Revenue Forecasting Nov. 9, 2006 UCSF Budget Work Group Revenue Forecasting Nov. 9, 2006

Medical Group Revenue Budgeting The general steps performed annually by the Medical Group are: Estimate the current year revenue (to complete the year). Estimate the contractual rate changes (Govt & Non-Govt). Apply the rate changes to year end revenue.

What We Do Not Do At the Med Group We do not estimate volume. We do not look at physician backstops. We do not incorporate mid year/ partial year changes. We do not budget revenue lower than the PSA department level.

FY05 & FY06 Revenue Trends The Graph above demonstrates the monthly payment trend. The fourth quarter has traditionally been the strongest of the year.

Estimating Current Year Revenue Typically, there are 3 ways of doing this: Annualize current year revenue. Does not account for 4th quarter activity. We begin our process with only 6 mos of data. Use 12 month rolling revenue trend. Doesn’t account for revenue changes from last year. Forecast using regression modeling. Difficult to implement. The first six months won’t predict the 4th qtr increase.

Estimating Contractual Rate Changes We receive lists of negotiated rate changes and effective dates. We determine the relative size of the plan. A small plan with a large rate increase will not effect the overall revenue stream significantly. Medicare rate schedule changes also impact commercial plans. SMS Rate increases are also considered.

Departmental Responsibilities Revenue is given back to the departments as “Baseline Revenue”. It has been the responsibility of the department to adjust the revenue projection for volume changes. “It does not include any accommodation for volume changes stemming from growth, physician productivity or physician departures”.