CBISA™ Financial Defaults and the IRS 990 Schedule H A resource for Finance For any CBISATM questions, contact Customer Support: (419)-885-4593 or support@lyonsoftware.com Use “enter” on your keyboard, or click your left mouse button to move through the screens

Planning for Community Benefit The information provided in this presentation does not constitute legal or tax advice. The material is provided for informational/educational purposes only.

Planning for Community Benefit How does Finance help in the planning for Community Benefit? Review/explain the financial assistance policy Establish standardized methods and policies Develop average rates for salaries and indirect costs Advise and provide oversight and support (what counts and how to count it) ©Lyon Software 2014

Planning for Community Benefit Review/explain the financial assistance policy Community benefit professionals and reporters need to understand the financial assistance policy. Who will be reporting on the program? Finance (if the program is part of the financial assistance program, i.e., charity care) or the community benefit team? ©Lyon Software 2014

Planning for Community Benefit Establish standardized methods and policies When policies and procedures are in place, the job of collecting, reporting and tracking community benefit becomes much more efficient. Finance can help set some standardized practices and policies. ©Lyon Software 2014

Planning for Community Benefit Develop average rates for salaries and indirect costs CBISA uses average salary rates for departments and up to four (4) group rates plus indirect cost percentages for programs that take place in the hospital (or facility) and those that take place in the community. ©Lyon Software 2014

Planning for Community Benefit Advise and provide oversight and support (what counts and how to count it) Community benefit programs or activities provide treatment and/or promote health and healing as a response to identified community needs. ©Lyon Software 2014

Planning for Community Benefit For a program to “count”: It must address a documented community need, and It must have at least one of these community benefit objectives: Improve access to health care services Enhance health of the community Advance medical or health care knowledge Relieve/reduce the burden of government/other community efforts to improve health Source: Catholic Health Association Guide for Planning & Reporting Community Benefit 2012 Edition

Planning for Community Benefit A program does not count as community benefit, if: The program is primarily for marketing purposes The program or donation is unrelated to health or the hospital’s mission An objective “prudent layperson” would question whether the program truly benefits the community (the program benefits, or appears to benefit, the organization more than the community) The program represents a community benefit provided by another entity or individual Access to the program is restricted to employees or physicians affiliated with the hospital The activity represents a normal “cost of doing business” or is associated with the current standard of care Source: Catholic Health Association Guide for Planning & Reporting Community Benefit 2012 Edition

Other Means-Tested Government Programs Planning for Community Benefit Financial Assistance, at cost Community Health Improvement Health Professions Education Subsidized Health Services Research Financial & In-kind Contributions Community Building Activities Community Benefit Operations Medicaid Other Means-Tested Government Programs Categories A-G ©Lyon Software 2014

Other Means-Tested Government Programs Planning for Community Benefit Financial Assistance, at cost Subsidized Health Services Finance specifically provides the numbers (persons served, expenses and offsetting revenue) for Financial Assistance, Medicaid and Other Means-Tested Programs. Also, because those three costs may also be included in Subsidized Health Services (Category C), Finance must remove any double counting entries and determine whether the service is still subsidized. Medicaid Other Means-Tested Government Programs Categories A-G ©Lyon Software 2014

Financial Defaults The information provided in this presentation does not constitute legal or tax advice. The material is provided for informational/educational purposes only.

Financial Defaults: Fiscal Year Select the active fiscal year from the dropdown list Enter in the applicable fiscal year starting and ending dates on the Reporting Unit/Financial information page Hint: To access the Reporting Unit/Financial page, choose Options/Org Defaults. Highlight the reporting unit, and click on “Edit” ©Lyon Software 2014

Financial Defaults: Expenses, Revenues & Indirect %’s Enter total functional expenses (for IRS 990H reporting), operating expenses and revenues, and indirect cost method percentages Hint: The amounts entered at the beginning of the year will be estimates. You will want to update the dollar amounts with final audited numbers prior to running your community benefit reports and 990H reports. ©Lyon Software 2014

Financial Defaults: Indirect Method After entering the indirect cost method percentages: 1. The Administrator/Coordinator will set the default method at the Program level ©Lyon Software 2014

Financial Defaults: Indirect Method 2. Select the applicable method of calculation for each occurrence Hint: The Occurrence indirect cost will default to the method chosen on the Program/General screen, but may be changed, as needed. ©Lyon Software 2014

Financial Defaults: Salary Defaults/Group Rates Enter the salary defaults Reporting Unit-wide average fringe benefit percent. Applied to all Occurrences that are added AFTER the percent is entered and the form is saved. Use Fringe % tool to apply Fringe Percent for a specific date range Defined in Custom Terms Reporting Unit-wide average hourly pay rate. Used on Occurrences when department is left at “none apply” ©Lyon Software 2014

Financial Defaults: Fringe Percent Enter the appropriate date range, the Fringe percent, then apply. CBISA will let you know how many records were updated. Hint: If you enter occurrences into a fiscal year BEFORE you set the Fringe percent default, you will want to use this tool to update those records. Occurrences entered AFTER the default is set will automatically use the correct Fringe percent entered on the Reporting Unit Financial page. ©Lyon Software 2014

Financial Defaults: Salary Defaults/Group Rates Define up to four standard salary group rates Hint: To access Custom Terms, choose Options/Edit Defaults. Open Custom Terms by clicking on the tab. Highlight each Average Hourly Pay Rate term, click “Edit,” enter in a “substitution” (named standard group) and “Save”. Administrators/Coordinators have access to Edit Defaults. ©Lyon Software 2014

Financial Defaults: Salary Defaults/Dept. Rates Update the average rate for each department Hint: You may highlight multiple departments at one time (use the “control key” or “shift key”) and update the rate information for each department that has the same average rate. Finance users may only update rates. ©Lyon Software 2014

Financial Defaults: Salary Defaults/Dept. Rates Hint: At the beginning of a new fiscal year, you may choose to “bring forward” the average salary rates from the previous year. You may bring forward one, more than one, or all rates by using the multi-select option (control key or shift key). ©Lyon Software 2014

IRS 990 Schedule H Part I The information provided in this presentation does not constitute legal or tax advice. The material is provided for informational/educational purposes only.

IRS 990H Who Must File? “An organization that answered “Yes” on Form 990, Part IV, line 20a must complete and attach Schedule H to Form 990.” Source: 2013 Instructions for Schedule H (Form 990) Instructions, Hospitals

IRS 990H Part I Financial Assistance Questions Source: 2013 Schedule H (Form 990) Hospitals

CBISA Screen: IRS Questions/Part I 1a-6b Choose “Add” to activate the question page To answer the questions on Part I of the IRS 990H (lines 1a-6b), access the Financial Services Module and choose IRS 990 Questions, Part I tab ©Lyon Software 2014

IRS 990H Part I #7 Table of Quantifiable Community Benefit Report on the Table (lines 7a-7k) at cost, the organization’s financial assistance and certain other community benefits. Use the organization’s most accurate costing methodology (cost account system, cost-to-charge ratio, or other) to calculate the amounts reported on the table. Source: 2013 Instructions for Schedule H (Form 990) Instructions, Hospitals CBISA™ gives you the systematic methodology to collect and complete the data for lines 7a-7k in: Financial Services Module (lines 7a-7c) Programs Module with Occurrences (lines 7e-7i) ©Lyon Software 2014

IRS 990H Part I #7 Table of Quantifiable Community Benefit Columns (a) “Number of activities or programs” and (b) “Persons served” are optional Column (c) “Total community benefit expense” means the total gross expense of the activity incurred during the year… includes both direct costs and indirect costs. Column (d) “Direct offsetting revenue” means revenue from the activity during the year that offsets the total community benefit expense of that activity... includes any revenue generated by the activity or program…also includes restricted grants or contributions that the organization uses to provide a community benefit, such as a restricted grant to provide financial assistance or fund research. Source: 2013 Instructions for Schedule H (Form 990) Instructions, Hospitals

IRS 990H Part I #7 Table of Quantifiable Community Benefit Column (e) “Net community benefit expense” is Total community benefit expense” (column c) minus “Direct offsetting revenue” (column d). If the calculated amount is less than zero, report such amounts as a negative number. Column (f) “percent of total expense” is based on column (e) “net community benefit expense,” rather than column (c) “total community benefit expense.” Source: 2013 Instructions for Schedule H (Form 990) Instructions, Hospitals

IRS 990H Part I #7 Table of Quantifiable Community Benefit Financial Services Programs/Occurrences Source: 2013 Schedule H (Form 990) Hospitals

CBISA Screen: Ratio of Patient Costs to Charges Choose “Add” to activate the date entry page To calculate a ratio of patient care costs to charges, access the Financial Services Module and choose Ratios screen ©Lyon Software 2014

CBISA Screen: Financial Assistance, at Cost 1. Click “Add” 2. Enter Data 3. Click “Save” ©Lyon Software 2014

CBISA Screen: Medicaid, Net Costs 1. Click “Add” 2. Enter Data 3. Click “Save” ©Lyon Software 2014

CBISA Screen: Means Tested Programs, Net Costs 1. Click “Add” 2. Enter Data 3. Click “Save” ©Lyon Software 2014

Enter Qualifying Joint Ventures ©Lyon Software 2014

Persons Served, Expenses, and Offsets Programs and Occurrences Enter Category A & G Programs Data is entered by Coordinators and Reporters Attach Statistical Occurrence forms capturing Persons Served, Expenses, and Offsets ©Lyon Software 2014

Persons Served, Expenses, and Offsets Programs and Occurrences Enter Category B Programs Data is entered by Coordinators and Reporters Attach Statistical Occurrence forms capturing Persons Served, Expenses, and Offsets ©Lyon Software 2014

Programs and Occurrences For category B “Health Profession Education” programs, make any offsetting adjustments on the occurrence screen. Step 1: Choose the Program from the browse box on the control panel Step 2: Open the Occurrence screens by clicking on the link Step 3: Choose the applicable occurrence from the browse box Step 4: Enter any applicable offsets ©Lyon Software 2014

Persons Served, Expenses, and Offsets Programs and Occurrences Enter Category C Programs Data is entered by Coordinators and Reporters Attach Statistical Occurrence forms capturing Persons Served, Expenses, and Offsets ©Lyon Software 2014

Programs and Occurrences For category C “Subsidized Health Services” programs, make any offsetting adjustments on the occurrence screen. Step 1: Choose the Program from the browse box on the control panel Step 2: Open the Occurrence screens by clicking on the link Step 3: Choose the applicable occurrence from the browse box Step 4: Make any necessary edits to avoid “double counting” issues. ©Lyon Software 2014

Persons Served, Expenses, and Offsets Programs and Occurrences Enter Category D Programs Data is entered by Coordinators and Reporters Attach Statistical Occurrence forms capturing Persons Served, Expenses, and Offsets ©Lyon Software 2014

Specific Offset for Category D Programs Programs and Occurrences Specific Offset for Category D Programs ©Lyon Software 2014

Persons Served, Expenses, and Offsets Programs and Occurrences Enter Category E Programs Data is entered by Coordinators and Reporters Attach Statistical Occurrence forms capturing Persons Served, Expenses, and Offsets ©Lyon Software 2014

Enter any benefit received from contribution in “Other” Programs and Occurrences Enter any benefit received from contribution in “Other” ©Lyon Software 2014

CBISA™ Reports & Listings Reports to complete each applicable section of the IRS Form 990 Schedule H and the corresponding supporting worksheet. ©Lyon Software 2014

IRS 990 Schedule H Part II Part III and Part VI The information provided in this presentation does not constitute legal or tax advice. The material is provided for informational/educational purposes only.

IRS 990H Part II: Community Building Activities (F) Programs/Occurrences Source: 2013 Schedule H (Form 990) Hospitals

IRS 990H Part II Community Building Activities “An organization that reports information in this Part must describe, in Part VI how its community building activities promote the health of the communities it serves.” Physical improvements and housing Economic development Community support Environmental improvements Leadership development and training for community members Coalition building Community health improvement advocacy Workforce development Source: 2013 Instructions for Schedule H (Form 990) Instructions, Hospitals

Persons Served, Expenses, and Offsets Programs and Occurrences Enter Category F Programs Data is entered by Coordinators and Reporters Attach Statistical Occurrence forms capturing Persons Served, Expenses, and Offsets ©Lyon Software 2014

IRS 9990H Part III: A, B, and C Source: 2013 Schedule H (Form 990) Hospitals

CBISA Screen: IRS Bad Debt 2. Choose your method 1. “Add” to activate the data entry screen 3. Enter the data and “Save” the record ©Lyon Software 2014

CBISA Screen: IRS Medicare 1. “Add” to activate the data entry screen 2. Enter your data 3. “Save” the record ©Lyon Software 2014

CBISA Screen: IRS Questions for Bad Debt, Medicare, Collection Practices “Add” activates the data entry screen Choose “Yes” or “No” from the dropdown or for question 8, choose the appropriate answer by clicking on the corresponding radio button. ©Lyon Software 2014

IRS 9990H Part VI: Supplemental Questions Source: 2013 Schedule H (Form 990) Hospitals

CBISA Screen: IRS Questions Supplemental Questions “Add” activates the data entry screen Enter text into each free form description box ©Lyon Software 2014

Summary The information provided in this presentation does not constitute legal or tax advice. The material is provided for informational/educational purposes only.

Summary: Numbers of Community Benefit Some basics about the numbers of community benefit Measured on the basis of cost (actual financial, not opportunity) Avoid double-counting Include indirect costs Use the most accurate cost-accounting methods Don’t offset by restricted contributions Use “proportionate share” for qualifying joint ventures ©Lyon Software 2014

Community Benefit Professional Summary: Team Members’ Duties Community Benefit Professional Community Health Improvement Services (Part I, 7e) Research (Part I, 7h) Cash Contributions (Part I, 7i) In-kind Contributions (Part I, 7i) Community Benefit Operations (Part I, 7e) Community Building Activities (Part II) Case for Community Building as Community Benefit (Part VI) ©Lyon Software 2014

Summary: Team Members’ Duties Finance Ratio Patient & Costs to Charges (IRS Worksheet 2) Financial Assistance (Part I, 7a) HFMA Statement 15 Applicability Medicaid (Part I, 7b) Other Means-Tested Public Programs (Part I, 7c) Health Professions Education-costs & offsets (Part I, 7f) Subsidized Health Services-costs & offsets (Part I, 7g) Double Count Adjustments (Part I, 7f, 7g) Bad Debt (Part III, Section A) Medicare (Part III, Section B) ©Lyon Software 2014

Summary: Team Members’ Duties Others Financial Assistance Policy Questions (Part I & Part VI) Financial Assistance Policies & Billing Directives Questions Definition of Community (Part VI) Collection Practices (Part III, Section e) ©Lyon Software 2014

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