using budgets and success...success mark p. sharp, cpa partner [email protected] amber j. popek, cpa...

5/18/2020

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Using Budgets and Dashboards to Drive Success

Mark P. Sharp, CPA

Partner

[email protected]

Amber J. Popek, CPA

Director

[email protected]

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

-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

2008 2010 2012 2014 2016 2018 2020

Inflation

Rate Changes

?

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Medicare Margins (Freestanding)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

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

Overall Margins (Freestanding)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

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

Budgeting

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Purposes of Budgeting

• Setting goals for financial performance

• Facilitating coordination

• Identifying areas needing attention

• Allocating resources

• Establishing metrics to measure performance

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

Price EfficiencyOR

• Flexible budgeting

• Eliminates volume variance

• Isolates variance to either

Actual to Budget Comparisons

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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

Month 1 - Flexible

Actual RN Salaries $189,260

Budgeted RN

salaries

$192,500

Actual RN visits 2,750



Variance $(3,250)

Month 1 - Static


Budgeted RN

salaries

$140,000

($1,680,000/12 months)

Variance $49,260


Month 2 - Static


Budgeted RN

salaries

$140,000

($1,680,000/12 months)

Variance $(3,110)

Month 2 - Flexible


Budgeted RN

salaries

$126,000

Actual RN visits 1,800



Variance $10,890


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Budgeting for PDGM

Budgeting for PDGM

PDGMPPSImpact

&

Strategy

• 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

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Budgeting Revenue Under PDGM

• PDGM KPI-based budget development

Medicare Revenue Budget

# of Payment Periods

Base Rate for CBSA

Non-LUPA %

Case-Mix

Index

LUPA %

Payment per

LUPA

Budgeting Revenues Under PDGM

• PDGM KPI-based budget development from baseline

$6,074,881 Medicare Revenue

3,709 Payment Periods

$1,822 Base Rate

85.76% Non-

LUPA %

1.0088 CMI

14.24% LUPA %

$432 AvgLUPA Pmt

Budgeting Revenue Under PDGM

• PDGM KPI-based budget development with strategy

$6,235,788 Medicare Revenue

3,709 Payment Periods

$1,822 Base Rate

86.92% Non-

LUPA %

1.0156 CMI

13.08% LUPA %

$432 AvgLUPA Pmt

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Budgeting Expenses Under PDGM

• KPI-based budget development from baseline

• 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 visits)

• 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

KPI & Dashboards

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Measure only what you’re

going to manage; manage only

what matters

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 performance

via key performance indicators

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Set Goals and Targets

Monitor Dashboards

Analyze

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

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

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Agency Success

Financial

ComplianceQuality

Collaboration with Balance

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

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

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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

PDGM Impacts on Cash

Revenue, Expense and Cash Flow Impacts

• Reduction of RAP payments to 20%

oComplete elimination of RAPs in 2021

• Requirements for accumulation of pre-billing documentation

• Potential pressures on profit marginsoPossible reduction in payment rates

o Increased costs of doing business

COVID-19 Impacts on Cash

Decrease in Revenues & Cash Flow

• Decreases in visits due to refusal by patients or staff

• Increase in Medicare Low Utilization Payment Adjustments (LUPAs)

• Decrease in elective procedures

• Distracted referral sources

• Difficulty in getting required documentation for billing

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COVID-19 Impacts on Cash

Increase in Costs

• Costs of personal protective equipment (PPE)

• Investments in telemonitoring

• Costs of crisis management efforts

• Investments in technology for remote workers

• General disruption of everyday operations

Cash Flow – Cash Receipts

Operating - Patient service revenue

• Medicare – RAPs and finals

• Other PPS/PDGM payers – RAPs and finals

• All other payers

Nonoperating

• Investment income

• Other nonoperating sources (e.g., rental income, vending, etc.)

Financing/Investing

• Draws on lines of credit or other debt

• Owner equity contributions

Cash Flow – Cash Disbursements

Operating

• Payroll and payroll related

• Vendor payments

Financing

• Payments on lines of credit or other debt

• Lease payments

• Distributions/dividends to owners

Investing

• Purchase of equipment

• Other business investments

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Sample Short

Term Cash

Needs Analysis

Other Short Term Considerations

• What should you consider doing immediately?

• Determine the cash burn rate to keep business open & break even

• Identify variable & fixed-cost components & eliminate all nonessential expenditures

• Realign organization & cost structure to support realistic sales volumes in the foreseeable future

• Get up to speed on employee rights that are part of the Families First Coronavirus Response Act

• Evaluate your options for additional capital

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Access to Capital

Reserves and

Investments

Traditional Financing

Owner Contributions

or Loans

COVID-19 Specific Options

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Long Term Considerations

• What should you consider when doing cash flow planning?

• Construct a 13-week cash flow projection to identify critical liquidity

gaps

• Develop a service delivery plan to protect & serve patients and

reduce collection risks

• Formulate a vendor payment plan to protect the supply chain &

minimize cash flows

• Create an employee plan to protect critical employee resources

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Long Term Considerations

• What assumptions do you need to consider with your source data?

• Cash flow plan, summarizing estimated days sales outstanding by payer, reassessing collection sensitivity

• Vendor payment plan defining critical versus noncritical vendors, alternate vendors & sensitivity to days payables outstanding assumptions

• Employee model, measure costs per FTE, including sensitivity to changes in headcount

• Forecasted income statement, monthly balance sheet & net working capital requirements

• Your efforts should be concentrated around controlling the cash burn rate to bridge the short-term storm (< 3 months) to the long-term future steady state

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bkd.com/HC | @bkdHC

Amber J. Popek, CPA

Director

[email protected]

Mark P. Sharp, CPA

Partner

[email protected]

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using budgets and success...success mark p. sharp, cpa partner [email protected] amber j. popek, cpa...

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