I. Identifying Costs in the RHC

Report
Iowa Association of Rural Health Clinics
Benchmark Reporting for Improved Performance
October 1, 2014
2:45 p.m. – 3:30 p.m.
Jeff Date
Bramschreiber,
or subtitle CPA, Partner
Wipfli Health Care Practice
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Summary
With reimbursement rates under health care reform stagnant
(at best!), successful cost management is essential toward
achieving sustainability as a health care organization.
Many organizations, including physician practices and rural
health clinics, have historically focused attention largely on
increased volumes and revenue enhancement opportunities.
No longer can health care organizations avoid managing
costs to remain profitable and viable.
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RHC Cost Management and Benchmarking
Presentation Overview
I. Identifying Costs in the RHC
II. Cost Management Techniques
III. Making Cost Comparisons
IV. RHC Benchmark Report
V. Summary
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I. Identifying Costs in the RHC
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Identifying Costs in the RHC
Why focus on cost management in the RHC?
• Less than 50% of RHC patients are likely reimbursed
using a cost-based approach. (Wipfli benchmark data shows
RHCs average close to 25% traditional Medicare patient mix.)
• Many commercial insurance plans reimburse at rates well
below cost.
• The average charge per RHC visit is usually less than
cost. (Who would pay more?)
• Cost analysis and cost reduction strategies have not been
widely used in RHCs.
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Identifying Costs in the RHC
Total costs represent all expenditures incurred by the clinic.
RHC costs represent only those expenditures related to
RHC services. RHC costs exclude laboratory, imaging,
hospital inpatient, and other non-RHC services.
Total costs are used to manage clinic profitability.
RHC costs are used to determine Medicare/Medicaid
reimbursement.
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Identifying Costs in the RHC
Total costs in the RHC are expenditures incurred by the clinic
in connection with the provision of health care services
delivered to patients. Examples include the cost of staff,
providers, supplies, occupancy, and professional fees.
Total costs may be reported on clinic financial statements
(independent practices) or departmental summary reports
(hospitals).
Costs may be directly incurred by the clinic (e.g., nurse
salaries) or indirectly allocated from an owner/hospital (e.g.,
administrative costs).
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Identifying Costs in the RHC
ABC Clinic
Summarized Income Statement
Total Income
Overhead expenses:
Staff wages
Benefits
Rent & utilities
Supplies
Insurance
Advertising
Other administration
Total Overhead
$ 1,500,000 100%
Provider salary & benefits
Total Expenses
Net Income (Loss)
600,000 40%
1,505,000 100%
$
(5,000)
0%
375,000
100,000
120,000
75,000
55,000
5,000
175,000
905,000
25%
7%
8%
5%
4%
0%
12%
60%
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Identifying Costs in the RHC
ABC Clinic
Summarized Expenses
Staff wages
Benefits
25%
40%
Rent & utilities
7%
11%
5%
8%
Supplies
Insurance
Advertising
Other administration
0% 4%
Provider salary & benefits
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Identifying Costs in the RHC
Improving Cost Data
(Before)
Staff Wages:
Wages
375,000
(After)
Staff Wages:
Wages - Administrative
Wages - Maint./Housekeeping
Wages - Nursing
Wages - Lab
Wages - Radiology
Total Staff Wages
125,000
15,000
170,000
45,000
20,000
375,000
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Identifying Costs in the RHC
Improving Cost Data
(After)
Provider Salary & Benefits:
Physician Salary
Physician Benefits
Physician Assistant - Salary
Physician Assistant - Benefits
Nurse Practitioner - Salary
Nurse Practitioner - Benefits
Total Provider Salary & Benefits
420,000
50,000
45,000
7,000
70,000
8,000
600,000
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II. Cost Management Techniques
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Cost Management Techniques
1. Know your costs –
•
Obtain/analyze clinic cost information on a regular
(monthly or quarterly) basis.
•
Understand what costs may/may not be included in the
cost data (e.g., are occupancy costs included, such as
rent, utilities, and/or depreciation?).
•
Have sufficient cost detail to enable analysis (e.g., split
staff wages from providers; split nursing wages from
administration).
•
Separate overhead from provider costs.
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Cost Management Techniques
2. Focus more on large/controllable cost items –
•
Practice overhead costs are usually 60% - 70% of net
revenue in a primary care practice.
•
Staff costs are usually 40% – 50% of overhead costs in
a primary care practice; largest single overhead cost in
most practices.
•
Track staff full-time equivalents (FTEs) by functional
area (nursing, reception, lab, imaging, billing,
administration).
•
Track staff overtime hours and cost.
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Cost Management Techniques
2. Focus more on large/controllable cost items (cont.)
•
Provider costs are usually 40% - 50% of net revenue in
a primary care practice.
•
Compare provider costs and related productivity using
external benchmarks that reflect provider type
(physician vs. NP vs. PA), FTE status, specialty, and
geographic area.
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Cost Management Techniques
3. Compare to cost benchmarks –
•
Practice overhead ratio (e.g., overhead is 60% - 70% of
net revenue in a primary care practice).
•
Staffing FTEs (e.g., 4.0 – 5.0 support staff FTEs per
physician may be reasonable).
•
Provider compensation and productivity.
•
Internal comparisons to prior year and budget data is
extremely valuable.
•
Use RHC cost report data for comparison.
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Cost Management Techniques
Staffing Example
ABC MEDICAL CLINIC
FY2013 RHC Encounters
FTE Physicians
FTE Midlevels
Front desk/scheduling
Billing
Medical records/transcription
Registered nurse
Licensed practical nurse
Medical assistant
Clinic manager/coordinator
Totals
16,556
3.00
2.65
Projected
FY2014
FTEs
6.2
4.5
3.0
1.5
4.7
2.7
0.5
Projected
Per FTE
Provider
1.1
0.8
0.5
0.3
0.8
0.5
0.1
23.2
4.1
MGMA
Mean
0.9
0.5
0.7
0.3
0.6
0.8
0.2
3.8
Variance
Per FTE
Provider
0.2
0.4
(0.1)
(0.0)
0.2
(0.3)
(0.1)
0.3
MGMA
Mean
Clinic
4.9
2.5
3.7
1.5
3.3
4.2
1.0
Variance
Per
Clinic
1.3
2.0
(0.7)
(0.1)
1.4
(1.5)
(0.5)
21.2
1.9
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Cost Management Techniques
Other Staffing Information (from NARHC list serve):
“Over the years when we had a steady 2 providers per clinic, I learned that it takes 1.3
nurses per provider. The .3 is to cover referrals, triage calls, and the increasing burden of
pre-auths, getting meds for patients w/o funds, etc.”
“We have an average of 4 practitioners seeing patients on a daily basis, with about
1100 to 1200 patients per month in the one clinic. We run about 1.2 – 1.3 clinical staff
per provider. I anticipate this will decrease to closer to 1 per provider as we shift roles
and re-classify job duties.”
“Our CAH Provider Based RHC uses 1 MA per provider working each day. Most days I
have an LVN in the back office to replace one of the MAs, so that she can administer
medications. (If not, the RNs must give all meds.) We have an RN working who does all
phone advice, patient education, complex wound care management, med prior auths, and
fills prescriptions. The RN also does both phone and in person triage. Additionally, we use
a case manager who manages all of the referrals and (non-medication) prior auths. She
also does patient satisfaction surveys and a variety of other tasks.”
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Cost Management Techniques
Other Staffing Information (from NARHC list serve):
“A particularly effective model I have found is to implement a team approach – 1 MA to
each provider, with a LPN for each 2 providers/medical assistants. The LPN can handle
more complicated things, and can float between two providers to give support as
necessary.”
“At our main site, we have one MD, 2 APNPs, 2 clinical RNs, 2 CMAs. Last year, the
three providers billed for 7900 encounters. Each provider has ½ day walk-in clinic
and ½ day administration per week. The pace is steady, but not rushed. It seems to
work well for us.”
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Cost Management Techniques
Physician Example
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III. Making Cost Comparisons
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Making Cost Comparisons
Successful cost management requires an understanding of
how your costs may differ from your peers or yourself over
time.
Cost comparisons using external benchmarks (surveys and
other reports) can be helpful to identify cost variances in your
organization.
 Medical
Group Management Association compiles the
annual Cost Survey (www.mgma.org).
 Medicare
RHC cost reports are public information that can be
used to develop benchmarks specific to these providers.
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Making Cost Comparisons
MGMA Reported Overhead Percentages (median)
Multispecialty
Anesthesiology
Cardiology
Family Medicine
Oncology
Internal Medicine
Neurology
2008
2012
63%
12%
51%
67%
82%
86%
61%
64%
10%
62%
78%
83%
77%
72%
OB/GYN
ENT
Pediatrics
Radiology
General Surgery
Orthopedic Surgery
Urology
2008
2012
61%
53%
64%
30%
49%
47%
55%
72%
55%
63%
29%
64%
52%
62%
Source: Medical Group Management Association Cost Surveys.
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Making Cost Comparisons
MGMA Reported Overhead Percentages (median)
2008
2009
2010
2011
2012
Family Medicine (All)
467 Groups
67%
69%
67%
71%
78%
Family Medicine (Phys Owned)
20 Groups
60%
61%
59%
58%
61%
Family Medicine (Hosp Owned)
444 Groups
70%
73%
68%
73%
78%
Multi-Specialty (All)
331 Groups
63%
64%
63%
63%
64%
Multi-Specialty (Phys Owned)
114 Groups
60%
60%
60%
58%
58%
Multi-Specialty (Hosp Owned)
200 Groups
72%
72%
73%
72%
74%
Source: Medical Group Management Association Cost Surveys.
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Making Cost Comparisons
MGMA Reported Staffing FTEs and Cost Percentages
Multispecialty
Anesthesiology
Cardiology
Family Practice
Oncology
Internal
Neurology
A
B
C
4.5
0.3
4.3
4.0
4.3
3.4
2.5
3.5
0.2
3.3
3.1
*
2.9
2.4
30%
5%
29%
35%
16%
35%
28%
OB/GYN
ENT
Pediatrics
Radiology
General Surgery
Orthopedic Surgery
Urology
A
B
3.7
3.8
3.6
1.4
2.4
4.5
4.3
2.9
2.5
3.2
1.4
2.0
2.8
3.5
C
30%
25%
26%
13%
24%
23%
26%
(A) = Total median support staff per FTE physician
(B) = Total median support staff per FTE provider
(C) = Support staff salaries and benefits as a % of total medical revenue
Source: 2013 Medical Group Management Association Cost Survey.
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RHC Benchmark Report ©
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Source of Comparative RHC Cost Data
Cost Reports
HCRIS Data Request Disclaimer:
The Centers for Medicare & Medicaid Services (CMS) has made a reasonable effort to
ensure that the provided data/records/reports are up-to-date, accurate, complete, and
comprehensive at the time of disclosure. This information reflects data as reported to
the Healthcare Cost Report Information System (HCRIS) by Medicare Administrative
Contractors. These reports are a true and accurate representation of the data on file at
CMS. Authenticated information is only accurate as of the point in time of validation
and verification. CMS is not responsible for data that is misrepresented, misinterpreted
or altered in any way. Derived conclusions and analysis generated from this data are
not to be considered attributable to CMS or HCRIS.
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-forOrder/CostReports/index.html
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Organization of Comparative RHC Cost Data
HospitalBased RHCs
Independent
RHCs
2010 Audited
(519*)
2010 Audited
(1,389*)
2011
Filed/Audited
(930*)
2011
Filed/Audited
(1,360*)
2012 Filed
(944*)
2012 Filed
(1,083*)
* Reporting entities may represent multiple
RHCs due to consolidated cost reporting.
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Making Productivity Comparisons
Sample RHC Cost Report Comparisons
Independent RHCs
2012
2012
Midwest
National
Encounters per FTE:
Physicians
Physician assistants
Nurse practitioners
Clinical Psychologist/Social Worker
4,388
3,243
3,151
904
4,677
3,594
3,340
1,459
Prov.-Based RHCs
2012
2012
Midwest
National
3,729
2,876
2,656
1,023
4,085
3,215
2,939
1,842
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Making Cost Comparisons
Sample RHC Cost Report Comparisons
Independent RHCs
2012
2012
Midwest
National
Health Care Staffing (Cost/Encounter)
Physicians
Physician assistants
Nurse practitioners
Health care staff
Physician services under agreement
Health Care Staffing (Cost/Provider FTE)
Physicians
Physician assistants
Nurse practitioners
Health care staff
Prov-Based RHCs
2012
2012
Midwest
National
$55.73
$35.05
$34.37
$15.77
$69.08
$51.70
$32.18
$31.83
$12.49
$54.66
$75.26
$38.97
$37.31
$24.99
$242.00
$62.00
$39.24
$35.97
$12.49
$259.01
$244,540
$113,638
$108,307
$60,265
$241,760
$115,671
$106,327
$51,654
$280,644
$112,063
$99,090
$83,747
$253,252
$126,164
$105,711
$81,552
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Making Cost Comparisons
Sample RHC Cost Report Comparisons (continued)
Independent RHCs
2012
2012
Midwest
National
Costs Per Encounter:
Total Direct Cost of Medical Services
$73.11
$65.88
Facility Cost
$10.47
$9.51
Total Overhead Cost
$54.96
$48.73
Total Allowable Cost per Actual Encounter
$137.30
Total Allowable Cost per Adjusted Encounter
Prov-Based RHCs
2012
2012
Midwest
National
$104.31
$91.16
$117.59
$183.87
$165.07
$121.36
$106.92
$170.99
$156.74
$139.10
$126.73
$118.38
$152.81
Cost per influenza injection
$36.03
$39.37
$44.01
$51.71
Medicare Percent of Visits
27.7%
26.7%
21.6%
25.1%
Cost per pneumococcal injection
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Cost Management Summary – Again!
With reimbursement rates under health care reform stagnant
(at best!), successful cost management is essential toward
achieving sustainability as a health care organization.
Many organizations, including physician practices and rural
health clinics, have historically focused attention largely on
increased volumes and revenue enhancement opportunities.
No longer can health care organizations avoid managing
costs to remain profitable and viable.
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Questions
?
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Contacts if you have questions
Jeff Bramschreiber, CPA
Partner, Health Care Practice
Wipfli LLP
469 Security Blvd.
Green Bay, WI 54313
920.662.2822
[email protected]
Jeff Johnson, CPA
Partner, Health Care Practice
Wipfli LLP
12 East Rowan Avenue, Suite 2
Spokane, WA 99207
Office: 509.489.4524
Direct line: 952.548.3367
[email protected]
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www.wipfli.com
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