AASA New Administrators Workshop Financial Management & Financial Models October 4, 2015

Page 2 Introduction  Issues to Consider in Financial Management  Stewardship of Department Resources  Models of Financial Reporting  Managing Finances in Research Administration

Page 3 Stewardship of Financial Resources  Willie Sutton Principle: Robs banks because that’s Where the money is

Page 4 Stewardship of Financial Resources  Ronnie Brown Principle: Know where your money is UAB Gift, State & Discretionary Accounts UAB Research Accounts

Page 5 Types/Location of Funds  Practice Plan Funds  Track P & L, Balance Sheet  State Funds Allocation  Allocation Models  Discretionary & Service Center Accounts  Endowment & Gift Accounts  Research Accounts

Page 6 Managing the Resources  Regular review of all accounts - All 300+ UAB Accounts  Know the sources and timing of salary support - Budget accordingly  Inquire about expenses and revenues - Multiple requisitions - Computer purchases

Page 7 Managing the Resources  Know campus/practice plan policies - Work with internal audit and compliance  Work on internal controls - Check & cash handling - No outside checking accounts  Avoid procurement and credit cards  Budget & Track faculty commitments

Page 8 Managing the Resources Monthly Visa Statement  Beer $45  Pizza $55  Bowling $60  Beer $75  Skydiving $100  Girlfriend’s Rent $500 $ 835 Ronald A. Brown 317 Shades Crest Lane Hoover, AL 35224

Page 9 Types of Financial Models  Salary Inclusive Model  Mission Based Model  Funds Flow Model

Page 10 Salary Inclusive Model FY 2015 – Actual FY 2015 – Budget % Variance Pro Fee Collec. 25,000,000 23,000,000 9% less Dean’s Tax (1,250,000) (1,150,000) 9% Other Assessments (750,000) (690,000) 9% Contractual Rev. 5,000,000 5,000, Hospital Support 10,000,000 11,000,000 -9% Grant Rev. 1,500,000 1,000,000 50% State Funds 2,000,000 2,000, VA Salary Support 2,500,000 2,500, Other Revenues 500, , % Total Revenues 44,500,000 42,910,000 4% Revenues

Page 11 Salary Inclusive Model FY 2015 – Actual FY 2015 – Budget % Variance Faculty Salary/Benefits 27,500,000 27,000,000 -2% Faculty CME 500, , Non-Faculty Sal/Ben 7,500,000 7,500, Operating Expenses 5,000,000 4,500, % Malpractice 3,000,000 3,000, Total Expenses 43,500,000 42,500,000 -2% Profit/Loss 1,000, , % For Divisional Statements Add: Chairman’s Assessment MSO/Billing Office Admin. Assessment Expenses

Page 12 Divisional P & L CV Plastics Urology General Chair/Admin P & L before 100,000 50,000 (35,000) 50,000 (75,000) Assessments Chairman’s Assessment (25,000) (10,000) (10,000) (20,000) 65,000 (5% of Revenues) MSO/Billing Office (2% of Revenues) (10,000) (4,000) (4,000) (8,000) 26,000 Admin. Assessment (10,000) (2,000) (2,000) (8,000) 22,000 Net P & L 55,000 34,000 (51,000) 14,000 38,000

Page 13 Mission Based Model Clinic Research Education Admin. Pro Fee Collec. 25,000,000 Less: Dean’s Tax (1,250,000) Other Assessments (750,000) Contractual Rev. 4,000,000 1,000,000 Hospital Support 6,000,000 2,000,000 2,000,000 Grant Rev. 1,500,000 State Funds 2,000,000 VA Salary Support 2,500,000 Other Revenues 250, ,000 Total Revenues 35,500,000 1,750,000 5,250,000 2,000,000 Revenues

Page 14 Mission Based Model Clinic Research Education Admin. Faculty Salary/Benefits 15,000,000 5,000,000 5,000,000 2,500,000 Faculty CME 250, ,000 Non-Faculty Sal/Ben 4,500,000 1,500, ,000 1,000,000 Operating Expenses 4,000, , , ,000 Malpractice 3,000,000 Total Expenses 26,750,000 7,000,000 6,000,000 3,750,000 Net P & L 8,750,000 (5,250,000) (750,000) (1,750,000) Expenses

Page 15 UAB Funds Flow Model – Began FY 2014 for All 17 Clinical Departments FY 2013 Hospital Mission Support Amount + Additional $23 Million in FY 14 Professional Fee Revenues Departments wRVU Revenues Expense Reimbursements Centralized Clinical Expenses Clinical Staff Malpractice Direct Clinic Expenses Billing Office Practice Plan Overhead Central Funds Flow Account

Page 16 UAB Funds Flow Model  Previous hospital support eliminated  All clinical costs centralized  wRVU Revenues – 3 year Rolling Avg. of MGMA Comp/RVU  70% of Median by Specialty, Surgery has 21 Rates  Non-Funds Flow Revenues & Expenses remain for non-UAB hospitals, e.g., Children’s Hospital of Birmingham  Physician Benefit & Dept. Administrative Cost Reimbursement  Funds Flow Withhold (10% of RVU Revenues) - 20 At-Risk Metrics  Development of wRVU Based Compensation Plans with Academic & Educational Component

Page 17 UAB Funds Flow Diagram Prior Department Clinical P & L Expenses Revenues Physician Salaries Phy Benefits Physician CME Clinic Staff Res./Admin Staff Malpractice Clinic Rent HSF Indirect Billing Office Professional Revenues Contract Rev Mission Support Clinic Rev Physician Salaries Physician Benefits & CME Res./Admin. Staff Indirect on Non-FF Rev. wRVU Revenues Non-FF Revenues Physician Benefits Admin. Reimburs. Contract Rev Central Funds Flow Account Clinic Staff Clinic Rent Malpractice HSF Indirect Billing Office Prof Rev (exc wRVU) Clinical Rev, Facility & Tech. Fees Knowledge that will change your world Revenues Expenses Department P & L Expenses

Page 18 Funds Flow Model – Department of Surgery FY 2015 – Actual Revenues wRVU Revenues 15,000,000 Non-Funds Flow Collec. 6,000,000 FF Reimbursement 4,000,000 Contractual Rev. 5,000,000 FF Withhold (1,500,000) Total Revenues 28,500,000 Expenses Faculty Sal/Frg 27,500,000 Faculty CME 500,000 Staff Sal/Frg 750,000 Operating Expenses 250,000 Malpractice 100,000 Overhead 250,000 Total Expenses 29,350,000 Clinical Operating Margin (850,000) 3 – 5% of Revenues

Page 19 Funds Flow Model – Department of Surgery With Payment of At-Risk FY 2015 – Actual Clinical Operating Margin 650,000 Other Income & Expenses Investment Income 100,000 UAB Transfers (650,000) AEF Transfers (150,000) Gain/Loss on Investments 100,000 Total Other Income & Expenses (600,000) Increase/Decrease in Net Assets 50,000

Page 20 Divisional P & L – Funds Flow CV Plastics Urology General Clinical Margin 500, , , ,000 Other Revenues Investment Income 50,000 5, ,000 State Appropriation 100,000 50,000 50,000 50,000 Other Expenses Faculty Education Comp. 200, , , ,000 Chairman’s Assessment 25,000 10,000 10,000 20,000 Research Expenses 50,000 10,000 10,000 20,000 Other UAB Contributions 100, , Total Other Rev. & Exp. 275, ,000 (45,000) 15,000 Net P & L 275, ,000 (45,000) 15,000

Page 21 Research Administration  Circular A21 - F & A Rate determinants  Campus F & A Rate (Indirect Expense)  Fixed vs. Variable Grants  Assist faculty with budgets & applications  Project grant expenses & monitor grant spending  Know salary expense timing  Actively manage clinical trials

Page 22 Research Administration – Clinical Trials  Budget Development  Start up costs  Patient Care costs  Staff/PI Effort  Completion of Agreement  IUCAC – Animal Care Committee  IRB –Human Subject Protocols

Page 23 Clinical Trials Budgeting A. Startup Costs Personnel Startup Costs (Time & Effort) RoleSalary#of HoursCost/hrFringe RateTotal Principal Investigator 100,000 3$ %$ Study Coordinator 50,000 10$ %$ $0.00 Subtotal$ Indirect$ Total$1, Administrative Startup/One-Time Fees DescriptionQuantityChargeTotal Clinical Trials Office Fee 1 $1, Pharmacy Setup Fee 1 $ IRB Fee 1 $1, Subtotal$2, %$ Total$3, Study Startup Costs Total: $4,340.05

Page 24 Clinical Trials Budgeting B. Clinical Care Costs per Subject Salary, Time and Effort RoleSalary#of HoursCost/hrFringe RteTotal Principal Investigator $100,000 2 $ %$ Study Coordinator $50,000 4$ %$ $0.00 Subtotal$ %$76.44 Total$ Subject Tests/Procedures/Subject Reimbursement DescriptionCPTQty forFacilityProCostTotalCost per CodeScreeningChargeFeeEachQtySubject Pharmacy dispensingN/A $ Subject reimbursementN/A $ Labs, X-Ray, CT, ETC. 1 $ $1, $0.00 Screening Failure Subtotal $500.00Subtotal$1, Indirect $150.00Indirect$ Total Screening Failure Cost $650.00Total$2, Clinical Care Cost per Subject:$2,346.24

Page 25 Clinical Trials Budgeting C. Other Study Costs DescriptionQuantityChargeTotal Pharmacy maintenance fee 1 $75.00 Pharmacy close-out fee 1 $75.00 $0.00 Subtotal$ Indirect$45.00 Total Other Study Costs:$ Budget Summary Costs Sponsor Reimburs. Variance Personnel Startup Costs $1, Administrative Startup Costs $3, Clinical Care Costs Per Subject $2, Full Enrollment Total (n= 100) $234,624 $234,624 Other Study Costs $ $0.00 Total Study Cost at Full Enrollment $241, $0.00

Page 26 Research Administration – Clinical Trials  Revenue Types  Start Up  Per patient enrollment  Miscellaneous services  Expense Management  Expense Timing  Subject Reimbursement

Page 27 Final Thoughts “You can observe a lot by watching” Yogi Berra