The Quill Exchange ~ Fall 2016 - SDHFMA · Welcome to the Quill Exchange. To learn more about the Quill Exchange's namesake, Georgia Quill, click here . ... Smart, Creative, Forward-Thinking

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The Quill Exchange ~ Fall 2016

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In This Issue

• -A Letter from your President

• -Upcoming Events

• -Letter from the Editor

• -SD Fun Fact Contest

• -Sponsors

• -SDHFMA Spring Save the Date

• -SDHFMA Survey Winners

• -SDHFMA Leaders

• -New Member Spotlight

• -HFMA Webinars

• -HFMA LEADERSHIP magazine

• -Region 8 Greeting

• -HFMA National Institute-Save the Date

• -Medicare's Quality Initiatives

• -Health Care 2020

• -HFMA Spring Seminars

• -HFMA Podcasts

• -Building Hospital Budgets

• -HFMA National Payment Innovation

Summit

Past Issues

Visit our website for a list of past issues. Click

here.

Upcoming SD Events

March 22-24, 2017

SDHFMA Spring Symposium

Sioux Falls, SD

Letter from the PresidentJamie Schaefer

President’s Letter - Winter 2017

Greetings SDHFMA Members!

Happy New Year! This year will not disappoint with bringing challenges

and changes to the healthcare industry. This is all the more reason to plan

on attending upcoming education that HFMA will be offering this year. We

will begin locally with our Winter Meeting in Chamberlain in January. Sioux

Falls will host the spring meeting March 22-24th. Please reach out if there

are specific education topics you would be interested in having included. If

education is your passion a great committee for you would be the Program

Committee. We will be looking for new committee members at the spring

meeting. More to come!

The new Chapter Relations director at National HFMA started November

1st. Tracy Packingham, past president of the Greater St. Louis Chapter

and past Regional Executive for Region 8, will be bringing her skills and

volunteer passion to the Chapter Relations department and national office.

This is a great contact for our chapter to feed ideas and opportunities for

improvement!

On behalf of the directors and board I would like to thank the members that

filled out the annual membership survey. If you recall there was an

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2/7/2017http://us7.campaign-archive1.com/?u=771753905072e725ee65fc82f&id=b88890d07e&e=1...

June 25-28, 2017

HFMA National Institute

Orlando, FL

South DakotaFUN Fact!

True or False: South Dakota has

more miles of shoreline than

Florida?

The winner will receive a $10.00

Gift Card to Starbucks!

Be the first to email the Newsletter Editor.

Please put HFMA URGENT in the

Subject of the email.

Thanks To Our SponsorsA special thanks goes out to these incredible

companies for their generous support.

Platinum Sponsors

incentive to fill this out this year for two $100 gift cards from the names of

all members who complete the survey! The winners are….Roger Hettinger

and Teri Bergeleen. I will be contacting you soon!

All my best,

Jamie Schaefer, President

South Dakota Chapter HFMA

Letter from the EditorBJ Dvorak

SDHFMA Winter ConferenceChamberlain, SD, January 18-20, 2017

In keeping with the annual HFMA theme of “THRIVE” the SDHFMA

meeting in Chamberlain gave us a lot of information on how to Thrive over

the next year in healthcare.

Greg Evans, Audit Reimbursement and Sara Aker of DSS South Dakota

Department of Social Services presented on the continued work with

Medicaid Reform by advocating to the new administration to permanently

fix the IHS issue by using 100% federal funds for IHS patients- no matter

where they receive care. The state is on year two of three to improve

reimbursement through targeted investments in key areas such as

Emergency Care Transportation, and Out Patient Psychiatric Services. In

addition, the state budgeted for FY18 a total of $1.1M dollars for 14

Medicare Critical Access Hospitals to be billed at a more uniform rate.

Emily Arias the Regional Vice President at MedData reviewed a project

they are doing with Sanford on Discharge Planning from the Hospital to a

Long-Term Care Facility. We learned strategies for hospitals to better

interact with nursing homes and LTACs in their communities with a hopeful

improvement on LOS delays and the patient experience during these

difficult times. Some of the Topics she covered included Medicaid long

term care eligibility and benefits, determining payer choices that best suite

patient needs, out of state eligibility for cross-state transfers, asset limits &

reduction basics, estate recovery for LTC recipients, spousal resource

allowance and protections, assessing risk before requesting admit, and

more!

Geoff Knobloch a Partner at Eide Bailly discussed the Revenue

Recognition process. He reviewed the upcoming changes to revenue

recognition for health care providers as a result of ASU 2014-09 Revenue



Gold Sponsors

AAA Collections

Avera Health Plans, Inc.

Dakotacare

Hauge Associates, Inc.

Sanford Health Plan

Wellmark BCBS

Silver Sponsors

Avadyne

ProAssurance Casualty

Bronze Sponsors

Accounts Management, Inc

First National Bank

Howalt McDowell

Qualified Presort Service, LLC

HFMA 2015-2016Leadership RosterPlease feel free to contact your 2016-2017 HFMA

Leaders with any questions or concerns. They are

always glad to help and we are so very Thankful for

them and their knowledge in our industry.

PresidentVP Finance / CFO

Avera Sacred Heart Hospital

Jamie SchaeferP: (605) 668-8776 | Email

501 Summit St.

Yankton, SD 57078

President- ElectChief Financial Officer

Madison Community Hospital

from Contracts with Customers and other recent related accounting

standards updates. We all learned about the implementation issues that

the AICPA’s Health Care Revenue Recognition Task Force is working to

address and what considerations should be made by the organizations to

be ready for the standard’s implementation in the future. This gave

everyone a lot of information to think about and take back to their facilities.

Marcia Rase Schmitz from Lead to Inspire gave us all some pointers on

“Mindful Leadership”. She reminded us all to send personal notes to people

since it is now an enigma rather than the norm to receive mail rather than

email or text messages. We all came away with ideas of how to be more in

tune with our leadership skills.

Mark Lyons from Casey Peterson & Associates talked about the state-wide

nursing home benchmark project. He is doing this in conjunction with

SDAHO. The statistics were so interesting and far different than you would

imagine. If you have questions or are interested in learning more about the

statistics, you may want to contact Mark Lyons. This was a project that

started from an HFMA networking event. This is a great example of

why you never want to miss one of our conferences as you never know

what exciting experiences lie ahead.

Gil Johnson VP of Business Development at SDAHO gave us a lot to think

about with the Legislative updates. He talked about the future of healthcare

with the new administration and what things may lie ahead in 2017 and

beyond. It is always very interesting to hear what is going on locally and

nationally in the legislation that the rest of us may not normally be

privileged to know or dig that deep into.

Thursday night was a big hit as usual with our White Elephant

exchange. You won't want to miss this event because the gifts are so

varied and interesting that only those that attend can appreciate the entire

experience. A HUGE thanks to the Public Relations committee for doing

such a great job of planning our networking events that make the entire

conference come together.

Friday morning Dana Darger Director of Pharmacy at Rapid City Regional

gave us a lot of information on many topics in the pharmacy world. I found

it fascinating how the drugs that save so many lives can be temporarily out

of stock, in short supply or being controlled by some outside source. Our

Pharmacy Directors have to be in tune with what is going on all around

them as their role is key in saving lives in our hospitals. Dana spoke about

the 340B program and how this project can help facilities that qualify. It is a

complex program but could be very beneficial to your facility.

Our last speaker was Andy Perry Co-Founder at Curvo Labs. Andy spoke

about making the Supply Chain your competitive advantage in an era of

bundled payments and population health. The presentation outlined the

Information System Strategy Triangle to uncover vestiges of cost based

reimbursement, outsourced contracting, and transactional management

that plague and inhibit an organization’s competitiveness and growth.

Looking forward to seeing all of you in the Spring!

BJ Dvorak, Newsletter Chair

South Dakota Chapter HFMA



Teresa MallettP: (605) 256-8605 | Email

917 N. Washington Ave.

Madison, SD 57042

Vice PresidentDirector, Revenue Cycle

Regional Health

John VetschP: (605) 719-7644 | Email

353 Fairmont Blvd.

Rapid City, SD 57701

SecretaryDirector Accounting

Regional Health

Jennifer SchmaltzP: (605) 928-3311 | Email

PO Box 6000


TreasurerVP Business Development

Health Information Systems

Reimbursement

SDAHO

Gilbert JohnsonP: 605-361-2281 | Email

3708 Brooks Place

Sioux Falls, SD 57106

Directors

Matt McLeodTerm Expiration 5-31-2017

Director of Client Relations

CCB Credit Collections Bureau

PO Box 9490


email

Duane EverdingTerm Expiration 5-31-2019

Business Office & Registration Director

Brookings Health System

300 22nd Avenue

Brookings, SD 57006

email

Aaron ClaytonTerm Expiration 5-31-2017

Senior Manager

Eide Bailly LLP

200 E. 10th Street, Suite 500


email

Vicki JensenTerm Expiration 5-31-2018

SDHFMA SPRING SYMPOSIUM

Sioux Falls, SD

March 22 - 24 2017

Hilton Garden Inn Sioux Falls

Guest rooms:

Held under SD Healthcare Financial Management

Association (HFMA)

Room rate of $120.00 per night

Block of rooms reserved until March 1, 2017

Reserve your room today!!

Meeting at a Glance:

Board meeting-Wednesday March 22 11:00a -

5:00p

Vendor Appreciation Night-Wednesday, March 22

5:00p - 9:00p

Conference-Thursday, March 23 7:30a - 5:00p

Networking-Thursday, March 23 6:00p - 9:00p

Conference-Friday, March 24 7:30a - 12:00p

Congrats to the SDHFMA

Survey Winners!

Roger Hettinger



Chief Financial Officer

Platte Health Center Avera

PO Box 200

Platte, SD 57369

email

Will FlettTerm Expiration 5-31-2018

Vice President and CFO

Avera Queen of Peace

525 N Foster St

Mitchell, SD 57301

email

Austin WilluweitTerm Expiration 5-31-2018

Director of Financial Reporting

Avera McKennan

1325 S Cliff Ave


email

SD HFMA Webinars

Learn about timely healthcare finance topics

and earn CPEs. Most live webinars are free for

HFMA members and $99 for non-members,

unless otherwise noted. Become a member

today.

Jan 10 Patient Payment Behaviors: Turn

Collection Costs and Bad Debt Into Revenue

Jan 16 Washington Update: What a New

Administration Means for Health Plans,

Provider Organizations, and Physicians

Jan 19 How to Create Patient Engagement

Mobile Apps that Provide ROI and Directly

Impact Your Bottom Line

Feb 8 Quality and Resource Use Reports:

Key Considerations to Optimize MACRA's

Merit-Based Incentive Payment System

Performance

Feb 9 Healthcare Analytics Design: Smart,

Creative, Forward-Thinking

Feb 14 An Overview of the Office of Inspector

General's 2017 Work Plan

Please check HFMA's Webinars page soon for the

latest updates.

If you are interested in presenting a webinar, please

contact Bill Casey at [email protected].

Thanks for the opportunity to participate in the

membership survey. SDHFMA does a wonderful job

in preparing high-quality educational conferences and

keeping the membership informed of the latest news

in the healthcare industry. Hats off to the South

Dakota officer team and the National HFMA Office for

all they do to make this organization so successful!

Teri Bergeleen

I really enjoy the programming of the SDHFMA

organization. I find the chapter officers and volunteers

work really hard to create meaningful content (through

educational and social events) throughout the year so

I wanted to share my appreciation via the survey. The

online survey tool was so easy to access and fill out.

How will anyone know how an organization is doing if

you don't share your opinion? Thanks again and keep

up the great work!

Spotlight on a New Member:Jaci Hoekstra



HFMA provides webinars available one

calendar year following the live webinar date.

Most on-demand webinars are free for HFMA

members and $99 for non-members, unless

otherwise noted. View these webinars before

they expire!

Available

until

April 6, 2017

Using the Right Metrics to

Improve Physician Practice

Productivity and Operating

Margin

Available

until

April 26, 2017

Best Practices for Leveraging

Analytics to Improve Revenue

Integrity

Available

until

May 17, 2017

Driving ROI with Improved

Patient Experiences

Available

until

December 23,

2017

Understanding the Final Rule

Changes of the 2017 Medicare

Physician Fee Schedule

Region 8 Connection

Winter 2016

Bill Fenske, CFO-Rice Memorial Hospital

HFMA Region 8 Regional Executive 2016-2017

Hello to the Chapters of Region 8:

HEALTHCARE SOLSTICE

I remember watching the Little Bear episode of the

Winter Solstice and thought to myself, “What does

solstice even mean?” I know what the two dates of

the year are when we use this word, but thought I

would incorporate this in to my letter. So I thought I

would look up the definition and here are a couple of

words to describe; a furthest or culminating point; a

turning point. My goodness, what a plethora of

opportunities this definition relates to healthcare and

the recent election.

I have been asked numerous times pre-election and

post-election what I thought about the healthcare

changes coming depending on who was elected. My

immediate answer was always the same, “It does not

matter!!” People were kind of shocked by my answer

as I think many were either hoping for a more political

answer or hoping for more insight. Healthcare

reached its solstice or turning point many years ago

regardless of politics. I realize that some may argue

that the Affordable Care Act either moved us forward

or backward, but regardless, healthcare was already

moving. Maybe the ACA pushed us quicker, but the

healthcare industry was already at a culminating point

Senior Audit Associate:

What is the hardest aspect of your position?

Besides staying up-to-date on healthcare industry changes, one of the hardest aspects of my

position is managing numerous relationships at once. I am the point of contact between the

engagement team, the partner, and the client when conducting a healthcare audit. I love the

challenge of ensuring everyone is on the same page and we are providing the best possible

service to meet each client’s needs.

What is the most rewarding aspect of your position?

One of the most rewarding aspects of my position is working with clients to help understand

their issues and identifying solutions to help them succeed.

If you knew five years ago what you knew now about your position

what advice would you give someone just starting?

Read whatever you can to learn more about the industry. All of the healthcare terms and

legislation can be overwhelming, but becoming familiar with the healthcare “lingo” is key.

What are you most excited about your new membership with HFMA?

I am looking forward to gaining more industry knowledge and connecting with some of the

best healthcare management professionals out there!

Fun Facts about Jaci:

My husband and I absolutely love to travel. This passion was sparked after my sophomore

year of college when I took part in a summer study abroad to Israel. Since then, I’ve ventured

to three more foreign countries and countless trips around the US. On the flight home from

our recent trip to Washington DC & New York, I leaned over to my husband and asked,

“Where to next?”.



and needed to move in a new direction from volume to

value. Our family, friends, and neighbors were

expecting and demanding that we reform healthcare

and thus there is no turning back regardless of what

we hear about repeal and replace.

So how does this relate to HFMA and Region 8?

HFMA needs to lead as we continue to reform

healthcare. We all realize there is no turning back and

we hit the culminating point of a volume based system

of reimbursement years ago so let’s move on!! This is

our solstice as we need to be in front and leading. At

the recent HFMA Region Executive Council meeting,

much work and changes were completed regarding

the Chapter Balanced Scorecard. This was recently

shared with your Chapter Presidents and President-

Elects on a call right before the holidays. The

changes in the scorecard are very much in alignment

with the shift from volume to value. HFMA is

enhancing our initiatives to focus on the quality and

value of your membership and away from incentives

relating to quantity and volume. As such, the

Chapters will be more focused on Innovation and

Quality.

The Region Executive Council and your Chapter

Leaders are very excited on these changes, but we

continue to need your support and your leadership.

HFMA needs to lead and should be expected to lead

as we continue our navigation through the Winter

Solstice (ok so I brought Little Bear back in to the

discussion). At the upcoming Mid-America Summer

Institute, which will be held on August 7-9 in Kansas

City, you will experience educational programming

around Innovation, Quality, and Value. Please mark

these dates on your calendar as we need your

attendance and participation at the conference.

Thank you for the opportunity to serve Region 8, by far

the best region in HFMA! I look forward to working

alongside your dedicated Chapter Leaders!! Please

feel free to contact me with any questions, concerns,

or comments at [email protected] or 320-

231-4009.

Medicare’s Quality Initiatives

Present New Management

Challenges

Paul Shoemaker and Jonathan York

The first wave of data for three

Medicare initiatives are helping

hospitals better understand

quality performance

measurements.

The Centers for Medicare & Medicaid Services (CMS)

in recent years has been implementing three

programs that adjust payment to hospitals based on

selected quality measurements:

• The Value-Based Purchasing (VBP) Program,

which rewards or penalizes hospitals based on

their performance on 19 quality measures

Leading the Push to Understand the True Cost of Care

Vivian S. Lee, PhD, MBA, the CEO of University of Utah Health Care,

discusses her organization's cutting-edge strategies for engaging clinicians

and consumers in the drive for better value. Read more.

Related content: Resources Improve Clinical Understanding of Cost and

Quality

What's important to you in a conference?

If you're looking for strategies centered in collaboration that lead to better

outcomes for patients, shareholders, and stakeholders, you need to be at

ANI 2017.

The dynamic and energizing experience you're expecting is reflected in the

keynote presentation selections, including:

Join Joe Scarborough and Mika

Brzezinski from MSNBC's Morning Joe

as they discuss the changing

landscape of America. This team will

share their thoughts on how working

collaboratively and inclusively will serve

you, your organization, and the industry

as a whole. Plan for an early arrival on

Sunday before the official keynote

presentation as Joe and Mika will each

facilitate their own Keynote Spotlight

session.

Steve Pemberton is Vice-President, Diversity and

Inclusion and Global Chief Diversity Officer for

Walgreen's Boots Alliance and is a widely recognized



• The Hospital Readmissions Reduction (HRR)

Program, which penalizes hospitals that are

deemed to have too many readmissions within

30 days

• The Hospital-Acquired Condition (HAC)

Reduction Program, which reduces payments

for hospitals with high rates of HACs such as

infections and patient injuries

These programs have presented specific management

challenges that are important for the nation’s hospitals

to manage because of the significant risk for reduced

payment that they pose, which is likely to increase

over time. Moreover, even as hospitals struggle to

understand the metrics used in these programs, the

performance measurements are made publicly

available, raising the probability that they might

influence consumer perspectives, legal investigations,

and other factors.

Nonetheless, only recently have sufficient data

become available to guide hospitals and health

systems in their internal education and performance

improvement efforts to meet the requirements of these

three programs. Hospital finance leaders can benefit

from a review of some of these data, not only to be

able to better address the specific management

challenges but also to provide insight that can help in

efforts to educate trustees, physicians, and others

about the significance of value-based purchasing.

Quality Measurements

CMS initiated the first these three programs, the VBP

Program, in 2012, as part of its larger ongoing effort to

improve the quality of the nation’s healthcare system.

Within each of the programs, performance data from

individual hospitals are compared with national

statistics each year and their payment rates are

adjusted to provide incentives for better performance.

These measurements present several management

issues.

The programs use performance data that hospitals

submit to the inpatient quality reporting (IQR) program,

which CMS launched in 2005 in an effort to define

quality measurements and collect performance data

self-reported by hospitals. Hospitals that choose not to

participate in IQR are subject to a 2 percent reduction

in Medicare payment each year. IQR data are posted

on CMS’s Hospital Compare website

(medicare.gov/hospitalcompare) and are available in

datasets downloadable from cms.gov.

Because many measurements are based on Medicare

claims data, it is extremely important for diagnoses

and procedures to be coded completely and

accurately. Secondary conditions that do not effect

Medicare severity-adjusted DRG (MS-DRG)

assignment may nevertheless effect quality

measurements. Other information, such as whether a

condition is present at admission and the patient’s

discharge destination, also should be accurately

reported on claims.

A hospital’s quality measurements are a matter of

public record and can be accessed easily through

Hospital Compare. Management may be faced with

public and private inquiries about quality measures.

CMS may change, add, or delete some

measurements from year to year. Hospitals should

anticipate such changes and respond accordingly.

Because new measurements must be listed on

Hospital Compare for at least one year prior to being

used in a value-based program, it is advisable to

watch for changes on an ongoing basis.

expert on matters of diversity and inclusion. In addition,

Steve's best-selling memoir, A Chance in the World,

details his personal story of defying seemingly

impossible odds, the importance of perseverance and

how kindnesses of strangers can help us all find our

purpose.

Joseph Grenny, most notably known as coauthor of

Crucial Conversations and New York Times bestseller

Influencer: The New Science of Leading Change, will

share his thoughts on what it means to be an

influencer—the person that leads change, replaces bad

behaviors with new skills, and makes things happen.

Save $150 off the full conference rate when you register by

February 28.

Health Care 2020



Some quality measures are based on data sources

other than Medicare claims. For example, CMS uses

Medicare enrollment data to identify patient deaths

outside the hospital, and the agency uses the Centers

for Disease Control and Prevention’s National

Healthcare Safety Network to identify certain

infections. Hospitals generally have an opportunity to

review and question the accuracy of their quality

measurements before the data are released. Although

validating the accuracy of these data may be difficult,

hospitals should not discount the importance of

making this effort.

In addition to these quality measurement

considerations, each of three CMS programs presents

its own unique management challenges for hospitals.

VBP Program

CMS implemented the VBP program to provide

hospitals with financial incentives based on selected

quality metrics. Currently, the program applies only to

fee-for-service Medicare patients treated in

approximately 3,100 short-term acute care hospitals.

Individual performance measurements are

mathematically combined into a single total

performance score (TPS) that determines a hospital’s

adjustment to payment. The program is funded by

withholding a percentage of DRG payments from all

hospitals and then redistributing it to individual

hospitals based on their TPS. The percentage

withheld was 1 percent in 2013 when the program was

first implemented and has been incrementally

increased to 2 percent for FY17. The selected quality

metrics have changed each year as new areas of

focus are introduced and previous areas of focus are

eliminated because hospitals no longer exhibit

significant variation in those previous areas. There are

14 metrics for FY17.

Here is a brief overview of the method CMS uses for

calculating the TPS.a

Quality metrics are grouped into four domains, each

weighted according to its contribution to the combined

TPS. For FY17 the four domains are:

• Patient and caregiver-centered experience of

care/care coordination (25 percent)

• Safety (20 percent)

• Clinical care outcomes and processes

(outcomes, 25 percent; processes, 5 percent)

• Efficiency and cost reduction (25 percent)

This domain is based on eight measurements taken

from the HCAHPS survey. This survey asks a sample

of patients about their experiences with care during a

recent overnight stay in the hospital. All hospitals use

the same survey questionnaire and standardized data

collection procedures. Data analysis is performed by

CMS, not by the hospitals. Individual quality measures

for 2017 are: The second domain, safety, is focused

on the incidence of HACs. Individual quality measures

include: Within this domain, the outcomes focus is on

mortality rates associated with three conditions within

30 days of a procedure or discharge, and the process

focus is on three selected clinical practices. Individual

quality measures include: The first domain represents

patient safety events as measured by the AHRQ PSI

90 composite score. This measure also is used in the

value-based purchasing safety domain explained

earlier, and the HAC Reduction Program’s second

domain represents performance across the same five

HACs that are the focus of the VBP Program’s safety

domain:

When considered together, the three programs have

potential payment adjustment factors totaling up to

6 in FY17: To read the complete article please go to

http://www.hfma.org/medicarequalityinitiatives/.

Join us in San Antonio or Seattle to expand your skills.

HFMA's Spring Seminars are your destination for in-depth education critical

to succeeding in today's healthcare environment. These highly rated

programs offer practical information on key areas of healthcare finance and

are designed for everyone from newcomers to the field to seasoned

professionals.

Seminar topics include:

• Managed Care Contracting

• Managing Reimbursement in a Value-Based Payment System

• Medicare Cost Reporting

• Revenue Cycle

• Strategic Productivity and Process Improvement

• Medical Group Management

• Population Health Management

Whether you need more healthcare finance fundamentals (Essentials

Programs) or need to focus on issues related to new care delivery models

(Master Sessions), HFMA's Seminars continue to deliver high-quality

information that enables you to achieve immediate job results and

organizational improvement.

Register early and save $100!



Paul Shoemaker is CEO, American Hospital

Directory, Louisville, Ky.

Jonathan York is senior software developer,

American Hospital Directory, Louisville, Ky.

This article is excerpted from "Medicare's Quality

Initiatives Present New Management Challenges"

by Paul Shoemaker and Jonathan York, published in

the January 2017 issue of hfm. The article can be

accessed at

http://www.hfma.org/medicarequalityinitiatives/.

Health Care From the Employers' Perspective

In this podcast, David Lansky, president and CEO of the nonprofit Pacific

Business Group on Health, discusses challenges in the healthcare system

for employers who offer health insurance. Justin Barnes, partner and chief

growth officer for iHealth in Atlanta, provides insight into MACRA and the

opportunities it presents. Finally, Lorraine Schelle, HFMA’s director of

health business solutions, and Sandra Wolfskill, director of healthcare

finance policy, revenue cycle MAP, discuss a new view of the patient-

centered, contemporary revenue cycle.

With So Much Uncertainty, How Do You Build Your Hospital’s Budget?

John Johnston, CPA, MHA

Many hospital CFOs have been in the planning mode going into the New

Year, putting the finishing touches on their budgets. And some are hoping

2017 will be different from recent years. Despite average margins being up

overall, some hospitals have found it harder to hit their annual budgets.



For example, one Midwestern health system recently ended its first quarter

with a $10 million negative variance to budget. The system has enough

cash flow to maintain overall profitability for now, but certainly cannot

withstand that same deficit over multiple quarters. This reflects a recent

and precarious trend we are seeing: hospitals that are profitable yet are

missing budget targets.

One of my colleagues, Sean Angert, a senior vice president

at Advisory Board, recently shared with me his perspective

on this trend, which he has gained during his years working

with hospitals on efforts to balance revenues with expenses.

Angert’s insights speak to the concerns of today’s

healthcare CFO regarding margin sustainability and

planning for 2017.

Why Managing to a Budget Is Different Today

“There’s no question that budgeting is a lot more complex than it used to

be when I first started almost 30 years ago—or even five years ago,”

Angert says. “We’re in a whole new world, where hospitals have much less

control over certain factors that impact performance and the overall budget,

including volumes and expenses.” He notes, for example, that volume

projections are less steady with the trend toward high-deductible plans, in

part because many consumers will delay or avoid care that would have

previously been delivered. And regarding expenses, he observes that, as

healthier patients are directed to lower-cost sites, hospitals are seeing an

increase in the average severity of their patients’ conditions, requiring them

to deliver more costly acute care

“Such circumstances are making revenue and expenses increasingly less

predictable and requiring more unplanned investments throughout the

year,” Angert says. “While hospital leaders used to have the luxury of

projecting their finances—and managing to a set annual budget—that

approach no longer works in today’s environment. That’s why many of

them are moving to flexible budgets that accommodate inevitable

variances in volume, case mix, and unplanned expenses.”

More Costly Inpatient Care

When asked to elaborate on why it’s so hard to make yesterday’s

assumptions about today’s budget, Angert underscores the fact that the

average patient in the hospital today is increasingly sicker with more

complications. (Advisory Board has tracked a 3 percent year-over-year

increase in overall patient severity, nationally.) Such patients require a

more involved and customized care plan to manage

comorbidities—diabetes, anemia, coronary artery disease, and others.

As a result of the increasing mix of these patients in many hospitals, there

are many more cost and clinical outlier cases, which may not be accounted

for in the historical budget, Angert says. He also points to the prevalence of

pay-for-performance penalties—for hospital-acquired conditions and

readmissions—as a factor further complicating the planning process.

Updating Cost Control Strategies

Cost control is obviously a big piece of ultimately making budget, and

Angert has a clear perspective on the challenges hospitals face today in



their efforts to curb expenses. “Whether it’s with labor, supplies, drugs or

other categories, hospital leaders say that they have less wiggle room to

improve efficiency,” he says. “For example, many have already tightened

up productivity targets so often that staffing levels are generally efficient

and lean. So where do they go from here?”

Angert suggests that instead of continuing to make cuts here and there for

short-term budget needs, hospital leaders should look at the same issues

from a slightly different lens. “For example, some take a more creative

approach to workforce management—which has always been the biggest

line item in the hospital budget,” he says.

He lists the following types of questions leaders can ask:

• Are clinical staff working at their top-of-license or is there room to improve?

• Does the hospital staff have flexibility to expand at peak times and right-size as

needed?

• Is the annual budget set in stone or are there opportunities to be flexible on a

monthly or quarterly basis, based on actual volume and demand?

Message for CFOs

Angert suggests that one of the biggest takeaways for CFOs is the

importance of maintaining flexibility. He shares an example of one health

system that lacked budgetary flexibility but realized that this caused a lot of

unnecessary inefficiencies that are just not sustainable in today’s

environment. “Across the organization’s multiple facilities, there were set

levels of staffing in the budget that did not adjust based on service

demands—resulting in both over- and under-staffed periods of time. But

the system worked to design a flexible workforce budget and structure, and

was able to take advantage of opportunities for sharing staff, adapting

roles, and appropriately meeting demand.”

Many organizations like that health system are moving to a more flexible

budget, Angert says. He notes that, based on actual volumes and spending

over a given month or quarter, these organizations leave room to make

adjustments to the budget and their projections. And best practice finance

teams form a committee to meet regularly and discuss budget variances

and how to close any gaps.

Angert’s message for hospital CFOs: With less predictability than ever,

hospitals need to take a fundamentally different approach to budget

planning so they can develop more accurate, yet flexible, projections.

Because in many cases, experiencing one or two bad quarters puts a

severe strain on even high-margin organizations (and their employee profit-

sharing plans) and will raise serious questions from the board of directors.

John Johnston, CPA, MHA, is senior vice president at Advisory Board,

Washington, D.C.

Publication Date: Friday, January 06, 2017



February 8-10, 2017The Westin GalleriaDallas, TX

This is the leading forum on the expansion of healthcare payment

approaches, with a special focus on innovative payment designs, including

evolving risk-based models, episode-based initiatives, and programs such

as MACRA, MIPS, and APMs. Clinicians, health plans, and providers will

discover strategies for understanding and implementing these

arrangements with both private and public sector payers.

You will get in-depth, cutting edge, and insightful information on:

• Navigating the change from fee for service to value based payment

• Challenges and opportunities for proposing advanced alternative payment

models

• Environmental and design factors that best support payment and delivery

reforms

• Analyzing and implementing effective alternative payment models on federal,

state and local levels

Additional Information

Register early

Please submit your registration early to allow ample processing time. You

will receive an email confirmation as soon as the registration process is

completed. Any registrant who has not received an emailed confirmation

should call HFMA's Member Services Center at (800) 252-4362, ext 2.

If you have to cancel

A refund of the registration fee (less a $100 processing fee) will be granted

if cancellation is received at least 10 days prior to the event date.

Subsequent cancellations received before the date of the program may be

issued an HFMA National credit certificate (less the processing fee), good

toward any future HFMA National educational programs or select products.



Substitutions are permitted. Cancellations must be submitted in writing by

fax to (708) 531-0665 or by mail.

CPE Information

Conference + Preconference Workshop: 14.5 hours

Conference only: 10 hours

Type of Program: Group Live

Content Area: Specialized Knowledge & Applications

Prerequisites: If required, are listed for individual sessions

Pre-work: None unless indicated for the session

Questions?

Email HFMA Member Services at [email protected] or call us at

(800) 252-4362, ext. 2.

Copyright © 2017 Healthcare Financial Management Association (HFMA) of South Dakota, All rights reserved.



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