Overview

1. Overview Goal Setting

2. Budget • The Importance of BudgetingPreparation of an annual budget and continuous budget monitoring allows management to anticipate and prepare for the effects of change from year to year.

3. Budgeting Methods • There are various approaches to building an operational budget: • Zero-Based Budgets • Top-Down Budgets • Incremental Budgets

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

5. 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

6. 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)

7. Revenue Budget • Patient Revenue • Grants • Contracts

8. Patient Revenue • Gross Revenue • Contractual Adjustment • Net Revenue

9. 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

10. 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

11. 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

12. 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

13. Sample Financial Dashboard

14. Sample Accounts Receivable Report

15. 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.

16. Operational Data • Data collection areas should include the following: • Appointment Scheduling • Patient Flow • Patient Satisfaction • Medical Records • Provider Productivity

17. Appointment Scheduling • Access • Next available appointment • No Shows • Walk-ins • New patients • Specialty referrals

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

19. 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

20. Operational Goals

21. 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

22. 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

23. Reporting Overview cont. • Linking financial and operational reports • Understanding the financial impact of operations • Reading operationally “between the lines” of the financial statement

24. In Summary • Communicate Often • Ensure Accurate Data • Goals are not set in stone • Use the PDSA cycle

25. Questions? Gervean Williams National Association of Community Health Centers