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Financial Sustainability Strategies for MRHC Growth

Explore the financial sustainability strategies of MRHC through tenets like serviceable debt and business intelligence. Learn about changing financials, positive margins, and growth initiatives for projected earnings. Delve into working capital, facility master plan, and service line analysis to reduce losses. Discover how MRHC is optimizing FFS and transitioning to PFV for better reimbursement. Navigate through Governance Institute insights on revenue sources and shifting towards value-based care.

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Financial Sustainability Strategies for MRHC Growth

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  1. MRHCFinancial Sustainability Darryl Linnington

  2. OVERVIEW • Financial sustainability • Tenets (not a publicly traded company) • MRHC • Changing financials • Governance Institute – 7 Questions

  3. Financial Sustainability • Tenets • Working capital • Serviceable debt • Business plan • Top line growth NOT http://m.newsok.com/oklahoma-hospital-charges-patients-almost-10-times-cost-of-care-report-says/article/5426847 • Positive margins • Reinvestment • Business intelligence • Back-up plan

  4. MRHC • Positive working capital • Little debt a/o 05/15 • Rigorous budget development • Several growth initiatives • Projected positive earnings • Facility master plan (reinvestment) • Service line analysis (still in development) • Correct, reduce or eliminate losses

  5. MRHC - Working Capital • Revenue cycle • Build depth in department • Reward consistency in performance • Exit long-term lending (turnover to bank) • New focus/lead for clinic accounts

  6. Serviceable Debt • New metric • Regulator on borrowing • Proposed debt to cap 33.3% • Capacity $24m ($2.2m pmt per year)

  7. Business Plan • FY2016 Budget Next Meeting • Detailed document/schedules

  8. Growth Initiatives • Geriatric psych • Urgent care • Gastroenterology (recruit) • Intensivists • Transitional care • Others …

  9. MRHC - Positive Margins • FY15 – estimated $7m • FY16 – still in development w/ margin growth • Collection goals • Labor productivity targets • Supply savings goals

  10. MRHC - Facility Master Plan • Continuing major works • Elevators, generator, etc. • ALSO – facelifts various areas • $2.2m+

  11. Service Line Analysis • Carve out Clinics • Confirm: • Thriving (ex. Ortho, ED, etc.) • Marginal (ex. Home Health, RHC) • Negative (ex. Obstetrics, SNF)

  12. Under-performing • Consolidate Rehab and SNF • Reduce expense burden • Cross utilize staff (clock each side) • Re-purpose vacated unit • OB • Another option - Obstetrician • ?Bundled payment for OB? • Facility improvements

  13. Changing FinancialsEntity • Merged PHA • Opportunity cost • Beneficial use • Higher asset base • Spin-off Clinics • Own financial statement • Own financial targets & accountability • Start-up losses • Quicker break-even

  14. Changing FinancialsBalance Sheet • Debt versus cash • Down-payment versus cash buy • For hard assets – PPE • Other strategic initiatives – service line • New metrics • Days cash @ 140 (currently) • Debt to cap 33% ($22m capacity) • Others TBD w/ time

  15. Changing FinancialsOff Balance Sheet • Physician partners • Payers & reimbursement • Replacement cash stream • Alignment • New models (ex. Co-mgt) • Distributions – cash requirements

  16. Changing FinancialsRevenues • Reimbursement methodology • Quiet revolution • Quasi-government • Volume versus rate • Patient acquisition • Take it or leave it • Risk sharing (w/ attribution) • Underwriting • Unrecorded liability - valuation

  17. Changing FinancialsMargins • Service line versus expense management • Focus on core business • Margin flux – enter, exit

  18. Governance InstitutePrimary Revenue Sources - TODAY • High Volume, High Margin  Sustain/Grow • Emergency Room • Imaging • High Volume, Low Margin  Improve Margin • Laboratory • Physical therapy • IP Medical • Home Health

  19. Governance InstitutePrimary Revenue Sources - TODAY • Low Volume, High Margin  Partner/Grow • IP Surgery • IP ICU • Cathlab • Low Volume, Low Margin  Improve $ or dc • Physician Clinics (negative margin) • Deliveries (negative margin) • Skilled Nursing (negative margin)

  20. Governance InstitutePrimary Revenue Sources5 Years Later VALUE TO PAYERS & PATIENTS • Centers of Excellence • Orthopedics • Interventional Cardiology • Disease Management • Pulmonology (ex. COPD) • Hypertension (ex. Screenings) • Health Promotion • Men (Urology) • Women (multi-disciplinary)

  21. Governance InstituteShift from FFS to PFV“They’re at the gates & they’re ….” • Oklahoma slower to adopt • Public payers (including Sooner-care) • Insurances • Pilots/demonstration projects • Willing partner • Experience counts • “Quiet revolution/the under-ground”

  22. Governance InstituteSigns & Symptoms of PFV“Let’s see what develops…” • Public payers • Medicare VBP • Sooner-care Readmissions • Network development • Physician ACO’s (rumors?) • Product launch w/ provider • St. Francis • St. John • Early adopters • Success • Fail • ACO examples (9 of the pioneers dc’d)

  23. Governance InstituteOptimizing FFS & PFV • Primary care (urgent care, residency) • Health screenings (needs assessment) • Care coordination (transitional care) • Increased competencies (Intensivists) • Centers of excellence (Ortho co-mgmt.) • Bundled payment (ex. OB w/ our MD’s)

  24. Governance InstituteMedicare Reimbursement • Breakeven on Medicare? • YES • Margins slim (~5%)

  25. Governance InstituteCommercial Business @ Medicare Rates • Projected net income FY15 $7m • Reduction in net revenues <$6.2m> • Adjusted margin $0.8m • Again, slim positive margins on Medicare • Ex. IP admit MCR Pmt $8.5k, CO Pmt $13k

  26. Governance InstituteIf Reimbursements Fellto Medicare Rates • Necessitate: • Close Obstetrics • Close Skilled nursing • RIF (non-clinical) and/or wage rollback • Adopt productivity standards of for-profit • Trim capital spending plans

  27. Governance InstituteAccess to Capital • Risks • Days cash • Attract physicians/specialists • Market share • Sustained SHOPP funding • Managed Medicaid • Showing top line growth • Age of plant (money monster) • Keep commercial rates • Government recoupments

  28. Governance InstituteAccess to Capital • Mitigating factors • Conserve cash, borrow/re-cycle responsibly • Recruiting – multi-track • Zero reliance on SHOPP funding • Service line clustering/branding/marketing • Pro-active facility re-investment • Payer rates – “Silence is Golden” • Recoupments – Physician documentation!

  29. Governance InstituteUnder-performing Service Lines • Obstetrics • Space spruce up • Skilled nursing • Consolidate with IRF (i.e. rehab) • Clinics • Separate company • Own performance targets

  30. Looking Ahead SOME QUESTIONS • Copper Top/Downtown Imaging • Ownership/structure • Development partner • Urgent care • Primary care • Go-it-alone versus strategic partners • Cardiology • Specialists - partners

  31. New World • Tension • Current contracts (comfortable shoes) • Stepping out taking risk (pilots) • Marketing (costs not assets) • Place (urgent care – 4 points of compass) • Price (contracts) • Promotion (service line) • Rapid (but silent) change • With partners • Limited resources – highest and best use

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