Licensed clinical social worker 250, , , , , , ,000 Licensed mental health counselor 75,000 75,000 37,500 37,500 75,000 75,000 General practice (CCBHC services) 1,500, ,000 1,650, , ,500 1,545,000 1,545,000 Other Staff 600, , , , , , ,000 TOTALS 3,795,000 1,205,000 5,000,000 2,186,250 2,427,500 4,613,750 4,895,000

23 Year 1 Cost Projection Analyzing other than personnel service (OTPS) costs Analyze the OTPS costs included in the initial CCBHC cost report Review trends and the how/when anticipated costs were incurred Forecast OTPS expenses based on the most recent period adjusting for anticipated cost expenditures Remove one-time expenditures, as appropriate Annualize new, recurring expenses Evaluate anticipated expenses yet to be incurred Prepare an OTPS budget for Year 2 based on trends and resolution of anticipated expenses

24 Year 1 Cost Projection Analyzing other than personnel service (OTPS) costs (cont d) Evaluate CCBHC direct costs as well as non- CCBHC and indirect OTPS expenses Per Cost Report Actual Forecast Forecast Yr 1 Budget Yr 2 Expense Item Base Year Anticipated Total Expense Expense Expense Expense Program Supplies 50,000 25,000 75,000 37,500 37,500 75,000 75,000 Transportation 40,000 25,000 65,000 20,000 32,500 52,500 65,000 Depreciation - program equipment 15,000 15,000 30,000 7,500 15,000 22,500 30,000 Professional liability insurance 15,000 10,000 25,000 7,500 12,500 20,000 25,000 Telehealth Other: Various 300,000 50, , , , , ,000 One-time consulting services - 25,000 25,000-25,000 25,000 - EHR maintenance fees - 50,000 50,000 12,500 25,000 37,500 50,000 TOTALS 420, , , , , , ,000

25 Year 1 Cost Projection Analyzing the indirect rate calculation Evaluate % of CCBHC direct expenses to the total Evaluate salary and OTPS expenses charged If indirect expenses are based on a Federallyapproved rate, evaluate its preparation and basis Actual Direct Forecasted Direct Forecasted Direct Budget Direct CCBHC Direct 7/1-12/31/2017 Cost % 1/1-6/30/2018 Cost % FYE 6/30/2018 Cost % Year 2 Cost % Cost Report Cost % Overhead Allocation Analysis: Direct CCBHC Costs 2,421, % 2,750, % 5,171, % 5,490, % 5,620, % Direct non-ccbhc Costs 500, % 750, % 1,250, % 1,500, % 1,000, % Total Direct Costs 2,921, % 3,500, % 6,421, % 6,990, % 6,620, % Indirect Costs 500, ,000 1,150,000 1,300,000 1,100,000 Indirect Rate 17.12% 18.57% 17.91% 18.60% 16.62%

26 Year 1 Volume Projection Visit volume analysis Must analyze clinician visit productivity levels per FTE actual versus anticipated Must evaluate clinician staffing patterns and their impact on volume Must evaluate visit volume versus number of patients (patient utilization) to evaluate patient demand Must evaluate how the scheduling process impacts visit counts

27 Year 1 Volume Projection Visit volume analysis (cont d) Evaluation of FTEs should be linked to the personnel staffing profile Per Cost Report Files Actual For Period Forecast Job Title FTEs Visits Productivity FTEs Visits Productivity FTEs Visits Productivity Psychiatrist ,521 2, ,000 2, ,500 1,500 Psychiatric nurse ,286 1, ,271 1, ,300 1,159 Substance abuse specialist ,154 1, ,625 1, ,600 1,231 Licensed clinical social worker , , , TOTALS ,532 1, ,431 1, , Per Cost Report Files Forecast Yr 1 Budget Yr 2 Job Title FTEs Visits Productivity FTEs Visits Productivity FTEs Visits Productivity Psychiatrist ,521 2, ,500 1, ,000 1,500 Psychiatric nurse ,286 1, ,571 1, ,600 1,159 Substance abuse specialist ,154 1, ,225 1, ,200 1,231 Licensed clinical social worker , , , TOTALS ,532 1, ,831 1, ,

28 Managing Performance When evaluating financial performance in the CCBHC PPS model, finances should be evaluated in total as compared to fluctuations in volume Financial analyses should therefore be performed on a per visit basis Visits 12,431 Total Patient Revenue, Net 2,585,865 $ Grants and Contracts 200,000 $16.09 TOTAL REVENUE 2,785,865 $ Direct Expenses CCBHC Staff Costs 2,186,250 $ Other Direct CCBHC Costs 235,000 $18.90 Indirect Expenses 414,420 $33.34 TOTAL EXPENSES 2,835,670 $ SURPLUS/(LOSS) (49,805) ($4.01)

29 Managing Performance Managing the revenue per visit Monitor payer mix of visits impacted by front desk and insurance verification process Negotiate favorable third party rates Monitor the bad debt % - impacted by front desk and billing process Visits Payer % Reimb Rates Revenue Patient Revenue: Medicaid 11, % $ ,573,240 Commercial Insurance % $ ,950 Self-pay % $ ,650 Subtotal 12, % $ ,665,840 Less: Uncollectible Accounts (79,975) 3.0% Bad debt rate Total Patient Revenue, Net 2,585,865

30 Managing Performance Managing the cost per visit Bottom-line Manage provider productivity to improve the bottom-line Monitor patient utilization measure patient demand Scheduling improve productivity (double booking, no show rates, scheduling template) and increase volume

31 Managing Performance Impact of Productivity in PPS Model Provider A Provider B Provider C Provider Productivity (visits) 1,000 1,500 2,000 Average PPS Revenue per Visit $ $ $ Total Revenue 225, , ,000 Provider Salary 150, , ,000 Direct Support Staff 50,000 50,000 50,000 Total Salary Cost 200, , ,000 Fringe Benefits (25%) 50,000 50,000 50,000 Total Salary and Benefits 250, , ,000 Variable $10/visit (eg. Supplies) 10,000 15,000 20,000 Total Direct Costs 260, , ,000 Overhead (25%) 65,000 66,250 67,500 Total Costs 325, , ,500 Surplus/(Loss) ($100,000) $6,250 $112,500 Revenue per visit $ $ $ Cost per visit $ $ $ Surplus/(Loss) per visit ($100.00) $4.17 $56.25

32 CCBHC Templates Based on the July 26, 2017 webcast, 2 templates have been developed to assist CCBHC s with monitoring volume (visits) Payer mix of visits Patient utilization of services The templates are write-protected Data entry fields are highlighted CCBHC Name and month of fiscal year Actual visits daily and monthly Budgeted visits daily and monthly Instructions on the use of each template are included at the bottom Each template has 2 tabs A blank template for use An example completed template for reference

33 Payer Mix Template Example report Actual Budget Visit Variance Payer # of Visits Payer Mix # of Visits Payer Mix # of Visits % Visits for the Month: Medicaid Fee-For-Service % 1, % (903) % Medicaid Managed Care % % % Medicare % % (82) % Commercial Insurance % % (6) -4.92% Self-pay % % % Totals 2, % 2, % (126) -5.17% Visits - Year-to-date: Medicaid Fee-For-Service 3, % 5, % (1,631) % Medicaid Managed Care 1, % % 1, % Medicare % % (242) % Commercial Insurance % % (16) -4.37% Self-pay % % % Totals 7, % 7, % (311) -4.25%

34 Payer Mix Template Example data entry (right of report area) Current Month - Actual Current Month - Budget Payer Visits for the Month: Medicaid Fee-For-Service 1,750 1, ,827 1,827 1,827 Medicaid Managed Care Medicare Commercial Insurance Self-pay Totals 2,426 2,263 2,311 2,437 2,437 2,437 Cumulative - Actual Cumulative - Budget Visits - Year-to-date: Medicaid Fee-For-Service 1,750 2,926 3,850 1,827 3,654 5,481 Medicaid Managed Care , Medicare Commercial Insurance Self-pay Totals 2,426 4,689 7,000 2,437 4,874 7,311

35 Utilization Template Example report CCBHC Name: Analysis of Utilization Current Year Budget Variance Client Condition # of Visits Actuarial Mix # of Visits Actuarial Mix # of Visits % Monthly Visits- Cumulative: Standard Population 1, % 1, % (187) % Certain Conditions % % (42) -4.76% Certain Conditions % % % Certain Conditions % % (6) -4.76% Totals 2, % 2, % (121) -4.80% Number of months: 3 Average Number of Patients: Standard Population % % (62) % Certain Conditions % % (14) -4.76% Certain Conditions % % % Certain Conditions % % (2) -4.76% Totals % % (40) -4.80% Daily Visits - Cumulative: Standard Population 1, % 1, % (346) % Certain Conditions 1 1, % 2, % (465) % Certain Conditions 2 2, % 1, % % Certain Conditions 3 1, % 2, % (565) % Totals 7, % 7, % (383) -5.19% Visit Utilization per Patient: Annual Monthly Annual Monthly Annual Monthly Standard Population (0.97) (0.08) Certain Conditions (5.14) (0.43) Certain Conditions (0.43) (0.04) Certain Conditions (45.95) (3.83) Totals (0.14) (0.01)

36 Utilization Template Example data entry (right of report area) Monthly Visits - Actual Monthly Visits - Budget Month Month Month Month Month Month Client Condition TOTAL TOTAL Monthly Visits- Cumulative: Standard Population , ,387 Certain Conditions Certain Conditions Certain Conditions Totals , , Daily Visits - Actual Daily Visits - Budget Month Month Month Month Month Month TOTAL TOTAL Daily Visits - Cumulative: Standard Population , ,846 Certain Conditions , ,215 Certain Conditions , ,107 Certain Conditions , ,215 Totals 1,833 1,833 1,834 5,500 1,845 1,845 1,847 5,537

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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

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 G O A L S A N D O B J E C T I V E S The goals of this webinar include