Demystifying a “Risk-focused Surveillance
Approach” to Establishing and Monitoring
Standards for Sound Systems of Financial
Management
10th Annual Public Health Finance Roundtable
November 16, 2014
New Orleans, LA
Peggy Honoré
AmeriHealth-Mercy General Russel Honoré
Endowed Professor
Risk-focused Surveillance Approach to
Establishing Standards
• Must be supported by a sound system of
financial management
• Should be supported by appropriate standards
• Availability of timely and reliable data to
continuously self-monitor for financial strengths
and risks continuously
• Should include Risk-mitigation strategies to
prevent the disruption of programs and services
Example of Processes that
Measure for Risks
• Accreditation
• Financial Reviews
• Audits
Describing Accreditation
Accreditation - process of ensuring acceptable levels of
quality in an institution that are consistent with industry
criteria.
Standards - serve as assessment criteria to evaluate
institutional conformity with industry-wide goals for
quality that are influenced by shared principles and
values.
Standards - reflection on the accreditation agency’s
capabilities to effectively measure the ability of the
organization under review to meet quality assuring
criteria. Office of Postsecondary Education Review of Standards. Fed Regist 2004
What is Financial Management
Financial management involves the “application of
theory and concepts to help managers make better
decisions”. Gapenski LC 2009 Fundamentals of Healthcare Finance
It includes the routine blending of accounting,
finance, and management concepts into
organizational practices as a means for minimizing
the risk of financial loss.
Examining Standards BY HRSA and
Higher Education
The assessment for quality in the financial management
systems used by HRSA and the six Higher Education
Accreditation agencies closely resembles a “risk-focused
surveillance approach” , a concept widely used in other
accreditation processes.
Quality is assessed by quantitatively measuring, through a
review of agency financial information, financial stability,
the allocation of financial resources consistent with
institutional mission, and sound financial planning as a
risk-mitigating strategy to prevent the disruption of
programs and services.
HRSA Site Visit Guide
• CHC has systems to maximize collections and reimbursement for its costs in
providing health services
• Does the CHC make reasonable effort to secure payment from patients for
amounts owed
• Does the health center maintain an annual budget necessary to accomplish
the service delivery plan?
• Are budgetary controls in effect (e.g. comparison of budget with actual
expenditures on a monthly basis)
• Does CHC have appropriate systems for collecting and organizing data
required in the Uniform Data Set
• Is the CHCs scope of project accurate in terms of services and sites
• Documents to review include:
– Financial Trends Data from the UDS
– Clinical and Financial Performance Measures (two from each must be
reviewed)
– Quality Improvement/Quality Assurance Plan
Higher Education Financial Standards and Key
Assessment Criteria
• Policy Compliance Review
– Annual analysis of institution’s financial health
• Organizational Governance
– Board monitoring for fiscal solvency
• Financial Planning
– Resources to support mission and goals
– 5 year history of financial stability
– Adequacy of financial reserves to meet fluctuations
– Report of financial adequacy
• Financial Management
– Resources to support mission and goals
– Corrective action plan to strengthen financial position
– Diversification of revenue sources
– Realistic plan to eliminate deficits
– Demonstrates control over financial resources
Higher Education Financial Standards and Key
Assessment Criteria
• Planning, Resource Allocation, and Institutional Renewal
– Review of Resource Allocation procedures and their
relationship to planning, purpose, mission, goals, and
objectives
– Sound financial planning
– Plans for financial contingencies
– Program additions and deletions are consistent with the
availability of resources
– Provides sufficient resources to sustain and improve programs
• Institutional Resources
– Sound financial planning
– Corrective action plan to strengthen financial position
• Administration
– Provide adequate information to support decision making
PHAB Documentation Review to Measure
Compliance with Standards
Documentation
 Audited financial statements
 Full disclosure of adverse auditing findings or
communications related to higher than usual level of
oversight or control from funding agency
 Contracts/MOUs/MOAs
 Approved health department budget
 Financial reports
 Formal efforts to seek additional financial resources
 Communications concerning the need for financial
support to maintain and improve infrastructure and
services
 Program reports
PHUND$ Features to Support a Risk-focused
Surveillance Approach to Establishing Standards
• Ratio and Trend Analysis
– Total Margin - Operating Surplus/Deficit
– Accounts Receivable Write off and Collections
– Total and Program Revenue and Expenditure ratios to assess
allocation methodologies
– General Fund Balance trends
– Leave liability
– Staff financial competency ratio
– Cash Flow
– Other measures of financial health/stability
• Program Sustainability Module
– Product Line analysis: Matching and Measuring with Ratios an
Individual Programs Revenues, Expenditures , FTE
• Benchmarking
• Dashboard
Roundtable Future Considerations:
Composite Measure of Financial Risk?
In-Progress by Patrick et al
Definition for the financial condition of a local health
department?
Example:
“Financial condition may be defined as a local
government’s ability to finance services on a
continuing basis. This ability involves maintaining
adequate service levels while surviving economic
disruptions, being able to identify and adjust to long term
changes and anticipating future problems”.
NYSD, 2003
Thank You
Moving on to the Next 10 Years!
PHAB Standards
Domain 11: Maintain Administrative and
Management Capacity
Standard 11.1 Develop and maintain an operational
infrastructure to support the performance of public
health functions
Standard 11.2: Establish effective financial management
system
PHAB Standards
• 11.2.1 A
Measure
• Manage grants and contracts
Documentation
 Audited financial statements
 Program reports
 Full disclosure of adverse auditing findings or
communications related to higher than usual level
of oversight or control from funding agency
PHAB Standards
11.2.2 A
Measure
• Written agreements with entities from which
the health department purchases, or
delegates services, programs, interventions
Documentation
Contracts/MOUs/MOAs
PHAB Standards
11.2.3 A
Measure
• Financial management system
Documentation
Approved health department budget
Financial reports
PHAB Standards
11.2.4.A
Measure
• Resources sought to support agency infrastructure
and processes, programs, and interventions
Documentation
 Formal efforts to seek additional financial
resources
 Communications concerning the need for financial
support to maintain and improve infrastructure
and services