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Understanding Your Cost of CareMeasuring a Health Center’s PerformanceDave KleiberProject Consultant, Capital LinkSeptember 26, 2018 2018 Capital Linkwww.caplink.org1

IntroductionCapital Link recently collaboratedwith NACHC to provide an updatedCost Per Visit—Measuring HealthCenter Performance that providesuseful methodologies to help healthcenters calculate the componentcosts of care with a focus on costper 5w 2018 Capital Linkwww.caplink.org2

Understanding Your Cost of CareDeveloping the capacity to accurately track, allocate, and compare costs across service linesis an essential tool in the successful management of a health center. 2018 Capital Linkwww.caplink.org3

ComponentsCostofperVisitComponents ofof CostCareAll expenses at the organization can be classified intoone of the following categories: Provider CostDirect Support CostDirect Enabling CostOverhead CostAncillary and Other Cost 2018 Capital Linkwww.caplink.org4

Provider Cost per VisitFour key factors that impact upon provider cost per visitare: CompensationProductivityNon-Clinical ActivitiesProvider Staffing Mix 2018 Capital Linkwww.caplink.org5

Provider Cost per Visit: ProductivityPhysician TypeTotal SalaryCostTotal VisitsVisits /FTECost per VisitFamily Practice (4 FTEs) 700,00012,3003,075 56.91Internist (1.5 FTEs) 262,5004,4502,967 58.98Pediatrician (2 FTEs) 326,0006,5003,250 50.15OB/GYN (1 FTE) 225,0002,8502,850 78.94 1,513,50026,1003,071 57.98TotalIf Eastside Health Center can increase productivity by 15%, that would result in 30,015 visits.Assuming that salary costs remained the same, the total provider cost per visit woulddecrease to 50.43 – generating an additional 226,600 to be applied to incentivesor other service costs. 2018 Capital Linkwww.caplink.org6

Productivity is an organizationalissue.All staff—from seniormanagement to receptionistand from nurses to specialtyphysicians—are responsible fororganizational productivity. 2018 Capital Linkwww.caplink.org7

Relative Value UnitsA more accurate way to monitor and evaluate productivity and effort isthrough a Relative Value Unit (RVU) methodology. RVUs measure theintensity and skill level required to provide a service. RVU scales assignnumerical values to procedures and services that reflect their intensity.Physician TypeFamily PracticeAvg.Total Work Avg. WorkAvg. SalaryVisits Per RVUs PerRVUs Per Avg. Salary Per WorkFTE (1)VisitPhysician (2) Per FTE (3)RVU3,0871.594,908 175,000 35.66Internist2,9641.654,891 175,000 35.78Pediatrician3,2511.635,299 163,000 30.76OB/GYN2,8552.406,852 225,000 32.84 2018 Capital Linkwww.caplink.org8

Provider Cost per Visit:Non-Billable FactorsWhen analyzing provider cost per visit, it is necessary to also takeinto account the non-billable factors related to providerperformance, including: Length of Standard WorkweekNumber of Clinic SessionsInpatient and On-Call VisitsClinical TeamsTravel TimeDocumentationContinuing Medical Education (CME) 2018 Capital Linkwww.caplink.org9

Provider Cost per Visit:Provider Staffing MixThe mix of provider staff should be taken into account whenanalyzing provider cost per visit. The chart below illustrates whythis is important:NursePhysicianPractitioner AssistantFamilyPracticePhysicianAvg. % APPto PhysicianAverage Salary 92,000 93,000 %Source: 2016 NACHC Salary Survey and 2016 UDS 2018 Capital Linkwww.caplink.org10

Direct Support Cost per VisitDirect support costs are costs of non-provider staff or items that aredirectly involved in the delivery of healthcare services to patients.These include: Nurses (RNs and LPNs), medical receptionists, medical assistants, andclinical managed care support Direct dental support (includes dental assistants and dentalreceptionists) Mental health support (includes mental health receptionists) Supplies(Note that this is not an exhaustive list—some health centers may employ othersupport staff positions depending upon the major service lines offered.) 2018 Capital Linkwww.caplink.org11

Direct Support Staff Cost per VisitThe major factors that impact the Direct Support StaffCost per Visit include: CompensationProductivityStaffing MixRatio of Support Staff to Providers 2018 Capital Linkwww.caplink.org12

Direct Support Staff Cost per VisitRatio of Support Staff to ProvidersThe health center median in 2017 (UDS) was: 1.89 FTE medical support staff (nurses, other medical personnel)per medical provider FTE;o2.35 for health centers 75th percentile for medical provider productivity.o1.48 for health centers 25th percentile for medical provider productivity 1.23 FTE dental support staff (Dental Assistants, Aides, Techs) perdental provider FTE 0.31 (average) FTE mental health support staff (Other MentalHealth Staff) per mental health provider FTE 2018 Capital Linkwww.caplink.org13

Support Staff Ratios, 2016All Management & Support Staff (1) Per Provider (2)Management & Support Staff Per ProviderFiscal & Billing Staff Per ProviderIT Staff Per ProviderFacility Staff Per ProviderPatient Support Staff per ProviderTotal Administrative, Facility and Patient Support StaffPer ProviderEnabling Staff Per ProviderQuality Improvement Staff per ProviderTotal Non-Clinical Support Staff per ProviderClinical Support www.caplink.orgStaff per Provider 2018 Capital LinkTotal Support Staff per ProviderNational AverageStaff FTEs/Provider 614

Direct Enabling Cost per VisitDirect Enabling Costs are those costs associated with social services orenabling services that are outside of the traditional definition of medicalservices. These services may include: Case Management Eligibility Specialists Patient/Community Education Child Care Programs Outreach Programs Community Health Programs Transportation Other: services outside thescope of the delivery ofprimary care services even ifthese services are consideredmedically necessary Translation Services 2018 Capital Linkwww.caplink.org15

Overhead Cost per VisitOverhead costs include: Rent, interest, and depreciation expense ( other facilities costs)Administrative and facility staff salaries and fringe benefitsMalpractice insuranceOffice supplies, legal/accounting feesOther costs not already classified into a categoryIt does not include costs of resources attributable to categorically grantfunded programs, since these vary across health centers. To avoidduplicating costs in the calculation, it is important to pull out directmedical support staff costs (e.g., medical receptionists) and directenabling staff costs (e.g. transportation workers) from office salaries. 2018 Capital Linkwww.caplink.org16

Overhead Cost per VisitApproximately 70%-75% of health center costs are personnelrelated expenses. Of the remaining 25-30% of costs,approximately 5-10% are facility costs and another 2-5% are otherfixed costs, which are difficult to reduce.On average, the percentage of total costs at a health center thatare accounted for by administrative overhead is between 25%and 40%. Cost reduction considerations include: Productivity Staffing Administrative Staff Compensation Facility Overhead Administrative Overhead 2018 Capital Linkwww.caplink.org17

.only 15-20% of non-personnelcosts are variable and can beimpacted by cost reductionstrategies. Such expenses astelephone, training, and travel donot represent major cost-reductionopportunities for health centers.The significant opportunities forcost reduction are with personnel. 2018 Capital Linkwww.caplink.org18

Overhead Cost per Visit - StaffingThe ratio of administrative to clinical staff mix is critical to the operationsof a health center, but there is no single optimal staffing mix. It isimportant for management to be willing to challenge the administrativeand facility staffing mix and make changes if necessary. Consider: Contracting out vs. direct employment (facility services, billing); Number of administrative supervisory staff and the ratio of supervisors tostaff; Categorize office salaries into functional job categories for evaluation,rather than evaluating the total expense (finance, administrative support,MIS/billing, marketing etc.); Compare average salaries at a health center with local and regional norms; Calculate the percentage of the total budget devoted to administration andto administrative salaries in particular 2018 Capital Linkwww.caplink.org19

Ancillary and Other Cost per VisitAncillary and Other Costs are those costs associated with services that areoutside of traditional primary or specialty care. It is important to note thatwith the growth, diversification and evolution of FQHC services sometraditional ancillary services such as vision and pharmacy can now beconsidered to be their own direct service lines.Typical Ancillary services include: Radiology LaboratoryBe sure to base your calculation on medical visits (as opposed to total visits)unless the center offers both medical radiology and dental radiology services thenseparating those costs and associated visits is appropriate. 2018 Capital Linkwww.caplink.org20

Ancillary Care Cost per VisitDue to the wide variation throughout the country, there is no“standard” set of ancillary services offered at health centers Range of Services ProvidedoOn-Site vs. Off-SiteoAvailability of ServicesoFixed and Variable Costs Utilization of Services Calculation of Costs Quality 2018 Capital Linkwww.caplink.org21

Looking Toward the FutureTeam-Based CareGlobal or Value-Based PaymentsIntegrated Care/ServicesSocial Determinants of HealthPartnerships & Collaborations 2018 Capital Linkwww.caplink.org22

Cost of Care Trends for CommunityHealth Centers, 2012 – 2017 2018 Capital Linkwww.caplink.org23

New Resource Available Nowhttp://go.pardot.com/l/149871/2018-04-23/n9x5w 2018 Capital Linkwww.caplink.org24

Methodology UDS data for all health centers, 2012 – 2017, Tables 5 and 8a Median values for each cost component, by patient, visit and FTEassociated with each service:- Medical- Dental- Behavioral Health- Substance Abuse- Vision- Enabling Services- Other Professional Services- Pharmacy Services- Pharmaceuticals For today’s presentation, also providing some data for small, medium andlarge health centers and urban vs rural health centers 2018 Capital Linkwww.caplink.org25

Medical Cost per Patient - National 2018 Capital Linkwww.caplink.org26

Medical Cost per Visit – National 2018 Capital Linkwww.caplink.org27

Medical Cost per PatientSmall, Medium, Large Health Centers 2018 Capital Linkwww.caplink.orgTrend – last two year average28

Medical Cost per PatientSmall, Medium, Large Health Centers 800 700 600 500 400 300 200 100 020122013Small 2018 Capital d – linear projected29

Medical Cost per VisitSmall Health CentersTrend – last two year average 2018 Capital Linkwww.caplink.org30

Medical Cost per VisitSmall, Medium, Large Health Centers 250 200 150 11 50 4 18 16 15 68 100 22 21 52 12 12 73 51 4 4 4 58 5 13 13 77 61 54 4 4 4 14 13 56 82 63 3 4 4 22 15 14 59 86 66 4 4 5 15 16 85 61 4 4 15 68 63 5 4 102 90 87 107 94 93 108 99 97 91 87 86 82 75 76 82 81 802012Staff Cost 2018 Capital Link20132014Lab and X-Ray Cost2015Overhead Costwww.caplink.org20162017Other Direct ll 0

Medical Cost per Patient – Rural, Urban 600 500 400 300 200 100 0 42 169 38 175 12 14 42 180 41 185 195 197 209 12 11 213 218 111411 209 211 14 13 13 12 264 268 282 289 303 303 314 311RuralUrbanRuralUrbanRuralUrbanRuralUrban 235 245 249RuralUrbanRuralUrban2013Staff Cost per PatientOverhead Cost per Patient 2018 Capital Link 192 43 47 53 52 14 2582012 46 52 56 542014www.caplink.org201520162017Lab and X-Ray Cost per PatientOther Direct Costs per Medical Patient32

Medical Cost per Visit – Rural, Urban 200 180 160 140 120 100 13 13 13 12 14 15 16 17 17 17 15 17 66 68 67 71 61 63 64 66 56 57 59 74 80 80 83 84 87 90 93 97 97 100 banRuralUrban 52 80 60 40 20 -2012Staff Cost 2018 Capital Link20132014Lab and X-Ray Cost2015Overhead Costwww.caplink.org20162017Other Direct Cost33