session 101: budgeting – why do it?benefits contract labor travel benchmark leaders all others...

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Session 101: Budgeting – Why Do It?Mark Sharp, Partner

BKD, LLP

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• Prioritize data to identify the key performance indicators that drive

success in home health

• Identify key performance indicators to generate a budget, track progress in dashboards, and effectively monitor performance

• Outline strategies for collaborating with clinical and operations on budgeting and forecasting.

Medicare Home Health Environment

?

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Medicare Margins (Freestanding)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

15.2% 15.3% 15.8% 12.2% 12.0% 12.2% 9.0% 13.9% 13.9% 13.7%

Overall Margins (Freestanding)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

4.0% 5.3% 4.8% 2.8% 2.7% 2.6% 2.6% 2.9% 2.3% 2.5%

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Budgeting

Purposes of Budgeting• Setting goals for financial performance

• Facilitating coordination

• Identifying areas needing attention

• Allocating resources

• Establishing metrics to measure performance

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Static

Flexible

Zero-based

Participative

Budgeting Approaches

Three Key Elements Volume

Revenue

Expenses

Operating Budget

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Operating Budget Expenses• Variable vs. fixed

• Personnel• Direct vs. indirect• Wage rates• FTEs and productivity

expectations• Benefits• Travel

• Non-personnel• Direct and/or variable• Contract labor• Medical supplies

• Indirect and/or fixed• Administrative• Capital and plant

Actual to Budget Comparisons• Variances

• Volume• Price• Efficiency

• Identify reasons for variances

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Price EfficiencyOR

• Flexible budgeting• Eliminates volume variance• Isolates variance to either

Actual to Budget Comparisons

Original Budget - Static

Annual budget basis

RN visits 24,000

RN hours per visit 2.0

RN avg wage rate $35

Budgeted RN salaries $1,680,000

Original Budget - Flexible

Annual budget basis

RN visits 24,000



Budgeted RN salaries $1,680,000

Example – Direct RN Salaries

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Month 1 - Flexible

Actual RN Salaries $189,260

Budgeted RN salaries $192,500

Actual RN visits 2,750



Variance $(3,250)

Month 1 - Static



($1,680,000/12 months)

Variance $49,260


Month 2 - Static



($1,680,000/12 months)

Variance $(3,110)

Month 2 - Flexible



Actual RN visits 1,800



Variance $10,890


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Budgeting for PDGM

Budgeting for PDGM

PDGMPPSImpact

&Strategy

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• KPI for PDGM should be used as the basis for your budget• As identified in your impact analysis• As identified by best practices of your peers

• Benchmark blackout period?

• Consider how the KPI may change given your strategy for operational changes in PDGM

• Roll up the detail KPI into a global budget goals

• Need drill down capabilities for budget variance analysis• To get to the root cause

Budgeting for PDGM

Budgeting Revenue Under PDGM• Using impact analysis for KPI-based budget development

Medicare Revenue Budget

# of Payment Periods

Base Rate for

CBSA

Non-LUPA %

Case-Mix

Index

LUPA %

Payment per

LUPA

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Budgeting Revenues Under PDGM• KPI-based budget development from impact analysis (Chicago

example)

$6,074,881 Medicare Revenue

3,709 Payment Periods

$1,822 Base Rate

85.76% Non-

LUPA %

1.0088 CMI

14.24% LUPA %

$432 Avg LUPA

Pmt

Budgeting Revenue Under PDGM• KPI-based budget development with strategy (Chicago example)

$6,235,788 Medicare Revenue

3,709 Payment Periods

$1,822 Base Rate

86.92% Non-

LUPA %

1.0156 CMI

13.08% LUPA %

$432 Avg LUPA

Pmt

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Budgeting Expenses Under PDGM• KPI-based budget development from impact analysis

•Visits per payment period by discipline•Direct cost per visit

•Wage Rates•Total paid hours per visit

•Travel and medical supplies

Direct Costs

•FTEs (admin hours per visit)•Wage rates for indirect staff•Non-labor administrative costs•Technology costs•Other capital costs

Indirect Costs

Budgeting Expenses Under PDGM• KPI-based budget development with strategy

•Adjustments to visit utilization•Shifts in clinical grouping•Fewer therapy visits•Additional visits from LUPA mgmt•Overall episode mgmt efforts

Direct Costs

•Changes in indirect costs•Intake or marketing strategies•Changes in revenue cycle mgmt•Coding, order, supply and episode mgmt•Investments in technology and data

Indirect Costs

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KPI & Dashboards

Measure only what you’re going to manage; manage only what

matters

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Managing Through KPI• KPI = key performance indicators

• Those measures critical for success• The indicators that tell you the most• Minimum data needed to manage your operations

• Monitor through dashboard reports

• Integrate throughout operations

Collaborating through Dashboards

A part of enterprise performance management, the dashboard provides alignment, visibility and collaboration across the organization by allowing business users to define, monitor and analyze business performancevia key performance indicators

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Set Goals and Targets

Monitor DashboardsAnalyze

Decide and Act

Performance Management

• Inaccurate and incomplete information• Too much data to sift through – or not enough• Difficulty locating the necessary information• Inability to analyze data for details and root causes

The Result: Decisions Not on Fact,

But on Gut Feel

The Business Fact Gap

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Performance measurement tool used in conjunction with improvement initiatives to measure comparative operating performance data & identify best practices

Helps Establish the Goals and Targets

Benchmarking

Agency Success

Financial

ComplianceQuality

Collaborating with Balance

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Know How to Harness Your Data

Short & concise

Drill-down capabilities

Keep it simple

Not a perfect science

Key Dashboard Concepts

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Establishing a Dashboard• Design a one-page dashboard

• Compares to year-to-date or prior periods• Compares to targets/benchmarks

• Identify data source

• See Attachment 2 for sample KPI and benchmarks

KPI Drill-downs• Start at a high level

• Benchmark against others

• Drill down where off targets/benchmarks

• Study reasons behind performance indicators

• Consider alternatives

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Tackle Outcomes that Move the Dial• Measures that offer multiple benefits

• Greatest opportunity for improvement

• Clinicians that are under performing

• Patients with high cost and high utilization

Incentivize Staff• Align staff targets that meet the organizations goals and objectives

• Annual merit• Outcomes bonuses• Compensation approach and outcomes

• Scorecards provides objective data to use in providing incentives to your staff and organizations

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Gross Profit

Net operating revenue – direct expenses

Operating Income (Loss)

Net operating revenue – operating expenses

Net Income (Loss)

Total revenue – total expenses

EBITDA

Earnings Before Interest, Taxes,

Depreciation & Amortization

Financial KPIs – Profitability

Benchmark Leaders All Others

Median Best 25% Median Best 25%

Gross margin 49% 54% 45% 57%

Net margin 11% 16% 2% 10%

Revenues Costs

AllPayers

AllPrograms

Overall Profitability (freestanding only)

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Consists of



Gross margin 53% 57% 52% 61%

Net margin 20% 26% 11% 25%

Medicare Profitability – Pre-PDGM

Consists of



Per episode $2,602 $2,955 $2,763 $3,202

Per patient $4,609 $3,892 $4,572 $3,425

Medicare Payments – Pre-PDGM

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Case mix weight 1.1023 1.1802 1.0255 1.1489

LUPA percentage 7.4% 5.6% 6.6% 3.4%

Episodes per patient 1.7 1.4 1.6 1.3

•Paint the right picture•Team collaboration•Clinician training•Proper service mix

OASIS Accuracy

•Proper discharge practices•Good clinical outcomes

Episode Management

Episode Payment Drivers – Pre-PDGM

Medicare Payments - PDGM

State of Illinois

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Medicare Payments - PDGM

State of Illinois

Direct Cost Per Episode – Pre-PDGM

Consists of



Direct labor costs $1,166 $1,008 $1,230 $944

Total direct costs 1,264 1,095 1,348 1,071

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Nursing 7.7 6.8 8.0 6.4

Therapies 8.0 6.5 6.6 4.5

Total 17.0 15.0 16.4 14.0

•Team collaboration•Patient participation•Manage care by the

episode•Effective use of technology

Episode Management

Visits per Episode – Pre-PDGM

Visits per PDGM Period

State of Illinois

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Direct Cost per Visit

Salaries and

Benefits

Contract Labor Travel



Nursing $66 $54 $71 $52

PT 82 76 85 72

OT 85 78 83 67

Direct Costs as a % of RevenueBenchmark Leaders All Others


Direct labor 48% 44% 48% 37%

Transportation 2.5% 2.0% 3.2% 1.5%

•Compensation approach•Productivity•Benefits package•Contract rates

Labor

•Mileage, zone payment or fleet

•GPS technology•Market appropriate

Travel

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Total indirect costs $833 $618 $1,065 $723

Indirect Costs

Plant

CapitalAdmin

Indirect Cost per Episode – Pre-PDGM



Admin labor costs 15% 12% 27% 17%

Total admin costs 33% 24% 38% 28%

Salaries and

benefits

Contract services

Office expenses

Efficient Use of

Resources

Admin Costs as a % of Revenue

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Capital and plant 2.3% 1.8% 2.8% 1.7%

Appropriate Space

Proper Equipment

Maximize Technology

Capital/Plant Costs as a % of Revenue

Funds availability/days cash on hand

Days sales outstanding

Current ratio

Quick ratio

Debt service coverage ratio

Financial KPIs – Liquidity

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Questions?

Mark Sharp, PartnerBKD, [email protected]

Attachment 1 Sample Flexible Budget

Sample Home Care & Hospice AgencyFlexible Budget

For the Year Ending December 31, 2008 = monthly inputs

FiscalUnit Budget 2008 Unit Basis Budget

Account Description Description Per Unit Budget 2008

VOLUME

Home HealthMedicare Episodes 1,500 117

SNV - Medicare per MC episode 10.00 15,000 v 1,500 10.84 1,268 SNV - Other 1,800 265 SNV - Total 16,800 1,533

PT - Medicare per MC episode 5.00 7,500 v 1,500 5.86 686 PT - Other 500 56 PT - Total 8,000 742

OT - Medicare per MC episode 1.00 1,500 v 1,500 1.12 131 OT - Other 60 16 OT - Total 1,560 147

ST - Medicare per MC episode 0.20 300 v 1,500 0.07 8 ST - Other - 1 ST - Total 300 9

MSW - Medicare per MC episode 0.10 150 v 1,500 0.14 16 MSW - Other 10 1 MSW - Total 160 17

HHA - Medicare per MC episode 3.50 5,250 v 1,500 6.23 729 HHA - Other 125 7 HHA - Total 5,375 736

Total Home Health Visits 32,195 3,184

HospiceHospice - Routine Medicare days 10,000 980 Hospice - Routine Other days 1,500 35 Hospice - total routine days 11,500 1,015

Total Hospice Days 11,500 1,015

JanuaryUnit Basis

Flexible Budget

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Account Description Description Per Unit Budget 2008 JanuaryUnit Basis

Flexible Budget

REVENUES

Home HealthMedicare - Skilled Nursing per MC SN visit 125.00 1,875,000 v 15,000 1,268 158,500 Medicare - PT per MC PT visit 160.00 1,200,000 v 7,500 686 109,760 Medicare - OT per MC OT visit 160.00 240,000 v 1,500 131 20,960 Medicare - Speech per MC ST visit 160.00 48,000 v 300 8 1,280 Medicare - Medical Social Worker per MC MSW visit 185.00 27,750 v 150 16 2,960 Medicare - HH Aide per MC HHA visit 50.00 262,500 v 5,250 729 36,450 Medicare - Medical Supplies per MC total visits - - v 29,700 2,838 -

3,653,250 329,910 HH Medicare - CA % of gross MC revenue 8.81% 321,750 8.81% 29,056

per episode 2,650.00 3,975,000 v 1,500 3,068.09 358,966

Other - Skilled Nursing per Other SN visit 125.00 225,000 v 1,800 265 33,125 Other - PT Per Other PT visit 160.00 80,000 v 500 56 8,960 Other - OT Per Other OT visit 160.00 9,600 v 60 16 2,560 Other Speech Per Other ST visit 160.00 - v - 1 160 Other - Medical Social Worker Per Other MSW visit 185.00 1,850 v 10 1 185 Other HH Aide Per Other HHA visit 50.00 6,250 v 125 7 350 Other - Medical Supplies Per Other total visits - - v 2,495 346 -

322,700 45,340 HH Other - CA % of gross Other revenue -25.00% (80,675) -25.00% (11,335)

242,025 34,005

Net Home Health Revenue 4,217,025 392,971

HospiceHospice - Routine M'Care per MC routine day 135.00 1,350,000 v 10,000 980 132,300 Hospice Medicare - CA % of gross MC revenue 0.00% - 0.00% -

1,350,000 132,300

Hospice - Routine Other per Other routine day 135.00 202,500 v 1,500 35 4,725 Hospice - Other CA % of gross Other revenue -25.00% (50,625) -25.00% (1,181)

151,875 3,544

Hospice - Charity Care % of gross Hsp revenue 2.50% 38,813 2.50% 3,426

Net Hospice Revenue 1,540,688 139,270

Other IncomeInterest Income per month 500.00 6,000 f 12 1 500 Misc Revenue per month 250.00 3,000 f 12 1 250 Gain (Loss) on Investment per month 1,000.00 12,000 f 12 1 1,000 Other Income per month 100.00 1,200 f 12 1 100 Donation Income per month 25.00 300 f 12 1 25

22,500 1,875

Total Revenue 5,780,213 534,116

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Flexible Budget

EXPENSESHome Health - DirectSN - Salaries hours per SN visit 1.25 588,000 v 16,800 1,533 53,655

avg wage rate 28.00 SN - Mileage per SN visit 4.75 79,800 v 16,800 1,533 7,282 SN - Contract per SN visit 5.00 84,000 v 16,800 1,533 7,665 PT - Salaries hours per PT visit 0.75 300,000 v 8,000 742 27,825

avg wage rate 50.00 PT - Mileage per PT visit 3.00 24,000 v 8,000 742 2,226 PT - Contract per PT visit 35.00 280,000 v 8,000 742 25,970 MSW - Salaries hours per MSW visit 3.75 15,000 v 160 17 1,594

avg wage rate 25.00 RT - Salaries hours per HH visit 0.0020 2,898 v 32,195 3,184 287

avg wage rate 45.00 Dietician - Salaries hours per HH visit 0.0020 2,861 v 32,195 3,184 6

avg wage rate 45.00 MSW - Mileage per MSW visit 20.00 3,200 v 160 17 340 MSW - Contract per MSW visit 2.50 400 v 160 17 43 ST - Salaries hours per ST visit 1.05 15,750 v 300 9 9

avg wage rate 50.00 ST - Mileage per ST visit 6.50 1,950 v 300 9 59 OT - Salaries hours per OT visit 0.05 3,510 v 1,560 147 331

avg wage rate 45.00 OT-Mileage per OT visit 0.50 780 v 1,560 147 74 OT - Contract per OT visit 55.00 85,800 v 1,560 147 8,085 HHA - Salaries hours per HHA visit 1.15 92,719 v 5,375 736 12,696

avg wage rate 15.00 HHA - Mileage per HHA visit 5.50 29,563 v 5,375 736 4,048 HHA - Contract per HHA visit 0.50 2,688 v 5,375 736 368 Non - Billable Medical Supplies per HH visit 2.45 78,878 v 32,195 3,184 7,801 Flu Vaccines per HH visit 0.25 8,049 v 32,195 3,184 796

1,699,846 161,160

Hospice - DirectNursing - Salaries hours per Hsp day 0.75 215,625 v 11,500 1,015 19,031

avg wage rate 25.00 PT - Salaries hours per Hsp day 0.0010 575 v 11,500 1,015 51

avg wage rate 50.00 Nursing - Mileage per Hsp day 2.25 25,875 v 11,500 1,015 2,284 Social Worker - Salaries hours per Hsp day 0.25 71,875 v 11,500 1,015 6,344

avg wage rate 25.00 Dietician - Salaries hours per Hsp day 0.0045 2,329 v 11,500 1,015 206

avg wage rate 45.00 Chaplain - Salaries hours per month 150.00 36,000 f 12 1 3,000

avg wage rate 20.00 Social Worker - Mileage per Hsp day 0.50 5,750 v 11,500 1,015 508 HHA - Salaries hours per Hsp day 0.45 77,625 v 11,500 1,015 6,851

avg wage rate 15.00 HHA Mileage per Hsp day 1.25 14,375 v 11,500 1,015 1,269 DME per Hsp day 6.00 69,000 v 11,500 1,015 6,090 Contract Labor per Hsp day 0.10 1,150 v 11,500 1,015 102 Non-Billable Med Supplies per Hsp day 1.00 11,500 v 11,500 1,015 1,015 Patient care per Hsp day 1.25 14,375 v 11,500 1,015 1,269 Patient transportation per Hsp day 0.10 1,150 v 11,500 1,015 102 Volunteer Training per month 120.00 1,440 f 12 1 120 Pharmacy per Hsp day 10.00 115,000 v 11,500 1,015 10,150

663,644 58,392

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Flexible Budget

Employee BenefitsEmployee Expense of total salaries 2.00% 59,385 v 2,969,238 260,580 5,212 401(k) Expense of total salaries 2.00% 59,385 v 2,969,238 260,580 5,212 Payroll Taxes of total salaries 8.25% 244,962 v 2,969,238 260,580 21,498 Workers Compensation of total salaries 2.00% 59,385 v 2,969,238 260,580 5,212 Employee Health Insurance of total salaries 6.00% 178,154 v 2,969,238 260,580 15,635 Other Employee Benefits of total salaries 1.00% 29,692 v 2,969,238 260,580 2,606

630,963 55,375

Home Health AdminHH - A&G - Salaries hours per month 2,400.00 576,000 f 12 1 48,000

avg wage rate 20.00 576,000 48,000

Hospice AdminHsp - A & G - Salaries hours per month 550.00 198,000 f 12 1 16,500

avg wage rate 30.00 Hsp - Medical Director Fees 60,000 f 12 1 5,000

258,000 21,500

Shared AdminA & G - Salaries hours per month 1,000.00 420,000 f 12 1 35,000

avg wage rate 35.00 A & G - Mileage per month 1,500.00 18,000 f 12 1 1,500 Liability Insurance per month 200.00 2,400 f 12 1 200 Business Meals & Entertainment per month 200.00 2,400 f 12 1 200 Bank Charges per month 60.00 720 f 12 1 60 Postage per month 850.00 10,200 f 12 1 850 Telephone per month 4,150.00 49,800 f 12 1 4,150 Legal & Accounting per month 3,000.00 36,000 f 12 1 3,000 Equipment per month 30.00 360 f 12 1 30 Computer per month 3,500.00 42,000 f 12 1 3,500 Office Supplies per month 3,000.00 36,000 f 12 1 3,000 Licenses & Fees per month 100.00 1,200 f 12 1 100 Dues & Subscriptions per month 625.00 7,500 f 12 1 625 Miscellaneous per month 500.00 6,000 f 12 1 500 Travel & Lodging per month 175.00 2,100 f 12 1 175 Automobile per month 750.00 9,000 f 12 1 750 Consultants per month 1,050.00 12,600 f 12 1 1,050 Other Taxes per month 100.00 1,200 f 12 1 100 Equipment Lease per month 125.00 1,500 f 12 1 125 Printing & Copying per month 2,050.00 24,600 f 12 1 2,050 Contract Labor per month 350.00 4,200 f 12 1 350 Medical Waste Disposal per month 150.00 1,800 f 12 1 150 Professional Fees per month 2,000.00 24,000 f 12 1 2,000 Contributions & Donations per month 400.00 4,800 f 12 1 400 Business insurance per month 1,250.00 15,000 f 12 1 1,250 Interest per month 1,800.00 21,600 f 12 1 1,800 Auto Insurance per month 750.00 9,000 f 12 1 750 Seminars & Education per month 1,250.00 15,000 f 12 1 1,250 Storage per month 175.00 2,100 f 12 1 175 Recruitment per month 3,000.00 36,000 f 12 1 3,000 Hsp - A & G - Mileage per month 600.00 7,200 f 12 1 600 Hsp - Miscellaneous per month 65.00 780 f 12 1 65 Hsp - Web Site per month 10.00 120 f 12 1 10 Hsp - Office Supplies per month 50.00 600 f 12 1 50 Hsp - Minor Equipment per month 10.00 120 f 12 1 10 Hsp - Educational Materials per month 60.00 720 f 12 1 60

826,620 68,885

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Flexible Budget

MarketingMarketing - salaries hours per month 840.00 352,800 f 12 1 29,400

avg wage rate 35.00 Advertising per month 8,000.00 96,000 f 12 1 8,000 Marketing fuel per month 350.00 4,200 f 12 1 350

453,000 37,750

Capital & PlantRent 9,500.00 114,000 f 12 1 9,500 Repairs & Maintenance per month 1,500.00 18,000 f 12 1 1,500 Utilities per month 1,000.00 12,000 f 12 1 1,000 Depreciation per month 4,000.00 48,000 f 12 1 4,000

192,000 16,000

Bad DebtsBad Debt - Home Health % of gross HH rev 0.00% - - Bad debt - Hospice % of gross hospice rev 0.00% - -

- -

Total Expense 5,300,073 467,062

PROFIT 480,140$ 67,054$

PROFIT MARGIN 8% 13%

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Attachment 2 Sample KPI & Benchmarks

4/22/2019

2017 Medicare Home Health Operations Dashboard ReportPeer Group Data1 Peer Group Data1 National Data1

All Other All United StatesMedicare Certified Medicare Certified

Measure Agencies Agencies

Lower Upper Lower Upper Lower UpperQuartile Median Quartile Quartile Median Quartile Quartile Median Quartile

Number of Agencies Total agencies in peer group: 301 Total agencies in peer group: 8,518 Total agencies in national data: 8,819Service Delivery Dashboards

Total home health visits 16,004 27,322 50,941 4,093 9,143 20,846 4,229 9,580 21,846 Total visits for other services4 - - - - - - - - - Total net patient revenue4 2,438,849$ 4,457,237$ 7,752,791$ 728,267$ 1,601,452$ 3,610,481$ 749,145$ 1,664,194$ 3,818,466$ Total Medicare episodes 687 1,076 2,076 165 344 717 169 360 762 Total Medicare home health revenue 1,663,754$ 3,040,154$ 5,507,502$ 426,751$ 936,189$ 1,994,725$ 439,745$ 974,967$ 2,114,473$ Total home health unduplicated patients 495 942 1,775 111 279 732 115 297 762 Total unduplicated patients for other services4 - - - - - - - - - Payer mix, measured on total visits

Medicare 60.7% 72.8% 84.9% 54.3% 77.9% 99.5% 54.7% 77.5% 99.2%Other 15.2% 27.2% 39.3% 0.6% 22.1% 45.7% 0.8% 22.5% 45.3%

Payer mix, measured on unduplicated patientsMedicare 59.1% 69.5% 81.6% 51.9% 75.8% 99.7% 52.3% 75.4% 99.4%Other 18.4% 30.5% 40.9% 0.3% 24.2% 48.2% 0.6% 24.6% 47.7%

Visits per Medicare episode (all episodes)Skilled nursing 6.8 7.7 8.5 6.4 8.0 9.6 6.4 8.0 9.5 Physical therapy 4.5 5.6 6.7 3.6 5.1 6.6 3.7 5.1 6.6 Occupational therapy 1.2 1.8 2.4 0.3 1.0 1.9 0.3 1.1 1.9 Speech therapy 0.2 0.3 0.6 0.0 0.1 0.3 0.0 0.1 0.3 Medical social services 0.0 0.1 0.2 - 0.0 0.1 - 0.1 0.1 Home health aide 0.4 0.8 1.4 0.4 1.1 2.4 0.4 1.1 2.3

Total visits per episode 15.0 17.0 18.4 14.0 16.4 19.1 14.0 16.4 19.1 Total therapy visits per episode 6.5 8.0 9.4 4.5 6.6 8.8 4.6 6.7 8.8

Skilled nursing 7.3 8.2 9.1 6.9 8.4 10.1 7.0 8.4 10.0 Physical therapy 4.9 6.1 7.2 4.0 5.5 7.2 4.0 5.5 7.2 Occupational therapy 1.3 2.0 2.7 0.3 1.1 2.1 0.3 1.2 2.1 Speech therapy 0.2 0.4 0.6 0.0 0.1 0.3 0.0 0.1 0.3 Medical social services 0.0 0.1 0.2 - 0.1 0.1 - 0.1 0.1 Home health aide 0.4 0.8 1.6 0.4 1.2 2.6 0.4 1.2 2.5

Total visits per episode 16.3 18.3 19.7 15.2 17.6 20.4 15.2 17.7 20.4 Total therapy visits per episode 7.1 8.7 10.1 4.9 7.2 9.6 5.0 7.3 9.6

Visits per Medicare LUPA episode 2.6 2.8 2.9 2.5 2.7 3.0 2.5 2.7 3.0

Health Care Group | www.bkd.com Questions? Contact Mark Sharp at [email protected].

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BKD/SHP Benchmark Leaders

Visits per Medicare full episode (including outliers)

4/22/2019






Service Delivery Dashboards (Continued)Number of episodes per Medicare patient 1.4 1.7 2.1 1.3 1.6 2.2 1.3 1.6 2.2 Estimated number of hours per visit

Direct nursing service (based on SN visits) 1.7 2.1 2.5 1.2 1.9 2.7 1.2 1.9 2.7 Home health aide service (based on HHA visits) 1.0 1.4 1.9 1.0 1.4 2.6 1.0 1.4 2.6 Administrative staff 0.6 0.7 0.9 0.8 1.2 1.8 0.8 1.1 1.8 Total staff 2.1 2.4 2.9 2.3 3.0 4.1 2.3 3.0 4.0

Estimated number of visits per day per FTE5

Direct nursing service 3.6 4.3 5.2 3.2 4.6 7.2 3.3 4.6 7.1 Physical therapy service 5.3 6.4 7.5 4.5 6.3 9.0 4.5 6.3 9.0 Occupational therapy service 4.3 5.7 7.2 4.2 6.0 8.7 4.2 6.0 8.6 Speech therapy service 3.6 4.8 7.2 3.5 5.1 7.7 3.5 5.1 7.6 Medical social services 2.1 3.5 4.8 1.1 2.8 5.7 1.2 2.8 5.7 Home health aide service 4.8 6.3 7.8 3.8 5.8 8.7 3.8 5.8 8.7

Operating DashboardsCost Per VisitSkilled nursing

Salaries 42.23$ 53.27$ 63.75$ 38.55$ 55.94$ 78.07$ 38.92$ 55.79$ 77.47$ Employee benefits 6.68 8.22 10.77 2.07 7.08 12.59 2.39 7.18 12.45 Contract services - - - - - 1.05 - - 0.97

Total labor 49.88 63.37 77.34 50.54 68.34 94.85 50.48 67.92 94.25 Transportation 2.57 3.43 4.45 - - 4.14 - - 4.16 Other direct costs - - - - - - - - -

Total direct care costs 53.76 66.18 81.38 52.12 70.94 99.22 52.20 70.58 98.53 Indirect agency costs 34.40 42.87 52.71 40.85 60.69 90.86 40.31 59.52 89.43

Total agency cost per visit 95.03 109.75 131.06 108.15 138.96 179.38 107.17 137.42 177.84 Provider-based overhead costs3 35.00 40.20 48.72 34.06 49.80 67.59 34.16 49.64 67.05

Total cost per visit 95.04$ 110.04$ 133.56$ 109.09$ 141.32$ 186.22$ 108.15$ 139.76$ 184.74$


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Operating Dashboards (Continued)Cost Per Visit (Continued )Physical therapy

Salaries 49.85$ 62.81$ 68.42$ -$ 18.92$ 67.49$ -$ 23.14$ 67.69$ Employee benefits 6.57 10.37 11.92 - 0.36 9.95 - 0.88 10.26 Contract services - 1.35 17.95 0.01 37.95 78.34 - 34.42 77.37




Total cost per visit 123.12$ 139.10$ 156.83$ 130.82$ 161.95$ 208.29$ 130.11$ 160.56$ 206.59$ Occupational therapy

Salaries 51.00$ 65.85$ 73.59$ -$ -$ 68.78$ -$ -$ 69.47$ Employee benefits 7.01 11.01 12.76 - - 10.02 - - 10.50 Contract services - - 14.11 - 25.62 76.97 - 21.79 75.75



Total agency cost per visit 127.74 143.46 159.70 124.87 157.41 202.96 125.06 156.30 200.90 Provider-based overhead costs3 - - - - - - - - -



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Operating Dashboards (Continued)Cost Per Visit (Continued )Speech therapy

Salaries 56.41$ 75.83$ 85.17$ -$ -$ 75.00$ -$ -$ 76.62$ Employee benefits 6.77 12.50 14.73 - - 10.34 - - 11.18 Contract services - - 9.01 - 29.51 81.59 - 22.08 80.30




Total cost per visit 143.27$ 162.16$ 187.88$ 131.70$ 167.96$ 221.04$ 132.07$ 167.48$ 218.73$ Medical social services

Salaries 58.25$ 72.60$ 100.18$ -$ 49.21$ 95.86$ -$ 52.12$ 96.02$ Employee benefits 9.28 12.08 18.16 - 2.21 14.98 - 3.88 15.16 Contract services - - - - - 75.00 - - 75.00






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Operating Dashboards (Continued)Cost Per Visit (Continued )Home health aide

Salaries 14.26$ 18.08$ 24.23$ 13.80$ 21.14$ 30.19$ 13.89$ 20.91$ 30.00$ Employee benefits 2.19 2.93 3.88 - 2.58 4.93 0.03 2.61 4.87 Contract services - - - - - - - - -




Total cost per visit 37.60$ 45.97$ 56.82$ 41.82$ 59.05$ 83.61$ 41.52$ 58.30$ 82.50$ Overall agency cost per visit (all disciplines)

Direct cost per visit 64.26$ 72.99$ 83.37$ 56.06$ 72.77$ 93.16$ 56.59$ 72.81$ 92.68$ Indirect cost per visit 36.08$ 47.20$ 57.27$ 39.75$ 60.66$ 94.26$ 39.66$ 59.59$ 92.68$ Provider-based overhead costs3 34.72$ 37.46$ 42.79$ 30.75$ 44.57$ 65.36$ 30.75$ 44.29$ 65.13$ Overall agency cost per visit 109.70$ 120.98$ 138.32$ 114.19$ 144.08$ 183.05$ 113.78$ 142.56$ 181.46$

Medical SuppliesNon-routine medical supplies 1.92$ 2.86$ 3.77$ 1.24$ 2.78$ 5.00$ 1.28$ 2.79$ 4.91$

Medicare Episode PaymentsEstimated average case-mix weight2 1.0275 1.1023 1.1802 0.9041 1.0255 1.1489 0.9082 1.0298 1.1510 Average payment ratio2 0.9488 1.0195 1.0982 0.8499 0.9614 1.0827 0.8536 0.9642 1.0832 Medicare episode mix by payment type

Unadjusted episodes 86.5% 88.7% 91.1% 81.8% 86.7% 91.4% 81.9% 86.9% 91.4%LUPA episodes 5.6% 7.4% 9.4% 3.4% 6.6% 10.3% 3.5% 6.7% 10.2%PEP episodes 1.2% 1.8% 2.6% 1.0% 1.9% 3.1% 1.0% 1.9% 3.0%Outlier episodes 0.6% 1.2% 2.5% 1.0% 2.8% 6.0% 0.9% 2.7% 5.9%

Average payment per episode by payment typeUnadjusted episodes 2,592.95$ 2,820.68$ 3,171.76$ 2,538.54$ 2,952.08$ 3,357.62$ 2,543.68$ 2,945.60$ 3,351.49$ LUPA episodes 337.14 370.95 407.84 363.03 409.15 466.44 361.62 407.43 464.72 PEP episodes 1,031.62 1,199.32 1,392.67 1,009.94 1,281.99 1,598.51 1,012.61 1,278.08 1,584.77 Outlier episodes 3,371.12 3,827.82 4,409.32 3,382.17 4,135.81 5,054.80 3,381.72 4,117.14 5,030.91


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Operating Dashboards (Continued)Medicare Episode ProfitabilityAverage payment per episode 2,401$ 2,602$ 2,955$ 2,366$ 2,763$ 3,202$ 2,368$ 2,757$ 3,190$ Direct costs per episode

Salaries 767 925 1,082 523 824 1,137 531 831 1,132 Employee benefits 122 158 187 46 106 192 48 110 192 Contract services 1 27 144 29 221 534 24 211 519

Total labor 1,008 1,166 1,329 944 1,230 1,547 949 1,227 1,539 Transportation 42 56 71 - 7 62 - 14 63 Other direct costs - - - - - - - - - Nonroutine supplies 17 28 44 0 19 45 0 19 45

Total direct care costs per episode 1,095 1,264 1,434 1,071 1,348 1,679 1,072 1,343 1,666 Direct profit (loss) per episode 1,200 1,367 1,595 1,019 1,386 1,761 1,029 1,384 1,752 Direct profit (loss) margin per episode 48.1% 52.6% 56.7% 40.7% 51.8% 60.9% 41.1% 51.8% 60.6%Indirect agency costs per episode 618 833 997 723 1,065 1,571 718 1,048 1,550

Total agency cost per episode 1,871 2,065 2,315 1,978 2,423 3,002 1,969 2,401 2,964 404 525 731 (49) 348 708 (25) 362 710

15.5% 20.3% 26.9% -2.3% 12.7% 25.4% -1.4% 13.4% 25.5%Provider-based overhead costs per episode3 - - - - - - - - - Total costs per episode 1,896 2,081 2,348 2,022 2,482 3,100 2,011 2,459 3,073

Overall profit (loss) per episode 371 498 705 (147) 300 683 (126) 319 685 Profit (loss) margin per episode 14.5% 19.7% 26.2% -5.6% 11.2% 24.5% -4.6% 11.8% 24.6%

Per Patient BenchmarksAverage visits per Medicare patient 24 30 37 20 28 41 20 28 40 Direct Cost per patient 1,768 2,117 2,599 1,414 2,050 2,879 1,428 2,053 2,867 Indirect Cost per patient 1,029 1,349 1,772 997 1,736 3,087 998 1,714 3,024 Provider-based overhead costs per patient 450 681 779 345 809 1,316 348 802 1,308 Total agency cost per patient 3,000 3,543 4,210 2,890 4,105 5,947 2,896 4,056 5,881 Average Medicare revenue per Medicare patient 3,892 4,609 5,459 3,425 4,572 6,203 3,446 4,575 6,178


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Profit (loss) per episode based on total agency costsProfit (loss) margin per episode based on total agency costs

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Operating Dashboards (Continued)Gross profit (loss) margin 39.8% 49.0% 54.0% 31.0% 45.0% 57.0% 31.0% 45.0% 56.0%Agency profit (loss) margin 7.9% 11.4% 16.0% -4.9% 2.1% 9.6% -4.5% 2.5% 10.1%Salaries as a % of total costs 54.7% 59.7% 67.8% 47.2% 57.3% 65.8% 47.6% 57.5% 65.9%Salaries as a % of total revenue4 46.7% 52.2% 56.7% 44.6% 56.0% 66.5% 44.8% 55.7% 66.2%Employee benefits as a % of total salaries 15.0% 16.8% 18.5% 11.1% 15.2% 19.8% 11.2% 15.3% 19.7%

64.8% 70.2% 80.2% 51.3% 65.6% 76.5% 51.8% 65.9% 76.7%54.2% 61.3% 66.4% 48.1% 63.6% 76.5% 48.5% 63.4% 76.1%0.3% 1.8% 7.4% 2.3% 9.9% 22.3% 2.1% 9.6% 21.9%0.3% 1.5% 6.2% 2.4% 10.3% 22.8% 2.1% 9.8% 22.3%

69.7% 74.7% 82.4% 71.9% 79.5% 85.7% 71.8% 79.4% 85.5%60.0% 64.1% 69.6% 66.8% 76.4% 86.2% 66.0% 75.8% 85.9%50.5% 55.2% 65.8% 39.6% 51.1% 61.9% 40.2% 51.3% 62.0%43.9% 47.9% 54.1% 36.7% 48.0% 59.3% 37.1% 48.0% 59.0%13.9% 17.0% 21.6% 16.6% 25.3% 36.7% 16.3% 24.9% 36.2%11.6% 14.8% 18.4% 16.8% 26.5% 39.8% 16.3% 25.8% 39.1%2.3% 3.0% 3.8% 0.0% 1.5% 3.2% 0.0% 1.7% 3.2%2.0% 2.5% 3.4% 0.0% 1.5% 3.2% 0.0% 1.6% 3.2%

14.3% 22.3% 27.2% 12.3% 18.6% 26.5% 12.4% 18.7% 26.6%11.6% 18.7% 23.8% 12.1% 18.9% 27.1% 12.0% 18.9% 26.9%27.2% 37.9% 42.7% 29.0% 38.9% 47.2% 28.9% 38.8% 46.8%23.7% 32.8% 37.3% 28.1% 38.1% 48.3% 27.9% 37.7% 47.8%

Capital & plant costs as a % of total cost4 2.0% 2.6% 3.5% 1.8% 2.9% 4.5% 1.8% 2.9% 4.4%Capital & plant costs as a % of total revenue4 1.8% 2.3% 3.1% 1.7% 2.8% 4.6% 1.7% 2.8% 4.6%Days in accounts receivable4 35.7 43.9 57.4 38.7 56.5 85.4 38.4 55.4 84.2 Current ratio4 1.4 4.0 14.9 0.8 1.9 5.1 0.9 1.9 5.4 Quick ratio4 1.3 2.9 5.9 0.7 1.6 4.2 0.7 1.6 4.3 Return on equity4 0.4% 11.8% 35.5% -10.8% 11.3% 69.7% -9.1% 11.4% 68.4%Return on assets4 0.1% 9.4% 29.0% -12.6% 5.2% 45.3% -11.1% 5.3% 44.4%

1Data compiled using all Medicare cost reports available from CMS with fiscal years ending in 2017.2Estimated based on payment rates effective for the location of the agency rather than service area.3Dashboard indicator only applies to hospital-based agencies, and accounts for costs allocated to the agency from the provider.4Dashboard indicator only includes freestanding agencies as hospital-based agency data is not available from CMS data sets.5Estimated based on 230 work days per year.


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Total labor as a % of total revenue4

Total salaries & employee benefits as a % of total costsTotal salaries & employee benefits as a % of total revenue4

Purchased services as a % of total costs

Administrative & general costs as a % of total revenue4

Indirect labor as a % of total revenue4

Transportation as a % of total costsTransportation as a % of total revenue4

Other costs as a % of total costsOther costs as a % of total revenue4

Administrative & general costs as a % of total cost

Purchased services as a % of total revenue4

Total labor as a % of total costs

Direct labor as a % of total costsDirect labor as a % of total revenue4

Indirect labor as a % of total costs

session 101: budgeting – why do it?benefits contract labor travel benchmark leaders all others...

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