AGENDA Special Meeting to Conduct a Study Session El Camino Hospital Board Tuesday, May 28, 2013 at 5:30 p.m. Conference Room G, Ground floor, El Camino Hospital 2500 Grant Road, Mountain View, CA MISSION: To be an innovative, publicly accountable and locally controlled comprehensive healthcare organization which cares for the sick, relieves suffering, and provides quality, cost competitive services to improve the health and well being of our community. A copy of the agenda for the Special Meeting will be posted and distributed at least twenty-four (24) hours prior to the meeting. In observance of the Americans with Disabilities Act, please notify us at 650-988-7504 twenty-four (24) hours prior to the meeting so that we may provide the agenda in alternative formats or to make disability related modifications and accommodations. PRESENTED BY I. CALL TO ORDER/ROLL CALL John Zoglin Board Chairperson 5:30-5:31pm II. POTENTIAL CONFLICT OF INTEREST DISCLOSURES John Zoglin Board Chairperson 5:31-5:32 III. 2014 BUDGET PRESENTATION ATTACHMENT 1 Tomi Ryba, CEO Michael King, CFO information 5:32-6:05 IV. ADJOURN TO CLOSED SESSION The Board will adjourn to a Closed Session, pursuant to the sections of the California codes noted below: 1. Conflict of Interest disclosures relating to Items 2-3 on the Closed Session agenda pursuant to the code provisions listed below. 2. Report involving health care facility trade secrets, Health and Safety Code Section 32106(b) --Development of new services and programs 3. Report involving health care facility trade secrets, Health and Safety Code Section 32106(b) --Development of new services and programs ATTACHMENTS 2, 3 V RECONVENE OPEN SESSION To report any required disclosure regarding permissible actions taken during Closed Session John Zoglin Board Chairperson 6:51 VI. ADJOURNMENT 6:52pm No business other than the subject matter noted above shall be considered by the Hospital Board at this Special Meeting to Conduct a Study Session. PLEASE NOTE: The CLOSED SESSION is for Board Members and Board staff only. Page 1/61
Separator Page 1. OPEN SESSION FY 2014 Budget Packet 5_22_13_v9.pdf Page 3/61
El Camino Hospital & Affiliates Budget FY 2014 Annual Operating & Capital Plan Page 4/61
Index Section Pages Strategy 3 Operating Budget 13 Capital Budget 21 Fiscal Year 2014 Summation 24 - Appendix: Income Statements 26 2 Page 5/61
Strategy 3 Page 6/61
El Camino Hospital s Strategy Embraces Wellness Strategy El Camino Hospital will be a locally controlled leader in optimizing the health and wellness of our communities in Silicon Valley, differentiated by innovative continuum of care developed in partnership with physicians, businesses, and payers. Positioning Statement El Camino Hospital will first be a value-based health care provider offering top decile, acute care quality at mid-level pricing, moving toward continuum partnerships that integrate care coordination and delivery strategies focused on the Triple Aim of quality, service, and affordability. 4 Page 7/61
Our Goals Focus on Value Quality. Within three years, El Camino Hospital s superior, acute care clinical programs will be at top decile performance on CMS Value-Based Purchasing core metrics; service levels will be at top quartile performance; El Camino Hospital s clinical services will extend into the community with our care partners with quality metrics related to transitions, chronic condition management and population health. Affordability. Within three years, El Camino Hospital s clinical programs will have operating expenses within 10% of the lowest cost, acute care provider located in the primary and secondary service area. El Camino Hospital will measurably reduce clinical variation and improve efficiency through clinical integration with its physician partners. El Camino Hospital will work with payors and physicians to achieve the goals set forth through risk contracting. Physician Partnerships. El Camino Hospital will advance physician integration structures and partnerships that enable optimal care management through clinical integration, common incentives and patient-centered care delivery throughout Silicon Valley. Within three years, El Camino Hospital will have established patient centered medical homes to retain a balanced medical staff as part of an innovative delivery system and to respond to the health needs of Medicare participants and their families. Innovative Business and Community Alliances. El Camino Hospital will advance a wellness program for El Camino Hospital employees with an emphasis on healthy choices and individual activation, with measurable goals. El Camino Hospital will leverage the innovative nature of Silicon Valley to translate clinical discovery to the bedside. El Camino Hospital will work with business and community providers to develop a broader strategy to improve quality and reduce the overall cost of healthcare in the Silicon Valley. Page 8/61 5
Our Approach is Phased Optimize Health & Wellness Quality & Service Affordability Continuum of Care Innovation in Wellness Achieve the Triple Aim: Quality, Service & Affordability Top Decile Quality Top Decile Core Measures Reduce Complications & Mortality Top Quartile Service Value Based Purchasing Efficient Operations Reduce Variation in Practice Lean Process Improvement Competitive Pricing Pricing within Market Costs Aligned with Pricing Moving Toward Continuum of Care Patient access to primary care & chronic disease management Coordinated Care Transitions Employee Well-Being Business & Provider Alliances for Innovative Continuum of Care 6 Page 9/61
Linkage to Three Year Strategic Plan 7 Page 10/61
Key Accomplishments FY 2013 HealthGrades Top Hospital TJC Accreditation American College of Surgeons Commission on Cancer National Accreditation with Commendation Gold Seal Stroke Accreditation Los Gatos Stroke Accreditation Chest Pain Accreditation Magnet Status for Nursing Hip Fracture & Joint Care Accreditation Women Certified Top 100 Hospitals for OB, Heart Care Intensivist Program Preventable Harm Index Telemedicine launch Wellness launch Initiation of PaCT and LEAN methodology Culture-based service initiative PAMF affiliation Bond rating upgrade to A1 by Moody s Medication barcoding (KBMA) Expanded clinical research with Fogarty Institute Nurses Improving Care for Healthsystem Elders NICHE 8 Page 11/61
FY 2014 Priority Goals Triple Aim: Quality, Service & Affordability PaCT: Triple Aim People Continuum of Care Clinical Integration through IT Case for Change Market Development Plans Innovative Partnerships Physician Partnerships Community Health & Wellness 9 Page 12/61
FY 2014 Draft Shared Executive Goals 10 Page 13/61
FY 2014 Draft Organizational Goals Performance Measurement Organizational Goal FY14 Minimum Target Maximum Weight Regulatory Compliance Evaluation Timeframe Joint Commission Accreditation Full Accreditation Threshold FY Financial Viability Budgeted Operating Margin 90% of Budgeted Threshold FY Operating Margin re Budget meet 0.5% 1.0% FY Quality and Patient Safety Core Measures % of 100 Possible Performance Points 84% 86% 90% Rate of Patient Falls TBD TBD TBD Service Meet the averaged performance for the 3 Service metrics on the Corporate Scorecard: - Improve Staff Communication to 75% - Improve Medication Communication to 60% - Improve Staff Responsiveness to 64% TBD TBD TBD Efficiency Minutes from ED Arrival to Admit to Unit TBD TBD TBD Continuum of Care 30 day all cause Readmission (Medicare) TBD TBD TBD People Biometrics Screening Employee Participation Rate TBD TBD TBD 12 Page 14/61
FY14 Operating Budget 13 Page 15/61
Assumptions - Revenue Category Assumption Volumes Dialysis service volumes will decrease significantly due to the initiation of services at competing facilities and due to Kaiser s consolidation of its dialysis offerings to fewer sites of service. Surgical volume growth expected to continue in Mountain View from Orthopedic & Spine service lines and the initiation of neuro-interventional services. With only minor variations, other services are expected to maintain the activity levels being experienced in fiscal year 2013. Prices While the price of individual items will be adjusted in response to market changes and in response to their acquisition cost, prices overall are expected to remain at their current levels (i.e., an overall 0% price increase). Reimbursement Rates for contracted payers have been projected based on the terms of their individual contracts and based on assessment of the marketplace. Medicare sequestration was budgeted to reduce revenues by $5.3 million. Additional reimbursement of $6.3 million was budgeted for various governmental supplemental payment, including the Hi-tech act, Medicare Disproportionate Share, and Medi-Cal supplemental payments. Case Mix Index adjusted upward slightly due to higher expected surgical volumes in spine, orthopedics and neuro-interventional. Page 16/61 14
Hospital Volumes 1.3% Above 2012 15 Page 17/61
Assumptions Operating Expenses Category Assumption Salaries Staffing was increased to re-assimilate services previously outsourced Information Services and Health Information Management. Staffing was increased for strategic initiatives and in support of expected volume increases, and was decreased due to the expected loss of dialysis volume. Wage increases were projected for market adjustments, step increases and contractual agreements. Benefits Health Benefits are expected to increase 11%. Updated actuarial projections provided the budgeted pension expense. Supplies & Other Supply and drug expenses were adjusted for expected volume changes and by a 4% inflation factor. G&A expenses were projected based on current year expenditures, adjusted for non-recurring events. The budget includes a $4.4 million targeted reduction in supply expense from management initiatives in this area. Interest Interest expense was based on existing indebtedness. Depreciation Depreciation was projected from current assets and anticipated capital spending. 16 Page 18/61
Budgeted 2014 Operating Margin Equals (1) FYTD 2013 Run Rate FYTD 2013 Run Rate FY 2014 Oper Marg (1) Run rate is operating margin after adjusting for the effect of one-time events. Value shown for FYTD 2013 is as of March. 17 Page 19/61
El Camino Hospital & Affiliates Consolidating Revenue and Expense Budget ($ Thousands) El Camino Hospital Concern Foundation SVMD Total Inpatient Revenue $1,509,284 $0 $0 $0 $1,509,284 Outpatient Revenue 946,516 0 0 0 946,516 Gross Patient Service Revenue 2,455,800 0 0 0 2,455,800 Deductions From Revenue (1,766,903) 0 0 0 (1,766,903) Net Patient Service Revenue 688,897 0 0 0 688,897 Other Operating Revenue 15,689 12,775 142 0 28,606 TOTAL NET REVENUES 704,587 12,775 142 0 717,503 Salaries 252,277 3,581 1,168 654 257,681 Employee Benefits 125,619 2,119 543 258 128,539 Supplies & Other Expenses 212,002 5,871 1,659 542 220,073 Interest 7,681 0 0 0 7,681 Depreciation/Amortization 50,366 73 13 0 50,452 TOTAL EXPENSES 647,944 11,644 3,383 1,454 664,426 OPERATING INCOME 56,642 1,131 (3,241) (1,454) 53,078 NON-OPERATING INCOME 19,284 (950) 5,335 1,454 25,123 TOTAL NET INCOME $75,927 $181 $2,094 ($0) $78,201 Operating EBIDA $114,689 $1,204 ($3,228) ($1,454) $111,211 Operating Margin Percentage 8.0% 8.9% 7.4% All dollar amounts in thousands Totals may not agree due to rounding 18 Page 20/61
FY 2014 Draft Corporate Scorecard Quality Affordability Core Measures Efficiency DVT Medical-Surgical Length of Stay Improvement Opportunity foley catheter management Observation ALOS (hours) Core Measures % of Possible Performance Points 30 day post acute Total Cost of Care Service Minutes from ED Arrival to Admit to Unit Communication with Nurses OR Room Turnaround within 35 min Responsiveness of Hospital Staff Worked Hours per CMI Adjusted Discharge Communication About Medicines Total Operating Expense per CMI Adjusted Discharge HCAHPS % of Possible Performance Points Financial Viability Outcomes Total Operating Margin Hospital Onset C diff Infection rate Inpatient Operating Margin Risk Adjusted Inpatient Mortality from MI Outpatient Operating Margin Risk Adjusted Inpatient Mortality from CHF Adjusted Discharges Risk Adjusted Inpatient Mortality from Pneumonia Total Days Cash on Hand Risk Adjusted comlications after percutaneous procedures (NCDR) Days of Accounts Receivable (NSQIP) Continuum of Care Patient Safety 30 Day All Cause Readmission Stage 3-4 Hospital Acquired Pressure Ulcer Rate 7 Day Unplanned Readmission after Discharge Rate of Patient Falls 30 Day Readmission: Medicare Only 5 Rights Medication Errors / 1000 Adj Pt Days Employee Wellbeing Mislabeled Specimens per Month Employee Lift/Transfer Injury Rate Counts of Preventable Harm (0 is Goal) Biometrics Screening Employee Participation Rate 11 Page 21/61
Hospital Operating Margin will be Impacted by Inflation, Investments in Strategy and Pressure on Reimbursement Category Change % of Revenue Dollars (Millions) Net Operating Income Fiscal Year 2013 Net Operating Margin 11.0% $ 76.4 M Operating Revenues Commercial & Gov't Payor increases, net of decreases 0.2% $ 1.7 M Operating Revenues Service, Volume & Misc. 0.7% $ 5.4 M Operating Expense Expense Inflation (Salaries, Supplies, Benefits) -2.4% $ (17.3) M Operating Expense Capital Spending -0.4% $ (2.6) M Operating Expense Strategic - Supply Chain/Savings Initiative 0.6% $ 4.4 M Operating Expense Strategic - Wellness Initiative; Marketing -0.1% $ (.8) M Operating Expense Strategic - PaCT -0.4% $ (2.5) M Operating Expense Strategic - Continuum of Care -0.1% $ (.8) M Operating Expense Strategic - Ortho/Neuro Service Line -0.3% $ (2.0) M Operating Expense All Other -0.7% $ (5.3) M Net Operating Income Fiscal Year 2014 Net Operating Margin 8.0% $ 56.6 M 19 Page 22/61
Financial Ratios Continue to Reflect Organization s Financial Strength 20 Page 23/61
Capital Budget 21 Page 24/61
Capital Spending (1) Fiscal 2013 Compared to Fiscal 2014 Budget ($ Millions) (1) Please see appendix for capital budget detail 22 Page 25/61
Excludes land improvements and building additions 23 Page 26/61
Fiscal Year 2014 Summation 24 Page 27/61
El Camino Hospital Fiscal Year 2014 Budget Summary To ensure the achievement of our strategic intent, we are focused on key initiatives by investing in: Quality Clinical registries, Intensivist program, Palliative care and value based care indicators including: mortality and AHRQ patient safety indicators Analysts, systems and methodologies to improve core measures and other quality metrics Service Training, Patient & family advisory committee and leadership to improve service scores in focused areas Affordability Flat pricing Assigning responsibility in reducing clinical variation in service lines Reducing supply costs Implementing cost reductions to partially offset the strategic investments Physician Partnerships Expanding PCMH Finalizing the collaborative projects underway with PAMF and supporting the clinical integration efforts of independent physicians Growing independent physician strategy Clinical programs including; palliative care, neurosciences, and orthopedics Payor and Community Partnerships Developing the infrastructure to handle shared risk contracting and participating in a few shared risk experiments Expanding wellness programs for El Camino Hospital employees and community 25 Page 28/61
Appendix Income Statements 26 Page 29/61
CONCERN: EAP Comparative Statement of Revenue and Expense ($ Thousands) Estimated Budget Fav (Unfav) Change 2012 _ 2013 2014 Amount Percent REVENUES Inpatient Revenue $0 $0 $0 $0 N/A Outpatient Revenue 0 0 _ 0 0 N/A Gross Patient Service Revenue 0 0 0 0 N/A Deductions From Revenue 0 0 0 0 N/A Net Patient Service Revenue 0 0 0 0 N/A Other Operating Revenue 12,361 12,943 12,775 (168) (1.3%) TOTAL NET REVENUES 12,361 12,943 12,775 (168) (1.3%) EXPENSES Salaries 3,452 3,470 3,581 (111) (3.2%) Employee Benefits 1,558 1,839 2,119 (280) (15.2%) Supplies & Other Expenses 5,290 5,553 5,871 (318) (5.7%) Interest 0 0 0 0 N/A Depreciation/Amortization 94 76 73 3 3.4% TOTAL EXPENSES 10,394 10,937 11,644 (707) (6.5%) OPERATING INCOME 1,967 2,006 1,131 (875) (43.6%) NON-OPERATING INCOME (495) (1,227) (950) 277 22.6% TOTAL NET INCOME $1,472 $779 $181 ($598) (76.8%) Operating EBIDA $2,061 $2,081 $1,204 ($877) (42.2%) Operating Margin Percentage 15.9% 15.5% 8.9% All dollar amounts in thousands Totals may not agree due to rounding 27 Page 30/61
El Camino Hospital Foundation Comparative Statement of Revenue and Expense ($ Thousands) Estimated Budget Fav (Unfav) Change 2012 _ 2013 2014 Amount Percent REVENUES Inpatient Revenue $0 $0 $0 $0 N/A Outpatient Revenue 0 0 _ 0 0 N/A Gross Patient Service Revenue 0 0 0 0 N/A Deductions From Revenue 0 0 0 0 N/A Net Patient Service Revenue 0 0 0 0 N/A Other Operating Revenue 77 80 142 61 76.4% TOTAL NET REVENUES 77 80 142 61 76.4% EXPENSES Salaries 1,147 1,044 1,168 (124) (11.9%) Employee Benefits 399 443 543 (101) (22.7%) Supplies & Other Expenses 1,760 1,321 1,659 (337) (25.5%) Interest 0 0 0 0 N/A Depreciation/Amortization 12 13 13 (0) (0.0%) TOTAL EXPENSES 3,318 2,821 3,383 (562) (19.9%) OPERATING INCOME (3,240) (2,740) (3,241) (501) (18.3%) NON-OPERATING INCOME 3,379 5,085 5,335 250 4.9% TOTAL NET INCOME $138 $2,344 $2,094 ($250) (10.7%) Operating EBIDA ($3,228) ($2,727) ($3,228) ($501) (18.4%) Operating Margin Percentage -4201.2% -3404.5% (2282.6%) All dollar amounts in thousands Totals may not agree due to rounding 28 Page 31/61
Silicon Valley Medical Development Comparative Statement of Revenue and Expense ($ Thousands) Estimated Budget Fav (Unfav) Change 2012 _ 2013 2014 Amount Percent REVENUES Inpatient Revenue $0 $0 $0 $0 N/A Outpatient Revenue 0 0 _ 0 0 N/A Gross Patient Service Revenue 0 0 0 0 N/A Deductions From Revenue 0 0 0 0 N/A Net Patient Service Revenue 0 0 0 0 N/A Other Operating Revenue 0 0 0 0 N/A TOTAL NET REVENUES 0 0 0 0 N/A EXPENSES Salaries 349 490 654 (165) (33.6%) Employee Benefits 160 309 258 51 16.6% Supplies & Other Expenses 557 126 542 (415) ####### Interest 0 0 0 0 N/A Depreciation/Amortization 0 0 0 0 N/A TOTAL EXPENSES 1,067 926 1,454 (529) (57.1%) OPERATING INCOME (1,067) (926) (1,454) (529) (57.1%) NON-OPERATING INCOME 1,037 872 1,454 582 66.8% TOTAL NET INCOME ($30) ($54) ($0) $54 99.4% Operating EBIDA ($1,067) ($926) ($1,454) ($529) (57.1%) Operating Margin Percentage N/A N/A N/A All dollar amounts in thousands Totals may not agree due to rounding 29 Page 32/61
El Camino Hospital Without Affiliates Comparative Statement of Revenue and Expense ($ Millions) Estimated Budget Fav (Unfav) Change 2012 _ 2013 2014 Amount Percent REVENUES Inpatient Revenue $1,408 $1,466 $1,509 $43 3.0% Outpatient Revenue 952 971 _ 947 (24) (2.5%) Gross Patient Service Revenue 2,360 2,437 2,456 19 0.8% Deductions From Revenue (1,730) (1,755) (1,767) (12) (0.7%) Net Patient Service Revenue 630 682 689 7 1.0% Other Operating Revenue 14 16 16 0 1.0% TOTAL NET REVENUES 644 697 705 7 1.0% EXPENSES Salaries 214 235 252 (17) (7.4%) Employee Benefits 105 119 126 (7) (5.8%) Supplies & Other Expenses 200 212 212 (0) (0.1%) Interest 8 8 8 0 1.9% Depreciation/Amortization 49 48 50 (3) (5.4%) TOTAL EXPENSES 576 621 648 (27) (4.3%) OPERATING INCOME 68 76 57 (20) (25.9%) NON-OPERATING INCOME 4 24 19 (4) (18.9%) TOTAL NET INCOME $72 $100 $76 ($24) (24.2%) Operating EBIDA $125 $132 $115 ($17) (13.1%) Operating Margin Percentage 10.5% 11.0% 8.0% KEY HOSPITAL INDICATORS: Total Hospital Discharges 22,593 24,276 24,291 15 0.1% Total Hospital Patient Days 90,800 97,273 97,434 161 0.2% Acute Length of Stay (LOS) 4.0 4.0 4.0 0.0 0.0% Hospital Average Daily Census 248 267 267 0 0.2% All dollar amounts in millions Totals may not agree due to rounding 30 Page 33/61
El Camino Hospital & Affiliates Comparative Statement of Revenue and Expense ($ Millions) Estimated Budget Fav (Unfav) Change 2012 _ 2013 2014 Amount Percent REVENUES Inpatient Revenue $1,408 $1,466 $1,509 $43 3.0% Outpatient Revenue 987 1,004 _ 947 (57) (5.7%) Gross Patient Service Revenue 2,395 2,469 2,456 (14) (0.6%) Deductions From Revenue (1,759) (1,781) (1,767) 14 0.8% Net Patient Service Revenue 637 688 689 1 0.1% Other Operating Revenue 26 29 29 0 0.2% TOTAL NET REVENUES 663 717 718 1 0.1% EXPENSES Salaries 221 242 258 (16) (6.4%) Employee Benefits 107 122 129 (6) (5.2%) Supplies & Other Expenses 211 222 220 2 0.8% Interest 8 8 8 0 1.9% Depreciation/Amortization 49 48 50 (2) (4.8%) TOTAL EXPENSES 598 642 664 (22) (3.5%) OPERATING INCOME 66 75 53 (22) (28.9%) NON-OPERATING INCOME 8 28 25 (3) (11.8%) TOTAL NET INCOME $74 $103 $78 ($25) (24.2%) Operating EBIDA $123 $131 $111 ($19) (14.8%) Operating Margin Percentage 9.9% 10.4% 7.4% KEY HOSPITAL INDICATORS: Total Hospital Discharges 22,593 24,276 24,291 15 0.1% Total Hospital Patient Days 90,800 97,273 97,434 161 0.2% Acute Length of Stay (LOS) 4.0 4.0 4.0 0.0 0.0% Hospital Average Daily Census 248 267 267 0 0.2% All dollar amounts in millions Totals may not agree due to rounding 31 Page 34/61
El Camino Hospital & Affiliates Consolidating Statement of Revenue and Expense ($ Thousands) El Camino Hospital Concern Foundation SVMD Total REVENUES Inpatient Revenue $1,509,284 $0 $0 $0 $1,509,284 Outpatient Revenue 946,516 0 0 0 946,516 Gross Patient Service Revenue 2,455,800 0 0 0 2,455,800 Deductions From Revenue (1,766,903) 0 0 0 (1,766,903) Net Patient Service Revenue 688,897 0 0 0 688,897 Other Operating Revenue 15,689 12,775 142 0 28,606 TOTAL NET REVENUES 704,587 12,775 142 0 717,503 EXPENSES Salaries 252,277 3,581 1,168 654 257,681 Employee Benefits 125,619 2,119 543 258 128,539 Supplies & Other Expenses 212,002 5,871 1,659 542 220,073 Interest 7,681 0 0 0 7,681 Depreciation/Amortization 50,366 73 13 0 50,452 TOTAL EXPENSES 647,944 11,644 3,383 1,454 664,426 OPERATING INCOME 56,642 1,131 (3,241) (1,454) 53,078 NON-OPERATING INCOME 19,284 (950) 5,335 1,454 25,123 TOTAL NET INCOME $75,927 $181 $2,094 ($0) $78,201 Operating EBIDA $114,689 $1,204 ($3,228) ($1,454) $111,211 Operating Margin Percentage 8.0% 8.9% 7.4% KEY HOSPITAL INDICATORS: Total Hospital Discharges 24,291 24,291 Total Hospital Patient Days 97,434 97,434 Acute Length of Stay (LOS) 4.0 4.0 Hospital Average Daily Census 266 267 All dollar amounts in thousands Totals may not agree due to rounding 32 Page 35/61
Pages 2 and 36-61 are closed session materials not publicly available.