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Hospice Budgeting with Benchmarks: Why Do It?

Continuing Education

The planners and presenters of this activity disclose no relevant relationships with any commercial entity pertaining to the content.

• Nurse attendees may earn a maximum of 15.5 contact hours• Accountant attendees can earn up to 18.9 CPEs

Accreditation StatementNAHC is accredited as a provider of continuing nursing education by the American Nurses Credentialing Center’s Commission on Accreditation.

NAHC is [also] approved by the California Board of Registered Nursing, provider #10810.__________________________________________________________________________________________________________________________________________________________________

Commercial Support provided by Brightree, Excel Health Group, Healthcare Provider Solutions, and SimioneHealthcare Consultants.

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Objectives• Identify direct and indirect costs and understand the relationship

of costs to multiple reimbursement models.

• Gain a better understanding of non-clinical and back office costs and become able to evaluate operational cost structure compared to industry benchmarks.

• Utilize industry benchmarks to evaluate the operating costs and revenue.

• Create buy in from staff and management on cost efficiency objectives.

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What is a Benchmark?• A Standard or a set of standards, used as a point of reference for

evaluating performance or level of quality.

• Source: BusinessDictionary.com

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Data Drives Solid Financial Decisions

Limitations of Performance DataA thermometer reading would have little value as a measure to your health.If you didn’t know 98.6 is the normal temperature.• Deluged with data

without meaning.• Data without context

is just a bunch of numbers.

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Where Do We Start?• All Financial Cost Data should be easily accessible and broken out.

• General Ledger• Payroll Software

• Identify Critical Financial KPI’s.• Keep it Simple• Focus on Revenue & Cost Drivers

• Automate your Reports.• Excel• Reporting software’s• Outside vendors

• Compare to Benchmark Data.6

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Where to Get Started?• Compare to Benchmark Data.

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Benchmark Comparisons• Research benchmark sources are available:

• NAHC, NHPCO, Simione Financial Monitor, OCS, SHP, MVI, Cost Report data.

• Understand data elements and calculations.• Need to ensure apples to apples comparison.

• Who are you going to compare to?• Geography, Payer Mix, Profit Status, Agency Type, Revenue Size.

• Remember benchmarks are the median.• Always strive to be in the top 10 to 20%.

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Key Considerations When Analyzing Data• Prioritize what are you evaluating?

• What do you want to look at and why?

• Accuracy of the Information.

• Timeliness of the Information.

• How and Where to Obtain the Data.

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Establish Your Reporting Process• What drives your processes?

• Financial – Revenue & Costs• Operational – Census & Productivity

• Determine responsibilities• Management, Directors and Staff

• Determine Frequency• Daily, Weekly, Monthly, Quarterly

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Establish Your Reporting Process• Know your Technology:

• What you can or can’t do.

• Internal Information: • Data must be relevant, accurate and timely.

• Trending Data:• Historical trends within your agency.• Comparisons to budget projections.• Comparison to industry benchmarks.

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Types of Data• Types of Data

• Financial• Statistical• Operational • Clinical

• Your Agency Data

• Competitor Data

• State Data

• National Data

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Key Performance Indicators:Financial• What do Financial Managers worry about?

• The bottom line!• Why?

• Money doesn’t grow on trees!• Do I have a sustainable operation?

• Will we be here into the futures?• What are my immediate concerns?

• Cash is a priority• Who and what influences my cash flow?

• Banking relationships• Revenue Cycle Team activities• Clinical Managers decisions• Vendor contract terms

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Key Performance Indicators:Financial• Gross Profit Margin• Net Profit Margin• Days Cash on Hand• Current Ratio• Return on Equity• Days Sales Outstanding• Cost per Day• Cost per Visit• Revenue by Type• Ancillary Cost per Day• Administrative and General Costs

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Key Performance Indicators:Clinical & Operational• What do Clinical Managers worry about? Why?

• What does my staff schedule look like?• Are there patients with urgent needs?• Are staff prepared/skilled to provide the needed care?• Are there any call outs? Are there enough staff to cover admissions?• Is there Per Diem availability?• Am I overstaffed? Do I need to send anyone home?

• What is the census this morning?• Admissions – actual and pending.• Deaths, discharges, transfers, revocations (paperwork completed).

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Key Performance Indicators:Clinical & Operational• What does my patient population look like?

• Where are my referrals coming from, how is it impacting LOS? (Cancer vs. Chronic Illness).

• Do I need to meet with marketing to communicate the impact a change in referral patterns may help to increase LOS?

• Do I have any compliance worries?• Is my staff documentation being completed timely?• Are there issues with technology?• Does the documentation support eligibility?• Do I have any ADRs? Are we responding timely?• Are we prepared if a surveyor walks in the door?

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Key Performance Indicators:Clinical & Operational• Average Length of Stay• Median Length of Stay• Average Daily Census• Visits per Day• Days by Level of Care• Discharges and Deaths• Referrals to Admissions Conversion Ratios• Patients by Diagnosis• Staffing Ratios (Caseloads & Productivity)• Quality Measures

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Daily Report Monitoring• Financial

• Cash

• Operational• Admissions• Pending admissions• Deaths/discharges• Schedules

• Visits per day• Ability to cover admissions• On call schedule• Acuity

• Caseload assignments

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Key Indicators Prioritization

• Days by Level of Care

• Average Daily Census

• Payer Mix• Margins by Payer• Days Sales Outstanding by

Payer• Patients and Revenue by

Payer

• Length of Stay • ALOS• MLOS

• Days by Level of Care• Total Cost per Day• Ancillaries PPD• Cost per Visit by

Discipline• Average Daily Census• Staffing and Labor Management

• Caseloads• Productivity

• Length of Stay• ALOS• MLOS

• Productivity

Revenue Drivers Direct Expense Drivers

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Organization of Indicators

1. Statistics that drive daily financials and clinical operations:• Include staffing needs, projected revenue and projected expense

• Census• Referrals: what is in the pipeline• Admissions• Conversion %• Deaths• Discharges

2. Average Daily Census

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Organization of Indicators

3. Length of Stay by Payer and Level of Care• Average Length of Stay• Median Length of Stay• Length of Stay <7 Days• Length of Stay >60 Days• Length of Stay >180 Days

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Organization of Indicators

4. Indictors that drive clinical operations:• Location of Service• Service Mix• Staffing Ratios• Number of Visits• Labor Hours• Diagnosis• Acuity• Supplies/DME/Drugs

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Creating Meaningful Reports• Reporting should enable focus on indicators that have an impact

on operations and financial performance.

Overall

Drill Down Capacity

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Gross Margin

• Gross Margin is where you need to start in any financial analysis.

• Everyone’s performance has an affect on Gross Margin.

• Direct Revenue minus Direct Expenses.• Direct Revenue – All Net Payer Revenue• Direct Expenses – Salaries, payroll taxes, workers compensation, benefits,

contract, mileage and supply costs from direct patient care along with inpatient contracts and facility costs.

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Everyone Impacts Gross Margin• Marketing – Admissions & Census

• Billing – Collections & Cash

• Clinical – Productivity & Costs

• Finance – Cost Control

• Management – Staffing

• Intake – Census, Cash & Operations

• Technology – Work Flow efficiencies

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Gross Margin

• Gross Margin Revenue Drivers:• Admissions• Average Daily Census• Payer Mix• Marketing• Billing/Collections• Clinical Quality

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Gross Margin

• Gross Margin Cost Drivers:• Payment Models• Productivity• Length of Stay• Clinical Teams• Management• Finance

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Hospice Gross MarginBenchmark• National Hospice Gross Profit Margin is 41.57%*

• In Home Hospice Gross Margin is 43.39%*• Inpatient Gross Margin is -63.74%*

*These numbers are National Benchmarks from the Simione Financial Monitor for 2019 Q1.

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Hospice Gross Margin By Payor: In Home• National Hospice Gross Profit Margin is 43.39%*

• Medicare – 48.07%*• Medicaid – 54.91%*• Other – 46.09%*

*These numbers are National Benchmarks from the Simione Financial Monitor for 2019 Q1.

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Gross Margin Analysis• Make sure staff understands Gross Margin and what it means to

them.• Set targets in productivity/admission goals to meet your Gross Margin

target.• Use Gross Margin as incentive for:

• Pay Increases• Quarterly/Annual bonuses• Other non pay incentives

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If Your Gross Margin Is Low• Review your Payer Mix

• Trend your volume

• Review Productivity

• Review your direct costs• Contract Rates• Salary/Pay per visit/contract• Benefit Costs• Mileage Costs• Supply Ancillary Contracts

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Start With Revenue• Always look for opportunities to grow your top line!

• Revenue Drivers• Payer mix• Admissions • Average Daily Census• Collections

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Growing Our Agency• Call the objective “Growing Our Agency”

• Use a combination of cost savings objectives and growth objectives to meet goals.

• Do NOT call it “Cost Cutting”• Causes low employee moral• Risk losing their loyalty• More staff working individually than as a team!

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Revenue Considerations• Am I getting ROI on Marketing staff?

• Targeting appropriate referral partners?• Are there identified performance goals?

• Does Intake and Admissions accept all appropriate referrals?• Reports for NTUC (not taken under care) by reason.

• Am I seeing a shift in payer sources?• Younger population with various private insurances / attributable to

identifiable referral source?• Is revenue negative variance to budget?

• Is census down? Is ALOS down?• Is there increased competition / new providers / mergers / acquisitions /

health system affiliations?• Are we strategically positioned to compete?

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Payer Mix• Payer Mix – Revenue

• Medicare – 92% • Medicaid – 3%• Other – 5%

92%

3%5%

Revenue

Medicare Medicaid Other

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Cost Analysis• Break out direct vs. indirect costs

• Break out costs by discipline

• Break out indirect costs by department

• Review Performance indicators

• Understand what drives revenue and cost for your organization

• Compare to industry benchmarks

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Consolidated HospiceDirect Cost Per Day Analysis

Discipline National

Total Direct Cost per Day $114

Routine Home Care $86

General Inpatient $1,434

Respite Inpatient $180

Continuous Care per Hour $180

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In Home HospiceDirect Cost Per Day Analysis

Discipline National

Total Direct Cost per Day $106

Routine Home Care $86

General Inpatient $694

Respite Inpatient $180

Continuous Care per Hour $180

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Ancillary Cost Per Day Analysis

Location Cost per Day

In Home $19

Inpatient $51

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Ancillary Cost Per Day AnalysisCategory In Home Hospice Inpatient Hospice

Medical Supplies $2.59 $12.94

Drugs and Infusion $8.22 $26.92

Labs and Diagnostics $0.08 $0.23

DME and Oxygen $6.40 $10.07

Patient Transportation $0.80 $8.95

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Hospice Direct Cost Per Visit AnalysisDiscipline National

Registered Nurse $137

Medical Social Worker $119

Therapist $124

Home Health Aide $36

Spiritual $89

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If Your Direct Cost Per Visit Is High• Review Volume vs. Cost

• Has your volume dropped but cost maintained the same?• Are you pay per visit vs. salary?• Do you contract Therapy or Aides?• What type of benefits do you provide, is this controllable.• Mileage Costs

• Rural vs. Urban• Mileage tracking software programs• Mileage study• Scheduling geographically

• Negotiate better rates with supply vendors.

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Decision Making On Direct CostsAnd Gross Margin• Staffing

• Maintaining caseloads at national benchmark or better.• Lower caseloads – higher cost• Higher caseloads – lower cost• Be careful not to impact care

• Using per diem/per visit staff to assist with fluctuating census.• Productivity

• Looking at numbers of visits per day in aggregate, over time to ensure that staff are efficient in their daily work.

• Need to account for fluctuations in acuity.• Eliminate barriers to efficiency for staff.

• Computer issues• Clerical issues• Travel times – Scheduling geographically• Communication enhancements to reduce office time

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Decision Making On Direct CostsAnd Gross Margin• Pharmacy costs

• Ordering off formulary• Delivery costs – not pre-planning reviewing• Related vs. Not Related

• DME Costs• Ensuring patients have what is needed• Formulary development• Pre-approval for items

• Supply Costs• Supply ordering and delivery• Formularies

• Balancing cost control with high quality care44

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Days Sales Outstanding• Another important component to monitor.

• Looks at the average number of days that a company takes to collect revenue.

• Analyzes how well your agency’s accounts receivable is being managed.

• DSO Ratio: Accounts Receivable / Annual Sales

• Low DSO: Fewer days to collect its Accounts Receivable.

• High DSO: Takes longer to collect money.

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Days Sales Outstanding• Hospice Overall DSO Benchmark (National)

• 49 Days*• 42 Days for Medicare*• 148 Days for Medicaid*• 74 Days for Other*

*These numbers are National Benchmarks from the Simione Financial Monitor for 2019 Q1.

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General Cost Analysis

• How are you spending your support cost dollars?• Indirect costs by type (salaries and benefits)• Indirect cost by department

• Marketing, Intake, Accounting, etc.

• Other Overhead Indirect Cost Items• Rent, Equipment, Leases, Professional Fees, Liability Insurance, Bad Debt, etc.

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Indirect Costs as a % Of Revenue• Total Administrative & General: 36%

• Total Salaries: 14%

• Total Benefits: 3%

• Taxes and Benefits as a Percent of Salaries National Average: 25%

• Hospice Indirect Cost per Day: $62

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Marketing Costs• National – 1.43%.

• Hold Marketers accountable for admission NOT referrals.

• Educate your marketing team on the importance of Medicare admissions compared to Managed Care/Medicaid.

• 71% Referral to Admission Conversion Rate Hospitals.

• 73 Admissions Per Month per Marketing FTE.

• Review your Advertising Campaigns – do they generate business?

• Review any Marketing cuts and their impact on revenue.

• Who will be your future Marketers – CEO, President, Owners.49

Intake Department

• National – 2.76%

• Collections starts with Intake!

• Review amount of denied authorizations and reauthorizations.

• Ensure proper authorization process is in place for non Medicare patients.

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Billing Department• Billing/Finance – 1.46%

• Accounting – 0.80% • Review days sales outstanding

• Overall – 49 days Hospice• Best Practice – 40 days

• Review bad debt as a % of revenue 0.50%• Evaluate staff – do you have the right person for the job?• No other task – just collections

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Clinical Supervision/Support/QI• National Benchmark – 8.03% of Revenue

• Supervisors must hold clinicians accountable to productivity standards.• Coordinators must schedule staff to be efficient achieve productivity

measures.• Support staff must assist with any field issues.• QI must ensure that clinicians and staff are compliant with all rules and

regulations.• Balance cost control with high quality care.

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Information Technology• National Benchmark – 1.24%

• Simione National IT Study December 31st 2018

TOTAL IT Cost as a % of Revenue Average Gross Margin

5% or More 33%

2.5% to 5% 36%

1.0 to 2.5% 40%

Less than 1% 38%

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Information Technology• Educate and train your clinicians and back office staff on how to

best use the EMR system to create efficiencies.

• Outsource hardware and server support?

• Research new technology that can improve efficiencies:• Patient Portals• Telehealth• New devices/Applications

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Non Employee Costs• Space Occupancy – 1.30%

• Rent or Own Space?• Mobile work staff?• Utilities & Maintenance Fees

• Legal/Audit/Professional Fees – 0.46%• Send out an RFP every 2-3 years• Outsource cost report function?• Outsource or in house legal department

• Liability Insurance – 0.28%• Interest Expense – 0.27%• Equipment Purchase/Lease/Repairs – 0.31%• All Other Admin – 1.90%

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Items to Consider• Employee Health Insurance Costs

• Are you reviewing your Health Insurance costs?• Does your broker really work hard for you each year?

• Reducing Office Space• Utilizing all of your office space?• If the end of your lease is approaching, should we relocate?

• Medical Records Storage• Storing on-site or Off-Site?

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Items to Consider• Cost Report Preparation:

• Internal vs. Outsourced?• Need Appropriate Data• Your cost report will effect not only your agency, but the industry as a

whole.

• IT System:• Ask for a price break?• Are we using all of the system you pay for?

• Telephone/Banking Costs• Analyzing usage and volume?• What are you being charged for?

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Items to Consider• Marketing Costs:

• Use benchmarks to monitor overall costs.• Understand how your market influences need for additional marketing

costs.• Assign territories and accounts to each marketer to avoid confusion• Know reasons for incurring more costs and develop tools to measure

effectiveness of these items.• Monitor each marketers effectiveness in producing admitted Medicare

referrals.

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Items To Consider• Reducing Bad Debts:

• Know where your Bad Debts come from:• Lack of assertive collection staff• Timely Filing requirements must be met• Proper authorizations upfront• Notice to patients of copays required• Continuing to accept payers that won’t pay

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Average Daily Census• Average Daily Census is a Major Indicator

• If low, where should you look?• Referral Sources• Marketing Campaigns• Intake Process

• Patients currently on service – Overall Impact• Staffing - # of staff to care for the patient (Cost)• Number of days for reimbursement• Effectiveness of outreach

• Conversions of referrals to admissions• Marketing• Liaisons

• Fluctuations in ADC• Be sure to be aware of reductions or increases in ADC to know if it is a trend or a normal

fluctuation. • Identify any trends in ADC and compare to budget to see if it is just a “blip” or if .

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Integrating Clinical And Financial Goals

• Foster Employee Engagement

Benchmark

Drill Down

Target Performance

Monitor Performance

• At the agency level

• To the staff level

• Where you want to be

• Accountability

Work as a Team

• Everyone should be involved.• Executive Management• Clinical Directors• Financial Directors

• Need buy in from everyone when it comes to cost review.• Analyze what would happen based on industry changes if all costs

remained the same.• Determine if something must be done!

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Implementation Strategy• Now work on an implementation strategy.

• Need to convince the management team of the urgent need to contain costs.

• Calculate the full impact of the past, present and future Medicare cuts on your agency.

• Quantify impact of these cuts and how it changed the agency’s overall profitability.

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Implementation Strategy• Do a detailed projection of revenues for the upcoming fiscal year

and compare to current expenses to determine potential shortfall.

• Forecast the impact of doing nothing. Future Medicare cuts translate into losses that threaten the future of the agency.

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Implementation Strategy• Meet with each member of the management team to review areas

where actual costs seem to deviate from benchmarks.

• Develop a plan of how actual expenses are incurred and what changes should be implemented to reduce overall costs.

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Implementation Strategy• Get management team concurrence on all reductions. “Buy in” is

important.

• Benchmarks can lead to working smarter, so you don’t have to work harder.

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This Is Probably How We All Feel…

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We Try To Save Cost But We Can’t Sacrifice Our Mission!

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Hospice Budgeting Case Study

Hospice Data Gathering• Total referrals and/or admissions by payer

• Medicare• Medicaid• Other

• Average length of stay by payer (ALOS)

• Days distribution by payer• Routine Home Care (RHC)

• 1-60 & 61+

• General Inpatient (GIP)• Respite Inpatient (Respite)• Continuous Care Hours (CCH)

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Hospice Data Gathering• Payment rates per day by payer

• Referral conversion rate

• Other direct care cost per day• Medical supplies• Drugs & infusion• Labs & diagnostics• Durable medical equipment (DME)

& oxygen• Patient transportation

• Administrative & general (A&G) cost as a percentage of revenue.

Revenue Assumptions 10/1/18-9/30/19 10/1/19-9/30/20

Daily Reimbursement Rates

Routine Home Care 1-60 $ 221.22 $ 215.23

Routine Home Care 61+ 173.83 169.12

General Inpatient 847.94 1,112.34

Respite Inpatient 193.65 479.51

Continuous Care 1,124.30 1,536.74

Expense Assumptions 2019-2020

Per Day Expenses

Medical Supplies $ 2.59

Drugs & Infusion 8.22

Labs & Diagnostics 0.08

DME & Oxygen 6.40

Patient Transporation 0.80

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Hospice Budget Assumptions• Growth in monthly referrals

and/or admissions• What are your marketing

strategies?

• Changes in your agency’s ALOS• Will your marketing strategies

impact the patient’s timeline to elect for the hospice benefit?

• Changes in your days distribution by level of care?

• Impact on inpatient/continuous care on the proposed rate rebasing.

Clinical Statistic Assumptions

CY 2019 FY 2020

Monthly Referrals 95 105Conversion Rate 70.0% 77.0%Monthly Admissions 67 81

ALOS 45.0 52.0

Days Distribution

Routine Home Care (1-60) 72.0% 71.0%Routine Home Care (61+) 25.0% 23.0%General Inpatient Care 1.5% 2.5%Respite Inpatient Care 1.0% 2.0%Continuous Home Care 0.5% 1.5%

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Hospice Budget Assumptions• Growth in monthly referrals

and/or admissions• What are your marketing

strategies?

• Changes in your agency’s ALOS• Will your marketing strategies

impact the patient’s timeline to elect for the hospice benefit?

• Changes in your days distribution by level of care?

• Impact on inpatient/continuous care on the proposed rate rebasing.

Clinical Statistic Assumptions

CY 2019 FY 2020

Monthly Referrals 130 143Conversion Rate 75.0% 75.0%Monthly Admissions 98 107

ALOS 45.0 52.0

Days Distribution

Routine Home Care (1-60) 72.0% 71.0%Routine Home Care (61+) 25.0% 23.0%General Inpatient Care 1.5% 2.5%Respite Inpatient Care 1.0% 2.0%Continuous Home Care 0.5% 1.5%

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Building the Budget• Monthly referrals and/or admissions

2019 Patient Statistics 2020 Patient StatisticsApr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Referrals130 130 130 143 143 143 143 143 143

Conversion Rate 70.00% 70.00% 70.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00%

Admissions91 91 91

107 107 107 107 107 107

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Building the Budget

• ALOS distribution: 52 daysALOS Distribution Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Calendar Days30 31 30 31 31 30 31 30 31

Apr-19 30 22 -

May-19- 31 21 -

Jun-19- - 30 22 -

Jul-19- - - 31 21 - - - -

Aug-19- - - - 31 21 - - -

Sep-19- - - - - 30 22 - -

Oct-19- - - - - - 31 21 -

Nov-19- - - - - - - 30 22

Dec-19- - - - - - - - 31

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Building the Budget• Days distribution

Days Distribution Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Admissions

Apr-1991 2,730 2,002

- - - - - - -

May-1991

-2,821 1,911

- - - - - -

Jun-1991

- -2,730

2,002 - - - - -

Jul-19107

- - - 3,325 2,252

- - - -

Aug-19107

- - - -3,325 2,252

- - -

Sep-19107

- - - - -3,218 2,360

- -

Oct-19107

- - - - - -3,325 2,252

-

Nov-19107

- - - - - - -3,218 2,360

Dec-19107

- - - - - - - -3,325

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Building the Budget

• Total Days

2020 Total DaysJul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Total Days 5,327 5,577 5,470 5,684 5,470 5,684 Census 172 180 182 183 182 183

Days DistributionRoutine Home Care (1-60) 71.00% 3,782 3,960 3,884 4,036 3,884 4,036 Routine Home Care (61+) 23.00% 1,225 1,283 1,258 1,307 1,258 1,307 General Inpatient Care 2.50% 133 139 137 142 137 142 Respite Inpatient Care 2.00% 107 112 109 114 109 114 Continuous Home Care 1.50% 80 84 82 85 82 85

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Building the Budget

• Medicare reimbursement rates• This agency has a 6/30 FYE• Hospice FYE is 9/30• Rates transition 10/1 (third

month of agency’s FY• Rates based on 2020 proposed

rule with rebasing

Revenue Assumptions 10/1/18-9/30/19 10/1/19-9/30/20

Daily Reimbursement Rates

Routine Home Care 1-60 $ 221.22 $ 215.23

Routine Home Care 61+ 173.83 169.12

General Inpatient 847.94 1,112.34

Respite Inpatient 193.65 479.51

Continuous Care 1,124.30 1,536.74

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Building the Budget

• Total Revenue2020

Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Hospice Revenue

Routine Home Care (1-60) 836,652 875,958 859,113 868,629 835,851 868,629

Routine Home Care (61+) 212,968 222,973 218,686 221,104 212,760 221,104

General Inpatient Care 112,919 118,224 115,950 158,070 152,106 158,070

Respite Inpatient Care 20,631 21,600 21,184 54,513 52,456 54,513

Continuous Home Care 89,833 94,053 92,245 131,028 126,084 131,028

Total Revenue 1,273,003 1,332,809 1,307,178 1,433,344 1,379,256 1,433,344

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Building the Budget

• Other direct care costs per day• Benchmark cost per day from

Simione Financial Monitor.• Supplies, drugs, labs, DME and

patient transportation based on total days.

• GIP and respite based on GIP and respite days respectively.

• Forecasted 2.5% increase in all cost per day based on consumer pricing index forecasted inflation.

Expense Assumptions 2019 2020

Per Day Expenses

Medical Supplies $ 2.59 $ 2.65

Drugs & Infusion 8.22 8.43

Labs & Diagnostics 0.08 0.08

DME & Oxygen 6.40 6.56

Patient Transporation 0.80 0.82

Expense Assumptions 2019 2020

Contract Per Day Expenses

Contract General Inpatient Care $ 694 $ 711

Contract Respite Inpatient Care 180 185

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Building the Budget

• Other Direct Cost per DayOther Direct Care Expenses Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Budgeted Days

Total Days 5,327 5,577 5,470 5,684 5,470 5,684

GIP Days 133 139 137 142 137 142

Respite Days 80 84 82 85 82 85

Per Day Direct Costs

Medical Supplies $ 14,141 $ 14,806 $ 14,521 $ 15,090 $ 14,521 $ 15,090

Drugs & Infusion 44,881 46,989 46,085 47,893 46,085 47,893

Labs & Diagnostics 437 457 449 466 449 466

DME & Oxygen 34,943 36,585 35,882 37,289 35,882 37,289

Patient Transporation 4,368 4,573 4,485 4,661 4,485 4,661

Contract General Inpatient Care 94,730 99,180 97,273 101,087 97,273 101,087

Contract Respite Inpatient Care 14,742 15,434 15,138 15,731 15,138 15,731 81

Building the Budget

• Staffing Assumptions

Staffing Assumptions

Normal Work WeekPaid Time Off (PTO) Days

Paid/Work Ratio

Hours worked per year 2,080 Sick Days 12 1.20

Hours in work week 40.00 Vacation Days 15 PTO Hours

Hours worked per day 8.00 Admin 10 347

Days worked per week 5.00 Holidays 6 %

Overtime Percentage2.00%

Average PTO Days 43

17%

Maximum PTO % 43

17%

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Building the Budget

• Staffing Assumptions

Staffing Assumptions

Normal Work WeekPaid Time Off (PTO) Days

Paid/Work Ratio

Hours worked per year 2,080 Sick Days 12 1.20

Hours in work week 40.00 Vacation Days 15 PTO Hours

Hours worked per day 8.00 Admin 10 347

Days worked per week 5.00 Holidays 6 %

Overtime Percentage 2.00%Average PTO

Days 43 17%Maximum

PTO % 43 17%

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Building the Budget

• Staffing Assumptions

Total Days Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Total Days in Month 31 31 30 31 30 31

Non-Work Days 8 9 9 8 9 9

Workdays 23 22 21 23 21 22

FTE Hours per Month 184 176 168 184 168 176

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Building the Budget

• SN StaffingJul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Total Hospice Days 5,327 5,577 5,470 5,684 5,470 5,684

Productivity- SN Caseload 15.00 15.00 15.00 15.00 15.00 15.00

Average Daily Census 171.83 179.90 182.33 183.36 182.33 183.36

Calculated FTEs NeededHospice A - SN 18.01 19.72 20.26 19.22 20.26 20.10 Actual FTEsHospice A - SN 16.00 16.00 16.00 16.00 16.00 16.00 Over/(Under) StaffedHospice A - SN (2.01) (3.72) (4.26) (3.22) (4.26) (4.10)

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Building the Budget

• SN StaffingJul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Full Time Staff HoursHospice A - SN Full Time 2,944 2,816 2,688 2,944 2,688 2,816 Hospice A - SN Per Diem 370 654 715 593 715 721

Overtime hours by Full Time StaffFull Time Staff - Overtime % 2%

Hospice A - SN Full Time 59 56 54 59 54 56 Full Time Staff Salaries & Wages

Full Time Staff - Hourly Rate SN $ 38.46 Per Diem Staff - Hourly Rate SN $ 48.08

Hospice A - SNHospice A - Full Time Salaries & Wages 113,231 108,308 103,385 113,231 103,385 108,308 Hospice A - Full Time Overtime 3,397 3,249 3,102 3,397 3,102 3,249 Hospice A - Per Diem Regular Salaries & Wages 17,809 31,449 34,394 28,503 34,394 34,657 Hospice A - Per Diem Overtime 534 943 1,032 855 1,032 1,040

Hospice A - Total SN Salaries & Wages 134,971 143,949 141,912 145,986 141,912 147,254

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Building the Budget

• All Direct Care Staffing

SN MSW HHA Chaplain

Total Hospice Days 66,567 66,567 66,567 66,567

Productivity- Caseload 15.0 24.0 12.0 50.0

Average Daily Census 181.9 181.9 181.9 181.9

Calculated FTEs Needed

Hospice A 19.8 12.4 24.7 5.9

Actual FTEs

Hospice A 16.0 10.0 11.0 5.0

Over/(Under) Staffed

Hospice A (3.8) (2.4) (13.7) (0.9)

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Building the Budget

• All Direct Care StaffingSN MSW HHA Chaplain Total

Full Time Staff Hours

Hospice A- Full Time 33,536 20,960 23,216 10,480 88,192

Hospice A- Full Time 7,883 4,927 28,558 1,946 43,314

Overtime hours by Full Time StaffFull Time Staff - Overtime % 2.0% 2.0% 2.0% 2.0%

Hospice A-Full Time 59 37 77 18 191 Full Time Staff Salaries & Wages

Full Time Staff - Hourly Rate $ 38.46 $ 36.06 $ 14.42 $ 36.06

Per Diem Staff - Hourly Rate $ 48.08 $ 45.07 $ 18.03 $ 45.07 Hospice A

Hospice A - Full Time Salaries & Wages $ 1,289,846 $ 755,769 $ 334,846 $ 377,885 $ 2,758,346

Hospice A - Full Time Overtime 38,695 22,673 10,045 11,337 82,750

Hospice A - Per Diem Regular Salaries & Wages 378,998 222,069 514,867 87,699 1,203,633

Hospice A - Per Diem Overtime 11,370 6,662 15,446 2,631 36,109

Hospice A - Total Salaries & Wages $ 1,718,909 $ 1,007,173 $ 875,204 $ 479,551 $ 4,080,838

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Building the Budget• Gross Margin

• Operating Revenue• Medicare only in this example• Sequestration (2.0%)• Contractual Allowances (based on non-

billable claims)

• Operating Expenses• Salaries & Wages• Taxes & Benefits (average percent for

all direct care staff)• Other Direct Expenses (cost per day)

• Gross Margin ($)• Gross Margin (%)

Profit & Loss Statement 2020

Operating Revenue

Medicare Operating Revenue $ 16,569,692

Sequestration (2.0%) (331,394)

Contractual Allowances (9.0%) (1,491,272)

Net Operating Revenue $ 14,747,026

Operating Expenses

Salaries & Wages $ 4,080,838

Taxes & Benefits (25.0%) 1,020,210

Other Direct Expenses 2,446,766

Total Operating Expenses $ 7,547,814

Gross Margin $ 7,199,212

Gross Margin % 48.8% 89

Building the Budget• Gross Margin

• Operating Revenue• Medicare only in this example• Sequestration (2.0%)• Contractual Allowances (based on non-

billable claims)

• Operating Expenses• Salaries & Wages• Taxes & Benefits (average percent for

all direct care staff)• Other Direct Expenses (cost per day)

• Gross Margin ($)• Gross Margin (%)

Profit & Loss Statement 2020

Operating Revenue

Medicare Operating Revenue $ 16,569,692

Sequestration (2.0%) (331,394)

Contractual Allowances (9.0%) (1,491,272)

Net Operating Revenue $ 14,747,026

Operating Expenses

Salaries & Wages $ 4,080,838

Taxes & Benefits (25.0%) 1,020,210

Other Direct Expenses 2,446,766

Total Operating Expenses $ 7,547,814

Gross Margin $ 7,199,212

Gross Margin % 48.8% 90

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Building the Budget• Administrative & General Expenses

• Break-out departments individually• i.e., marketing & sales, intake, billing,

finance, clinical supervision & support, information technology, etc.

• Break-out other costs by type• i.e., space occupancy, legal fees, liability

insurance, etc.

• Budget as a percent of revenue• As your agency increases it’s volume,

the revenue should increase and thus all expenses both direct care and A&G should also increase.

Administrative & General Expenses Percent of Revenue Revenue/Expense

Net Operating Revenue 100.0% $ 14,747,026

Administrative & General Expenses

Administrative & General Salaries & Wages 14.0% $ 2,064,584

Administrative & General Taxes & Benefits 3.0% 442,411

Marketing & Sales 1.4% 210,882

Intake 2.8% 407,018

Billing & Finance 1.5% 215,307

Accounting 0.8% 117,976

Clinical Supervision & Support & QI 8.0% 1,184,186

Information Technology 1.2% 182,863

Space Occupancy 1.3% 191,711

Legal & Audit & Professional Fees 0.5% 67,836

Liability Insurance 0.3% 41,292

Interest Expense 0.3% 39,817

Equipment Purchase & Lease & Repairs 0.3% 45,716

All Other Administrative & General 1.9% 280,193

Total Administrative & General Expenses 37.2% $ 5,491,792 91

Building the Budget• Net Margin Profit & Loss Statement 2020

Operating Revenue

Medicare Operating Revenue $ 16,569,692

Sequestration (2.0%) (331,394)

Contractual Allowances (9.0%) (1,491,272)

Net Operating Revenue $ 14,747,026

Operating Expenses

Salaries & Wages $ 4,080,838

Taxes & Benefits (25.0%) 1,020,210

Other Direct Expenses 2,446,766

Total Operating Expenses $ 7,547,814

Gross Margin $ 7,199,212

Gross Margin % 48.8%

Non-Operating Expenses

Salaries & Wages $ 2,064,584

Taxes & Benefits (25.0%) 442,411

Other Indirect Expenses 2,984,798

Total Non-Operating Expenses $ 5,491,792

Net Margin $ 1,707,419

Net Margin % 11.6% 92

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Questions???

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Thank You For Joining Us Today!

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Thank You For Joining Us Today!• Rob Simione, CPA

• Director of Finance• robsimione@simione.com• (203) 848-2471

• Michael Simione, MBA• Manager• msimione@simione.com• (203) 848-2465

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