2015 Eide Bailly CAH Conference

1

Experience the Eide Bailly Difference

Ralph Llewellyn, CPA, CHFPPartnerrllewellyn@eidebailly.comwww.linkedin.com/in/ralphllewellyn701.239.8594

Critical Access Hospital Financial Trends

w w w . e i d e b a i l l y . c o m

Introduction

• 58 rural hospitals out of 2,322 rural hospitals have closed their doors since 2010 (not all CAH).

• 2% sequestration

• Bad debt payment reductions

• Rural Hospitals represent:• 20% of local income• 195 jobs on average• $8.4 million in payroll

• Access is at risk

2

w w w . e i d e b a i l l y . c o m

Introduction

3

2015 Eide Bailly CAH Conference

2

w w w . e i d e b a i l l y . c o m

Introduction

• Profitability and overall performance varies from one Critical Access Hospital to another Critical Access Hospital

• Two factors seem to be critical in determining overall performance

• Location• Adoption/demonstration of best practices

4

w w w . e i d e b a i l l y . c o m

Introduction

• Location• Not much can be done about your general location• Payor contracts• Marketplace penetration• Medicaid expansion

5

w w w . e i d e b a i l l y . c o m

Introduction

• Adoption/demonstration of best practices• Board of Directors• Community Needs• Leadership Team• Providers

• Innovators develop and adopt best practices that can be adopted by others

6

2015 Eide Bailly CAH Conference

3

w w w . e i d e b a i l l y . c o m

Board of Directors

• Best organizations have strong boards that understand and fulfill their role

• Establish vision/direction• Are educated about the health care industry and are

engaged• Compliance• Trends

• Are not a “rubberstamp” • Understand they are not management - let management

manage

7

w w w . e i d e b a i l l y . c o m

Board of Directors

• Best organizations have strong boards that understand and fulfill their role

• These boards avoid local politics• Set vision/direction• Assign accountability

8

w w w . e i d e b a i l l y . c o m

Community Needs

Service Line

Expansion

Service Line

Retraction

Bricks and Mortar

9

2015 Eide Bailly CAH Conference

4

w w w . e i d e b a i l l y . c o m

Service Line Programming

A. Education and Preparation• Ensure alignment of the strategic plan with the quality

program• Educate key leaders (e.g., Board, physicians,

department heads)• Ensure a patient centered focus• Determine a value proposition that is different and

more desirable than competitor’s offering

10

w w w . e i d e b a i l l y . c o m

Service Line Programming

B. Analysis• Assess the market need:

• Selected clinical area• Total market demand• Current volumes among identified specialists• Determine direction (protect, grow, monitor, disinvest,

etc.)• Prioritization (which specialty area is programmed

first/why)• Secure/understand existing key data and volumes

11

w w w . e i d e b a i l l y . c o m

Service Line Programming

C. Program design for selected strategy• Team consists of both physicians and organizational

staff• Develop FOUR components:

1. Market position: correct service• Access• Reputation• Service• Quality metrics• Define patient/customer value proposition• Discuss market data, competitor profiles, and own

medical staff capabilities

12

2015 Eide Bailly CAH Conference

5

w w w . e i d e b a i l l y . c o m

Service Line Programming

2. Alignment strategy• What is the best legal structure that allows physicians to

participate;• Employment• Professional Service Agreement (PSA), administrative

processes• Medical Services Agreement (MSA), clinical processes• Co-management• Equity joint venture(s)• Medical directorship (compensated)• Quicker “through-put” and/or OR room turnover

13

w w w . e i d e b a i l l y . c o m

Service Line Programming

3. Patient experiences and processes• Every patient experience must meet brand promise• Coordinate desired patient and referring physician

expectations• Identify and improve key processes to deliver market

promise• Typical examples:

• Improved patient flow• Enhanced (clarify) communications among patients and

referring physicians• Eliminate barriers to enhanced quality care

4. Investments to support key processes or desired capacity• Determine and fix “gaps”

• Missing skill sets• Needed technology• Upgraded facilities

14

w w w . e i d e b a i l l y . c o m

Adding Services and Growth

• Continually challenge the work around the work being done by doctors and measure the opportunity coefficient

• With capacity in hand, focus on quality and standardize when applicable

• Understand supplier-customer relationships within the care organization

• Safely add work and grow the practice and service line without adding any harm

• Understand and measure your leading indicators to impact lagging and reportable indicators as your grow the service line

15

2015 Eide Bailly CAH Conference

6

w w w . e i d e b a i l l y . c o m

Other Service Line Considerations

• Service line retraction• Recent report said a Hospital has eliminated physicians

and nurses from doing work in a certain area if they drop below a certain volume.

• What about a service that continually loses money?

16

w w w . e i d e b a i l l y . c o m

Other Service Line Considerations

• Heavy capital investment – bricks and mortar• Capital market considerations• Community fundraising/support

17

w w w . e i d e b a i l l y . c o m

Other Service Line Considerations

• Delivery of Care Choices• CAHs need to carefully evaluate the needs of their

community, their total cost of patient care, their affiliations, and all factors influencing their ability to deliver services and make choices about what services they can and should provide.

• Community Health Needs Assessment Results• As a current requirement of non-profit CAHs today, the

data in this assessment is a crucial starting point to determine how your facility currently provides services and what the gaps are for care.

• As the ACA moves care to a “predict and prevent” standard, CAHs will also be responsible for the health of populations and not just individual patients.

18

2015 Eide Bailly CAH Conference

7

w w w . e i d e b a i l l y . c o m

Leadership Team

19

w w w . e i d e b a i l l y . c o m

Knowledgeable Leadership

• Best practice facilities understand the value of investing in education for their staff and leadership

• The environment is changing quickly• Yesterday’s strategies are yesterday’s strategies• Updated strategies necessary for the future

20

w w w . e i d e b a i l l y . c o m

Knowledgeable Leadership

• Freezes on education are a short term fix to a long range problem

• Create more problems than solutions

• Goal – Have the most educated team.

21

2015 Eide Bailly CAH Conference

8

w w w . e i d e b a i l l y . c o m

Proactive versus Reactive Leadership

• Continual improvement

• Proper planning and preparation• Identifying risks/trends

• Team-oriented• Problem-solving/decisions

22

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Quality/Value)

• How many know your Quality/HCAPS scores?• Readmission Rates• HACs• “Patients who reported YES, they would definitely

recommend the hospital.”

Value = Patient OutcomesCost per Patient

• More importantly – What are you doing to improve these scores?

23

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Budgets)

• Capital and operating budgets• Team approach to development

• Department leaders• Finance• Administration

• Accountability for budget• Monthly monitoring at departmental level• Explanation of variances• Solutions to resolve variances

24

2015 Eide Bailly CAH Conference

9

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Revenue Cycle)

• Increased challenges in Revenue Cycle

• Best Practice• Establishment of policies and procedures• Assignment of accountability

• Must manage the revenue cycle process• Not just lip service

25

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Revenue Cycle)

Revenue Recognition – Charge Capture/Coding

• Best practice facilities capture the revenues for services they are rendering

• Significant area of opportunity for most facilities• Common areas of confusion/lost revenues

• Outpatient Nursing Procedures• Pharmacy

26

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Revenue Cycle)

Timely Filing

• Why capture the charges and then not file them timely?• All Medicare claims must be filed within 1 year of

service• Other payors may vary

• 90 days• 30 days?

• Many facilities still missing the deadlines!• Monitor write-off’s• Separate account for tracking

27

2015 Eide Bailly CAH Conference

10

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Revenue Cycle)

Denial Management

• Advanced Beneficiary Notices / Medical Necessity• Need to manage denials• ABNs are not an option

• This is an issue of liability not a determination of proper care

28

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Revenue Cycle)

Denial Management

• Track Denials• Service• Physician• Staff performing service• Etc.

• Emergency Room services are not exempt• Increased frequency of denials• Monitor• Follow up with providers

29

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

• Best practice organizations monitor and manage productivity on an ongoing basis

• Gathering of data• Establishing of benchmarks• Monitoring of results

• Becoming more important• Affects total cost of population health• Patients becoming increasing engaged in managing their

costs

30

2015 Eide Bailly CAH Conference

11

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

• No organization is too small• Avoid “core-staffing” trap

• Acknowledge that every facility is different

• No benchmark is perfect

• Benchmarks are moving lower with adoption of tighter standards to recognize changes in the industry

31

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

• Various data sources• External

• Trade organizations• Research studies• Proprietary

• Internal• Detailed study• Historical data

32

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

• External data• Greatest benefit

• Externally derived• Based on best practices

• Greatest challenge• Difficult to access – costly• Methodology is often challenged

• How data is gathered• We are different

33

2015 Eide Bailly CAH Conference

12

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

• Internal data• Takes time to develop• Provides historical data and trending• Only includes your data• Recommend 5 year trending

• Only use productive hours

34

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

• Ultimately may use both internal and external data• External data to manage against peers• Internal data to monitor trends and reduce resistance• Example

• Benchmark = 10 hours per statistic

35

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

36

2015 Eide Bailly CAH Conference

13

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

37

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Labor Management)

• Labor management is about more than completing mathematical calculations

• Processes are key• Cannot usually reduce resource utilization without

updating the processes in the organization• Work smarter, not harder

• Most facilities would experience significantly better financial performance if they could just get the majority of their departments to operate at the best historical levels of performance

38

w w w . e i d e b a i l l y . c o m

Monitoring of Operations (Supply Chain Management)

• Purchasing through GPO• Sometimes direct negotiation may result in better price

• Drugs (340b) program

• Standardize products across the entity• Engage and education clinicians/practitioners• Quality products at lower cost

39

2015 Eide Bailly CAH Conference

14

w w w . e i d e b a i l l y . c o m

Physicians

• Successful CAHs understand the importance of the physician relationship

• Starts with understanding the correct number of mix of providers

• Moves to creating an alignment of vision and engagement of physicians

40

w w w . e i d e b a i l l y . c o m

Physicians – Demand Analysis

• Common trap• Add providers based on perceived need

• Other providers• Community• Internal

• Results• Too many providers to support available number of visits• Too view providers in needed specialties

41

w w w . e i d e b a i l l y . c o m

Physicians – Demand Analysis

42

Source: “Community-Based Physician Need Planning Methodologies Evolve” H.J. Simmons, III, MBA, CHE and John M. Harris, MBA; Healthcare Strategic Management, December 2004

2015 Eide Bailly CAH Conference

15

w w w . e i d e b a i l l y . c o m

Physicians – Demand Analysis

• Same process followed for specialties

• Demand is for all providers – not just your organization!

• Understanding the demand analysis can help hospital and physician leadership better understand the long term needs of the organization

• Recruitment• Succession planning

43

w w w . e i d e b a i l l y . c o m

Physicians – Alignment and Engagement

• Ultimately, physicians are the driver of patient relationships and services

• Patients chose physicians• Physicians refer to hospitals and other providers

• Covered lives with drive reimbursement and primary care providers will control covered lives

44

w w w . e i d e b a i l l y . c o m

Physicians

• Identify physician champion(s)• Key physician leader• Understands clinical and financial realities• Influential among other physicians• May or may not be the Chief of Staff/Medical Director• Number of champions will vary

• Size of organization• Skill sets of providers

45

2015 Eide Bailly CAH Conference

16

w w w . e i d e b a i l l y . c o m

Physicians

• Board involvement• Board position (if possible)• Gains greater appreciation of overall organizational

goals and issues• Facilitates discussion of physician perspective

46

w w w . e i d e b a i l l y . c o m

Physicians

• Accountability• Physician/hospital compact

• Expectations for both sides of relationship• Physician input

• Significant issues• Input does not equal decision authority• Improves decision making

• Timeliness of decision making and communication• Physicians expect timely decision making and

communication

47

w w w . e i d e b a i l l y . c o m

Physicians

• Accountability• Employed/contracted providers

• Operational expectations• Chart completion• Citizenship

• Financial expectations• Compensation methodology

• Production• Panel Size• Call• Quality• Patient satisfaction• Leadership• Cost control

48

2015 Eide Bailly CAH Conference

17

w w w . e i d e b a i l l y . c o m

Physicians

• Communicate• Communication is key to develop strong positive

relationships• Failure to properly communicate leads to distrust• Feedback and recognition

49

w w w . e i d e b a i l l y . c o m

Physicians

• Make them more successful• Professionally• Financially• Provide them leadership education• Streamline processes• Reduce barriers• Improve productivity

50

w w w . e i d e b a i l l y . c o m

Physicians

• Ultimate goal• If they are successful, you can be successful

51

2015 Eide Bailly CAH Conference

18

w w w . e i d e b a i l l y . c o m

Summary

• Top performing facilities do not make excuses• Great leaders are innovators and step outside the box• Tough decisions are made and implemented• Mistakes are made• Long term failure is not an option• Few of the strategies are complicated – commitment is

the key

52

Experience the Eide Bailly Difference

This presentation is presented with the understanding that the information contained does not constitute legal, accounting or other professional advice. It is not intended to be responsive to any individual situation or concerns, as the contents of this presentation are intended for general informational purposes only. Viewers are urged not to act upon the information contained in this presentation without first consulting competent legal, accounting or other professional advice regarding implications of a particular factual situation. Questions and additional information can be submitted to your Eide Bailly representative, or to the presenter of this session.

Questions?

53

Experience the Eide Bailly Difference

Ralph J. Llewellyn, CPA, CHFPPartnerrllewellyn@eidebailly.comwww.linkedin.com/in/ralphllewellyn701.239.8594

Thank You!