Iowa Association of Rural Health Clinics Benchmark Reporting for Improved Performance October 1, 2014 2:45 p.m. – 3:30 p.m. Jeff Date Bramschreiber, or subtitle CPA, Partner Wipfli Health Care Practice © Wipfli LLP © Wipfli LLP 0 Summary With reimbursement rates under health care reform stagnant (at best!), successful cost management is essential toward achieving sustainability as a health care organization. Many organizations, including physician practices and rural health clinics, have historically focused attention largely on increased volumes and revenue enhancement opportunities. No longer can health care organizations avoid managing costs to remain profitable and viable. © Wipfli LLP 1 RHC Cost Management and Benchmarking Presentation Overview I. Identifying Costs in the RHC II. Cost Management Techniques III. Making Cost Comparisons IV. RHC Benchmark Report V. Summary © Wipfli LLP 2 I. Identifying Costs in the RHC © Wipfli LLP 3 Identifying Costs in the RHC Why focus on cost management in the RHC? • Less than 50% of RHC patients are likely reimbursed using a cost-based approach. (Wipfli benchmark data shows RHCs average close to 25% traditional Medicare patient mix.) • Many commercial insurance plans reimburse at rates well below cost. • The average charge per RHC visit is usually less than cost. (Who would pay more?) • Cost analysis and cost reduction strategies have not been widely used in RHCs. © Wipfli LLP 4 Identifying Costs in the RHC Total costs represent all expenditures incurred by the clinic. RHC costs represent only those expenditures related to RHC services. RHC costs exclude laboratory, imaging, hospital inpatient, and other non-RHC services. Total costs are used to manage clinic profitability. RHC costs are used to determine Medicare/Medicaid reimbursement. © Wipfli LLP 5 Identifying Costs in the RHC Total costs in the RHC are expenditures incurred by the clinic in connection with the provision of health care services delivered to patients. Examples include the cost of staff, providers, supplies, occupancy, and professional fees. Total costs may be reported on clinic financial statements (independent practices) or departmental summary reports (hospitals). Costs may be directly incurred by the clinic (e.g., nurse salaries) or indirectly allocated from an owner/hospital (e.g., administrative costs). © Wipfli LLP 6 Identifying Costs in the RHC ABC Clinic Summarized Income Statement Total Income Overhead expenses: Staff wages Benefits Rent & utilities Supplies Insurance Advertising Other administration Total Overhead $ 1,500,000 100% Provider salary & benefits Total Expenses Net Income (Loss) 600,000 40% 1,505,000 100% $ (5,000) 0% 375,000 100,000 120,000 75,000 55,000 5,000 175,000 905,000 25% 7% 8% 5% 4% 0% 12% 60% © Wipfli LLP 7 Identifying Costs in the RHC ABC Clinic Summarized Expenses Staff wages Benefits 25% 40% Rent & utilities 7% 11% 5% 8% Supplies Insurance Advertising Other administration 0% 4% Provider salary & benefits © Wipfli LLP 8 Identifying Costs in the RHC Improving Cost Data (Before) Staff Wages: Wages 375,000 (After) Staff Wages: Wages - Administrative Wages - Maint./Housekeeping Wages - Nursing Wages - Lab Wages - Radiology Total Staff Wages 125,000 15,000 170,000 45,000 20,000 375,000 © Wipfli LLP 9 Identifying Costs in the RHC Improving Cost Data (After) Provider Salary & Benefits: Physician Salary Physician Benefits Physician Assistant - Salary Physician Assistant - Benefits Nurse Practitioner - Salary Nurse Practitioner - Benefits Total Provider Salary & Benefits 420,000 50,000 45,000 7,000 70,000 8,000 600,000 © Wipfli LLP 10 II. Cost Management Techniques © Wipfli LLP 11 Cost Management Techniques 1. Know your costs – • Obtain/analyze clinic cost information on a regular (monthly or quarterly) basis. • Understand what costs may/may not be included in the cost data (e.g., are occupancy costs included, such as rent, utilities, and/or depreciation?). • Have sufficient cost detail to enable analysis (e.g., split staff wages from providers; split nursing wages from administration). • Separate overhead from provider costs. © Wipfli LLP 12 Cost Management Techniques 2. Focus more on large/controllable cost items – • Practice overhead costs are usually 60% - 70% of net revenue in a primary care practice. • Staff costs are usually 40% – 50% of overhead costs in a primary care practice; largest single overhead cost in most practices. • Track staff full-time equivalents (FTEs) by functional area (nursing, reception, lab, imaging, billing, administration). • Track staff overtime hours and cost. © Wipfli LLP 13 Cost Management Techniques 2. Focus more on large/controllable cost items (cont.) • Provider costs are usually 40% - 50% of net revenue in a primary care practice. • Compare provider costs and related productivity using external benchmarks that reflect provider type (physician vs. NP vs. PA), FTE status, specialty, and geographic area. © Wipfli LLP 14 Cost Management Techniques 3. Compare to cost benchmarks – • Practice overhead ratio (e.g., overhead is 60% - 70% of net revenue in a primary care practice). • Staffing FTEs (e.g., 4.0 – 5.0 support staff FTEs per physician may be reasonable). • Provider compensation and productivity. • Internal comparisons to prior year and budget data is extremely valuable. • Use RHC cost report data for comparison. © Wipfli LLP 15 Cost Management Techniques Staffing Example ABC MEDICAL CLINIC FY2013 RHC Encounters FTE Physicians FTE Midlevels Front desk/scheduling Billing Medical records/transcription Registered nurse Licensed practical nurse Medical assistant Clinic manager/coordinator Totals 16,556 3.00 2.65 Projected FY2014 FTEs 6.2 4.5 3.0 1.5 4.7 2.7 0.5 Projected Per FTE Provider 1.1 0.8 0.5 0.3 0.8 0.5 0.1 23.2 4.1 MGMA Mean 0.9 0.5 0.7 0.3 0.6 0.8 0.2 3.8 Variance Per FTE Provider 0.2 0.4 (0.1) (0.0) 0.2 (0.3) (0.1) 0.3 MGMA Mean Clinic 4.9 2.5 3.7 1.5 3.3 4.2 1.0 Variance Per Clinic 1.3 2.0 (0.7) (0.1) 1.4 (1.5) (0.5) 21.2 1.9 © Wipfli LLP 16 Cost Management Techniques Other Staffing Information (from NARHC list serve): “Over the years when we had a steady 2 providers per clinic, I learned that it takes 1.3 nurses per provider. The .3 is to cover referrals, triage calls, and the increasing burden of pre-auths, getting meds for patients w/o funds, etc.” “We have an average of 4 practitioners seeing patients on a daily basis, with about 1100 to 1200 patients per month in the one clinic. We run about 1.2 – 1.3 clinical staff per provider. I anticipate this will decrease to closer to 1 per provider as we shift roles and re-classify job duties.” “Our CAH Provider Based RHC uses 1 MA per provider working each day. Most days I have an LVN in the back office to replace one of the MAs, so that she can administer medications. (If not, the RNs must give all meds.) We have an RN working who does all phone advice, patient education, complex wound care management, med prior auths, and fills prescriptions. The RN also does both phone and in person triage. Additionally, we use a case manager who manages all of the referrals and (non-medication) prior auths. She also does patient satisfaction surveys and a variety of other tasks.” © Wipfli LLP 17 Cost Management Techniques Other Staffing Information (from NARHC list serve): “A particularly effective model I have found is to implement a team approach – 1 MA to each provider, with a LPN for each 2 providers/medical assistants. The LPN can handle more complicated things, and can float between two providers to give support as necessary.” “At our main site, we have one MD, 2 APNPs, 2 clinical RNs, 2 CMAs. Last year, the three providers billed for 7900 encounters. Each provider has ½ day walk-in clinic and ½ day administration per week. The pace is steady, but not rushed. It seems to work well for us.” © Wipfli LLP 18 Cost Management Techniques Physician Example © Wipfli LLP 19 III. Making Cost Comparisons © Wipfli LLP 20 Making Cost Comparisons Successful cost management requires an understanding of how your costs may differ from your peers or yourself over time. Cost comparisons using external benchmarks (surveys and other reports) can be helpful to identify cost variances in your organization. Medical Group Management Association compiles the annual Cost Survey (www.mgma.org). Medicare RHC cost reports are public information that can be used to develop benchmarks specific to these providers. © Wipfli LLP 21 Making Cost Comparisons MGMA Reported Overhead Percentages (median) Multispecialty Anesthesiology Cardiology Family Medicine Oncology Internal Medicine Neurology 2008 2012 63% 12% 51% 67% 82% 86% 61% 64% 10% 62% 78% 83% 77% 72% OB/GYN ENT Pediatrics Radiology General Surgery Orthopedic Surgery Urology 2008 2012 61% 53% 64% 30% 49% 47% 55% 72% 55% 63% 29% 64% 52% 62% Source: Medical Group Management Association Cost Surveys. © Wipfli LLP 22 Making Cost Comparisons MGMA Reported Overhead Percentages (median) 2008 2009 2010 2011 2012 Family Medicine (All) 467 Groups 67% 69% 67% 71% 78% Family Medicine (Phys Owned) 20 Groups 60% 61% 59% 58% 61% Family Medicine (Hosp Owned) 444 Groups 70% 73% 68% 73% 78% Multi-Specialty (All) 331 Groups 63% 64% 63% 63% 64% Multi-Specialty (Phys Owned) 114 Groups 60% 60% 60% 58% 58% Multi-Specialty (Hosp Owned) 200 Groups 72% 72% 73% 72% 74% Source: Medical Group Management Association Cost Surveys. © Wipfli LLP 23 Making Cost Comparisons MGMA Reported Staffing FTEs and Cost Percentages Multispecialty Anesthesiology Cardiology Family Practice Oncology Internal Neurology A B C 4.5 0.3 4.3 4.0 4.3 3.4 2.5 3.5 0.2 3.3 3.1 * 2.9 2.4 30% 5% 29% 35% 16% 35% 28% OB/GYN ENT Pediatrics Radiology General Surgery Orthopedic Surgery Urology A B 3.7 3.8 3.6 1.4 2.4 4.5 4.3 2.9 2.5 3.2 1.4 2.0 2.8 3.5 C 30% 25% 26% 13% 24% 23% 26% (A) = Total median support staff per FTE physician (B) = Total median support staff per FTE provider (C) = Support staff salaries and benefits as a % of total medical revenue Source: 2013 Medical Group Management Association Cost Survey. © Wipfli LLP 24 RHC Benchmark Report © © Wipfli LLP 25 Source of Comparative RHC Cost Data Cost Reports HCRIS Data Request Disclaimer: The Centers for Medicare & Medicaid Services (CMS) has made a reasonable effort to ensure that the provided data/records/reports are up-to-date, accurate, complete, and comprehensive at the time of disclosure. This information reflects data as reported to the Healthcare Cost Report Information System (HCRIS) by Medicare Administrative Contractors. These reports are a true and accurate representation of the data on file at CMS. Authenticated information is only accurate as of the point in time of validation and verification. CMS is not responsible for data that is misrepresented, misinterpreted or altered in any way. Derived conclusions and analysis generated from this data are not to be considered attributable to CMS or HCRIS. http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-forOrder/CostReports/index.html © Wipfli LLP 26 Organization of Comparative RHC Cost Data HospitalBased RHCs Independent RHCs 2010 Audited (519*) 2010 Audited (1,389*) 2011 Filed/Audited (930*) 2011 Filed/Audited (1,360*) 2012 Filed (944*) 2012 Filed (1,083*) * Reporting entities may represent multiple RHCs due to consolidated cost reporting. © Wipfli LLP 27 Making Productivity Comparisons Sample RHC Cost Report Comparisons Independent RHCs 2012 2012 Midwest National Encounters per FTE: Physicians Physician assistants Nurse practitioners Clinical Psychologist/Social Worker 4,388 3,243 3,151 904 4,677 3,594 3,340 1,459 Prov.-Based RHCs 2012 2012 Midwest National 3,729 2,876 2,656 1,023 4,085 3,215 2,939 1,842 © Wipfli LLP 28 Making Cost Comparisons Sample RHC Cost Report Comparisons Independent RHCs 2012 2012 Midwest National Health Care Staffing (Cost/Encounter) Physicians Physician assistants Nurse practitioners Health care staff Physician services under agreement Health Care Staffing (Cost/Provider FTE) Physicians Physician assistants Nurse practitioners Health care staff Prov-Based RHCs 2012 2012 Midwest National $55.73 $35.05 $34.37 $15.77 $69.08 $51.70 $32.18 $31.83 $12.49 $54.66 $75.26 $38.97 $37.31 $24.99 $242.00 $62.00 $39.24 $35.97 $12.49 $259.01 $244,540 $113,638 $108,307 $60,265 $241,760 $115,671 $106,327 $51,654 $280,644 $112,063 $99,090 $83,747 $253,252 $126,164 $105,711 $81,552 © Wipfli LLP 29 Making Cost Comparisons Sample RHC Cost Report Comparisons (continued) Independent RHCs 2012 2012 Midwest National Costs Per Encounter: Total Direct Cost of Medical Services $73.11 $65.88 Facility Cost $10.47 $9.51 Total Overhead Cost $54.96 $48.73 Total Allowable Cost per Actual Encounter $137.30 Total Allowable Cost per Adjusted Encounter Prov-Based RHCs 2012 2012 Midwest National $104.31 $91.16 $117.59 $183.87 $165.07 $121.36 $106.92 $170.99 $156.74 $139.10 $126.73 $118.38 $152.81 Cost per influenza injection $36.03 $39.37 $44.01 $51.71 Medicare Percent of Visits 27.7% 26.7% 21.6% 25.1% Cost per pneumococcal injection © Wipfli LLP 30 Cost Management Summary – Again! With reimbursement rates under health care reform stagnant (at best!), successful cost management is essential toward achieving sustainability as a health care organization. Many organizations, including physician practices and rural health clinics, have historically focused attention largely on increased volumes and revenue enhancement opportunities. No longer can health care organizations avoid managing costs to remain profitable and viable. © Wipfli LLP 31 Questions ? © Wipfli LLP 32 © Wipfli LLP 33 Contacts if you have questions Jeff Bramschreiber, CPA Partner, Health Care Practice Wipfli LLP 469 Security Blvd. Green Bay, WI 54313 920.662.2822 jbramschreiber@wipfli.com Jeff Johnson, CPA Partner, Health Care Practice Wipfli LLP 12 East Rowan Avenue, Suite 2 Spokane, WA 99207 Office: 509.489.4524 Direct line: 952.548.3367 jjohnson@wipfli.com © Wipfli LLP 34 www.wipfli.com © Wipfli LLP 35