1. © Wipfli LLP 0 Date or subtitle © Wipfli LLP Jeff Bramschreiber, CPA, Partner Wipfli Health Care Practice Iowa Association of Rural Health Clinics Benchmark Reporting for Improved Performance October 1, 2014 2:45 p.m. – 3:30 p.m.

2. © Wipfli LLP 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. 1 Summary

3. © Wipfli LLP Presentation Overview I.Identifying Costs in the RHC II. Cost Management Techniques III.Making Cost Comparisons IV.RHC Benchmark Report V.Summary RHC Cost Management and Benchmarking 2

4. © Wipfli LLP I. Identifying Costs in the RHC 3

5. © Wipfli LLP 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. 4 Identifying Costs in the RHC

6. © Wipfli LLP 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. 5 Identifying Costs in the RHC

7. © Wipfli LLP 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). 6 Identifying Costs in the RHC

8. © Wipfli LLP ABC Clinic Summarized Income Statement 7 Identifying Costs in the RHC

9. © Wipfli LLP ABC Clinic Summarized Expenses 8 Identifying Costs in the RHC

10. © Wipfli LLP Improving Cost Data (After) (Before) 9 Identifying Costs in the RHC

11. © Wipfli LLP Improving Cost Data (After) 10 Identifying Costs in the RHC

12. © Wipfli LLP II. Cost Management Techniques 11

13. © Wipfli LLP 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. 12 Cost Management Techniques

14. © Wipfli LLP 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. 13 Cost Management Techniques

15. © Wipfli LLP 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. 14 Cost Management Techniques

16. © Wipfli LLP 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. 15 Cost Management Techniques

17. © Wipfli LLP Staffing Example 16 Cost Management Techniques

18. © Wipfli LLP Other Staffing Information (from NARHC list serve): 17 Cost Management Techniques “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.”

19. © Wipfli LLP Other Staffing Information (from NARHC list serve): 18 Cost Management Techniques “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.”

20. © Wipfli LLP Physician Example 19 Cost Management Techniques

21. © Wipfli LLP III. Making Cost Comparisons 20

22. © Wipfli LLP 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. 21 Making Cost Comparisons

23. © Wipfli LLP MGMA Reported Overhead Percentages (median) Source: Medical Group Management Association Cost Surveys. 22 Making Cost Comparisons

24. © Wipfli LLP MGMA Reported Overhead Percentages (median) Source: Medical Group Management Association Cost Surveys. 23 Making Cost Comparisons

25. © Wipfli LLP MGMA Reported Staffing FTEs and Cost Percentages (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. 24 Making Cost Comparisons

26. © Wipfli LLP RHC Benchmark Report © 25

27. © Wipfli LLP 26 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-for- Order/CostReports/index.html

28. © Wipfli LLP 27 Organization of Comparative RHC Cost Data Hospital- Based RHCs 2010 Audited (519*) 2011 Filed/Audited (930*) 2012 Filed (944*) Independent RHCs 2010 Audited (1,389*) 2011 Filed/Audited (1,360*) 2012 Filed (1,083*) * Reporting entities may represent multiple RHCs due to consolidated cost reporting.

29. © Wipfli LLP Sample RHC Cost Report Comparisons 28 Making Productivity Comparisons

30. © Wipfli LLP Sample RHC Cost Report Comparisons 29 Making Cost Comparisons

31. © Wipfli LLP Sample RHC Cost Report Comparisons (continued) 30 Making Cost Comparisons

32. © Wipfli LLP 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. 31 Cost Management Summary – Again!

33. © Wipfli LLP Questions ? 32

34. © Wipfli LLP 33

35. © Wipfli LLP Contacts if you have questions 34 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

36. © Wipfli LLP 35 www.wipfli.com