predicting monthly cash with confidence and accuracy

Predicting Monthly Cash with Confidence and

Accuracy

Steve Markesich, CPAMYale New-Haven HealthMaryland, AI - 2012

The History

BackgroundHospital OnlyThe challengeThe evolutionTrial and errorSuccess

The “Model”

There is no “model” – one model doesn’t work (at least not for me - I use 5)

Why more is better Works across all hospitals within system 2-3 year process to get to this point

The Factors or Variables

Gross Revenue• Net would be better if you didn’t have to wait

Cash (historical) Posting days Days of the week Current average daily census “Hiccups” Seasonality

Revenue cashCalendar days historical

Revenue/cashHistorical posting days

6 month cash byday of week (mean)

Coming up with thenumber

THE FORECAST RECIPE:• 3 month calendar projection: $24,795,672• 2 month calendar projection: $24,284,585• 3 month posting projection: $25,763,757• 2 month posting projection: $25,126,436• 6 month daily mean projection: $23,112,500• AVERAGE: $24,616,590

• Month Projection: $24M - $25M

Tracking progress

6 month cash byday of week (mean)

The results for our organization THE RESULTS THIS FISCAL YEAR

Hospital A (1,000 beds) - accurate within 1% Hospital B (350 beds) - accurate within 2% Hospital C (200 beds) - accurate within 1%

OVERALL ACCURACY WITHIN 1%

Current routine Offer forecast on the first or second

business day of the month Track cash and trends daily Update trends five business days prior to

month end. Communicate problems you know will

impact cash as early as you identify them (but don’t be “Chicken Little”)

Previous month issues

What I track dailyPrevious day’s

• Census• Gross Revenue• Payments• A/R

• In-House•Minimum Hold•Candidate for Billing•Active

Flies in the ointment

Computer conversions (don’t even bother) System issues (internal and external)

• Need to identify and report within the month

External fiscal year ends The finance department Census Price increases/new programs

Suggestions to start off Do this on your own for a while and don’t

tell anyone until you get a comfort level Be slightly conservative in your

forecasting at first and update later in month with good news

Over time, trust your instincts Be an expert on historical trends within

your organization

Final thoughts Develop your own process and routine Have confidence in your projections or

don’t offer any Be bold when the time is right Be careful about putting your operational

managers under the gun Keep tuned into everything that goes on

in your shop

GOOD LUCK! Now for a brief update on Healthcare

Reform…………………….

June 28, 2012 In what was a surprise to many based on the

analysis following March’s oral arguments, the Supreme Court upheld the constitutionality of the individual mandate by a 5-4 vote.

SCOTUS decision, cont. The one significant change to the law under

the ruling concerns states that do not expand their Medicaid programs.

Under the law as originally written, states would not be eligible for federal funds to help underwrite the expansion AND all funding received for their current programs.

SCOTUS ruled that states could not lose current funding if they don’t expand Medicaid.

So now what? States still need to decide if they will set up the

required insurance exchanges or whether they will have the feds do it for them

States still need to decide if they will except federal money for Medicaid expansion.

Is the IRS capable of policing the healthcare decisions millions will make while also collecting the taxes needed to run the federal government?

Now what?, cont Employers still have the option of offering or

dropping coverage. The law does push large employers to provide coverage and provide tax credits to small employers, but nobody can predict what happens to coverage as the insurance market adapts.

The act mostly extends a flawed system to more people

In many ways this is only the first step in the reform process, hopefully providing a step in the right direction that ultimately evolves into something better.

Is the fight to overturn the law over? What can the 2012 elections potentially

do? What is the risk of focusing on opposing

the law during the campaign? What in all likelihood is going to happen

in 2013 and beyond

Conclusion What do we do to prepare?