Financing Our Mission Workshop National Leadership Conference for Academic Pediatricians

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Financing Our Mission WorkshopNational
Leadership Conference for Academic Pediatricians

• Denice Cora-Bramble, MD, MBA
• Senior Vice President
• Childrens National Medical Center
• Goldberg Center for Community Pediatric Health
• Professor of Pediatrics, George Washington
  University

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Disclosure

• I have no financial relationships to disclose.

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Overview

• Practical, case-based, interactive session
• Revenues and expenses
• Nuts and bolts Finance Accounting 101
• Financial performance improvement
• Future directions
• Professional development opportunities

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Learning Objectives

• At the end of the session, the learner will be
  able to
• Understand the general principles of financial
  statements, budgets and financial decision making
• Apply strategies to improve their divisions
  financial performance
• Assess the financial challenges inherent in
  leading an academic division

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Workshop Challenges

• Learners at different stages (prospective,
  current and Emeritus Division Directors)
• Each division is different our goal is to share
  and examine the differences

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The Business Side of Medicine

• Limited training as part of undergraduate and
  graduate medical education
• Ascent to Division Director position often
  without financial tool kit
• Personal trajectory Kellogg Foundation
  leadership fellowship, Business of Medicine
  Certificate, Johns Hopkins University MBA with
  concentration in Medical Services Management

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Environmental Pulse

• Decreased reimbursement and total revenue
• Increased expenses
• Decrease in NIH research dollars
• Productivity pressure
• Decreasing educational financial support
• Competing demands
• Clinical/research/education/advocacy

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Other Environmental Factors?
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Division Directors Financial Challenges

• Develop realistic budgets
• Manage clinical and research budgets
• Anticipate and manage budget shortfalls
• Improve revenues
• Minimize expenses
• Compensate faculty and staff appropriately

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Nuts and Bolts Accounting and Finance 101

• Terms and definitions
• Financial statements
• Budgeting and forecasting
• Financial decision making

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Tools to Answer Financial Questions

• Is my division
• Meeting budget?
• Making a profit?
• Doing better than last year?

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Types of Financial Statements

• Income statement
• Balance sheet
• Cash flow statement

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I. Income Statements

• Also known as
• Profit and Loss Statement (PL)
• Statement of Revenue and Expenditures
• Statement of Earnings

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Income Statements

• Sales
• Less cost of goods sold
• _____________________________________
• Gross Margin
• Less operating cost
• _____________________________________
• Operating Margin
• Less taxes, other
• _____________________________________
• Net Income or Net Profit Margin

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II. Balance Sheets

• Assets
• Cash
• Accounts receivable
• Inventory
• Fixed Assets
• Intangibles

• Liabilities
• Accounts payable
• Long-term debt
• Equity
• Retained earnings
• Equity Assets - Liabilities

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III. Cash Flow Statements

• Beginning balance
• () Cash collected
• (-) Cash paid
• ___________________________________
• Ending cash

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Group Questions

• What financial statement(s) do you receive?
• How often are they shared?
• Are they easy to understand?
• Are they error-free and accurate?

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Comment by General Pediatrics Division Director

• I am certain we lose money but our institutions
  creative accounting makes it difficult to know.

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Division Directors Directives

• Understand, review, identify and correct errors
• Teach other division leaders to understand and
  interpret financial statements
• Plan and implement back-to-budget mid course
  corrections
• Use data as baseline in developing growth plan
  and future budgets
• Assess financial and patient volume trends (3-5
  years)
• Plan (boldly!) for divisions growth

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Key Terms

• Revenue
• Patient Revenue
• Other Operating Revenue
• Expenses
• Operating Margin
• Variance
• Profit, Earnings or Net Income

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Profit Margin Revenue - Expenses

• Revenue
• () Inpatient Revenue
• () Outpatient Revenue
• () Other Revenue
• (-) Deductions from Patient Revenue
• (-) Bad Debt
• ____________________
• TOTAL REVENUE

• Expenses
• Salaries Benefits
• Lease
• Supplies
• Equipment
• Utilities
• Other
• ________________
• TOTAL EXPENSES

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Variance Actual - Budgeted

• If actual gt budgeted profit
• Does division keep the profit?
• Reinvestment in faculty/staff, technology,
• program development
• If actual lt budgeted loss
• Communication
• Justification
• Plan of action
• Monitoring

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Sample Profit and Loss Statement
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Group Exercise What is the Margin?

• Revenue
• Total Patient Revenue 1,575,000
• Deductions f/ Revenue 875,000
• Net Patient Revenue 700,000
• Other Sources of Rev. 200,000
• TOTAL REVENUE ______
• Actual Revenue ______
• Budgeted Revenue 1,000,000
• VARIANCE ______

• Expenses
• Total Expenses 825,000
• Budgeted Expenses 925,000
• VARIANCE ______

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Revenue Sources for General Pediatrics
Divisions Cheng T, Markakis D, DeWitt T. The
Status of Academic General Pediatrics No Longer
Endangered? Pediatrics. 2007119(1)e46-52
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Clinical Revenue

• Patient volume
• Coding
• Denials
• Time of service collections
• Operational efficiencies
• Third party payor contracts
• Payor mix
• Capitated vs. fee for service
• Uncompensated care

CONTROL
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Improving Our Margin

• Maximizing reimbursement
• Increasing patient volume
• Accessing new revenue sources
• Managing claims processes
• Controlling expenses
• Maximizing operational efficiencies
• Involving faculty and staff - train, incentivize
  and reward

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Group Questions

• How are the research grants indirect costs
  handled by your division/department?
• Does your division/department receive funding to
  support medical student education activities?

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Impact of Coding on Patient Revenue CNMCs Case
Study

• Practice audit of largest of seven health centers
  revealed significant under coding of primary care
  E/M visits
• Implemented coding and documentation education of
  residents, faculty and staff
• Significant initial and sustained improvements in
  coding
• Featured in AAP News, January 2004
• Coding improvement initiative led by Mark
  Weissman, MD, Division Director, General and
  Community Pediatrics, Childrens National Medical
  Center

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Coding E/M Charge Pediatrics Bell Curve
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Coding CNMC and National Comparisons
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Post Coding and Documentation Training Results
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Sustained Improvement in Charges per Visit
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Team Effort
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Increasing Patient Volume

• Aggressive outreach and marketing
• New product lines
• Expanded referral sources
• Partnerships with schools, WIC, Head Start
  Centers, others

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Accessing New Revenue Sources

• Training and service grants
• Industry and government contracts
• Philanthropy
• Subsidies by hospital or cross-subsidization by
  subspecialty departments

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Managing Claims Processes

• Challenge and reduce denials by third party
  payors
• Improve point of service collections of
  co-payments
• Timely claims submission

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Group Exercise Where Did the Patients Go?

• In reviewing the patient volume monthly
  statistics you notice that there has been a
  gradual and sustained decrease over the last six
  months. A new retail-based clinic opened in the
  neighborhood eight months ago.
• What is the financial impact?
• Are there strategies to mitigate the impact?

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Budgeting - Business World

• Line item budgets list all revenues and
  expenses
• Performance-based budgets links strategic plan
  to budget
• Zero-based budgets must justify all employees,
  equipment, space

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Budgeting Academic World

• Mission-Based Management
• Quantification of faculty activities clinical,
  research, teaching, administration
• Assessment of productivity in each activity
• Assessment of cost
• Nutter DO, Bond JS, Coller BS, et al. Measuring
  Faculty Effort and Contributions in Medical
  Education. Acad Med. 200075199-207

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Budgeting Academic World

• Mission-Aligned Planning
• Assessment of faculty effort
• Unified spreadsheet merging activity data and
  departments expenses/revenues
• Identification and presentation of mission
  specific financial margins
• Sloan T, Kaye C, Allen W, et al. Implementing a
  Simpler Approach to Mission-Based Planning in a
  Medical School. Acad Med. 200580(11)994-1004

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Sample Spreadsheet
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Group DiscussionBudgeting Process

• Who in the division should be included?
• How long should it take?
• What criteria should be used to prioritize and
  make final budget decisions?

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Faculty Compensation

• National benchmarking data sources
• Professional Associations
• AAMC (Association of American Medical Colleges)
  Report on Medical School Faculty Salaries
• AAAP (Association of Administrators in Academic
  Pediatrics) Medical School Pediatric Faculty
  Compensation and Productivity Survey
• MGMA (Medical Group Management Association)
  Physician Compensation and Productivity Survey
• SHM (Society of Hospital Medicine)
• Others

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Faculty Compensation

• National benchmarking data sources
• Surveys conducted by consulting companies, such
  as
• Sullivan, Cotter and Associates
• Watson Wyatt Worldwide

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Compensation Challenges

• Variability in delivery of clinical services
• Fluctuation in extramural funding
• Physician expectation of guaranteed salary
• Andreae M, Blad K, Cabana M Physician
  Compensation Programs in Academic Medical
  Centers. Health Care Management Review.
  200631(3)251-8

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Incentive-Based Compensation

• Some published articles raised authors concerns
  regarding
• Impact on teaching
• Quality of trainees educational experience
• Acceptance by academic physicians

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Incentive-Based Compensation

• Recently published review (1995-2005) article
• Business and medical research databases
• Outcome measures
• Effect on professional productivity ()
• Financial impact () or neutral
• Quality of educational experience for trainees
  neutral
• Faculty satisfaction () or neutral, in one
  study (-)
• Andreae M, Blad K, Cabana M Physician
  Compensation Programs in Academic Medical
  Centers. Health Care Management Review.
  200631(3)251-8

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Incentive-Based Compensation

• The most important finding from our review was
  that incentive-based compensation programs can
  motivate academic physicians to improve their
  productivity in both the clinical and scholarly
  arena without a negative impact on job
  satisfaction or education of trainees. Use of
  financial incentives is not necessarily in
  opposition with and may actually enhance the
  academic missions.
• Andreae M, Blad K, Cabana M Physician
  Compensation Programs in Academic Medical
  Centers. Health Care Management Review.
  200631(3)251-8

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Productivity Measures

• National Physician Fee Schedule relative value
  units (RVUs)
• Used frequently to estimate clinical
• productivity
• Does not measure research,
• administration and teaching

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Productivity Measures

• Educational Value Unit (EVU)
• Unit of time spent in education of students
  and residents
• 0.1 EVU 4 hours of work per week
• Core EVU teaching time not associated with
  clinical care
• Clinical EVU associated with billable
  clinical activities
• Stites S, Vansaghi L, Pingleton S, et al.
  Aligning Compensation with Education Design and
  Implementation of the Educational Value Unit
  (EVU) System in an Academic Internal Medicine
  Department. Acad Med. 200580(12)1100-1106

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Future Directions

• Increase in financial demands in academic
  divisions
• Need for on going financial and leadership
  training
• Expansion of small but important
• pay-for-performance payments
• Increased competition of retail-based clinics
• Others?

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Professional Development

• Hopkins Business of Medicine Graduate Certificate
  Program
• Four courses (business, finance, accounting and
  leadership) in one year
• MBA and/or MPH
• Degree granting, university-based program
• On-line programs (George Washington U, Hopkins, U
  of Maryland, others)
• Workshops
• American College of Healthcare Executives
• Medical Group Management Association
• Academic Pediatric Association
• Others

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Questions and Comments
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Contact Information

• Denice Cora-Bramble, MD, MBA
• Senior Vice President
• Childrens National Medical Center
• Goldberg Center for Community Pediatric Health
• [phone]
• dcorabra_at_cnmc.org