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Health Center Board Member
Workshop
MPCA
Finance 101
Jim Raschke, MBA
Finance Director
MidMichigan Community Health Services
Roscommon and Gladwin Counties, Michigan
More Concepts
Finance is a simple mathematical
equation
The financial reports are messengers
only, nothing more
Everything you do, every decision
you make, every efficiency you gain
or lose, will eventually impact your
finances
Still More Concepts
No number is an island
Relationships
You need to spend money to make
money in order to spend more
money in order to make more
money………
Make your financial statements make
sense to you
Even More Concepts
Benchmarking
To prior period performance
To industry standards
To what makes sense to you
Report Preparation
Frequency of report preparation
Should be first agenda item in
Management meetings
One More Concept
The Success of Your Clinic
Depends on the Success of
Your Financial Management
Practice Management Reports
Medical Statistical Report
For the practice
By individual provider
On a comparative basis
•Budget
•Year to Year
•Other practices (MGMA Median)
Clinical Activities Reports
Accounts Receivable Reports
Dashboard Indicator Report
Financial Statements
Income Statements
Balance Sheet
Cash Flow Statement
Cash Projections
Key Financial Ratios
Income Statements
Operating Revenue
Operating Expenses
Operating Income
Non-Operating Revenue
Total Income
Comparisons
•Budget
•Prior Year
•12 Month Trend
Income Statement
Year to Date
Actual Budget Prior Year
Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452
Provision for Adjustments (356,653) (397,936) (409,435)
Net Patient Service Revenue 1,607,138 1,500,449 1,204,017
Other Operating Revenue 464,047 452,755 439,698
Total Operating Revenue 2,071,185 1,953,204 1,643,714
Total Operating Expenses 2,035,416 1,908,265 1,598,732
Total Operating Income 35,769 44,938 44,983
Non-Operating Income 8,172 3,976 (1,407)
Total Income $43,941 $48,914 $43,576
Operating Margin 1.7% 2.3% 2.7%
Total Margin 2.1% 2.5% 2.7%
Operating Revenue #1
Gross Patient Service Revenue
Gross Patient Charges
Ancillary Services
Lab
Pharmacy
Radiology
Cost Report Settlements
Wrap-around payments
Total Gross Patient Service Revenue
Income Statement
Year to Date
Actual Budget Prior Year
Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452
Operating Revenue #2
Contractual Adjustments
• The difference between what you
charge and what you are allowed by
contract to collect
• Defined by agreement
• Medicare, Medicaid, other insurance
programs, sliding fee adjustments
• Bad Debt
Payor Mix
It is what it is, the mix of
payors!
Operating Revenue #3
Net Patient Service Revenue
Gross Patient Service Revenue
Minus
Contractual Adjustments
Income Statement
Year to Date
Actual Budget Prior Year
Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452
Provision for Adjustments (356,653) (397,936) (409,435)
Net Patient Service Revenue 1,607,138 1,500,449 1,204,017
Other Operating Revenue
Continuing Grants (330)
Rental Revenues
Miscellaneous Fees (Health Fair Screening,
Occupational Medicine)
Pop machine Revenue
Income Statement
Year to Date
Actual Budget Prior Year
Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452
Provision for Adjustments (356,653) (397,936) (409,435)
Net Patient Service Revenue 1,607,138 1,500,449 1,204,017
Other Operating Revenue 464,047 452,755 439,698
Total Operating Revenue 2,071,185 1,953,204 1,643,714
Operating Expenses
Personnel
• Salaries & Wages
• Benefits
Supplies
Contract Services
Utilities
Administration
Bad Debt Expense
Depreciation
Interest
Income Statement
Year to Date
Actual Budget Prior Year
Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452
Provision for Adjustments (356,653) (397,936) (409,435)
Net Patient Service Revenue 1,607,138 1,500,449 1,204,017
Other Operating Revenue 464,047 452,755 439,698
Total Operating Revenue 2,071,185 1,953,204 1,643,714
Total Operating Expenses 2,035,416 1,908,265 1,598,732
Operating Income
Operating Revenue Minus Operating Expenses
Income Statement
Year to Date
Actual Budget Prior Year
Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452
Provision for Adjustments (356,653) (397,936) (409,435)
Net Patient Service Revenue 1,607,138 1,500,449 1,204,017
Other Operating Revenue 464,047 452,755 439,698
Total Operating Revenue 2,071,185 1,953,204 1,643,714
Total Operating Expenses 2,035,416 1,908,265 1,598,732
Total Operating Income 35,769 44,938 44,983
Non-Operating Revenue
Interest Income
Donations
One-time Grant Revenues
Income from Investments
Income Statement
Year to Date
Actual Budget Prior Year
Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452
Provision for Adjustments (356,653) (397,936) (409,435)
Net Patient Service Revenue 1,607,138 1,500,449 1,204,017
Other Operating Revenue 464,047 452,755 439,698
Total Operating Revenue 2,071,185 1,953,204 1,643,714
Total Operating Expenses 2,035,416 1,908,265 1,598,732
Total Operating Income 35,769 44,938 44,983
Non-Operating Income 8,172 3,976 (1,407)
Net Income
All Revenues Minus All Expenses
Income Statement
Year to Date
Actual Budget Prior Year
Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452
Provision for Adjustments (356,653) (397,936) (409,435)
Net Patient Service Revenue 1,607,138 1,500,449 1,204,017
Other Operating Revenue 464,047 452,755 439,698
Total Operating Revenue 2,071,185 1,953,204 1,643,714
Total Operating Expenses 2,035,416 1,908,265 1,598,732
Total Operating Income 35,769 44,938 44,983
Non-Operating Income 8,172 3,976 (1,407)
Total Income $43,941 $48,914 $43,576
Operating Margin 1.7% 2.3% 2.7%
Total Margin 2.1% 2.5% 2.7%
Balance Sheet
Assets
•Current Assets
•Property and Equipment
•Other
Liabilities and Fund Balance
•Current Liabilities
•Long-Term Liabilities
•Fund Balance (Net Assets)
Balance Sheet
June, 2006 May, 2006 December, 2005
Assets
Cash $697,065 $765,073 $749,766
Net Accounts Receivable 196,960 203,147 184,154
Other Current Assets 407,083 452,382 474,797
Total Current Assets 1,301,109 1,420,603 1,408,717
Net Property & Equipment 2,914,251 2,851,830 2,872,338
Other Assets 9,151 9,389 10,579
Total Assets $4,224,511 $4,281,821 $4,291,634
Liabilities and Net Assets
Current Liabilities $669,939 $741,581 $710,766
Other Liabilities 1,293,945 1,312,846 1,405,929
Total Liabilities 1,963,884 2,054,428 2,116,695
Net Assets 2,260,627 2,227,394 2,174,939
Total Liabilities and Net Assets $4,224,511 $4,281,821 $4,291,634
Cash Flow Statement
Impact of Current Operations
Property and Equipment
Financing Activity
Cash Flow Projections
Beginning cash balance
Impact of current and projected Operations
Add back non-cash items - depreciation
Subtract projected capital outlays and
payments on principal
Twelve months
The Numbers
Gross Collection Percentage
Net Collection Percentage
Days in A/R
A/R in Excess of 90 Days Old
Clinical Encounters
This year better than last year?
Gross Collection Percentage
Gross Patient Service Revenue (GPSR)
Patient Charges
Capitation Payments
Cost Report Settlements
Ancillary Services
Contractual Adjustments (CA)
Third Part Adjustments
Sliding Fee Adjustments
GPSR minus CA = Net Patient Service Revenue
Net Collection Percentage
All cash collected divided by all collectible
charges (Net Patient Service Revenue)
Should be 90% or higher for FQHCs
Days in Accounts Receivable
(Gross Pt A/R /Gross Pt Revenue) * 365
Should be below 45.0 Days
(Net Pt A/R / Net Pt Revenue) * 365
Should be below 30.0 Days
Accounts Receivable > 90 days
Accounts Receivable over 90 days divided
by total Accounts Receivable
Should be less than 20% of total
Clinical Encounters
By total clinic
By provider
Current period and year-to-date
Trends
By CPT codes
This Year Better Than Last Year
Compare all categories to prior year
performance
Looks at current period as well as year-to-
date
Always, always, always look at twelve
month trends
Six Key Things to Watch
Number of Encounters
Operating Income (or Loss)
Accounts Receivable Measures (days in AR,
gross and net, payor mix, denial rates)
Cash (days cash on hand, daily collections)
LTD to Capital
FTEs, particularly FTEs per encounter
Number of Encounters
Operating Income (or Loss)
Accounts Receivable Measures (days in AR,
gross and net, payor mix, denial rates)
Cash (days cash on hand, daily collections)
LTD to Capital
FTEs, particularly FTEs per encounter
Board acts as a Partner
Trusts and Supports the Management Team
Functions with the Best Interests of the
Clinic in Mind at ALL times
Stays Informed
Stays Active
Role of the Board
Regarding Finances
