North Carolina Community Health
Center Association
Financial Management & Operations
Workshop
Introduction to Community Health
Center Finance & Operation
March 2, 2011
Today’s Agenda
 How do we get paid?
 What is unique about CHC accounting?
 Received a CHC grant; what strings are
attached?
 All I need to do is break-even, right?
 Other issues & questions & answer forum
How do we get paid?
Payment Methods
 Cost-based reimbursement
 Prospective payment system (PPS)
 Fee schedule reimbursement
 Patient co-payments
 Grants
 Donations
 Other
Medicare and Medicaid
 Best payers (typically)
 A community health center should market
its services to these patients
 Understanding the cost reporting process
is a must; not understanding can result in
a reduction of revenue (sometimes
significant)
 Problem of unbilled services (Part B, etc.)
Revenue Cycle
 Proper management of the revenue cycle
is a fundamental necessity of operating a
community health center
 Breakdowns in any area of the revenue
cycle cause delay or prevent proper cash
flow
 What are the components of the revenue
cycle?
The Revenue Cycle
 Charge structure
 Appointment taking
 Patient registration
 Patient check out
 Charge capture
 Third-party billing
 Patient collections
 Cash receipts/collections
Appointment Taking
 Be careful multi-tasking appointments with
registration & check-in
 Provider scheduling should provide for
sufficient patient volume
 No-shows should be addressed with
scheduling policies
 Financial responsibility should be
discussed when making appointment
Registration – Common Problems

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

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Failure to recruit & pay appropriately
Lack of communication & cooperation with billing
Not verifying third-party coverage
Failure to request updated information at every visit
Failure to proactively address registration errors which
impact billing processes
 Failure to collect patient amounts owed
 Excessive wait times due to lengthy registration
processes
Check-Out Process
 Lack of a check-out process is a common
problem in community health centers
 A reasonable attempt should be made to
collect outstanding balances due from the
patient
 Collection training may need to be provided
 Charges should be input at check-out if
possible
Charge Capture – Common
Problems
 Not accounting for numerical sequence of fee
tickets
 Not recording all charges on a fee ticket
 Lost or missing fee tickets
 Not capturing all charges
 Not utilizing system generated fee tickets
 Not requiring providers to complete the
encounter form during the visit
Third-Party Billing - Problems
 Failure to bill all reimbursable services
 Failure to identify correct primary payer for each
claim
 Not billing timely (within two days of date of service)
 Failure to monitor claim denial trends & correct
errors at the source, including follow-up on all
denials
 Lack of knowledgeable billing staff
 Improper coding
Patient Collections - Problems
 Not having or following patient collection policies
 Lack of focus/priority on patient collections
 Not collecting everything possible (co-pays, deductibles,
coinsurance & balances from previous visits) at the timeof-service
 Not following up on past-due accounts timely
 Not reviewing detailed accounts receivable aging reports
monthly
 Not having sufficient personnel to allow for collection
activities
Cash Receipts/Collections
 Cash drawers should be balanced regularly
and all cash deposited daily
 Receipts should be issued for in-office
payments
 If you can post payments and record
adjustments in the practice management
software, you should not have access to
cash
What is Unique About CHC
Accounting?
This is not Your Typical Not-forProfit Model
 A set of financial statements exist for
health care organizations

Developed by AICPA

Tailored specifically to examine the financial
health of a health care entity
 A copy of the health care audit guide
should be maintained on site for reference
Health Care Financial
Statements
 Balance Sheet
 Statement of Operations
 Statement of Changes in Net Assets
 Statement of Cash Flows
 Footnotes specific to a health care
organization
Generally Accepted Accounting
Principles (GAAP)
 Accrual based accounting is required (no
cash basis financials)
 Interim financial statements should also be
prepared on the accrual basis & in
accordance with GAAP
 Estimates are important in health care
financial statements
Accounting Estimates
 Allowance for doubtful accounts –
measures at any given date, what amount
of gross patient accounts receivable may
not be converted to cash (not collected)
 Due to/from third party payers – mainly
results from cost report settlements –
should be accrued in the period earned
Grants vs. Contributions
 These transactions may seem similar but they
are accounted for differently
 Grants – (exchange transactions) – typically
come from governmental agencies – revenue
recorded when earned
 Contributions – (non-exchange transactions) –
revenue recorded when promised – net assets
restricted until donors intent has been fulfilled
Received a CHC Grant; What
Strings are Attached?
Grant Funds:
No Strings Attached?
 If you accept the grant, accept the rules
 It is the responsibility of health center
management to understand the set of
rules that accompanies each grant award
 Non-compliance with any grant rules could
result in significant risk to those with
fiduciary responsibilities at the health
center (e.g. grant reporting)
Managing Federal Grant Funds
 Governing federal regulations

OMB Circulars A-110, A-122 & A-133
 A-110 - Management of federal grant funds
 A-122 - Cost principles
 A-133 - Audit requirements

Applicable to Section 330 funding

Important for health center management to be
familiar with applicable federal regulations

Available on Internet
Managing Federal Grant Funds
 Important to establish consistent draw
down policies & processes
 Consider establishment of a separate
bank account (interest bearing) for federal
grant funds for tracking purposes
 Federal reporting accomplished through
submission of an annual Federal Financial
Report (FFR)
Documentation is King
 It is important to maintain detailed grant files
for each grant your organization receives
 These files should be maintained for at least
three years after the acceptance of the grant’s
FFR
 Although the FFR is completed in the
aggregate, it is important to be able to identify
specific expenditures that were charged to
each grant
Contents of Grant File
 Grant application
 Notice of grant award (all copies, all pages)
 Copies of all correspondence between your
organization & the granting agency
 FFR & UDS
 Copy of audited financial statements
 Detail record of all fixed assets purchased with
grant funds
Accounting for Grants
 Accounting for grants includes a variety of
unique financial issues


Grant draw processes & procedures
Cash management issues

General ledger maintenance

Revenue & expenditure recognition

Grant reporting
Scope of Project
 Important to know what activities are
included & excluded from your scope of
project as defined by the BPHC
 Changes in the scope of project should be
communicated to & approved by the BPHC
in writing
 Important to designate management level
position to monitor compliance
Scope of Project
 Risks of not including qualified health center
activities in the scope of project

FTCA Coverage

Medicare & Medicaid FQHC reimbursement

Pharmacy benefits

Other?
PIN 98-23
 Financial System Expectations

Accounting & Internal Controls

Budget

Billing & Collections

Independent Financial Audit
Accounting & Internal Controls
 Systems should be appropriate to size &
complexity of the organization
 Accounting system should be based on GAAP

Designed to accurately reflect financial performance
 Separation of financial functions should be
implemented to safeguard assets

Access function

Recording function

Monitoring function
Accounting & Internal Controls
 Routine financial reports should be generated

Reviewed by appropriate management staff

Reviewed by members of the health center’s
governing body on a regular basis (monthly)

Should accurately reflect current financial status

Allow for comparisons to past & projected
financial position
Budget
 Reflects the level & scope of services to be
provided within the constraints of the health
center’s resources
 Should reflect available resources & required
expenditures
 Should be approved by the health center’s
governing body
 Particular emphasis on health center revenue
streams
All I Need to do Is
Break Even, Right?
Mission vs. Business
 In order for a CHC to be successful, the
mission & business side must be equal. If
they ever get out of balance, a CHC can
easily fail.
 A CHC must have positive operating
margins to establish reserves, replace
equipment, etc…
Mission vs. Business
 Not-for-profit is a tax status
 The Bureau of Primary Health Care is
encouraging health centers to establish
reserves to help ensure that the CHC will
operate in perpetuity
Salary Related Issues
 A CHC is often a training ground for other
local health care providers (especially
billers)
 Be competitive – it costs much more to
train a new biller than to increase the
salary of your existing one
 Same goes for other key CHC employees
Expansion Issues
 Change of scope & provider number issues
 Grow wisely
 Do the financial due diligence before you
expand
 Quick expansions can have severe
negative financial consequences
Questions and Discussion
Jeffrey Allen, CPA
Partner
jeallen@bkd.com
910 E. St. Louis St.
Springfield, MO 65801-1190
Office: 417.865.8701
Fax: 417.865.0682
www.bkd.com
Thank You!