Indiana Council of Community Mental Health Centers, Inc. Community Health Centers – Financial Information and Benchmarking - PowerPoint PPT Presentation


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Indiana Council of Community Mental Health Centers, Inc. Community Health Centers – Financial Information and Benchmarking


Indiana Council of Community Mental Health Centers, Inc. Community Health Centers Financial Information and Benchmarking Presented by: Michael B. Schnake, CPA, CGFM – PowerPoint PPT presentation

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Title: Indiana Council of Community Mental Health Centers, Inc. Community Health Centers – Financial Information and Benchmarking

Indiana Council of Community Mental Health
Centers, Inc. Community Health Centers
Financial Information and Benchmarking
  • Presented by Michael B. Schnake, CPA, CGFM

Presentation Prelude
  • Goal of the presentation - increase awareness of
    the financial issues related to the successful
    (and sustainable) operation of community health
  • Is this an opportunity for my community mental
    health center to further an integration of
    primary and behavioral health care services?

Presentation Prelude
  • An organizations status as a Federally Qualified
    Health Center (FQHC) adds significant
    complexities to the financial management of the
  • FQHC Look-Alike status
  • Federal grant funding
  • Issues of complexity include
  • Federal grants management matters
  • Medicaid and Medicare FQHC reimbursement

Presentation Prelude
  • Federal grants management issues
  • Compliance and oversight
  • Reporting (Financial Status Report (FSR), cash
    management, ARRA specific reporting, etc.)
  • Medicaid and Medicare FQHC reimbursement issues
  • Medicaid (FQHC PPS rate setting, change in scope
    of services, reconciliation process, managed care
    contracting, etc.)
  • Medicare (FQHC cost-based reimbursement)

Presentation Prelude
  • Federally qualified health centers may be the
    most complex health care provider type to manage
    from a financial perspective
  • Requires a proper balancing of the federal
    investment and other funding streams
  • It is important for health center management team
    and Board of Directors members to have an
    understanding of community health center finance

Todays Agenda
  • Overview of the community health center (CHC)
  • Health center finance issues of importance
  • Overview of financial systems expectations of the
    Bureau of Primary Health Care (BPHC) Policy
    Information Notice (PIN) 98-23
  • Unique issues of CHC financial management
  • CHC financial ratios
  • Final thoughts

Overview of the Community Health Center Program
Characteristics of CHCs
  • Located in or serve a high need community
    (designated medically underserved area or
  • Governed by a community board majority (51) of
    board members must be patients that represent the
    population served
  • Services provided include comprehensive primary
    health care services as well as supportive
    services that promote access to health care
    (transportation, translation, etc.)
  • Services provided to all patients with charges
    adjusted based on the patients ability to pay
    (sliding fee scale requirement)
  • Meet performance and accountability requirements
    regarding administrative, clinical and financial

Required ServicesDirectly or Through Contract
  • Primary care
  • Dental
  • Mental health
  • Substance Abuse
  • Diagnostic lab x-ray
  • Prenatal perinatal services
  • Cancer other disease screening
  • Blood level screenings
  • Lead levels
  • Communicable diseases
  • Cholesterol
  • Child adult immunizations
  • Eye ear screening for children
  • Family planning services
  • Emergency medical
  • Pharmaceutical
  • Case management
  • Outreach education
  • Eligibility/Enrollment services
  • Transportation interpretation

Types of Health Centers
  • Grant-supported Federally Qualified Health
  • Receive federal grant funding under the
    Consolidated Health Centers progam
  • Include Community Health Centers, Migrant Health
    Centers, Healthcare for the Homeless Programs and
    Public Housing Primary Care Programs
  • Federally Qualified Health Center Look-Alikes
  • Outpatient health programs/facilities operated by
    tribal organizations

Health Center Patient Characteristics
  • Based on statistics obtained from the HRSA
    website (2008 statistics)
  • 36 - children (age 19 or younger) 7 - age 65
    or older
  • 38 of patients all ages (approximately
    6,500,000) were uninsured
  • 28 - African-American 33 - Hispanic/Latino
  • Special populations served
  • 834,000 migrant and seasonal farm workers and
    their families
  • 934,000 homeless individuals
  • 157,000 residents of public housing

Paths to Achieving CHC Status
  • Apply to Bureau of Primary Health Care for
    Section 330 federal grant funding
  • New Access Point (NAP) application released
    each year
  • Apply to be an FQHC Look-Alike organization
  • Noncompetitive process
  • Must comply with all requirements at the time of
    application submission
  • Can later apply for Section 330 federal grant

Paths to Achieving CHC Status
  • Collaborate with an existing CHC to apply as an
    expansion site
  • Existing CHCs can start a satellite clinic
  • Using NAP application
  • Change in Scope application

Section 330 Program Requirements
  • Four components
  • Governance
  • Mission strategy
  • Clinical program
  • Management finance

FQHC Look-Alike Organizations
  • Meet all of the Section 330 program
    expectations/requirements, but do NOT receive
    federal grant support
  • Must be fully operational for at least one month
    to be eligible to apply for FQHCLA status
  • Preferred that organization has 12 months of
    operations a completed financial audit

FQHCLA Organization Benefits
  • Prospective Payment System (PPS) reimbursement
    for services to Medicaid and CHIP patients
  • PHS drug pricing discounts
  • Cost-based reimbursement for Medicare services
    (deductible is waived)
  • Other

Benefits of Federal Grant Status
  • All the benefits of FQHCLA status, plus
  • Federal grant to support the costs of
    uncompensated care
  • Medical malpractice coverage under Federal Tort
    Claims Act (FTCA)
  • Eligible for additional grant support loan
    guarantees for capital improvements

Other Funding Requirements
  • No New Access Point funding available for fiscal
    year 2010
  • Recent funding for NAP has typically provided
    650,000 maximum award
  • Newly funded applicants must demonstrate how
    Section 330 federal grant funds will be used to
    expand existing primary health care capacity
  • Section 330 funds may not supplant other funds
  • Must demonstrate that funds and other resources
    currently committed to the clinic will remain

Health Center Finance Issues of Importance
Financial Health Considerations
  • No money no mission (that is the reality)
  • Community health centers must be proactive
    (versus reactive) on financial management issues
  • The tone at the top must reflect a commitment
    to sound business and financial practices.
    Remember that the Board sets the expectation bar
  • The Bureau of Primary Health Care expects the
    Board of Directors and health center management
    teams to make prudent and sound business

Financial Health Considerations
  • Community health centers are business activities
    that require positive operating margins to
    sustain the mission
  • Replacement of property and equipment
  • Repayment of long-term debt
  • Maintenance of financial reserves

Financial Health Considerations
  • Financial health should be a priority
  • Bureau of Primary Health Care (BPHC) Policy
    Information Notice (PIN) 98-23 includes a focus
    on financial systems must versus should

External Environment Matters
  • Increasing federal investment under the American
    Recovery and Reinvestment Act of 2009 the
    federal stimulus program
  • New access point funding
  • Increased services to health centers
  • Capital improvements funding
  • State budgetary issues elimination of optional
    Medicaid benefits and other cash flow issues

External Environment Matters
  • Increasing scrutiny of health center financial
    results by the federal granting agency, lenders
    and donors
  • Expect reporting requirements to be expanded and
    closely monitored
  • OIG audits are a recent reality (experience to
    date indicates a primary focus on detailed policy
    and general ledger expense tracking issues)

External Environment Matters
  • Strategic financial planning (sustainability
    planning) is necessary to identify anticipated
    financial impact of program changes
  • Operational results
  • Cash flow implications

Bureau of Primary Health Care PIN 98-23
(Financial Systems Expectations)
PIN 98-23
  • Financial System Expectations
  • Accounting Internal Controls
  • Budget
  • Billing Collections
  • Independent Financial Audit

Accounting Internal Controls
  • Systems should be appropriate to size
    complexity of the organization
  • Accounting system should be based on GAAP
  • Designed to accurately reflect financial
  • Separation of financial functions should be
    implemented to safeguard assets
  • Access function
  • Recording function
  • Monitoring function

Accounting Internal Controls
  • Routine financial reports should be generated
  • Reviewed by appropriate management staff
  • Reviewed by members of the health centers
    governing body on a regular basis (monthly)
  • Should accurately reflect current financial
  • Allow for comparisons to past projected
    financial position

  • Reflects the level scope of services to be
    provided within the constraints of the health
    centers resources
  • Should reflect available resources required
  • Should be approved by the health centers
    governing body
  • Particular emphasis on health center revenue

Billing Collections
  • Health Center programs must maintain adequate
    cash flow to support operations maximize
    revenue from nonfederal sources
  • Revenue maximization requires an adequate
    competitive fee schedule a corresponding
    schedule of discounts, prompt accurate billing
    of third party payers, billing of patients in
    accordance with the schedule of discounts,
    timely follow-up on all uncollected amounts

Billing Collections
  • Process necessary to ensure that federal grant
    resources address true financial access barriers
    to the maximum degree possible
  • Health Centers are expected to utilize
    information to monitor performance compared to
    internal external benchmarks, as well as for
    tracking trends

Billing Collections
  • Health Centers should establish a target for days
    in receivables for collections on billable
    services by payer, monitor collection rates on
    outstanding balances follow-up or write-off
    such balances as appropriate
  • Electronic billing encouraged

Unique Issues of CHC Financial Management
CHC Financial Management Issues
  • Within the health care industry, CHCs are unique
    from a financial perspective
  • CHC management teams must be knowledgeable on the
    primary drivers of health center financial
    success in order to effectively navigate the
    financial challenges of the health center (have
    an understanding of operational issues)

CHC Financial Management Issues
  • Unique financial issues include
  • Revenue generation from third-party payers
    (Medicare, Medicaid and private insurers)
  • Federal grants management matters
  • Achieving operational profitability, including
    proper obligation of federal grant funds
  • Sliding fee scale compliance

CHC Financial Management Issues
  • Unique financial issues include
  • Management of health center cash flows for
    ongoing replacement of property equipment,
    payment of long-term debt obligations and
    maintenance (establishment) of reserve funds
  • Communication of financial results and planned
    fiscal strategy (both internally and externally)

CHC Financial Ratios
Establishing Financial Goals
  • Financial goals should be established for
  • Operational profitability
  • Balance sheet health (ongoing growth of health
    center net assets position)
  • Cash flow targets
  • Development of key financial indicators can be at
    an organization-wide level and/or drilled down to
    much more detailed levels (site specific, program
    specific, etc.)
  • What are the key financial indicators that should
    be monitored?

Financial Ratios
  • Current ratio
  • Current assets/current liabilities
  • 21 is a healthy current ratio
  • Net days revenue in net accounts receivable
  • 30 to 45 days of net revenue in net accounts
    receivable is reasonable

Financial Ratios
  • Days cash on hand (financial reserve)
  • 30 - 120 days of cash on hand a good target
  • Days in accounts payable
  • Target should be less than 30 days
  • Debt to equity ratio
  • Generally target less than .40

Financial Ratios
  • Operating income to total revenue ratio
  • Calculated by dividing total revenue by operating
  • Target should be 2 to 4 to generate necessary
    operating cash flow to use as follows
  • Replacement of fixed assets
  • Payment of debt obligations
  • Funding of cash reserves

Monitoring Key Financial Indicators
  • Once goals are established for key financial
    indicators, ongoing monitoring must occur
  • Monthly financial statement review
  • Development of dashboards
  • Periodically with reconsideration of financial
    sustainability plan scenarios (best case, most
    likely, and worst case)

Final Thoughts
Final Thoughts
  • There may be opportunities for community mental
    health centers to work collaboratively with
    existing CHCs
  • CHC development of an expansion location in the
    CMHC facility
  • CMHC selling excess provider capacity to the CHC
    for mental health services professionals

Final Thoughts
  • It may be financially beneficial for the CMHC to
    consider expanding services provided in order to
    position itself for submission of a FQHCLA
    application or NAP application
  • Decision making will require a well planned
    business strategy supported by appropriate
    financial analysis

Thank You
  • Please feel free to contact
  • Mike Schnake
  • 417.865.8701, ext. 23017