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Activity Based Cost Accounting and Payment Bundling
Agenda
• Introduction of Speakers
• Fast Facts about Jewish Senior Life/Jewish Home of Rochester
• Determining the need and uses for an Activity Based Cost Accounting System
• Overview of the system
• Factors considered, informational needs and challenges faced during implementation
• Current utilization & the future!
Speakers
• Travis Masonis – Jewish Senior Life - CIO
• Michael Ryan- Cost Flex – Vice President
• Patricia Hughes – Jewish Senior Life - Assistant Director of Finance
• Debbie McIlveen – Jewish Senior Life – CFO
Jewish Senior Life Background
• Long Term Care facility with 362 Beds with 68 Transitional Care beds (TCP)
• 84 Medical Adult Day Care slots
• CCRC with 90 independent living apartments; 60 Assisted Living units and 18 Memory Care beds.
• Outpatient Rehab, Physician House Calls program
• Companion Services and other community services
Please note the cost accounting system is currently utilized in the Jewish Home (nursing home) only at the present time.
Rationale
• Shift from Fee-For-Service to Payment Bundling• Preparation to negotiate Post-Acute portion of a bundle
• Utilization of historical data to understand costs based on diagnoses and other demographic data• Other operational efficiencies and analysis around non-bundled
patients
• Mitigation of uncertainty in costs and risk.
The Requirements
• A company willing to provide SNF friendly pricing
• A software company whose business IS healthcare cost accounting and understood our needs
• A product that was either built for Long Term/Post Acute Care (LTPAC) or could be modified to work with LTPAC.
• There were limited options that would fit our needs.
• Need to interface with existing billing, clinical and general ledger software packages.
The Selection Process
• Management determined what data was desired.
• Staff involved in the decision• Clinical, Financial, IT, EMR/Billing software vendors
• Interviewed a few companies
• Determine ability to interface with existing software packages
• Took over six months to identify the firm
• Final selection – Cost Flex
Necessary Electronic Information
• This information comes primarily from the Billing/Census systems• Patient Charges
• Includes charge codes, descriptions, quantities, $ amounts, posting and service dates
• Patient Cash• Posting dates, transaction codes, amounts
• Patient Adjustments
• Patient Demographics• RUG, Age, Sex, Financial Class, Insurance, diagnoses codes, procedure
codes
Challenges
• Finding the right solution
• Activity Based Cost Accounting was relatively unexplored in post-acute care
• Cost of the systems and implementation
• MS-DRG availability
• It has been difficult to obtain MS-DRG information on discharged hospital patients.
• Used hospital discharge diagnosis/post-acute admitting diagnosis instead, to evaluate patient costs.
• Using a hospital centric system in Post Acute Care
• RUGS, per diem room charges, RVU’s
Challenges (cont.)
• What data is useful to us?
• Do we look at cost per RUG? Cost per diagnosis? Cost per diagnosis with comorbidities? Are outliers skewing the results?
• The more historical data you have, the better you are able to predict and create cost trends.
• Was historical data captured the way we needed it in our current systems?
• ICD10 conversion
How Cost Accounting Works - Concepts
1. Your Expenses - money you spent that month - are your Costs
2. Cost Accounting is simply taking knownExpenses (salaries, supplies, etc) and restating them on known patients you cared for.
Concepts of Patient Costing
1. The cost of a patient is simply the sum of the cost of things we provided to the patient
2. To cost a patient we will cost the “things we did for them” – room and bed, supplies consumed, drugs consumed, therapy services, medical services, nursing, etc.
3. Maxim: To cost it you must count it
CostFlex is a Monthly Costing Process
GL: Jan
GL: Feb
GL: Mar
GL: Apr
GL: May
GL: Jun
GL: Jul
GL: Aug
GL: Oct
GL: Sep
GL: Dec
GL: Nov
WL: Jan
WL: Feb
WL: Mar
WL: Apr
WL: May
WL: Jul
WL: Jun
WL: Aug
WL: Oct
WL: Sep
WL: Dec
WL: Nov
Cost: Jan
Cost: Feb
Cost: Mar
Cost: Apr
Cost: May
Cost: Jul
Cost: Jun
Cost: Aug
Cost: Oct
Cost: Sep
Cost: Dec
Cost: Nov
Expenses:
Salaries, Supply $, Depreciation, ect.
Workload:
Room Charges, Supplies used Drugs issued, etc
Costing Application
Concept: Costs change from month to month
500600
700800
9001000
2006
0320
0605
2006
0720
0609
2006
1120
0701
2007
0320
0705
2007
0720
0709
2007
11
Months ----->
Co
st (
$)
Monthly
Due to changes in expenses and workload / census, The costs for an activity can change from month to month
500600700
800900
100020
0603
2006
0520
0607
2006
0920
0611
2007
0120
0703
2007
0520
0707
2007
0920
0711
Months ----->
Co
st (
$)
Monthly
3 Month Avg
Concept: Costs can be smoothed for patient
reporting (i.e. apply a 3 month weighted average)
Costs are “smoothed” but trends are still visible for management. Note: cost trending up!
Annual Costing just gives 1 number per year
GL: Jan
GL: Feb
GL: Mar
GL: Apr
GL: May
GL: Jun
GL: Jul
GL: Aug
GL: Oct
GL: Sep
GL: Dec
GL: Nov
WL: Jan
WL: Feb
WL: Mar
WL: Apr
WL: May
WL: Jul
WL: Jun
WL: Aug
WL: Oct
WL: Sep
WL: Dec
WL: Nov
Costing ApplicationExpenses Workload
CostsJan – Dec
Gen. Ledger
Jan – DecWorkload
Jan – Dec
500
600700
800900
1000
2006
0320
0605
2006
0720
0609
2006
1120
0701
2007
0320
0705
2007
0720
0709
2007
11
Months ----->
Co
st (
$)
Monthly
Annual
- Costs hold consistent for 12 months at a time.- Management cannot see trends to take action on
Annual Costing vs. Monthly Costing
Knowing your Annual Cost of patients vs
the Monthly Cost is like knowing the Average
Depth of the lake vs how deep it is where
you are right now.
Considerations of LTC costing vs Hospital
Costing
1. Create patients by month for costing trends2. Attaching cash to correct “monthly patient”3. “Non Patient Cash” i.e. insurance settlements
can be large.4. Get more activities from other feeds in
organization (i.e. Labs, Pharmacy, Radiology)
System Setup
• Where does the data come from?• Billing software
• Accounting software
• Online purchasing software
• Invoice detail from third party vendors
• What do we do with all of this data?• All of the data is then uploaded into Cost Flex
• Each cost is stepped down from Nursing Home to Transitional Care Unit to Patient and allocated as a direct or indirect cost
• Reimbursement is then attached to the stay to calculate a gain or loss
Costs Accumulators
• Direct Costs – related to the care of the patient
• Nursing Labor
• Therapy Labor
• Medical Labor
• Pharmacy
• Lab
• Radiology
• Direct Supplies
• Indirect Costs – overhead costs stepped down to the patient
• Support departments
• Facility Costs – utilities
• Depreciation and Interest
Reimbursement
• Reimbursement• Direct payments
• Accounts receivable balance
• Allocation of overhead revenue (Contributions, discounts, etc)
• Allocates all costs and reimbursements at a daily level• Determines daily gain/loss that provides analytical tools for
admissions and nursing management
Report Utilization
• Developed a “team” to review the data on a monthly basis:• Clinical Coordinator from TCP• Finance Staff• Admissions Coordinator• Administrator
• Several iterations of the reports that we wanted to use
• What metrics to measure that will allow us to use this data strategically?
• Determine what will provide the most useful for our partners?
Operational Challenges• Not having a dedicated position for creating the reports and analyzing
the data. “Another thing” added to the to do list! Not being able to spend as much time on it as we would like.
• Developing financial and clinical understanding for the “other” side.• Not having enough historical data to really develop trends at this point• Trying to operationalize our findings – how do we change our practices
based on this.• Not real time….looking at things after the fact. But at least now we’re
looking at it. • Not being able to benchmark yet with other facilities only to ourselves.• Will be changing clinical and billing software…will require re-working all
of the systems.
Demographic Data Used
• Length of Stay
• Financial Class – actual payor
• Admitting source
• Discharge Source
• RUG score
• ICD Admitting Diagnosis
• Number of episodes/admissions during this stay
Sample Detailed Cost Information
LOS
Nurs ing
Labor
Therapy
Labor
Medical
Labor Lab Radiology Pharmacy
Direct
Suppl ies Indirect Total Costs Dai ly Cost
Total
Reimb
Dai ly
Reimb
Gain /
(Loss)
Dai ly Gain /
(Loss)
20 $ 2,733 $ 1,534 $ 671 $ 54 $ - $ 387 $ 1,085 $ 4,729 $ 11,193 $ 559.66 $ 11,417 $570.83 $ 223 $ 11.16
17 2,278 1,256 268 66 79 560 568 3,842 8,918 524.59 9,187 540.42 269 15.84
31 4,544 2,908 254 18 55 382 838 8,975 17,974 579.81 18,323 591.08 349 11.26
14 1,848 984 287 77 - 191 539 3,137 7,062 504.43 7,554 539.60 492 35.17
Sample of Executive Summary Report
2015 / 2016
Month Average LOS Average Cost/Day Average Reimb/Day
Average
Gain/(Loss)
/Day
Average
Gain/Loss
/Stay
October 24 547.05$ 505.86$ (41.19)$ (901)$
November 21 472.36 489.78 17.42 486
December 21 467.42 477.37 9.95 707
January 22 475.67 483.87 8.20 174
February 26 549.38 475.63 (73.75) (138)
March 22 511.18 513.18 2.00 145
April
May
June
July
August
September
Rolling Average 23 503.84$ 490.95$ (12.90)$ 79$
Trends for Overall Gains/Losses
Monthly Review Also Includes:
• Top Five Losses and Top Five Gains for each month. • Discuss the impact of comorbidities…what caused each of the results for these 10
patients. What can we learn; what could we have done differently?
• Look at the average LOS, Cost, Reimbursement and Gain/Loss for Hospital Readmission Penalty Dx’s:• CHF• Stroke • Pneumonia• COPD• Joints• Sepsis What would our colleagues at the hospitals find interesting or helpful about this data?
Where do we go from here?• We need to continue to analyze and operationalize our data• As we have more historical data will be able to share the results with
our partners• Begin to share our findings and accomplishments with our partners in
preparation for bundling• More informed decisions on our admission practices• Possibly utilize the data for budgeting by nursing unit• Look at the implementation of the system in areas such as LTC and
Adult Day Care• Looking at adding some additional hours to support this system as we
move forward.
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