Sticking the landing

1. Sticking the landing Taking Control of Your Financial Management and Reporting Systems

2. Cary D. Calhoun • Have served as CFO for three different CHCs • Have a CPA License • Have been consulting for 10 years • Worked in 37 different states during that period • carycalhoun@yahoo.com

3. Today’s Goal To provide a deeper understanding the Financial Program Expectations in order to better understand what to expect during your next Operational Assessment.

4. Financial Policies Health center maintains accounting and internal control systems appropriate to the size and complexity of the organization reflecting Generally Accepted Accounting Principles (GAAP) and separates functions appropriate to organizational size to safeguard assets and maintain financial stability. Health center assures an annual independent financial audit is performed in accordance with Federal audit requirements, including submission of a corrective action plan addressing all findings, questioned costs, reportable conditions, and material weaknesses cited in the Audit Report. (Section 330(k)(3)(D), Section 330(q) of the PHS Act and 45 CFR Parts 74.14, 74.21 and 74.26) Health Center Site Visit Guide

5. What does this look like? • Policies must be written and approved by the Board • Documentation must support the approval • Policies must be up-to-date • Documentation of reviews are up-to-date • Evidence that policies are in place and functioning • Demonstrated ownership of policies • Days in A/P at 30

6. What does this look like? • Finance Committee is active • Minutes are kept of Finance Committee • Receives an annual independent audit • Writes a Corrective Plan addressing all findings cited in the Audit Report • Bank and Credit Card Statements are reconciled monthly • Reconciliations are signed off by CEO • Timely Tax, Insurance & Retirement Payments

7. What does this NOT look like? • Disorganization • Dusty binders • Policy manuals that are hard to locate • Multiple binders for same area • Not organized in binders (file folders) • Forms that have not been updated… for years/decades • Evidence of ALL policies (including Admin & Clinical) being signed recently in a mass signing • Finance Committee does not keep minutes

8. What does this NOT look like? • Contradicting policies with other areas of business (Finance vs. Payroll vs. HR) • Contradicting policies with other Financial policies (A/P dues dates vs. Taking discounts) • Policies that make bad business sense • Policies/Procedure s that state responsibilities by individual names • Policies/Procedures that state responsibilities by positions not on the org chart

9. Best Practices • A schedule for reviewing/approving policies • Monthly rotation as part of board meeting • Annual review • Monthly/quarterly training as agenda item • Entity Control Listing • Finance Committee presenting Financial Report Reconciliations conducted on all Balance Sheet accounts • Reconciliations are reviewed by Finance Committee

10. Learning from others’ mistakes • Policy allowing CEO to borrow up to $400K without board approval • Policy allowing CEO to borrow up to $30K each month • A different vacation policy in each of the Finance, HR & Payroll Manuals • Policy that states ALL discounts will be taken in A/P while another stated

11. Sliding Fee Discounts Health center has a system in place to determine eligibility for patient discounts adjusted on the basis of the patient’s ability to pay. This system must provide a full discount to individuals and families with annual incomes at or below 100% of the Federal poverty guidelines (only nominal fees may be charged) and for those with incomes between 100% and 200% of poverty, fees must be charged in accordance with a sliding discount policy based on family size and income. • *No discounts may be provided to patients with incomes over 200 % of the Federal poverty guidelines. • *(Section 330(k)(3)(G) of the PHS Act and 42 CFR Part 51c.303(f)) • Health Center Site Visit Guide

12. What does this look like? • See comments on Financial Policies… applies to the Sliding Fee Policy • Must be in writing • Policies must be approved by the Board • Policies must be up-to-date with poverty guidelines • Must cap out at 200% of poverty • Consistent applied • Slides to $0 but may ask for a nominal fee

13. What does this look like? • “Household Income” & “Household Size” • Correctly calculated • Gross income • Income verification for One Month • Income annualized (if sliding scale is annualized) • S/F Table is updated to reflect the most recent poverty guidelines • Documentation in BOD Minutes showing approval of the updated table

14. What does this NOT look like? • Statements like “patients without insurance” or “uninsured patients only” • “Family Income” and “Family Size” • “Divorced “ spouses sharing same address, one working and the other one not • Single man with $0 income because parents support him • Outdated applications still used to grant discount • No procedure to following up on patients who do not return missing documents • Nominal fees so large they create a barrier to care

15. Best Practices • Prominently displayed for patients to see • Displayed in all appropriate languages • Applications • Attach calculations • Utilize spreadsheet to calculate (mistake proofing) • Applications get a second look and supervisor’s initials

16. Learning from others’ mistakes • One site had all income verifications up-to-date and correctly calculated… except for the one that was not double-checked • A S/F Scale that did not cap out… • Patient income transposed from $48K to $480K and still received a discount • ALL patients start receiving discounts from PMS • The result is lowered collections for the organization • Birthday example

17. Program Data Reporting Systems Health center has systems which accurately collect and organize data for program reporting and which support management decision making. (Section 330(k)(3)(I)(ii) of the PHS Act) Health Center Site Visit Guide

18. What does this look like? • UDS reports filed annually on time • Computerized General Ledger • Capable of tracking revenues and expenditures by funding source • Financial Statements are created and presented to BOD monthly • Capability to pull data from system in ad hoc reports • Useful and Understandable reports that support management/BOD decisions

19. What does this look like? • Strategic Plan includes financial components • Meaningful Use • Effective Policies and Procedures • Effective Security Protocols in place • Example financial presentation

20. What does this NOT look like? • IT Policies that reference software no longer used • Financial Statements that are 37 pages long • Daily backup tapes stored onsite • PMS that captures data that cannot be extracted

21. Possible KPIs • Debt to Equity Ratio • Working Capital per Average Monthly Expense • Change in Net Assets as a % of Total Expenses • Total Cost/Patient • Medical Cost/Medical Encounter • Dental Cost/Dental Encounter • Current Ratio • Level of Encounters • Collections/Gross Chgs • Collections/Net Chrgs • Days in A/P • Days in A/R • Days of Cash on Hand • Collections/Encounter • % of Clean Claims

22. Possible KPIs • Grant Drawdown • Accounts Receivable • Accounts Payable • Cash Accounts • No-Show Rate • Uncompensated Care • UC Percentage • Wait Times • % of Scheduled Day • Employee Turnover • Employee Satisfaction • Patient Satisfaction • Support Staff to Provider Ratio • Encounters/Patient • Gross Charges/Enc • Net Charges/Enc

23. Best Practices • EHR • Disaster Plan • Reviewing the 5 Financial Measures monthly/quarterly • Comparisons to prior year state averages (UDS KPIs)

24. Learning from others’ mistakes • Inability to install backed up data • Person that knows how to do ________ leaves the organization.

25. Closing • Questions • See the Health Center Site Visit Guide • Thank you!