1. Webinar: Introduction and Use of Ohio Local Health Departments July 16, 2015

2. 2 Introductions Jan Wilhoit, NACCHO staff Peggy Honore, AmeriHealth Mercy-General Russel Honore Endowed Professor at LSU Health Sciences Center, School of Public Health Matt Stefanak, Consultant and former Health Commissioner, Mahoning County District Board of Health

3. Objectives Introduce financial performance management Review the concepts of ratio and trend analysis and benchmarking financial performance in local health departments Provide an overview of PHUND$ Demonstrate PHUND$ using data from Ohio LHDs 3

4. Value of Financial Performance Measurement Demonstrates concepts and techniques that should be routinely conducted to ensure sustainability while reducing the risk of financial instability Promotes strategic decision making by aligning operational and financial performance Advances government and nonprofits’ ability to integrate financial considerations with social impact into decision making just as corporations are shifting to integrate social responsibility into business models 4

5. Financial Ratios and Financial Statements Most LHDs – Produce budgets showing revenue and expenditures – Compare actual to budgeted amounts for current year – Create year end financial statements, balance sheets These statements do NOT provide information needed to evaluate long-run financial condition 5

6. Financial Ratios and Financial Conditions Financial statements & budgets do not address: – Costs of each service provided – Accumulated employee leave liability – Decreasing flexibility in use of funds that have become more restrictive due to federal, state, or local mandates – Erosion of funding sources – Effects of population growth or change on revenues and expenditures – Delivery of mission critical programs – Trends in expenditures and revenue over time – Programs w/expenditures in excess of dedicated and self-generated revenues. 6

7. Government Finance Officers Association (GFOA) Financial analysis using Trend and Comparative Data (2003) Risk Management (2009) – Identification, Evaluation, Treatment, Avoidance, etc Responsibility and training to ensure sound system of internal controls (2008) Policies regarding setting fees (1996) Budgeting (1998): – Long term perspective, linkages to organizational goals, focus on results and outcomes, etc Measure the cost of services (2002) Sustainability as a core value for business practices and policy setting (2002)

8. Almanac of Hospital Financial and Operating Indicators Beds Ratio >499 300-399 <100 Total Margin 4.3% 3.6% 3.1% Revenue per FTE $128,000 $116,000 $105,000 10. Admin Exp Ratio 7.8% 8.5% 3% 147 Indicators and Ratios Examples: Examples: Revenue per patient Revenue per patient Expenditures per patient Expenditures per patient Days in Accounts Receivables Days in Accounts Receivables Total Margin (Revenue less Expenditures) Total Margin (Revenue less Expenditures) Source: INGENIX Almanac of Hospital Financial and Operating Indicators

9. 9 Hospitals that benchmark had: ROI 11% ↑ Total Margin 30% ↑ Days in Patient Accounts Receivable 3% ↓ Days of Cash on Hand 5% ↑ Supply Cost 9% ↓ Operation Cost 11%↓ Benchmarking Improves Hospital Performance Data from Healthcare Financial Management Association

10. Community Health Centers Uniform Data System (UDS) National, State, and Regional Ratio and Trend Analysis by: Demographic & Socioeconomic Financial Services Rendered Staffing, Utilization, and Administration Enabling Services Revenues http://bphc.hrsa.gov/uds/2007data/national/nationaltable2.htm

11. 11 Examples of financial performance measures Ratio Analysis – comparing several pieces of information Trend Analysis – Examination of ratios over time periods Benchmarking – comparisons to others

12. Financial ratio and trend analysis is the calculation and comparison of ratios which are derived from information in an organization’s financial records and relevant demographic data sets Ratio values are calculated using a numerator and denominator Comparisons are made with prior budgetary periods (trend analysis) and with other similar organizations (benchmarking) What is ratio and trend analysis?

13. Ratio and trend analysis aids in answering What expenses need to be reined in Are administrative cost reasonable How diversified are agency revenues Can declines in revenues be forecasted What are demographic and economic indicators that could impact agency financial status What are Trends in revenues and expenditures How many programs must be subsidized because they can not operate fully from dedicated or self-generated revenues 13

14. Indicators of Financial Sustainability Budget overruns Expenditures exceeding revenues Diminishing Fund Balances Limited Revenue Diversification Accounts Receivable write- off Reliance on government categorical funding Unsustainable programs that lack dedicated revenues Unfunded Liabilities (e.g., leave liability) Mission creep Repeated negative audit finding Inadequate Information Systems Lack of impacts and outcomes

15. 15 Key revenue and expenditure measures Total Revenues Total Expenditures Operating Surplus/Deficit – (Total Revenues / Total Expenses ) – Measures excess of revenues over expenses – Warning Trend – Ratio values < 1.0% Total Margin – (Total Revenue – Total Expenditures) / Total Revenue – Amount each dollar of revenue generated in surplus (deficit) operating dollars – Warning Trend – Negative values Fund balance

16.  Total Margin = (Total Revenues – Total Expenditures)/Total Revenues  The surplus (+ values) or deficit (-values) for each dollar of revenue  In 2009 Total Margin is -.01, agency lost 1 cent for each dollar of revenue received in 2009 16 Example: Total Margin trend analysis for Buckeye HD

17.  Alert - decreasing trend  Data shows population size is stable – revenue is decreasing  What sources of revenue are decreasing?  Short or long term?  Does the HD need to reduce services, costs, or increase revenues? 17 Example: Revenues per capita trend analysis for Buckeye HD

18. Example : Benchmarking revenues per capita with other LHDs  Revenues per capita decreasing for Buckeye HD (agency A)  Average revenue per capita increasing for all other LHDs  Peer (comparison) agencies ratio increasing 18

19. Overview of PHUND$ Web-based public health financial data collection and analysis portal hosted by NACCHO Provides LHDs with timely, reliable and uniform data to support assessment and decision-making Individual LHDs enter financial and demographic data, or aggregate data for all LHDs in a state are uploaded, and PHUND$ generates: − Ratio and trend analyses − A dashboard of financial indicators − Benchmarking against peer agencies

20. Designed and tested by LHDs for LHDs Core Value = confidentiality of LHD data = access to an LHD’s data is restricted to health commissioner or designee – LHDs selected for benchmarking are de-identified Enables LHDs to apply these financial trend analysis and benchmarking practices Overview of PHUND$

21. PHUND$ Answers Questions Are administrative cost reasonable? How diversified are agency revenues? Can declines in revenues be forecasted? What are demographic and economic indicators that could impact agency financial status? What are trends in revenues and expenditures?

22. PHUND$ History 2006 – 2012 Development of a ratio & trend analysis spreadsheet tool Demonstrations and testing of the tool in: Florida, Ohio, North Carolina, Kansas, West Virginia, and Kentucky Development of the PHUND$ web-based portal October – November 2012 Beta test of the PHUND$ web-based portal January 2013 PHUND$ launched for use by local health departments Use is voluntary - LHDs must request an account Users report that data entry takes from several hours to several days

23. PHUND$ Current Status 377 registered users: LHDs from 38 states New applications created for Washington and Ohio LHDs from publicly available data reported to the state HD to encourage use by more LHDs and relieve burden on LHDs of data entry (June 2015) Ohio accounts were created for all 124 Ohio LHDs by uploading Annual Financial Report (AFR) data for 2011-2014 AFR data populated key PHUND$ variables, enabling the PHUND$ system to calculate most common financial ratios (AFR-PHUND$ data crosswalk is available on request) PHUND$ is “read-only” until NACCHO completes an evaluation of these new applications in OH and WA

24. PHUND$: Trend Analysis and Benchmarking Ohio LHDs can benchmark their PHUND$ revenue, expenditure and other data against others in the state – Revenues – Total, local (tax, other local), state, federal, Medicare, Medicaid, patient fees, environmental health fees, vital statistics fees, home health, school health, tuberculosis control Expenditures – Total, programmatic, administrative, prevention (health promotion), personal health, environmental health, laboratory Other – Year-end fund balance, staffing (FTEs)

25. PHUND$ Ratios PHUND$ calculates the following ratios: – Total margin – Operating surplus or deficit – Operating ratio – Revenue per capita – Local, state, federal revenue as % of total revenue – Personal health, Medicare, Medicaid, home health, and environmental health revenue as % of total revenue – % change in year-end fund balance – Expenditures per capita – Staffing per capita – Programmatic, administrative, personal health, prevention (health promotion), environmental health, and laboratory expenditures as % of total expenditures

26. New Data Elements in 2014 AFR Addition of new data elements to 2014 AFR allows Ohio LHDs to benchmark additional expenditures against other LHDs: – Salaries – Fringe benefits – Emergency preparedness – Chronic disease prevention and control – Communicable disease prevention and control – Injury prevention and control – Tobacco use prevention and control – Capital expenditures

27. Next Steps LHDs will receive email with account login and password information LHDs go to http://phunds.naccho.org/ to access accounts and make use of ratio and trend analysis and benchmarking featurehttp://phunds.naccho.org/ LHDs follow instructions on website to request assistance re: accessing account LHDs respond to requests from NACCHO to offer feedback about how they are using PHUND$

28. Thank You! The following slides are screenshots from a webinar demonstration of the PHUND$ application using financial data from the fictitious Buckeye County Health Department