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FQHC Look-Alike
Business Plan
April 21, 2010
Twyla Adams, MHS, Branch Chief
Valerie Kolick, Public Health Analyst
Leo Fishel, Financial Consultant
Department of Health and Human Services
Health Resources and Services Administration
Bureau of Primary Health Care
Objectives
To become familiar with the Financial Measures
To understand how to collect and use an
organization’s financial data to create a
Business Plan
2
Five Financial Measures
Measures Based on FQHC Look-Alike data
Total cost per patient
Medical Cost per medical encounter
Measures Based on the Financial Audit
Change in net assets as a percent of expense
Working capital to monthly expense ratio
Long term debt to equity ratio
3
Purpose of Measures
Frames the business plan
Addresses cost and financial viability
Focuses on individual improvement rather
than performance standards
4
What the Measures Indicate
Total cost per patient:
the dollar value of service provided
Medical cost per medical encounter:
medical cost efficiency
Change in net assets as a percent of expense:
financial performance during audit period
Working capital to monthly expense ratio:
current financial condition
Long term debt to equity ratio:
long term financial condition
5
Calendar Year Cost Data
Need calendar year cost data for two measures
Total cost per patient
Medical cost per medical visit
Need calendar year cost data to match patient
and visit data – both reported for the CY
Calendar year cost data not currently submitted
To use cost worksheet following definitions for
the section 330 UDS Table 8A
6
Table 8A Cost by Function
7
Table 8A – Financial Costs
Col (a) Accrued Costs:
• Direct costs
• Report donated (“in-kind”)
costs on line 18 only
• Exclude bad debt
• Include depreciation
Col (b) Allocation of
Facility and Admin:
• Allocate indirect costs from
Line 16 to cost centers
Col (c ) Total Cost:
• Sum of direct and indirect
expenses
8
Administrative Costs
Administrative costs include:
General administration
Billing and collection functions
Including practice management system
operation, depreciation and maintenance
All patient record costs
Patient service support costs
Leadership time in corporate administration
9
Table 8A Cost Used in the Measures
Medical care cost
Line 1: Medical staff salaries and benefits
including staff on contract and contracted visits
Line 3: All other direct medical costs: dues,
supplies, depreciation of equipment, EMR
operation, maintenance and depreciation,
travel, CME, etc.
Column c: after the allocation of overhead
Total cost before donations – line 17
10
Total Cost Per Patient
Measurement: quantity of service provided
Data source: FQHC Look-Alike data
Description: Total accrued cost before
donations and after allocation of overhead
divided by total patients
Formula: (T8A L17 CC / T4 L6 CA)
11
Total Cost Per Patient
Numerator
(Table 8A, line 17, column c)
12
Total Cost Per Patient
Denominator
(Table 4, line 6, column a)
13
Total Cost Per Patient
Interpretation Considerations
Includes “other” costs on table 8a, line 12
Other costs may be associated with patients not counted in FQHC
Look-Alike data
Other cost include WIC, research, advocacy programs, space or
personnel leased to others, etc
Goal affected by change in service mix
A stable clinic in a stable environment will
show increases over time
14
Medical Cost per Medical Encounter
Measurement: medical cost efficiency
Data source: FQHC Look-Alike data
Description: Total accrued medical staff and
medical other cost after allocation of overhead
(excludes lab and x-ray cost) divided by non-
nursing medical encounters (excludes nursing
and psychiatrist encounters)
Formula:
(T8AL1CC + T8AL3CC) / (T5L15CB - TT5L11CB)
15
Medical Cost per Medical Encounter
Numerator
(Table 8A, line 1, column C) + (Table 8A, line 3, column C)
16
Medical Cost per Medical Encounter
Denominator
(Table 5, line 15, column b) – (Table 5, line 11, column b)
17
Medical Cost per Medical Encounter
Interpretation Considerations
Lab & X-ray costs excluded
Pharmacy and other clinical costs excluded
Overhead is included
Donated costs are excluded
Different than Medicare/Medicaid FQHC rate
Affected by
Demand, productivity and production
Cost – staffing mix
Addition or deletion of sites, services, and service areas
Inflation
18
Change in Net Assets as a % of Expense
Measurement:
financial performance during the audit period
Data source: Audit
Description:
change in net assets divided by total expenses
Formula:
(Ending Net Assets - Beginning Net Assets)/(Total Expense)
Also known as:
Change in Net Assets to Expense Ratio
19
April 2010
Change in Net Assets
Community Health Center, Inc.
Audit Audit Audit
Net Operations Oct-09 Oct-08 Oct-07
months 12 12 12
Revenue
Federal Grant 651,500 643,500 650,000
Patient Service Revenue 7,217,074 5,827,110 5,258,612
State, Local and Other Revenue 2,192,318 2,087,598 1,829,863
Net Revenue before In-kind 10,060,892 8,558,208 7,738,475
In-kind Revenue 10,004 10,004 21,188
Total Net Revenue 10,070,896 8,568,212 7,759,663
Expense
Personnel Expense 5,901,311 5,686,840 4,608,405
Other than Personnel Expense 2,636,739 2,670,313 2,388,467
Depreciation and Bad Debt 365,849 708,925 209,201
Total Expense 8,903,899 9,066,078 7,206,073
Change in Net Assets 1,166,997 (497,866) 553,590
Change in Net Assets/Expense 13.1% -5.5% 7.7%
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Change in Net Assets
Interpretation Considerations
Includes non-operating income and expense
FQHC Look-Alike settlement accruals
Interest and investment income and expense
Gains and losses on disposal of assets
Includes restricted income
Income restricted for future use
Includes income for capital development
Includes everything that affects the value of
the corporation during the audit period
May include out-of-scope activity
21
Working Capital to Monthly Expense Ratio
Measurement:
Current financial condition related to size of
operation
Data source: Audit
Description: Working capital, current assets less
current liabilities, divided by average monthly
expense
Formula: (Current Assets - Current Liabilities) /
(Total Expense / Number of Months in Audit)
Also known as: Months in Working Capital
22
Sample Balance Sheet
Community Health Center, Inc.
Audit Audit Audit
Balance Sheet Oct-09 Oct-08 Oct-07
Current Assets
Cash and Cash Equivalents 780,258 259,173 514,265
Net Patient Receivables 1,547,377 748,750 961,012
Grants and Other Receivables 55,545 71,822 47,386
Prepaid Expenses and Other 122,763 158,366 154,277
Total Current Assets 2,505,943 1,238,111 1,676,940
Long Term Assets 334,757 375,254 310,369
Total Assets 2,840,700 1,613,365 1,987,309
Current Liabilities
Accounts Payable 174,085 173,719 121,862
Accrued Expenses 363,905 339,795 280,015
Current Portion of LT Liabilities 195,743 118,651 73,033
Total Current Liabilities 733,733 632,165 474,910
Long Term Liabilities 163,870 206,077 239,410
Total Liabilities 897,603 838,242 714,320
Net Assets 1,943,097 775,123 1,272,989
23
Working Capital
Working Capital
Sample Measure
Audit Audit Audit
Oct-09 Oct-08 Oct-07
Current Assets 2,505,943 1,238,111 1,676,940
Current Liabilities 733,733 632,165 474,910
Working Capital 1,772,210 605,946 1,202,030
Average Monthly Expenses 741,158 754,673 598,740
Months in Working Capital 2.39 0.80 2.01
Dollars Required for One Mo (1,031,052) 148,727 (603,290)
24
Working Capital
Working Capital
Interpretation Considerations
Board restricted assets not in current assets
May be to create operating or other reserve
Cash may be readily accessible
Can affect interpretation of measure
Should be considered in setting goals
In-kind expenses
Increases average monthly expense and reduces
ratio result
Should be considered in setting goals
25
Long Term Debt to Equity Ratio
Measurement:
Long term financial condition
Data source: Audit
Description:
Long term debt divided by net assets
Formula:
Long term liabilities / Net assets
26
Long Term Debt to Equity Ratio
Long Term Debt to Equity Ratio
Sample Measure
Audit Audit Audit
Oct-09 Oct-08 Oct-07
Long Term Liabilities 163,870 206,077 239,410
Net Assets 1,943,097 775,123 1,272,989
LT Debt to Equity Ratio 0.08 0.27 0.19
27
Long Term Debt to Equity Ratio
Interpretation Considerations
Small equity affects and distorts ratio – can
use fixed assets in place of net assets
Some liabilities associated with restricted
assets may not be classified as either current
or long term such as deferred compensation
Some liabilities are not pursued by lender
Out-of-scope activity may affect debt load
28
The Business Plan
29
Business Plans
The measures are now required for the business
plans in FQHC Look-Alike applications
FQHC Look-Alikes set baselines and five-year
goals in the initial designation and renewal of
designation applications
Progress is presented in the annual
recertification application
Project Officers review the plans and select one
measure for BPHC follow-up and assistance
30
Goal Setting
Goals are set for the project period
Goals may be revised - progress or setbacks
Goals set in relation to baselines, not standards
Set as percent change and absolute values
Goals must be reasonable, achievable, and
represent improvement
Goals should be logically consistent between
measures
31
Baseline and Goal Year
Initial and Renewal of Designation
Applications
Baseline: Baselines are set using data
from the calendar year and audit periods
completed prior to the application
submission.
Goal: Goals are set to be accomplished
by the end of the project period (5
years).
32
Baseline and Goal
Recertification Applications
• Baseline: Carried over from most recent initial
or renewal of designation application. If the
organization has never submitted a Business
Plan, the organization will create a new
baseline from the prior calendar year and
audit period.
• Goal: Goals are set to be accomplished by
the FQHC Look-Alike’s renewal of designation
application due date.
33
Designation Business Plan Format
34
Focus Area, Measure and Goal
Focus area and measure are stated in format
Goal Description: shown as annual rate of
increase and absolute target at end of
designation period
35
Measure Calculation Description
The numerator and denominator are described
36
Baseline Data
Baseline:
Data prior to designation period
Baseline measure of $123 per visit not shown
Projected goal as of end of designation
period shown
Data source: FQHC Look-Alike data
37
Key Factors, Actions and Comments
Factors: up to three factors affecting measure
Actions: up to two per factor
Comments: supplementary and related
information
38
Recertification Business Plan Format
39
Measure Restated
Goal and baseline are restated from the
original application
40
Progress Report
Quantitative Progress: absolute value
Qualitative Progress: rate of change,
factors affecting progress, actions
taken or planned
41
Data Dates
Data are from different periods
FQHC Look-Alike data are for the calendar
year
Audit is the fiscal year
Data are available at different times
FQHC Look-Alike data are available after
submission
Audit three to nine months after end of FY
Baseline dates can affect goal setting
42
Dates and Goals
43
Resources
PIN 2009-06:
http://bphc.hrsa.gov/policy/pin0906/
Uniform Data System Reporting
Manual: http://www.hrsa.gov/data-statistics/health-
center-data/reporting/2009udsreportingmanual.pdf
44
Contact Information
Twyla Adams
Branch Chief
Health Center Systems Branch
Office of Policy and Program Development
301.594.4300
Twyla.Adams@hrsa.hhs.gov
45
Contact Information
Valerie Kolick
Public Health Analyst
Health Center Systems Branch
Office of Policy and Program Development
301.594.4300
Valerie.Kolick@hrsa.hhs.gov
46
Questions
47
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