1. Overview Goal Setting

2. Budget The Importance of Budgeting Preparation of an annual budget and continuous budget monitoring allows management to anticipate and prepare for the effects of change from year to year.

3. Budgeting Methods There are various approaches to building an operational budget: Zero-Based Budgets Top-Down Budgets Incremental Budgets

4. Budget Timeline Overall organization budget preparation for the next year should begin four (4) months prior to the health center’s current year end.

5. Preparing for Budgeting Preparing Budget: Review prior year’s budget and actual expenditures Identify capital and equipment needs Provide written explanation for budget changes (increases or decreases of more than 10%) from prior year Provide crosswalk between performance goals and budget requests During Budget Period: Provide written explanation for variance between actual amounts and budgeted amounts during the fiscal year

6. Factors to Consider There are various factors to consider when projecting visit volume. The following are a few examples: User trends (demand side) Payor mix (demand side) New sites and/or departmental expansion = new hires (supply side) Provider productivity targets (supply side)

7. Revenue Budget Patient Revenue Grants Contracts

8. Patient Revenue Gross Revenue Contractual Adjustment Net Revenue

9. Expenses Key Points to Budgeting Expenditures: Review prior year financial statements Review first 6 months internal financial statement Base expenditures on first 6 months financial statement: –Compare to prior year for major differences and reconcile –Increase or decrease appropriate costs due to visit volume variance –Increase or decrease due to unit cost differences

10. Pitfalls in Budgeting Assuming provider productivity increases without justification Forgetting about physical constraints of facility Forgetting to project replacement of fixed assets over time The “Build It And They Will Come” mentality. Assuming no competitors Basing plans on grant funding opportunities Not monitoring actual results and variance from plans Not adequately planning for cash need

11. Key Performance Indicators Days cash on hand (Cash and Cash equivalents)/((total expense less depreciation)/365) –This tells if a health center stops generating revenue and how many days they can meet their obligations. *Minimum at least 30 days Current Ratio –Current assets/current liabilities –A high ratio indicates the health center can meet short term obligations and the Center is more liquid. * At a minimum 1.5; ideally 2.0

12. Key Performance Indicators Days in Accounts Receivable (Gross Accounts Receivable less allowance for doubtful accounts and contractual)/((Revenue less contractual and bad debt)/365) –This tells how long it takes a health center to collect on a patient’s account. *Lower number is best, 45 days or less Days in Accounts Payable (Accounts Payable)/ ((Total expenses less salaries and benefits)*365) –This tells how long it takes the health center to pay outstanding invoices. *Standard is 30- 45 days

13. Sample Financial Dashboard Balance Sheet Current Period Prior Year End Change FAV(UNFAV) Percentage Current Ratio.821.1(.28)-25% Days Cash on Hand 525(20)-80% Days in Accounts Receivables 10966(43)-65% Days in Accounts Payable 6457(7)-12%

14. Sample Accounts Receivable Report

15. Operational Reporting Why it is needed? In order to improve the efficiency of service provision, it is important to understand the current operational status at the clinic.

16. Operational Data Data collection areas should include the following: –Appointment Scheduling –Patient Flow –Patient Satisfaction –Medical Records –Provider Productivity

17. Appointment Scheduling Access Next available appointment No Shows Walk-ins New patients Specialty referrals

18. Patient Flow/Patient Satisfaction Patient Flow Issues Medical record availability & completeness Nurses/MAs availability Sub-waiting and confusion Supplies in exam rooms Others?

19. Medical Records/Provider Productivity Completed Medical Records –Timely Documentation Provider Productivity goals –If the record is not complete, the provider did not reach the goal –Set goals with Provider input

20. Operational Goals MilestoneCalculationGoal Encounter Form Complete Date of Service to date signoff0 days Bill generatedDate Of Service to date billed2 days Claim PaidDate billed to date paid45 days Patient Wait timeFrom time when patient signs in to time patient is seen by provider 30 minutes Next Available Appointment Next open slot in appointment scheduling system Same day

21. Benchmarks Internal Benchmarking -Measuring current operations What should be measured? Is everything going to have benchmarks? Once you have measures, how do you establish benchmarks? What most impacts on your clinic’s efficiency? How do you report on progress or lack of progress? -Goal setting  Who should be involved?  What does it mean when goals are not achieved? When they are? Implementing Change

22. Reporting Overview –Monitoring benchmarks Senior leadership monitoring Board monitoring Sharing performance with the whole staff –Using performance data to celebrate success and identify areas for improvement –Communicating good and bad news

23. Reporting Overview cont. –Linking financial and operational reports –Understanding the financial impact of operations –Reading operationally “between the lines” of the financial statement

24. In Summary Communicate Often Ensure Accurate Data Goals are not set in stone Use the PDSA cycle

25. Questions? Gervean Williams National Association of Community Health Centers