Demystifying a “Risk-focused Surveillance Approach” to Establishing and Monitoring Standards for Sound Systems of Financial Management 10 th 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 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 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 A Measure Written agreements with entities from which the health department purchases, or delegates services, programs, interventions Documentation Contracts/MOUs/MOAs

PHAB Standards A Measure Financial management system Documentation Approved health department budget Financial reports

PHAB Standards 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