chc finance: finance 101

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




$1,963,791

$1,898,385

$1,613,452


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!



Gross Patient Service RevenueMinus

Contractual Adjustments




$1,963,791

$1,898,385

$1,613,452


(356,653)

(397,936) (409,435)


1,607,138

1,500,449 1,204,017


Continuing Grants (330) Rental Revenues Miscellaneous Fees (Health Fair Screening,

Occupational Medicine) Pop machine Revenue




$1,963,791

$1,898,385

$1,613,452


(356,653)

(397,936) (409,435)


1,607,138

1,500,449 1,204,017


464,047 452,755 439,698


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




$1,963,791

$1,898,385

$1,613,452


(356,653)

(397,936) (409,435)


1,607,138

1,500,449 1,204,017


464,047 452,755 439,698


2,071,185

1,953,204 1,643,714


2,035,416

1,908,265 1,598,732

Operating Income

Operating Revenue Minus Operating Expenses




$1,963,791

$1,898,385

$1,613,452


(356,653)

(397,936) (409,435)


1,607,138

1,500,449 1,204,017


464,047 452,755 439,698


2,071,185

1,953,204 1,643,714


2,035,416

1,908,265 1,598,732


35,769 44,938 44,983

Non-Operating Revenue

Interest Income Donations One-time Grant Revenues Income from Investments




$1,963,791

$1,898,385

$1,613,452


(356,653)

(397,936) (409,435)


1,607,138

1,500,449 1,204,017


464,047 452,755 439,698


2,071,185

1,953,204 1,643,714


2,035,416

1,908,265 1,598,732


35,769 44,938 44,983


Net Income

All Revenues Minus All Expenses




$1,963,791

$1,898,385

$1,613,452


(356,653)

(397,936) (409,435)


1,607,138

1,500,449 1,204,017


464,047 452,755 439,698


2,071,185

1,953,204 1,643,714


2,035,416

1,908,265 1,598,732


35,769 44,938 44,983


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

Jim Raschke, MBA, FHFMAFinance Director

MidMichigan Health Services989.422.2105

[email protected]

chc finance: finance 101

Economy & Finance