OverviewGoal

Setting

Budget• The Importance of Budgeting

Preparation of an annual budget and continuous budget monitoring allows management to anticipate and prepare for the effects of change from year to year.

Budgeting Methods • There are various approaches to building an operational

budget:

• Zero-Based Budgets• Top-Down Budgets• Incremental Budgets

Budget Timeline

• Overall organization budget preparation for the next year should begin four (4) months prior to the health center’s current year end.

Preparing for Budgeting• Preparing Budget:

• Review prior year’s budget and actual expenditures• Identify capital and equipment needs • Provide written explanation for budget changes

(increases or decreases of more than 10%) from prior year

• Provide crosswalk between performance goals and budget requests

• During Budget Period:

• Provide written explanation for variance between actual amounts and budgeted amounts during the fiscal year

Factors to Consider• There are various factors to consider when projecting visit

volume. The following are a few examples:

• User trends (demand side)

• Payor mix (demand side)

• New sites and/or departmental expansion = new hires (supply side)

• Provider productivity targets (supply side)

Revenue Budget

• Patient Revenue

• Grants

• Contracts

Patient Revenue• Gross Revenue

• Contractual Adjustment

• Net Revenue

Expenses• Key Points to Budgeting Expenditures:

• Review prior year financial statements

• Review first 6 months internal financial statement

• Base expenditures on first 6 months financial statement:

– Compare to prior year for major differences and reconcile

– Increase or decrease appropriate costs due to visit volume variance

– Increase or decrease due to unit cost differences

Pitfalls in Budgeting• Assuming provider productivity increases without

justification

• Forgetting about physical constraints of facility

• Forgetting to project replacement of fixed assets over time

• The “Build It And They Will Come” mentality.

• Assuming no competitors

• Basing plans on grant funding opportunities

• Not monitoring actual results and variance from plans

• Not adequately planning for cash need

Key Performance Indicators• Days cash on hand(Cash and Cash equivalents)/((total expense less

depreciation)/365)– This tells if a health center stops generating revenue and how

many days they can meet their obligations.

*Minimum at least 30 days

• Current Ratio– Current assets/current liabilities– A high ratio indicates the health center can meet short term

obligations and the Center is more liquid.

* At a minimum 1.5; ideally 2.0

Key Performance Indicators• Days in Accounts Receivable

(Gross Accounts Receivable less allowance for doubtful accounts and contractual)/((Revenue less contractual and bad debt)/365)

– This tells how long it takes a health center to collect on a patient’s account.

*Lower number is best, 45 days or less

• Days in Accounts Payable(Accounts Payable)/ ((Total expenses less salaries and benefits)*365)

– This tells how long it takes the health center to pay outstanding invoices.

*Standard is 30- 45 days

Sample Financial Dashboard

Balance Sheet

Current Period

Prior Year End

ChangeFAV(UNFAV

)

Percentage

Current Ratio .82 1.1 (.28) -25%

Days Cash on Hand

5 25 (20) -80%

Days in Accounts

Receivables

109 66 (43) -65%

Days in Accounts Payable

64 57 (7) -12%

Sample Accounts Receivable Report

Medical 0 - 30 days 31 - 60 days 61 - 90 days91 - 120 days121 - 180 days > 181 days Total Full Pay, No Discount 44,386 40,382 54,137 44,131 85,567 189,398 538,002 Sliding Fee 450 256 178 125 98 - 343 Medicaid 152,562 86,763 31,024 22,912 45,886 201,852 540,998 MC+ 111,349 61,592 26,964 14,752 54,911 131,935 401,346 Medicare 60,868 23,719 18,355 30,489 57,111 330,625 521,166 Third Party Ins 33,062 19,292 17,791 18,561 34,066 135,355 258,096

Total 402,677 232,004 148,449 130,970 277,639 989,165 2,259,951

Summary of Aged Receivables

Operational Reporting

• Why it is needed?• In order to improve the efficiency of service provision, it is

important to understand the current operational status at the clinic.

Operational Data• Data collection areas should include the following:

– Appointment Scheduling

– Patient Flow

– Patient Satisfaction

– Medical Records

– Provider Productivity

Appointment Scheduling• Access

• Next available appointment• No Shows• Walk-ins• New patients• Specialty referrals

Patient Flow/Patient Satisfaction

• Patient Flow Issues• Medical record availability & completeness• Nurses/MAs availability • Sub-waiting and confusion• Supplies in exam rooms• Others?

Medical Records/Provider Productivity

• Completed Medical Records– Timely Documentation

• Provider Productivity goals– If the record is not complete, the provider did

not reach the goal– Set goals with Provider input

Operational GoalsMilestone Calculation Goal

Encounter Form Complete

Date of Service to date signoff 0 days

Bill generated Date Of Service to date billed 2 days

Claim Paid Date billed to date paid 45 days

Patient Wait time From time when patient signs in to time patient is seen by provider

30 minutes

Next Available Appointment

Next open slot in appointment scheduling system

Same day

Benchmarks• Internal Benchmarking

- Measuring current operations What should be measured? Is everything going to have benchmarks? Once you have measures, how do you establish benchmarks? What most impacts on your clinic’s efficiency? How do you report on progress or lack of progress?

- Goal setting Who should be involved? What does it mean when goals are not achieved? When they are?

• Implementing Change

Reporting Overview– Monitoring benchmarks

• Senior leadership monitoring• Board monitoring• Sharing performance with the whole staff

– Using performance data to celebrate success and identify areas for improvement

– Communicating good and bad news

Reporting Overview cont.

– Linking financial and operational reports– Understanding the financial impact of

operations– Reading operationally “between the lines”

of the financial statement

In Summary• Communicate Often

• Ensure Accurate Data

• Goals are not set in stone

• Use the PDSA cycle

Questions?

Gervean Williams

National Association of Community Health

Centers