The American Organization of Nurse Executives CONTINUING EDUCATION CERTIFICATE The American Organization of Nurse Executives (AONE) is accredited as a provider of continuing nursing education by the American Nurses Credentialing Center’s Commission on Accreditation. Program: Finance and Business Skills for Nurse Managers Date: August 22, 2017 Place: Omni Severin 40 W. Jackson Place Indianapolis, IN 46225 Provider: American Organization of Nurse Executives (AONE) 155 N. Wacker Drive, Suite 400 Chicago, IL 60606 This is to certify that: __________________________________________(Name of Learner) has attended and completed a continuing professional education program and earned a total of 7.0 Continuing Education Contact Hours. The American Organization of Nurse Executives is accredited as a provider of continuing nursing education by the American Nurses Credentialing Center's Commission on Accreditation. AONE is also a provider of continuing education for the State of California. Provider # CEP15740.
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The American Organization of Nurse Executives ... cert/Finance and...The American Organization of Nurse Executives CONTINUING EDUCATION CERTIFICATE The American Organization of Nurse
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The American Organization of Nurse Executives
CONTINUING EDUCATION CERTIFICATE
The American Organization of Nurse Executives (AONE) is accredited as a provider of continuing nursing education by the American Nurses Credentialing Center’s Commission on Accreditation. Program: Finance and Business Skills for Nurse Managers Date: August 22, 2017 Place: Omni Severin 40 W. Jackson Place Indianapolis, IN 46225
Provider: American Organization of Nurse Executives (AONE)
155 N. Wacker Drive, Suite 400 Chicago, IL 60606
This is to certify that:
__________________________________________(Name of Learner) has attended and completed a continuing professional education program and earned a total of 7.0 Continuing Education Contact Hours. The American Organization of Nurse Executives is accredited as a provider of continuing nursing education by the American Nurses Credentialing Center's Commission on Accreditation. AONE is also a provider of continuing education for the State of California. Provider # CEP15740.
Under Outcomes Based Payment, A Large Number of “Covered Lives” Allows for Decreased Performance Variability and Provides A Sufficient Population to Support Existing Delivery System
Volume Remains an Important FactorValue: Public Payers
Not Surprisingly, the Bundled Payments for Care Improvement (BPCI) Episodes Including the Most Common MS‐DRGs Are the Most Prevalent
Source: CMS Innovation and Health Care Delivery System Reform, Amy Bassano, Director Patient Care Models Group, CMMI, Presentation to HFMA’s BPCI Council, June 22, 2015
Mixed Results for ACOs Continue in 2015• Over 400 Medicare ACOs generated more than $466 million in total program
savings in 2015 with 125 qualifying to share savings.
• The results show that more ACOs are sharing savings in 2015 compared to 2014 and that ACOs with more experience in the Pioneer ACO Model and the Medicare Shared Savings Program tend to perform better over time.
• While the cohort of Pioneer ACOs decreased between PY3 (2014) and PY4, they still generated total model savings of over $37 million.
– Of the eight Pioneer ACOs that generated savings, six generated savings outside a minimum savings rate and earned shared savings.
– Of the four Pioneer ACOs that generated losses, one generated losses outside a minimum loss rate and owed shared losses.
• The mean quality score among Pioneer ACOs increased to 92.26 percent in PY4 from 87.2 percent in PY3. The mean quality score has increased in every year of the model, with a total increase of over 21 percentage points since the first year.
Initial Episodic Programs Still Ramping Up• ACE Demonstration: A three‐year experiment by the CMS, the Acute Care Episode
(ACE) Demonstration, that included 28 cardiac and nine orthopedic procedures led to savings of $319 per patient
• BPCI: For most BPCI models, results are preliminary and unspecified due to minimal timeframes of analysis and small sample sizes. In one model, early comparison group analysis showed lower cost growth during the hospitalization phase, but not during the post‐acute phase.
– In another model, post‐acute spending was lower. Preliminary results from other models showed either no statistical difference in overall spending, or results are unavailable.
– Early analysis found no notable differences in quality between BPCI and non‐BPCI participants across all four BPCI models.
– Three of the four models increased in provider participation since the start of the BPCI program
• CMS will set targets each year on historical regional and hospital‐specific data for inpatient stay and care provided 90 days post‐discharge.
• Beat the target and meet quality metrics to keep savings. Miss target and pay Medicare at end of the year.
• The calculation will shift from relying mostly on hospital‐specific data in the first two years of the program to only regional data in the final two years.
• Risk will be phased in with hospitals held harmless for first 15 months, capped at 5% for remainder of second year, 10% in year three and 20% in years four and five.
• The upside is capped at 5% for first two years and follows same schedule as downside in years three through five.
CMS proposing cancelling major bundled payment initiatives
CMS has proposed canceling the cardiac and expanded joint replacement bundled payment models.
The rule would cancel mandatory bundled payment programs for heart attacks and bypass surgeries, as well as the expansion of the Comprehensive Care for Joint Replacement (CJR) model to include surgical treatment for hip and femur fractures (SHFFT). These are currently slated to take effect Jan. 1, 2018
Physicians would have the opportunity to earn a 5 percent bonus for participating in the cardiac bundles or the expanded CJR model, as the initiatives qualify as Advanced Alternative Payment Models under MACRA’s Quality Payment Program.
Once finalized, the CMS rule would eliminate the bonus opportunity for physicians.
Given the Index Admission Spending Is Fixed, Most Savings Will Come from the Post‐Discharge Period
Source: Maximizing Success in a Bundled Payment Environment, Melinda Hancock, Partner – Healthcare, DHG; Presentation at HFMA’s 2015 Annual National Institute
• Relationships and agreements will need to be established for compliant and efficient operational and financial structures
• Need for infrastructure investments to support operational model necessary for high performance
• All providers involved in episode of care must work together to increase coordination and efficiency
– In addition, areas like finance, revenue cycle, and IT need to understand the challenges facing the clinicians to better support increased efficiency and innovation
“to provide the community with the services it needs, at a clinically acceptable level of quality, at a publicly responsive level of amenity, at the least possible cost”
Income Statement – reports revenues and expenses. Used to measure performance over a specific period. Also known as P&L, Statement of Operations
Balance Sheet – reports assets, liabilities and net assets (net worth) of the organization. Perpetual in nature and reported as of a specific date in time.
Bond/Credit Rating – equivalent of organizations credit score and used to obtain cash via debt offerings to investors. AAA is the highest, most non‐profit healthcare organizations are rated from BBB to AA+, if they have a rating. The better the rating, the lower the interest rate on the debt.
Revenue – proceeds from services rendered or products sold. In healthcare we categorize Patient revenue and other operating revenue separately to tie the activity metrics back to the revenue. Also known as Charges.
Cost – for the healthcare provider this is the price of all goods, services, labor and overhead required to provide care
Expense – financial recognition of resources utilized for overhead or operational purposes.
Budget – financial blueprint resulting from a strategic planning process. Typically prepared and approved once a year and includes anticipated revenues, expenses, cash flow, volumes. The Income Statement, Balance Sheet and Statement of Cash Flows are typically prepared with the budget figures.
FTE (Full Time Equivalent) – calculated by taking the hours worked or paid divided by the full time daily, weekly or monthly total. Example – 36 hour nursing position equates to a .9 FTE or 36/40 = .90.
Flexible or Variable Budget – tool that calculates the volume adjusted budget using an established hours or dollars per statistic. Example – Nursing unit’s volume is 10% over budget, so the hours per patient day X actual patient days = Flexible budgeted hours. This allows for a comparison to your budgeted expenses and hours based on the actual volume that will almost always be different than the budgeted volume.
Statistics – operational and financial metrics, activity indicators, volumes, acuity indicators. Examples include admissions, discharges, Case Mix Index, patient days, CT Scans, Lab Tests, etc.
Outpatient Equivalents – approximated calculation of outpatient activity into comparable inpatient activity or volumes.
Adjusted Admissions – approximated calculation accounting for outpatient activity and/or acuity using a Case Mix Index factor.
Patient Class – category of patient’s billing status. Examples include Inpatient Acute, Outpatient, Observation, Swing Bed, SNF, Inpatient Rehab, Bedded Outpatient, Inpatient Surgical, etc.
Financial Ratios – calculations drawn from financial statements for benchmarking and comparability amongst similar organizations. Example is Debt Service Coverage Ratio which measures an organization’s ability to repay their debt.
• Generally Accepted Accounting Principles (GAAP) guide the uniform accumulation and communication of historical and projected economic data relating to the financial position and operating results of an enterprise. These principles are governed by the Financial Accounting Standards Board (FASB).
• The Financial Accounting Standards Board (FASB) mission is "to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision‐useful information to investors and other users of financial reports.“1
Statement of Operations aka Income Statement aka P&L
• Periodic statement produced to reflect operating performance
• Includes Revenue, Expenses and Income
• Revenue
– Receipts driven by delivery of product or service
• Expense
– Resources used to produce or deliver service. (Note: capital items such as equipment are expensed over a period of years of useful life, called depreciation)
• Net Income(Loss)
– Amount remaining(or not) for the reporting period
This is the consolidation of all activity within the individual department budgets
Gross Patient Service Revenue‐ Deductions From Revenue‐ Charity Care‐ Bad DebtNet Patient Service Revenue+ Other Operating RevenueTotal Operating Revenue‐ Operating ExpensesOperating Income(Loss)+ Non‐Operating Income (i.e., investment income)Excess of Revenue Over Expenses (or Total Income)
• Liquidity‐How well is the organization positioned to meet its short‐term obligations? Can we pay our bills?
• Activity‐ How efficiently is the organization using its assets to produce revenues? Are we busy enough to justify our investments?
• Profitability‐How profitable is the organization? Is our bottom line where it should be?
• Capital structure‐ How are the organization’s assets financed and ability to take on new debt? Can and should we borrow more or use cash to pay for large investments?
• Operating revenue per adjusted discharge: measures total operating revenues generated from the patient care line of business based on its adjusted inpatient discharges
• Operating Expense per Adjusted Discharge: measures total operating expenses incurred for providing its patient care services based on its adjusted inpatient discharges
• Salary and Benefit Expense as a Percentage of Total Operating Expenses: measures the total operating expenses that are attributed to labor costs
• Operating Margins: measures profits earned from the organizations main line of business
• Return on Net Assets: measures the rate of return for each dollar in net assets
• How able is this organization to take on new debt?
• Examine the statement of cash flows to determine if significant long term debt has been acquired or paid off OR if there has been a sale or purchase of fixed assets
A budget is the financial blueprint or action plan for an organization. It translates strategic plans into measurable expenditures and anticipated performance over a certain period of time.
Budgeting is the process of creating and fine-tuning budgets. Budgeting activities include:
• Forecasting future business results, such as patient volume, revenues, capital investments, and expenses
• Reconciling those forecasts to organizational goals and financial constraints
• Obtaining organizational support for the proposed budget
• Managing subsequent business activities to achieve budgeted results113
Process of converting the operating plan into monetary terms.
Budgets become the control standard against which performance ismanaged and measured.
Budget process is an excellent opportunity for the financial manager to educate non‐financial department managers on financial implications.
Budget process is an excellent opportunity for the clinical and operating manager to educate the financial manager on quality and clinical outcomes implications.
• A reasonable profit is necessary to support demand for more and better services, continued investment in advanced technology, medical equipment, and facilities upkeep as well as meeting inflationary pressures.
• In addition, maintaining the credit rating allows for preferred rates and access to capital.
• Any profit is re‐invested in the community via continued operations, access to care for those without financial resources.
The adjustment will be based upon the requirements (targets) set forth by the Board and the Administration in its Strategic Plan and Strategic Financial Plan
Common causes of variances in revenue and expenses
Example: Labor expense over budget by 5%; FTEs on budget
Reason: Staffing mix. Higher level/paid RN’s than budgeted.
Potential solution: Review Labor distribution report to determine which specific job/position codes were over compared to the budget. Use the Labor distribution or productivity reports to obtain detail.
Example: Supply cost over budget, volume on budget
Reason: Supplies issued as ordered, budgeted based on volume. A large order occurred this month to stock up on necessary supplies which were not all used in this period.
Another reason could be that supplies were issued to your department in error.
Potential Solution:
Check the inventory issued product using Inventory distribution report or AP distribution depending on whether supplies were ordered from outside vendor or internal supply room.
• Decreases in reimbursement have created a need for additional financial information
• This information is typically very detailed and is aggregated from the clinical, financial, supply chain and payroll systems
• Each organization utilizes this data differently, though calculating the provider’s cost of a specific service or procedure is a primary component
• Revenue, cost and profitability is often included in decision support information to better understand the financial perspective and implications of certain operations and/or strategies 133
Please calculate: – ADC– The number of FTEs that must be filled in order to provide direct
care 365 days/year– HPPD for this unit– The number of FTEs needed if the staff worked 8 hour shifts – The number of FTEs needed if the staff worked 12 shifts
• Identify other hours that will be necessary to budget in addition to direct care hours.
Calculate productivity standard based on staffing matrix4 RNs and 1 CNA X 12 hours = 60 hours per day shift3 RNs and 1 CNA X 12 hours = 48 hours per night shiftTotal patient care hours in 1 day = 108 hours108/15=7.2 HPPD
Calculate annual hours108 hours X 365 days = 39,420
Calculate productivity standard based on staffing matrix4 RNs and 1 CNA X 8 hours = 40 hours per day shift4 RNs and 1 CNA X 8 hours = 40 hours per evening shift3 RNs and 1 CNA X 8 hours = 32 hours per night shiftTotal patient care hours in 1 day = 112 hours112/15=7.47 HPPD
Calculate annual hours112 hours X 365 days = 40,880
Calculate FTEs• Based on working 8 hour shifts • 40,880/2,080 = 19.65 FTEs70% RN = 13.75 FTEs30% CNA = 5.90 FTEs
• Based on working 12 hour shifts 39,420/2,080 = 18.95 FTEs* 70% RN = 13.27 FTEs30% CNA = 5.68 FTEs
Indirect care hours• Education, council, projects• Vacation, sick (PTO)• Generally accepted replacement factor is 15%• 19.65 X 0.15 = 2.95 18.95 X 0.15 = 2.84• Total FTES needed
• 8 hour shifts = 22.60• 12 hours shifts = 21.79
*12 hour shift employees are .9 FTE, so you’ll need more than 19 in headcount to staff accordingly.