5/30/2017 1 Cost-Modeling for CBO Services for Healthcare Partnership Success Sharon Fusco, M.A., Vice President–Business Services Group, Council on Aging of Southwestern Ohio Part of the Aging and Disability Business Institute Series- a collaboration of n4a and ASA
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Cost-Modeling for CBO Services for Healthcare Partnership Success · 2017-06-07 · Cost-Modeling for CBO Services for Healthcare Partnership Success Sharon Fusco, ... Care Management
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5/30/2017
1
Cost-Modeling for CBO Services for Healthcare
Partnership Success
Sharon Fusco, M.A., Vice President–Business Services Group, Council on Aging of Southwestern
Ohio
Part of the Aging and Disability Business Institute Series- a collaboration of n4a and ASA
5/30/2017
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The “Business Institute”
The mission of the Aging and Disability Business Institute (Business Institute) is to successfully build and strengthen partnerships between community-based organizations (CBOs) and the health care system so older adults and people with disabilities will have access to services and supports that will enable them to live with dignity and independence in their homes and communities as long as possible.
www.aginganddisabilitybusinessinstitute.org
Partners and Funders
Partners:
• National Association of Area Agencies on Aging
• Independent Living Research Utilization/National Center for Aging and Disability
• American Society on Aging
• Partners in Care Foundation
• Elder Services of the Merrimack Valley/Healthy Living Center of Excellence
research about how we conduct our business. Assumptions come from how we define our work and are used in “what if” scenarios.
Examples from our work:
• Caseloads will be 65 clients to 1 care manager.
• We will hire 1 case aid to support 15 care managers.
• We will hire only RNs.
• We will remain in the same facility.
• The volume of clients will increase by 5% annually.
Fixed vs. Variable Costs
• Fixed Cost – does not change as volumes increase.
• Example from our work: rent
• Variable Costs – Rises and falls as volume increases or decreases.
• Example from our work: the number of care managers we hire.
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Direct vs. Indirect Costs
• Direct Cost – Expensed or connected easily to providing the service
• Example from our work:
• Variable: Care Manager Salaries
• Fixed: Care Management Software System
• Indirect Cost – Not easily traced to providing the service
• Example from our work:
• Variable: Cost of providing IT support.
• Fixed: Rent, insurance
Contingency and Margin
• Contingency – Used to cover uncertainty. The more “conservative” (or certain) the model, the less contingency required.
May be added into the cost of item or included as a separate line item.
Margin – A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings.
Using models to Manage your business – concluding remarks
• A tool for making the business case of net benefit to the MCO or hospital client that results from the AAA’s service
• Fee or Price – Cost of Status Quo = Net Benefit to MCO
• Fees Paid by MCO to Receive AAA Service < Value to MCO
• Buy Net Benefit > Make Net Benefit
• What MCO or hospital will pay AAA is constrained by state Medicaid policy and budget decisions, sometimes Medicare
• AAA services delivered must result in financial benefit (profit) to the AAA organization
• A continuum of financial skills to be acquired before risk-based capitation; start with fee-for-service
Concluding wisdom –Wait a minute…
Earlier did you say “profit margin”?
• Yes.
• But we are non-profits, isn’t that illegal?
• No.
• Non-profits that earn revenue put their revenue back into programs and services to provide Better Service to More Clients.
Disclaimer to make the CFO’s happy: There is a bit more to it and there are a fewrules, but as long as they are followed, it’s okay for a nonprofit to bring in more thanit costs them to provide services.
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But wait, there’s more…
• We are nonprofits…
• Why should we be concerned about being “competitive” and having a “market share”?
• Because:
• Aging and disabilities is a hot market!
High and growing demand + low supply = profit potential.
• Others believe they can do it better.
• Others can do it at a lower cost.
• Others can do it and make money at it.
AND…
By Playing to Win…
…WE CAN CONTINUE TO SERVE OUR CLIENTS!
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Questions & Answers: Please Submit Using the “Questions”
Box
Questions about the Aging and Disability Business Institute?