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7/18/2019
1
Hospice Budgeting with Benchmarks: Why Do It?
Continuing Education
The planners and presenters of this activity disclose no relevant relationships with any commercial entity pertaining to the content.
• Nurse attendees may earn a maximum of 15.5 contact hours• Accountant attendees can earn up to 18.9 CPEs
Accreditation StatementNAHC is accredited as a provider of continuing nursing education by the American Nurses Credentialing Center’s Commission on Accreditation.
NAHC is [also] approved by the California Board of Registered Nursing, provider #10810.__________________________________________________________________________________________________________________________________________________________________
Commercial Support provided by Brightree, Excel Health Group, Healthcare Provider Solutions, and SimioneHealthcare Consultants.
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Objectives• Identify direct and indirect costs and understand the relationship
of costs to multiple reimbursement models.
• Gain a better understanding of non-clinical and back office costs and become able to evaluate operational cost structure compared to industry benchmarks.
• Utilize industry benchmarks to evaluate the operating costs and revenue.
• Create buy in from staff and management on cost efficiency objectives.
3
What is a Benchmark?• A Standard or a set of standards, used as a point of reference for
evaluating performance or level of quality.
• Source: BusinessDictionary.com
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Data Drives Solid Financial Decisions
Limitations of Performance DataA thermometer reading would have little value as a measure to your health.If you didn’t know 98.6 is the normal temperature.• Deluged with data
without meaning.• Data without context
is just a bunch of numbers.
5
Where Do We Start?• All Financial Cost Data should be easily accessible and broken out.
• General Ledger• Payroll Software
• Identify Critical Financial KPI’s.• Keep it Simple• Focus on Revenue & Cost Drivers
• Automate your Reports.• Excel• Reporting software’s• Outside vendors
• Compare to Benchmark Data.6
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Where to Get Started?• Compare to Benchmark Data.
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Benchmark Comparisons• Research benchmark sources are available:
• NAHC, NHPCO, Simione Financial Monitor, OCS, SHP, MVI, Cost Report data.
• Understand data elements and calculations.• Need to ensure apples to apples comparison.
• Who are you going to compare to?• Geography, Payer Mix, Profit Status, Agency Type, Revenue Size.
• Remember benchmarks are the median.• Always strive to be in the top 10 to 20%.
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Key Considerations When Analyzing Data• Prioritize what are you evaluating?
• What do you want to look at and why?
• Accuracy of the Information.
• Timeliness of the Information.
• How and Where to Obtain the Data.
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Establish Your Reporting Process• What drives your processes?
• Financial – Revenue & Costs• Operational – Census & Productivity
• Determine responsibilities• Management, Directors and Staff
• Determine Frequency• Daily, Weekly, Monthly, Quarterly
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Establish Your Reporting Process• Know your Technology:
• What you can or can’t do.
• Internal Information: • Data must be relevant, accurate and timely.
• Trending Data:• Historical trends within your agency.• Comparisons to budget projections.• Comparison to industry benchmarks.
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Types of Data• Types of Data
• Financial• Statistical• Operational • Clinical
• Your Agency Data
• Competitor Data
• State Data
• National Data
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Key Performance Indicators:Financial• What do Financial Managers worry about?
• The bottom line!• Why?
• Money doesn’t grow on trees!• Do I have a sustainable operation?
• Will we be here into the futures?• What are my immediate concerns?
• Cash is a priority• Who and what influences my cash flow?
• Banking relationships• Revenue Cycle Team activities• Clinical Managers decisions• Vendor contract terms
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Key Performance Indicators:Financial• Gross Profit Margin• Net Profit Margin• Days Cash on Hand• Current Ratio• Return on Equity• Days Sales Outstanding• Cost per Day• Cost per Visit• Revenue by Type• Ancillary Cost per Day• Administrative and General Costs
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Key Performance Indicators:Clinical & Operational• What do Clinical Managers worry about? Why?
• What does my staff schedule look like?• Are there patients with urgent needs?• Are staff prepared/skilled to provide the needed care?• Are there any call outs? Are there enough staff to cover admissions?• Is there Per Diem availability?• Am I overstaffed? Do I need to send anyone home?
• What is the census this morning?• Admissions – actual and pending.• Deaths, discharges, transfers, revocations (paperwork completed).
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Key Performance Indicators:Clinical & Operational• What does my patient population look like?
• Where are my referrals coming from, how is it impacting LOS? (Cancer vs. Chronic Illness).
• Do I need to meet with marketing to communicate the impact a change in referral patterns may help to increase LOS?
• Do I have any compliance worries?• Is my staff documentation being completed timely?• Are there issues with technology?• Does the documentation support eligibility?• Do I have any ADRs? Are we responding timely?• Are we prepared if a surveyor walks in the door?
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Key Performance Indicators:Clinical & Operational• Average Length of Stay• Median Length of Stay• Average Daily Census• Visits per Day• Days by Level of Care• Discharges and Deaths• Referrals to Admissions Conversion Ratios• Patients by Diagnosis• Staffing Ratios (Caseloads & Productivity)• Quality Measures
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Daily Report Monitoring• Financial
• Cash
• Operational• Admissions• Pending admissions• Deaths/discharges• Schedules
• Visits per day• Ability to cover admissions• On call schedule• Acuity
• Caseload assignments
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Key Indicators Prioritization
• Days by Level of Care
• Average Daily Census
• Payer Mix• Margins by Payer• Days Sales Outstanding by
Payer• Patients and Revenue by
Payer
• Length of Stay • ALOS• MLOS
• Days by Level of Care• Total Cost per Day• Ancillaries PPD• Cost per Visit by
Discipline• Average Daily Census• Staffing and Labor Management
• Caseloads• Productivity
• Length of Stay• ALOS• MLOS
• Productivity
Revenue Drivers Direct Expense Drivers
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Organization of Indicators
1. Statistics that drive daily financials and clinical operations:• Include staffing needs, projected revenue and projected expense
• Census• Referrals: what is in the pipeline• Admissions• Conversion %• Deaths• Discharges
2. Average Daily Census
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Organization of Indicators
3. Length of Stay by Payer and Level of Care• Average Length of Stay• Median Length of Stay• Length of Stay <7 Days• Length of Stay >60 Days• Length of Stay >180 Days
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Organization of Indicators
4. Indictors that drive clinical operations:• Location of Service• Service Mix• Staffing Ratios• Number of Visits• Labor Hours• Diagnosis• Acuity• Supplies/DME/Drugs
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Creating Meaningful Reports• Reporting should enable focus on indicators that have an impact
on operations and financial performance.
Overall
Drill Down Capacity
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Gross Margin
• Gross Margin is where you need to start in any financial analysis.
• Everyone’s performance has an affect on Gross Margin.
• Direct Revenue minus Direct Expenses.• Direct Revenue – All Net Payer Revenue• Direct Expenses – Salaries, payroll taxes, workers compensation, benefits,
contract, mileage and supply costs from direct patient care along with inpatient contracts and facility costs.
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Everyone Impacts Gross Margin• Marketing – Admissions & Census
• Billing – Collections & Cash
• Clinical – Productivity & Costs
• Finance – Cost Control
• Management – Staffing
• Intake – Census, Cash & Operations
• Technology – Work Flow efficiencies
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Gross Margin
• Gross Margin Revenue Drivers:• Admissions• Average Daily Census• Payer Mix• Marketing• Billing/Collections• Clinical Quality
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Gross Margin
• Gross Margin Cost Drivers:• Payment Models• Productivity• Length of Stay• Clinical Teams• Management• Finance
27
Hospice Gross MarginBenchmark• National Hospice Gross Profit Margin is 41.57%*
• In Home Hospice Gross Margin is 43.39%*• Inpatient Gross Margin is -63.74%*
*These numbers are National Benchmarks from the Simione Financial Monitor for 2019 Q1.
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Hospice Gross Margin By Payor: In Home• National Hospice Gross Profit Margin is 43.39%*
• Medicare – 48.07%*• Medicaid – 54.91%*• Other – 46.09%*
*These numbers are National Benchmarks from the Simione Financial Monitor for 2019 Q1.
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Gross Margin Analysis• Make sure staff understands Gross Margin and what it means to
them.• Set targets in productivity/admission goals to meet your Gross Margin
target.• Use Gross Margin as incentive for:
• Pay Increases• Quarterly/Annual bonuses• Other non pay incentives
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If Your Gross Margin Is Low• Review your Payer Mix
• Trend your volume
• Review Productivity
• Review your direct costs• Contract Rates• Salary/Pay per visit/contract• Benefit Costs• Mileage Costs• Supply Ancillary Contracts
31
Start With Revenue• Always look for opportunities to grow your top line!
• Revenue Drivers• Payer mix• Admissions • Average Daily Census• Collections
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Growing Our Agency• Call the objective “Growing Our Agency”
• Use a combination of cost savings objectives and growth objectives to meet goals.
• Do NOT call it “Cost Cutting”• Causes low employee moral• Risk losing their loyalty• More staff working individually than as a team!
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Revenue Considerations• Am I getting ROI on Marketing staff?
• Targeting appropriate referral partners?• Are there identified performance goals?
• Does Intake and Admissions accept all appropriate referrals?• Reports for NTUC (not taken under care) by reason.
• Am I seeing a shift in payer sources?• Younger population with various private insurances / attributable to
identifiable referral source?• Is revenue negative variance to budget?
• Is census down? Is ALOS down?• Is there increased competition / new providers / mergers / acquisitions /
health system affiliations?• Are we strategically positioned to compete?
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Payer Mix• Payer Mix – Revenue
• Medicare – 92% • Medicaid – 3%• Other – 5%
92%
3%5%
Revenue
Medicare Medicaid Other
35
Cost Analysis• Break out direct vs. indirect costs
• Break out costs by discipline
• Break out indirect costs by department
• Review Performance indicators
• Understand what drives revenue and cost for your organization
• Compare to industry benchmarks
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Consolidated HospiceDirect Cost Per Day Analysis
Discipline National
Total Direct Cost per Day $114
Routine Home Care $86
General Inpatient $1,434
Respite Inpatient $180
Continuous Care per Hour $180
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In Home HospiceDirect Cost Per Day Analysis
Discipline National
Total Direct Cost per Day $106
Routine Home Care $86
General Inpatient $694
Respite Inpatient $180
Continuous Care per Hour $180
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Ancillary Cost Per Day Analysis
Location Cost per Day
In Home $19
Inpatient $51
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Ancillary Cost Per Day AnalysisCategory In Home Hospice Inpatient Hospice
Medical Supplies $2.59 $12.94
Drugs and Infusion $8.22 $26.92
Labs and Diagnostics $0.08 $0.23
DME and Oxygen $6.40 $10.07
Patient Transportation $0.80 $8.95
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Hospice Direct Cost Per Visit AnalysisDiscipline National
Registered Nurse $137
Medical Social Worker $119
Therapist $124
Home Health Aide $36
Spiritual $89
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If Your Direct Cost Per Visit Is High• Review Volume vs. Cost
• Has your volume dropped but cost maintained the same?• Are you pay per visit vs. salary?• Do you contract Therapy or Aides?• What type of benefits do you provide, is this controllable.• Mileage Costs
• Rural vs. Urban• Mileage tracking software programs• Mileage study• Scheduling geographically
• Negotiate better rates with supply vendors.
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Decision Making On Direct CostsAnd Gross Margin• Staffing
• Maintaining caseloads at national benchmark or better.• Lower caseloads – higher cost• Higher caseloads – lower cost• Be careful not to impact care
• Using per diem/per visit staff to assist with fluctuating census.• Productivity
• Looking at numbers of visits per day in aggregate, over time to ensure that staff are efficient in their daily work.
• Need to account for fluctuations in acuity.• Eliminate barriers to efficiency for staff.
• Computer issues• Clerical issues• Travel times – Scheduling geographically• Communication enhancements to reduce office time
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Decision Making On Direct CostsAnd Gross Margin• Pharmacy costs
• Ordering off formulary• Delivery costs – not pre-planning reviewing• Related vs. Not Related
• DME Costs• Ensuring patients have what is needed• Formulary development• Pre-approval for items
• Supply Costs• Supply ordering and delivery• Formularies
• Balancing cost control with high quality care44
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Days Sales Outstanding• Another important component to monitor.
• Looks at the average number of days that a company takes to collect revenue.
• Analyzes how well your agency’s accounts receivable is being managed.
• DSO Ratio: Accounts Receivable / Annual Sales
• Low DSO: Fewer days to collect its Accounts Receivable.
• High DSO: Takes longer to collect money.
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Days Sales Outstanding• Hospice Overall DSO Benchmark (National)
• 49 Days*• 42 Days for Medicare*• 148 Days for Medicaid*• 74 Days for Other*
*These numbers are National Benchmarks from the Simione Financial Monitor for 2019 Q1.
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General Cost Analysis
• How are you spending your support cost dollars?• Indirect costs by type (salaries and benefits)• Indirect cost by department
• Marketing, Intake, Accounting, etc.
• Other Overhead Indirect Cost Items• Rent, Equipment, Leases, Professional Fees, Liability Insurance, Bad Debt, etc.
47
Indirect Costs as a % Of Revenue• Total Administrative & General: 36%
• Total Salaries: 14%
• Total Benefits: 3%
• Taxes and Benefits as a Percent of Salaries National Average: 25%
• Hospice Indirect Cost per Day: $62
48
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Marketing Costs• National – 1.43%.
• Hold Marketers accountable for admission NOT referrals.
• Educate your marketing team on the importance of Medicare admissions compared to Managed Care/Medicaid.
• 71% Referral to Admission Conversion Rate Hospitals.
• 73 Admissions Per Month per Marketing FTE.
• Review your Advertising Campaigns – do they generate business?
• Review any Marketing cuts and their impact on revenue.
• Who will be your future Marketers – CEO, President, Owners.49
Intake Department
• National – 2.76%
• Collections starts with Intake!
• Review amount of denied authorizations and reauthorizations.
• Ensure proper authorization process is in place for non Medicare patients.
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Billing Department• Billing/Finance – 1.46%
• Accounting – 0.80% • Review days sales outstanding
• Overall – 49 days Hospice• Best Practice – 40 days
• Review bad debt as a % of revenue 0.50%• Evaluate staff – do you have the right person for the job?• No other task – just collections
51
Clinical Supervision/Support/QI• National Benchmark – 8.03% of Revenue
• Supervisors must hold clinicians accountable to productivity standards.• Coordinators must schedule staff to be efficient achieve productivity
measures.• Support staff must assist with any field issues.• QI must ensure that clinicians and staff are compliant with all rules and
regulations.• Balance cost control with high quality care.
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Information Technology• National Benchmark – 1.24%
• Simione National IT Study December 31st 2018
TOTAL IT Cost as a % of Revenue Average Gross Margin
5% or More 33%
2.5% to 5% 36%
1.0 to 2.5% 40%
Less than 1% 38%
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Information Technology• Educate and train your clinicians and back office staff on how to
best use the EMR system to create efficiencies.
• Outsource hardware and server support?
• Research new technology that can improve efficiencies:• Patient Portals• Telehealth• New devices/Applications
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Non Employee Costs• Space Occupancy – 1.30%
• Rent or Own Space?• Mobile work staff?• Utilities & Maintenance Fees
• Legal/Audit/Professional Fees – 0.46%• Send out an RFP every 2-3 years• Outsource cost report function?• Outsource or in house legal department
• Liability Insurance – 0.28%• Interest Expense – 0.27%• Equipment Purchase/Lease/Repairs – 0.31%• All Other Admin – 1.90%
55
Items to Consider• Employee Health Insurance Costs
• Are you reviewing your Health Insurance costs?• Does your broker really work hard for you each year?
• Reducing Office Space• Utilizing all of your office space?• If the end of your lease is approaching, should we relocate?
• Medical Records Storage• Storing on-site or Off-Site?
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Items to Consider• Cost Report Preparation:
• Internal vs. Outsourced?• Need Appropriate Data• Your cost report will effect not only your agency, but the industry as a
whole.
• IT System:• Ask for a price break?• Are we using all of the system you pay for?
• Telephone/Banking Costs• Analyzing usage and volume?• What are you being charged for?
57
Items to Consider• Marketing Costs:
• Use benchmarks to monitor overall costs.• Understand how your market influences need for additional marketing
costs.• Assign territories and accounts to each marketer to avoid confusion• Know reasons for incurring more costs and develop tools to measure
effectiveness of these items.• Monitor each marketers effectiveness in producing admitted Medicare
referrals.
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Items To Consider• Reducing Bad Debts:
• Know where your Bad Debts come from:• Lack of assertive collection staff• Timely Filing requirements must be met• Proper authorizations upfront• Notice to patients of copays required• Continuing to accept payers that won’t pay
59
Average Daily Census• Average Daily Census is a Major Indicator
• If low, where should you look?• Referral Sources• Marketing Campaigns• Intake Process
• Patients currently on service – Overall Impact• Staffing - # of staff to care for the patient (Cost)• Number of days for reimbursement• Effectiveness of outreach
• Conversions of referrals to admissions• Marketing• Liaisons
• Fluctuations in ADC• Be sure to be aware of reductions or increases in ADC to know if it is a trend or a normal
fluctuation. • Identify any trends in ADC and compare to budget to see if it is just a “blip” or if .
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Integrating Clinical And Financial Goals
• Foster Employee Engagement
Benchmark
Drill Down
Target Performance
Monitor Performance
• At the agency level
• To the staff level
• Where you want to be
• Accountability
Work as a Team
• Everyone should be involved.• Executive Management• Clinical Directors• Financial Directors
• Need buy in from everyone when it comes to cost review.• Analyze what would happen based on industry changes if all costs
remained the same.• Determine if something must be done!
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Implementation Strategy• Now work on an implementation strategy.
• Need to convince the management team of the urgent need to contain costs.
• Calculate the full impact of the past, present and future Medicare cuts on your agency.
• Quantify impact of these cuts and how it changed the agency’s overall profitability.
63
Implementation Strategy• Do a detailed projection of revenues for the upcoming fiscal year
and compare to current expenses to determine potential shortfall.
• Forecast the impact of doing nothing. Future Medicare cuts translate into losses that threaten the future of the agency.
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Implementation Strategy• Meet with each member of the management team to review areas
where actual costs seem to deviate from benchmarks.
• Develop a plan of how actual expenses are incurred and what changes should be implemented to reduce overall costs.
65
Implementation Strategy• Get management team concurrence on all reductions. “Buy in” is
important.
• Benchmarks can lead to working smarter, so you don’t have to work harder.
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This Is Probably How We All Feel…
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We Try To Save Cost But We Can’t Sacrifice Our Mission!
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Hospice Budgeting Case Study
Hospice Data Gathering• Total referrals and/or admissions by payer
• Medicare• Medicaid• Other
• Average length of stay by payer (ALOS)
• Days distribution by payer• Routine Home Care (RHC)
• 1-60 & 61+
• General Inpatient (GIP)• Respite Inpatient (Respite)• Continuous Care Hours (CCH)
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Hospice Data Gathering• Payment rates per day by payer
• Referral conversion rate
• Other direct care cost per day• Medical supplies• Drugs & infusion• Labs & diagnostics• Durable medical equipment (DME)
& oxygen• Patient transportation
• Administrative & general (A&G) cost as a percentage of revenue.
Revenue Assumptions 10/1/18-9/30/19 10/1/19-9/30/20
Daily Reimbursement Rates
Routine Home Care 1-60 $ 221.22 $ 215.23
Routine Home Care 61+ 173.83 169.12
General Inpatient 847.94 1,112.34
Respite Inpatient 193.65 479.51
Continuous Care 1,124.30 1,536.74
Expense Assumptions 2019-2020
Per Day Expenses
Medical Supplies $ 2.59
Drugs & Infusion 8.22
Labs & Diagnostics 0.08
DME & Oxygen 6.40
Patient Transporation 0.80
71
Hospice Budget Assumptions• Growth in monthly referrals
and/or admissions• What are your marketing
strategies?
• Changes in your agency’s ALOS• Will your marketing strategies
impact the patient’s timeline to elect for the hospice benefit?
• Changes in your days distribution by level of care?
• Impact on inpatient/continuous care on the proposed rate rebasing.
Clinical Statistic Assumptions
CY 2019 FY 2020
Monthly Referrals 95 105Conversion Rate 70.0% 77.0%Monthly Admissions 67 81
ALOS 45.0 52.0
Days Distribution
Routine Home Care (1-60) 72.0% 71.0%Routine Home Care (61+) 25.0% 23.0%General Inpatient Care 1.5% 2.5%Respite Inpatient Care 1.0% 2.0%Continuous Home Care 0.5% 1.5%
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Hospice Budget Assumptions• Growth in monthly referrals
and/or admissions• What are your marketing
strategies?
• Changes in your agency’s ALOS• Will your marketing strategies
impact the patient’s timeline to elect for the hospice benefit?
• Changes in your days distribution by level of care?
• Impact on inpatient/continuous care on the proposed rate rebasing.
Clinical Statistic Assumptions
CY 2019 FY 2020
Monthly Referrals 130 143Conversion Rate 75.0% 75.0%Monthly Admissions 98 107
ALOS 45.0 52.0
Days Distribution
Routine Home Care (1-60) 72.0% 71.0%Routine Home Care (61+) 25.0% 23.0%General Inpatient Care 1.5% 2.5%Respite Inpatient Care 1.0% 2.0%Continuous Home Care 0.5% 1.5%
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Building the Budget• Monthly referrals and/or admissions
2019 Patient Statistics 2020 Patient StatisticsApr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Referrals130 130 130 143 143 143 143 143 143
Conversion Rate 70.00% 70.00% 70.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00%
Admissions91 91 91
107 107 107 107 107 107
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Building the Budget
• ALOS distribution: 52 daysALOS Distribution Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Calendar Days30 31 30 31 31 30 31 30 31
Apr-19 30 22 -
May-19- 31 21 -
Jun-19- - 30 22 -
Jul-19- - - 31 21 - - - -
Aug-19- - - - 31 21 - - -
Sep-19- - - - - 30 22 - -
Oct-19- - - - - - 31 21 -
Nov-19- - - - - - - 30 22
Dec-19- - - - - - - - 31
75
Building the Budget• Days distribution
Days Distribution Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Admissions
Apr-1991 2,730 2,002
- - - - - - -
May-1991
-2,821 1,911
- - - - - -
Jun-1991
- -2,730
2,002 - - - - -
Jul-19107
- - - 3,325 2,252
- - - -
Aug-19107
- - - -3,325 2,252
- - -
Sep-19107
- - - - -3,218 2,360
- -
Oct-19107
- - - - - -3,325 2,252
-
Nov-19107
- - - - - - -3,218 2,360
Dec-19107
- - - - - - - -3,325
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Building the Budget
• Total Days
2020 Total DaysJul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Total Days 5,327 5,577 5,470 5,684 5,470 5,684 Census 172 180 182 183 182 183
Days DistributionRoutine Home Care (1-60) 71.00% 3,782 3,960 3,884 4,036 3,884 4,036 Routine Home Care (61+) 23.00% 1,225 1,283 1,258 1,307 1,258 1,307 General Inpatient Care 2.50% 133 139 137 142 137 142 Respite Inpatient Care 2.00% 107 112 109 114 109 114 Continuous Home Care 1.50% 80 84 82 85 82 85
77
Building the Budget
• Medicare reimbursement rates• This agency has a 6/30 FYE• Hospice FYE is 9/30• Rates transition 10/1 (third
month of agency’s FY• Rates based on 2020 proposed
rule with rebasing
Revenue Assumptions 10/1/18-9/30/19 10/1/19-9/30/20
Daily Reimbursement Rates
Routine Home Care 1-60 $ 221.22 $ 215.23
Routine Home Care 61+ 173.83 169.12
General Inpatient 847.94 1,112.34
Respite Inpatient 193.65 479.51
Continuous Care 1,124.30 1,536.74
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Building the Budget
• Total Revenue2020
Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Hospice Revenue
Routine Home Care (1-60) 836,652 875,958 859,113 868,629 835,851 868,629
Routine Home Care (61+) 212,968 222,973 218,686 221,104 212,760 221,104
General Inpatient Care 112,919 118,224 115,950 158,070 152,106 158,070
Respite Inpatient Care 20,631 21,600 21,184 54,513 52,456 54,513
Continuous Home Care 89,833 94,053 92,245 131,028 126,084 131,028
Total Revenue 1,273,003 1,332,809 1,307,178 1,433,344 1,379,256 1,433,344
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Building the Budget
• Other direct care costs per day• Benchmark cost per day from
Simione Financial Monitor.• Supplies, drugs, labs, DME and
patient transportation based on total days.
• GIP and respite based on GIP and respite days respectively.
• Forecasted 2.5% increase in all cost per day based on consumer pricing index forecasted inflation.
Expense Assumptions 2019 2020
Per Day Expenses
Medical Supplies $ 2.59 $ 2.65
Drugs & Infusion 8.22 8.43
Labs & Diagnostics 0.08 0.08
DME & Oxygen 6.40 6.56
Patient Transporation 0.80 0.82
Expense Assumptions 2019 2020
Contract Per Day Expenses
Contract General Inpatient Care $ 694 $ 711
Contract Respite Inpatient Care 180 185
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Building the Budget
• Other Direct Cost per DayOther Direct Care Expenses Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Budgeted Days
Total Days 5,327 5,577 5,470 5,684 5,470 5,684
GIP Days 133 139 137 142 137 142
Respite Days 80 84 82 85 82 85
Per Day Direct Costs
Medical Supplies $ 14,141 $ 14,806 $ 14,521 $ 15,090 $ 14,521 $ 15,090
Drugs & Infusion 44,881 46,989 46,085 47,893 46,085 47,893
Labs & Diagnostics 437 457 449 466 449 466
DME & Oxygen 34,943 36,585 35,882 37,289 35,882 37,289
Patient Transporation 4,368 4,573 4,485 4,661 4,485 4,661
Contract General Inpatient Care 94,730 99,180 97,273 101,087 97,273 101,087
Contract Respite Inpatient Care 14,742 15,434 15,138 15,731 15,138 15,731 81
Building the Budget
• Staffing Assumptions
Staffing Assumptions
Normal Work WeekPaid Time Off (PTO) Days
Paid/Work Ratio
Hours worked per year 2,080 Sick Days 12 1.20
Hours in work week 40.00 Vacation Days 15 PTO Hours
Hours worked per day 8.00 Admin 10 347
Days worked per week 5.00 Holidays 6 %
Overtime Percentage2.00%
Average PTO Days 43
17%
Maximum PTO % 43
17%
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Building the Budget
• Staffing Assumptions
Staffing Assumptions
Normal Work WeekPaid Time Off (PTO) Days
Paid/Work Ratio
Hours worked per year 2,080 Sick Days 12 1.20
Hours in work week 40.00 Vacation Days 15 PTO Hours
Hours worked per day 8.00 Admin 10 347
Days worked per week 5.00 Holidays 6 %
Overtime Percentage 2.00%Average PTO
Days 43 17%Maximum
PTO % 43 17%
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Building the Budget
• Staffing Assumptions
Total Days Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Total Days in Month 31 31 30 31 30 31
Non-Work Days 8 9 9 8 9 9
Workdays 23 22 21 23 21 22
FTE Hours per Month 184 176 168 184 168 176
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Building the Budget
• SN StaffingJul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Total Hospice Days 5,327 5,577 5,470 5,684 5,470 5,684
Productivity- SN Caseload 15.00 15.00 15.00 15.00 15.00 15.00
Average Daily Census 171.83 179.90 182.33 183.36 182.33 183.36
Calculated FTEs NeededHospice A - SN 18.01 19.72 20.26 19.22 20.26 20.10 Actual FTEsHospice A - SN 16.00 16.00 16.00 16.00 16.00 16.00 Over/(Under) StaffedHospice A - SN (2.01) (3.72) (4.26) (3.22) (4.26) (4.10)
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Building the Budget
• SN StaffingJul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Full Time Staff HoursHospice A - SN Full Time 2,944 2,816 2,688 2,944 2,688 2,816 Hospice A - SN Per Diem 370 654 715 593 715 721
Overtime hours by Full Time StaffFull Time Staff - Overtime % 2%
Hospice A - SN Full Time 59 56 54 59 54 56 Full Time Staff Salaries & Wages
Full Time Staff - Hourly Rate SN $ 38.46 Per Diem Staff - Hourly Rate SN $ 48.08
Hospice A - SNHospice A - Full Time Salaries & Wages 113,231 108,308 103,385 113,231 103,385 108,308 Hospice A - Full Time Overtime 3,397 3,249 3,102 3,397 3,102 3,249 Hospice A - Per Diem Regular Salaries & Wages 17,809 31,449 34,394 28,503 34,394 34,657 Hospice A - Per Diem Overtime 534 943 1,032 855 1,032 1,040
Hospice A - Total SN Salaries & Wages 134,971 143,949 141,912 145,986 141,912 147,254
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Building the Budget
• All Direct Care Staffing
SN MSW HHA Chaplain
Total Hospice Days 66,567 66,567 66,567 66,567
Productivity- Caseload 15.0 24.0 12.0 50.0
Average Daily Census 181.9 181.9 181.9 181.9
Calculated FTEs Needed
Hospice A 19.8 12.4 24.7 5.9
Actual FTEs
Hospice A 16.0 10.0 11.0 5.0
Over/(Under) Staffed
Hospice A (3.8) (2.4) (13.7) (0.9)
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Building the Budget
• All Direct Care StaffingSN MSW HHA Chaplain Total
Full Time Staff Hours
Hospice A- Full Time 33,536 20,960 23,216 10,480 88,192
Hospice A- Full Time 7,883 4,927 28,558 1,946 43,314
Overtime hours by Full Time StaffFull Time Staff - Overtime % 2.0% 2.0% 2.0% 2.0%
Hospice A-Full Time 59 37 77 18 191 Full Time Staff Salaries & Wages
Full Time Staff - Hourly Rate $ 38.46 $ 36.06 $ 14.42 $ 36.06
Per Diem Staff - Hourly Rate $ 48.08 $ 45.07 $ 18.03 $ 45.07 Hospice A
Hospice A - Full Time Salaries & Wages $ 1,289,846 $ 755,769 $ 334,846 $ 377,885 $ 2,758,346
Hospice A - Full Time Overtime 38,695 22,673 10,045 11,337 82,750
Hospice A - Per Diem Regular Salaries & Wages 378,998 222,069 514,867 87,699 1,203,633
Hospice A - Per Diem Overtime 11,370 6,662 15,446 2,631 36,109
Hospice A - Total Salaries & Wages $ 1,718,909 $ 1,007,173 $ 875,204 $ 479,551 $ 4,080,838
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Building the Budget• Gross Margin
• Operating Revenue• Medicare only in this example• Sequestration (2.0%)• Contractual Allowances (based on non-
billable claims)
• Operating Expenses• Salaries & Wages• Taxes & Benefits (average percent for
all direct care staff)• Other Direct Expenses (cost per day)
• Gross Margin ($)• Gross Margin (%)
Profit & Loss Statement 2020
Operating Revenue
Medicare Operating Revenue $ 16,569,692
Sequestration (2.0%) (331,394)
Contractual Allowances (9.0%) (1,491,272)
Net Operating Revenue $ 14,747,026
Operating Expenses
Salaries & Wages $ 4,080,838
Taxes & Benefits (25.0%) 1,020,210
Other Direct Expenses 2,446,766
Total Operating Expenses $ 7,547,814
Gross Margin $ 7,199,212
Gross Margin % 48.8% 89
Building the Budget• Gross Margin
• Operating Revenue• Medicare only in this example• Sequestration (2.0%)• Contractual Allowances (based on non-
billable claims)
• Operating Expenses• Salaries & Wages• Taxes & Benefits (average percent for
all direct care staff)• Other Direct Expenses (cost per day)
• Gross Margin ($)• Gross Margin (%)
Profit & Loss Statement 2020
Operating Revenue
Medicare Operating Revenue $ 16,569,692
Sequestration (2.0%) (331,394)
Contractual Allowances (9.0%) (1,491,272)
Net Operating Revenue $ 14,747,026
Operating Expenses
Salaries & Wages $ 4,080,838
Taxes & Benefits (25.0%) 1,020,210
Other Direct Expenses 2,446,766
Total Operating Expenses $ 7,547,814
Gross Margin $ 7,199,212
Gross Margin % 48.8% 90
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Building the Budget• Administrative & General Expenses
• Break-out departments individually• i.e., marketing & sales, intake, billing,
finance, clinical supervision & support, information technology, etc.
• Break-out other costs by type• i.e., space occupancy, legal fees, liability
insurance, etc.
• Budget as a percent of revenue• As your agency increases it’s volume,
the revenue should increase and thus all expenses both direct care and A&G should also increase.
Administrative & General Expenses Percent of Revenue Revenue/Expense
Net Operating Revenue 100.0% $ 14,747,026
Administrative & General Expenses
Administrative & General Salaries & Wages 14.0% $ 2,064,584
Administrative & General Taxes & Benefits 3.0% 442,411
Marketing & Sales 1.4% 210,882
Intake 2.8% 407,018
Billing & Finance 1.5% 215,307
Accounting 0.8% 117,976
Clinical Supervision & Support & QI 8.0% 1,184,186
Information Technology 1.2% 182,863
Space Occupancy 1.3% 191,711
Legal & Audit & Professional Fees 0.5% 67,836
Liability Insurance 0.3% 41,292
Interest Expense 0.3% 39,817
Equipment Purchase & Lease & Repairs 0.3% 45,716
All Other Administrative & General 1.9% 280,193
Total Administrative & General Expenses 37.2% $ 5,491,792 91
Building the Budget• Net Margin Profit & Loss Statement 2020
Operating Revenue
Medicare Operating Revenue $ 16,569,692
Sequestration (2.0%) (331,394)
Contractual Allowances (9.0%) (1,491,272)
Net Operating Revenue $ 14,747,026
Operating Expenses
Salaries & Wages $ 4,080,838
Taxes & Benefits (25.0%) 1,020,210
Other Direct Expenses 2,446,766
Total Operating Expenses $ 7,547,814
Gross Margin $ 7,199,212
Gross Margin % 48.8%
Non-Operating Expenses
Salaries & Wages $ 2,064,584
Taxes & Benefits (25.0%) 442,411
Other Indirect Expenses 2,984,798
Total Non-Operating Expenses $ 5,491,792
Net Margin $ 1,707,419
Net Margin % 11.6% 92
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Questions???
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Thank You For Joining Us Today!
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Thank You For Joining Us Today!• Rob Simione, CPA
• Director of Finance• [email protected]• (203) 848-2471
• Michael Simione, MBA• Manager• [email protected]• (203) 848-2465
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