RSM McGladrey Inc. is a member firm of RSM International – an affiliation of separate and independent legal entities. BUDGETING FOR NEW ACCESS POINTS IN HIGH POVERTY COUNTIES Hosted By: National Association of Community Health Centers Gil Bernhard, CPA (212) April 19, 2007

2 Operating Budget (Scope of Project) Patient Revenue = Program Income Federal Grant Dollars State and Local Contracts & Grants Other Patient Revenue = Program Income Federal Grant Dollars State and Local Contracts & Grants Other TOTAL BUDGET CONCEPT HEALTH CENTER – SINGLE BRHC GRANTEE TOTAL BUDGET CONCEPT HEALTH CENTER – SINGLE BRHC GRANTEE Hosted by: National Association of Community Health Centers, Inc.

3 Patient Revenue = Program Income Federal Grant Dollars State and Local Contracts & Grants Other Section 330(e) Operations Federal Grant Dollars Patient Revenue = Program Income Section 330(h) Operations Other Federal Grant Dollars State and Local Contracts & Grants Patient Revenue = Program Income Ryan White Title III b Operations Other State and Local Contracts & Grants TOTAL BUDGET CONCEPT HEALTH CENTER – MULTIPLE BPHC GRANTEE Operating Budget (Scope of Project) Single Grant Application Hosted by: National Association of Community Health Centers, Inc.

4 Preparation of Budget(s): –330 grant applications must submit a balance budget (Revenues = Expenses) –Operational budget = Surplus ? –FQHC look-a-like application (PIN ) must be able to demonstrate revenues are 90% of expenses –Change in scope (PIN ) demonstrate financially viable Hosted by: National Association of Community Health Centers, Inc. BUDGETING ISSUES

5  Budget presentation should include the following forms: BPHC funding request summary (Form 1-B) PHS : Form SF 424A, Sections A-F –Section C – Non Federal Resources and Section D - Forecasted Cash Needs are not applicable Detailed budget justification (line item budget and narrative) for each 12-month period requested for federal funding Proposed staff profile for each 12 month period requested (Form 2) Income analysis format for each 12 month period requested (Form 3) Note: As of 2007 grant applications and could change in the future. Please refer to most recent guidance available. Hosted by: National Association of Community Health Centers, Inc. 330 GRANT APPLICATIONS

6 Keys to writing line item budget: –Justification Amounts Should Agree to Budget Forms –Be Specific Regarding Each Line of the Budget (Revenue and Expenses - See example in PIN): If Variable Costs, Describe Calculation of Cost (e.g., Supplies Cost Per Visit X Visit) If Fixed Cost, Describe Cost (e.g., Rent – As Per Lease Agreement) Note: As of 2007 grant applications and could change in the future. Please refer to most recent guidance available. Hosted by: National Association of Community Health Centers, Inc. 330 GRANT APPLICATIONS

7 Budget Narrative – Additional information and detail may be provided in narrative form, as needed.  Cost effectiveness (Cost/Visit, Cost/User, Grant $ per user)  Users  Visits If a capital managed care program is included, the applicant should: describe each current capitated managed care arrangement, identifying the services for which the applicant is at risk; provide the current number of enrollees and support for the projected number of enrollees included in the total user count In addition, if there are budget items for which costs are shared with other programs (e.g. HRSA programs or an independent home health program administered by the applicant organization), the basis for the allocation of costs between federally supported programs and other independent programs must be explained. Note: As of 2007 grant applications and could change in the future. Please refer to most recent guidance available. Hosted by: National Association of Community Health Centers, Inc. 330 GRANT APPLICATIONS

8 Budgets for Multiple Years After Year 1 Continue to budget conservatively Consider any contractual agreements (Union Contacts) for impact on salaries and fringe benefits If organization has a strategic plan – it should be factored into budget No change in scope can be factored into 330 grant application budgets Consider new contracts being received in the near future Consider cost of living adjustments or inflationary factors on expenses Any variances greater than 5% should be explained Note: As of 2007 grant applications and could change in the future. Please refer to most recent guidance available. Hosted by: National Association of Community Health Centers, Inc. 330 GRANT APPLICATIONS AND BUDGETING

9 Make Certain the Budget Balances!!!!! –Review Patient Revenue Factors –Review Staffing BE CONSERVATIVE WHEN PROJECTING PATIENT SERVICES REVENUE!!!! (If overly aggressive projection are used, an unobligated balance (UOB -  ) of Federal funds instead of Estimated Program Income (EPI - ) could result when the Financial Status Report (FSR) is filed) Hosted by: National Association of Community Health Centers, Inc. 330 GRANT APPLICATIONS

10 SUPPORT REQUESTED 1.Applicant demonstrates that the budget presentation (an annualized budget for each 12 month period for which funding is requested of the new project period) is appropriate and reasonable in terms of: a. The level of requested Federal Section 330 grant funds versus total budget for each year; b. The total resources required to achieve the goals and objectives of the applicant’s proposed service delivery plan (i.e., total project budget); c. The maximization of non-grant revenue relative to the proposed plan and other Federal/State/Local/in-kind resources applied to the project; d. The projected patient income is reasonable based on the patient mix and number of projected users and encounters; e. The number of proposed users and encounters; f. The total cost per user and encounter; g. The total federal section 330 grant dollars per user; and h. The one-time minor capital costs. Hosted by: National Association of Community Health Centers, Inc. 330 GRANT APPLICATIONS

11 SUPPORT REQUESTED (continued) 2. Applicant demonstrates that the Federal grant funds requested are being used to (a) leverage other sources of funding and (b) expand services and capacity to provide services. If the applicant is purchasing/taking over/assuming a clinic(s) operation as part of the proposal, the applicant must demonstrate the level of continued commitment and collaboration of the other organization to assure the viability of the clinic operation. 3. Applicant demonstrates that the Business Plan goals and objectives, appropriate financial planning in the development of the proposal and for the long-term success of the project. 4. Applicant describes how the proposed health center new access point is a cost-effective approach to meeting the primary care needs of the target population given the health care needs of the target population and the level of health care resources currently available in the community. Note: As of 2007 grant applications and could change in the future. Please refer to most recent guidance available. Hosted by: National Association of Community Health Centers, Inc. 330 GRANT APPLICATIONS

12 Other Key Points / Coordination Needed With Other Sections of Grant Application: –Run Budget through Uniform Data System (UDS) as a Check of Compliance with Eight Performance Measures –Business and Health Plan –Improvement Proposal (Goals & Objectives) –Address Findings and Issues (Audit & Performance Reviews) Note: As of 2007 grant applications and could change in the future. Please refer to most recent guidance available. Hosted by: National Association of Community Health Centers, Inc. 330 GRANT APPLICATIONS

13 Budgeted Revenue CHC 1 CHC 2 CHC 3 Federal grant $1,200,000 $1,200,000 $1,200,000 State, Local & Other 1,800,000 1,800,000 1,800,000 Estimated program income 4,500,000 4,500,000 4,500,000 Total Budget $7,500,000 $7,500,000 $7,500,000 Actual Revenue Federal grant $1,200,000 $1,200,000 $1,200,000 State, Local & Other 1,800,000 1,700,000 2,000,000 Program income (P.I.) 4,500,000 4,600,000 5,000,000 Total Outlays ($7,400,000) ($7,300,000) ($7,900,000) Excess revenue over outlays $ 100,000 $ 200,000 $ 300,000 Order of Dollars Spent 1) State, Local & Other $1,800,000 $1,700,000 $2,000,000 2) P.I. up to budget $4,500,000 4,500,000 4,500,000 3) Federal grant 1,100,000 1,100,000 1,200,000 4) P.I ,000 Total Expenditures $7,400,000 $7,300,000 $7,900,000 Unspent Dollars Excess Program Income --- $100,000 $300,000 Unobligated Federal Grants $100,000 $100, Total Unspent Dollars 100,000 $200,000 $300,000 Hosted by: National Association of Community Health Centers, Inc. FSR – EPI vs UOB

14 TOTAL BUDGET – Year One Estimated Projected Users 3,000 Estimated User Utilization 4.0 Total Expected Projected Visits 12,000 Cost per Visit $ Operating Expenses 1,599,840 One-Time Capital Cost 150,000 Total Cost $1,749,840 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT BUDGET SUMMARY – YEAR ONE

15 Sample Staffing Budget – Year One Employee Name Position FTE Salary Dr. Steven Smith Family Practice 1.00 $125,000 Dr. Maria Sanchez Family Practice ,000 Dr. John Walsh Family Practice.50 65,000 Bill Jones Nurse Prac ,000 Joan Ross RN ,000 Bill Gregg LPN ,000 Marie Ryan Medical Assistant ,000 John Cooper Front Desk/Reception ,000 John Schwartz Biller ,000 Raul Hernandez Outreach Coor ,000 Total $620,000 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

16 Budgeting of Expenditures – Year One Salaries = $ 620,000 Fringe Benefits (30%) = 186,000 Supplies ($15 per visit) = 180,000 One-Time Capital = 150,000 Other = 613,840 Total Expenses $1,749,840 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

17 Calculation of Projected Visits – Year One Budgeted Projected EmployeePosition FTE Visits Visits Dr. S. SmithFamily Practice ,950 3,950 Dr. M. SanchezFamily Practice ,950 3,950 Dr. J. WalshFamily Practice.50 3,950 1,975 Bill JonesNurse Prac ,125 2,125 Total Visits 12,000 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

18 NEW ACCESS POINT GRANT – BUDGETING Payor MCD# MCR S/P* OTP ** % % # Visits 8,400 1,200 12,000 Rate $120 $85 Var Coll. % 95% 100% 50% Revenues $957, ,000 4,800 35,440 $1,099,840 #Includes wraparound and Medicaid Managed Care visits at PPS rates. All MCD managed care patients are budgeted at PPS rate. *Average collection $8.00** Average collection $59.06 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

19 Projected Budget – Year One BPHC Grant (3,000 $150)$450,000 BPHC Grant Capital component 150,000 State, Local, and Other 50,000 Program Income 1,099,840 Total projected revenue $1,749,840 Total Projected Expenses $1,749,840 Excess of Projected Expenses Over Projected Revenue $ 0*** *** CHCs must always submit a balanced budget when submitting a grant application. Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

20 TOTAL BUDGET – Year Two Estimated Projected Users * 4,000 Estimated User Utilization 3.50 Total Additional Visits14,000 Cost per Visit $ Total Cost $1,680,000 (3,000 users from year 1+an additional 1,000 new users for year 2) Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

21 Sample Staffing Budget – Year Two Employee NamePosition FTE Salary ** Dr. Steven Smith Family Practice 1.00 $128,750 Dr. Maria SanchezFamily Practice ,050 Dr. John WalshFamily Practice * ,000 Bill JonesNurse Prac ,400 Joan RossRN ,500 Bill GreggLPN ,200 Marie RyanMedical Assistant ,900 John CooperFront Desk/Reception ,750 John Schwartz Biller ,900 Raul HernandezOutreach Coor ,200 Total$706,650 * Additional.5 FTE ** Includes 3% COLA Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

22 Budgeting of Expenditures – Year Two Salaries = $ 706,650 Fringe Benefits (30%) = 211,995 Supplies ($15 per visit) = 227,475 Other = 533,880 Total Expenses $1,680,000 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

23 Calculation of Projected Visits – Year Two Budgeted Projected EmployeePositionFTE Visits Visits Dr. S. SmithFamily Practice1.00 4,000 4,000 Dr. M. SanchezFamily Practice ,000 4,000 Dr. J. WalshFamily Practice ,000 4,000 Bill JonesNurse Prac ,000 2,000 Total Visits 14,000 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT– BUDGETING

24 Payor MCD# MCR S/P* OTP** % % # Visits 7,140 1,400 4,060 1,400 14,000 Rate $124 $87 Var Coll. % 95% 50% 65% Revenues $841, ,710 18,270 54,928 $1,030,000 #Includes wraparound and Medicaid Managed Care visits at PPS rates. All MCD managed care patients are budgeted at PPS rate. *Average collection $9.00** Average collection $60.00 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT– BUDGETING – Year Two

25 Projected Budget– Year Two BPHC Grant (4,000 $150.00) $600,000 State, local, and Other 50,000 Program Income 1,030,000 Total projected revenue $1,680,000 Total projected expenses $1,680,000 Excess of Projected Expenses Over Projected Revenue $ 0*** *** CHCs must always submit a balanced budget when submitting a grant application. Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT– BUDGETING

26 TOTAL BUDGET – Year Three Estimated Projected Users * 5,000 Estimated User Utilization 3.00 Total Additional Visits 15,000 Cost per Visit $ Total Cost $1,800,000 NEW ACCESS POINT GRANT – BUDGETING (3,000 users from year 1+an additional 1,000 users for year 2 + 1,000 new users for year 3) Hosted by: National Association of Community Health Centers, Inc.

27 Sample Staffing Budget – Year Three Employee NamePosition FTE Salary * Dr. Steven Smith Family Practice 1.00$132,615 Dr. Maria SanchezFamily Practice ,220 Dr. John WalshFamily Practice ,050 Bill JonesNurse Prac ,870 Joan RossRN ,045 Bill GreggLPN ,435 Marie RyanMedical Assistant ,825 John CooperFront Desk/Reception ,525 John Schwartz Biller ,825 Raul HernandezOutreach Coor ,435 Total$727,845 NEW ACCESS POINT GRANT – BUDGETING Includes 3% COLA Hosted by: National Association of Community Health Centers, Inc.

28 Budgeting of Expenditures – Year Three Salaries = $ 727,845 Fringe Benefits (30%)= 218,354 Supplies ($15 per visit)= 225,000 Other = 628,801 Total Expenses $1,800,000 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT – BUDGETING

29 Calculation of Projected Visits – Year Three Budgeted Projected EmployeePositionFTEVisits Visits Dr. S. SmithFamily Practice1.00 4,200 4,200 Dr. M. SanchezFamily Practice ,200 4,200 Dr. J. WalshFamily Practice ,200 4,200 Bill JonesNurse Prac ,400 2,400 Total Visits 15,000 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT– BUDGETING

30 Payor MCD# MCR S/P* OTP** % % # Visits 7,200 2,250 4,050 1,500 15,000 Rate $128 $89 Var Coll. % 97% 95% 50% Revenues $893, ,238 20,250 45,560 $1,150,000 #Includes wraparound and Medicaid Managed Care visits at PPS rates. All MCD managed care patients are budgeted at PPS rate. *Average collection $10.00** Average collection $60.75 Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT– BUDGETING – Year Three

31 Projected Budget– Year Three BPHC Grant (5,000 $120)$600,000** State, Local and Other 50,000 Program Income 1,150,000 Total projected revenue $1,800,000 Total projected expenses $1,800,000 Excess of Projected Expenses Over Projected Revenue $ 0*** ** Award capped at Dollar amount threshold *** CHCs must always submit a balanced budget when submitting a grant application. Note: PPS Rate $128 Cost per Visit 120 Difference $ 8 * 7,500 visits = $60,000 – Additional Medicaid income generated to cover services for the uninsured. Hosted by: National Association of Community Health Centers, Inc. NEW ACCESS POINT GRANT– BUDGETING