Arizona Rural Hospital Flexibility Program

Using Flex Monitoring Team (FMT)Financial Indicator Reports

to Support Arizona CAHsNational Conference of State Flex Programs

July 11, 2012

Kevin Driesen, PhD & Howard Eng, DrPHArizona Rural Hospital Flexibility Program

Arizona-Flex

FMT Financial & Operational Indicators Total Margin

Profitability Cash Flow Margin Return on Equity Operating Margin

Current ratioLiquidity Days Cash on Hand

Net Days Revenue in A/R Equity Financing

Capital Structure Debt Service Coverage LT Debt to Capitalization

O/P Revenue to Total RevenueRevenue Patient Deductions

Medicare I/P Payer Mix Medicare O/P Payer Mix Medicare O/P Cost to Charge Medicare Revenue per Day

Utilization ADC Swing-SNF Beds ADC Acute Beds

ProfitabilityAbility to generate financial return required to replace assets, meet increases in service demands, and compensate investors

Liquidity Ability to meet cash obligations in timely manner

Capital Structure Extent of debt and equity financing

Revenue Amount and mix of different sources of revenue

Cost Amount and mix of different types of cost

Utilization Extent to which beds are fully occupied

What do the indicators mean?

Proposed Outpatient Expansion

Primary Diagnosis (Top 20)

$ Claim Total Charge Amount

Claim Payment

# Patients

# Claims

Avg. $ Charge / Pt.

Avg. $ Payment Due Provider

Avg. # Annual Visits / Pt.

Use in Arizona• Support hospital management

– Reports sent to 11/14 AZ-CAH, CFOs & CEOs– Useful for Board members– Peer, state, and national comparisons– Data limits

• Information is 2-years-old, limits utility for real-time management• Some missing and unlikely values

• Support AZ-Flex program development— Reports printed & sent— Webinar with Sheps Center Faculty— Contact distressed hospitals (2012)— Guidance for site visits— Identify distressed hospitals (3), target resources— Identify Arizona best practice hospitals— Track by year, distribute compendium at annual PI Summit

• Support state advocacy

Distress Model Predictions

• Three AZ-CAHs distressed– Within 6 months

• One hospital laid off 21 employees• One hospital CEO fired• One CAH-based LTC closed

Distress Model – Predictive Value

AZ-CAH Distressed

FMT Predicted No Yes

No 6 2

Yes 0 3

Distressed Hospital: Days in Accounts Receivable

Distressed Hospital: Days Cash-on-Hand

Benchmark to AZ-CAH Best Practice:Days in Accounts Receivable

63

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

10

20

30

40

50

60

70

80

90

100

Days

in A

R

42

AZ-US Comparison: Total Margin, 2004-2009

2004 2005 2006 2007 2008 20090

1

2

3

4

5

6

7

8

1.92.6

3.6 3.6

2.4 1.9

6.7

3.9

7.4 7.4

5.9

0.5

U.S. Median CAH AZ Median CAH

Tota

l Mer

gin

(%)

Source: Cecil G. Sheps Center CAH Financial Indicators Reports

AZ-US Comparison: Days Cash on Hand

2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

48.7

53 54.659.7

61 65.9

54.3

44.849.8

58.754.4

40.6

U.S. Median CAH AZ Median CAH

Day

s Cas

h on

Han

d (#

)

Source: Cecil G. Sheps Center CAH Financial Indicators Reports

AZ-Flex Program Evaluation:$ Margin & # Licensure Citations

-10 -8 -6 -4 -2 0 2 4 6 8 100

5

10

15

20

25

30

35

40

45

50

Total Margin

# Ci

tatio

ns

AZ-Flex Program Evaluation:CAH Negative Margin

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Negative Margin

Thank you!

Kevin Driesen, PhD & Howard Eng, DrPHArizona Rural Hospital Flexibility Program

kdriesen@email.arizona.edu aeng@ahsc.arizona.edu (520) 626-5837 (520) 626-5840

Arizona Rural Hospital Flexibility Program