Health Center Board Member Workshop MPCA Finance 101 Jim Raschke, MBA, FHFMA Finance Director MidMichigan Health Services Roscommon County, Michigan
Dec 01, 2014
Health Center Board Member WorkshopMPCA
Finance 101Jim Raschke, MBA, FHFMA
Finance DirectorMidMichigan Health Services
Roscommon County, Michigan
Financial Statements should not be a mystery!
Concepts
Numbers always tell the truth
More Concepts
Finance is a simple mathematical equation
The financial reports are messengers only, nothing more
Everything you do, every decision you make, every efficiency you gain or lose, will eventually impact your finances
Are you kidding me?
Still More Concepts
No number is an islandRelationshipsYou need to spend money to make money in order to spend more money in order to make more money………
Make your financial statements make sense to you
Hey, come back! I’m not done yet!
Even More Concepts
BenchmarkingTo prior period performanceTo industry standardsTo what makes sense to you
Report PreparationFrequency of report preparationShould be first agenda item in Management meetings
Okay, one more!
One More Concept
The Success of Your Clinic Depends on the Success of Your Financial Management
Practice Management Reports
Medical Statistical ReportFor the practiceBy individual providerOn a comparative basis
•Budget•Year to Year•Other practices (MGMA Median)
Clinical Activities ReportsAccounts Receivable ReportsDashboard Indicator Report
Financial Statements
Income StatementsBalance SheetCash Flow StatementCash ProjectionsKey Financial Ratios
Income Statements
Operating RevenueOperating ExpensesOperating IncomeNon-Operating RevenueTotal Income
Comparisons•Budget•Prior Year•12 Month Trend
Income StatementYear to Date
Actual Budget Prior Year
Gross Patient Service Revenue
$1,963,791
$1,898,385
$1,613,452
Provision for Adjustments
(356,653)
(397,936) (409,435)
Net Patient Service Revenue
1,607,138
1,500,449 1,204,017
Other Operating Revenue
464,047 452,755 439,698
Total Operating Revenue
2,071,185
1,953,204 1,643,714
Total Operating Expenses
2,035,416
1,908,265 1,598,732
Total Operating Income
35,769 44,938 44,983
Non-Operating Income 8,172 3,976 (1,407)
Total Income $43,941 $48,914 $43,576
Operating Margin 1.7% 2.3% 2.7%
Total Margin 2.1% 2.5% 2.7%
Operating Revenue #1
Gross Patient Service RevenueGross Patient ChargesAncillary Services
LabPharmacyRadiology
Cost Report SettlementsWrap-around payments
Total Gross Patient Service Revenue
Income StatementYear to Date
Actual Budget Prior Year
Gross Patient Service Revenue
$1,963,791
$1,898,385
$1,613,452
Operating Revenue #2
Contractual Adjustments• The difference between what you
charge and what you are allowed by contract to collect
• Defined by agreement• Medicare, Medicaid, other insurance
programs, sliding fee adjustments
Does not include Bad Debt, which is an expense
Payor Mix
It is what it is, the mix of payors!
Operating Revenue #3
Net Patient Service Revenue
Gross Patient Service RevenueMinus
Contractual Adjustments
Income StatementYear to Date
Actual Budget Prior Year
Gross Patient Service Revenue
$1,963,791
$1,898,385
$1,613,452
Provision for Adjustments
(356,653)
(397,936) (409,435)
Net Patient Service Revenue
1,607,138
1,500,449 1,204,017
Other Operating Revenue
Continuing Grants (330) Rental Revenues Miscellaneous Fees (Health Fair Screening,
Occupational Medicine) Pop machine Revenue
Income StatementYear to Date
Actual Budget Prior Year
Gross Patient Service Revenue
$1,963,791
$1,898,385
$1,613,452
Provision for Adjustments
(356,653)
(397,936) (409,435)
Net Patient Service Revenue
1,607,138
1,500,449 1,204,017
Other Operating Revenue
464,047 452,755 439,698
Total Operating Revenue
2,071,185
1,953,204 1,643,714
Operating Expenses
Personnel• Salaries & Wages• Benefits
Supplies Contract Services Utilities Administration Bad Debt Expense Depreciation Interest
Income StatementYear to Date
Actual Budget Prior Year
Gross Patient Service Revenue
$1,963,791
$1,898,385
$1,613,452
Provision for Adjustments
(356,653)
(397,936) (409,435)
Net Patient Service Revenue
1,607,138
1,500,449 1,204,017
Other Operating Revenue
464,047 452,755 439,698
Total Operating Revenue
2,071,185
1,953,204 1,643,714
Total Operating Expenses
2,035,416
1,908,265 1,598,732
Operating Income
Operating Revenue Minus Operating Expenses
Income StatementYear to Date
Actual Budget Prior Year
Gross Patient Service Revenue
$1,963,791
$1,898,385
$1,613,452
Provision for Adjustments
(356,653)
(397,936) (409,435)
Net Patient Service Revenue
1,607,138
1,500,449 1,204,017
Other Operating Revenue
464,047 452,755 439,698
Total Operating Revenue
2,071,185
1,953,204 1,643,714
Total Operating Expenses
2,035,416
1,908,265 1,598,732
Total Operating Income
35,769 44,938 44,983
Non-Operating Revenue
Interest Income Donations One-time Grant Revenues Income from Investments
Income StatementYear to Date
Actual Budget Prior Year
Gross Patient Service Revenue
$1,963,791
$1,898,385
$1,613,452
Provision for Adjustments
(356,653)
(397,936) (409,435)
Net Patient Service Revenue
1,607,138
1,500,449 1,204,017
Other Operating Revenue
464,047 452,755 439,698
Total Operating Revenue
2,071,185
1,953,204 1,643,714
Total Operating Expenses
2,035,416
1,908,265 1,598,732
Total Operating Income
35,769 44,938 44,983
Non-Operating Income 8,172 3,976 (1,407)
Net Income
All Revenues Minus All Expenses
Income StatementYear to Date
Actual Budget Prior Year
Gross Patient Service Revenue
$1,963,791
$1,898,385
$1,613,452
Provision for Adjustments
(356,653)
(397,936) (409,435)
Net Patient Service Revenue
1,607,138
1,500,449 1,204,017
Other Operating Revenue
464,047 452,755 439,698
Total Operating Revenue
2,071,185
1,953,204 1,643,714
Total Operating Expenses
2,035,416
1,908,265 1,598,732
Total Operating Income
35,769 44,938 44,983
Non-Operating Income 8,172 3,976 (1,407)
Total Income $43,941 $48,914 $43,576
Operating Margin 1.7% 2.3% 2.7%
Total Margin 2.1% 2.5% 2.7%
Balance Sheet
Assets•Current Assets•Property and Equipment•Other
Liabilities and Fund Balance•Current Liabilities•Long-Term Liabilities•Fund Balance (Net Assets)
Balance SheetJune, 2006 May, 2006 December, 2005
Assets
Cash $697,065 $765,073 $749,766
Net Accounts Receivable 196,960 203,147 184,154
Other Current Assets 407,083 452,382 474,797
Total Current Assets 1,301,109 1,420,603 1,408,717
Net Property & Equipment
2,914,251 2,851,830 2,872,338
Other Assets 9,151 9,389 10,579
Total Assets $4,224,511 $4,281,821 $4,291,634
Liabilities and Net Assets
Current Liabilities $669,939 $741,581 $710,766
Other Liabilities 1,293,945 1,312,846 1,405,929
Total Liabilities 1,963,884 2,054,428 2,116,695
Net Assets 2,260,627 2,227,394 2,174,939
Total Liabilities and Net Assets
$4,224,511 $4,281,821 $4,291,634
Cash Flow Statement
Impact of Current OperationsProperty and EquipmentFinancing Activity
Cash Flow Projections
Beginning cash balanceImpact of current and projected OperationsAdd back non-cash items - depreciationSubtract projected capital outlays and payments on principalTwelve months
Ready for more?
The Numbers
Gross Collection PercentageNet Collection PercentageDays in A/RA/R in Excess of 90 Days OldClinical EncountersThis year better than last year?
Gross Collection Percentage
Gross Patient Service Revenue (GPSR)Patient ChargesCapitation PaymentsCost Report SettlementsAncillary Services
Contractual Adjustments (CA)Third Part AdjustmentsSliding Fee Adjustments
GPSR minus CA = Net Patient Service Revenue
Net Collection Percentage
All cash collected divided by all collectible charges (Net Patient Service Revenue)
Does not include impact of Bad DebtShould be 85% or higher for FQHCs
Days in Accounts Receivable
(Gross Pt A/R /Gross Pt Revenue) * 365
Should be below 40.0 Days(Net Pt A/R / Net Pt Revenue) * 365
Should be below 20.0 Days
Accounts Receivable > 90 days
Accounts Receivable over 90 days divided by total Accounts Receivable
Should be less than 20% of total
Clinical Encounters
By total clinicBy providerCurrent period and year-to-dateTrendsBy CPT codes
Measuring your progress!
This Year Better Than Last Year
Compare all categories to prior year performanceLooks at current period as well as year-to-dateAlways, always, always look at twelve month trends
Five Key Things to Watch
Number of Encounters
Operating Income (or Loss)
Accounts Receivable Measures (days in AR, gross and net, payor mix, denial rates)
Cash (days cash on hand, daily collections)
FTEs, particularly FTEs per encounter