Utilizing Benchmarking to Manage Health Center Operations. Curt Degenfelder Managing Director

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1 Utilizing Benchmarking to Manage Health Center Operations Curt Degenfelder Managing Director 1

2 KEY COMPONENTS OF COST PER VISIT! Physician Productivity! Physician Salary & Fringe! Midlevel Productivity! Midlevel Salary & Fringe! Midlevel/Physician Mix Direct Support! Staffing Ratios! Direct Support Mix! Direct Support Salaries & Fringe Enabling! Staffing Ratios! Other Staff who Engage in Enabling Services Overhead! Staffing ratios! Overhead % of Total Cost! Facility Overhead! Administrative Overhead Ancillary & Other! Dental! Pharmacy! Radiology! Lab! WIC! Other Programs 2

3 ALLOCATION OF HEALTH CENTER COSTS BY AREA* 13% 30% 29% 16% 8% 4% Direct Support Direct Enabling Facility Overhead Administrative Overhead Ancillary and Other * Data extracted from RSM proprietary National Ambulatory Care Database. 3

4 PHYSICIAN PRODUCTIVITY - VISITS Data Source: Internal Reports, Worksheet B of the Medicare Cost Report Cost Component Calculation Comparison Physician Productivity Total Physician Visits Productivity (by provider type) Physician FTEs Standards COMPARATIVE DATA BY SPECIALTY: Health Center (1) MGMA (2) General and Internal Medicine 3,566 3,651 Family Practice 3,858 4,367 Pediatrics 3,623 4,771 Obstetrics & Gynecology 3,679 2,962 Median of all Physicians 3,682 4,009 (1) Data is from proprietary Health Center Database maintained by RSM McGladrey Inc. (2) Data is from Physician Compensation and Production Survey: 2004 Report Based on 2003 Data (MGMA 2004) Represents Ambulatory Encounters only. 4

5 PROVIDER PRODUCTIVITY DRIVERS OF PROVIDER PRODUCTIVITY: Mix (Number of Physicians, Nurse Practitioners, etc.) Percent of Time spent in Patient Care Adequate Infrastructure to Support s Number of Scheduled Patients plus Walk-Ins 5

6 DRIVERS OF PROVIDER COSTS-PERCENT OF TIME SPENT IN PATIENT CARE ISSUES FOR CONSIDERATION: What is the standard workweek? 35 Hours? 40 Hours? How many sessions is a full-time provider responsible for? Weekly average is 7-8, average hours in clinic are How is inpatient/on-call time handled? When are meetings scheduled? During lunch? On weekends? At night? How is Quality Assurance Peer Review coordinated? How is travel time taken into account? 6

7 DIAGNOSING HEALTH CENTER BENCHMARKS PHYSICIAN PRODUCTIVITY VISITS Productivity Family Practice Pediatric Ratio Health Centers (1) 3,858 3, Private Practice 4,367 4, What is it about the way Health Centers provide care to children that is different from private practice? (1) Data is from proprietary Health Center Database maintained by RSM McGladrey Inc. 7

8 DRIVERS OF PROVIDER COSTS - SALARY - PHYSICIAN Cost Component Example Comparison Physician Salary Total Physician Salaries/ Regional Salaries Total Physician FTEs COMPARATIVE DATA BY SPECIALTY: Health Center (1) MGMA General and Internal Medicine $ 131,455 $ 159,252 Family Practice $ 135,148 $ 157,481 Pediatrics $ 129,779 $ 158,867 Obstetrics & Gynecology $ 201,068 $ 237,191 Median of all Physicians $ 136,136 $159,252 (1) Data extracted from RSM proprietary National Ambulatory Care Database. 8

9 PHYSICIAN COST PER VISIT Data Source: Medicare Cost Report, Worksheet A, Line 1, Column 5 Divided by Worksheet B, Line 1, Column 2 Cost Component Calculation Comparison Physician Cost per Medical Visit Total Physician Cost / Evaluate Against Total Medical Visits Cost per Visit Standards Example: $585,862 Salary & Fringe Cost/11,546 visits = $50.74/visit National Median for Health Centers - $44.00 (1) (1) Data is from proprietary Health Center Database maintained by RSM McGladrey Inc. 9

10 PHYSICIAN COST PER VISIT BY PHYSICIAN TYPE* General & Internal Medicine Family Practice Pediatrics MD Cost per Visit Health Center A $ $ $ $ Health Center B $ $ $ $ Health Center C $ $ $ $ National Median $ $ $ $ * Includes fringe benefits 10

11 PHYSICIAN COST PER VISIT Productivity is the #1 Driver of Cost Physician Salary Physician Productivity Physician Salary per Visit Facility Overhead Cost per Physician Facility Overhead per Visit Facility and Physician Salary Cost per Visit Health Center A $ 128,359 4,700 $ ,000 $ 6.81 $ National Median $ 125,534 3,694 $ ,000 $ 8.72 $ While Health Center A has higher Physician Salary Costs, thus higher absolute costs than the national average, it also has higher productivity. This ultimately leads to a lower cost per visit. 11

12 COMPONENTS OF COST PER VISIT MIDLEVEL PRODUCTIVITY VISITS Data Source: Internal Reports, Worksheet B of the Medicare Cost Report Cost Component Calculation Comparison Midlevel Productivity Total Midlevel Visits / Productivity Midlevel FTEs Standards COMPARATIVE DATA BY MIDLEVEL TYPE: Health Center (1) MGMA (2) Nurse Practitioners 2,535 2,351 Physician Assistants 3,077 3,106 Nurse Midwives 2,361 1,876 Median of all Midlevels 2,596 2,351 (1) Data is from proprietary Health Center Database maintained by RSM McGladrey Inc. (2) Data is from Physician Compensation and Production Survey: 2004 Report Based on 2003 Data (MGMA: 2004). 12

13 DRIVERS OF PROVIDER COSTS - SALARY - MIDLEVEL PROVIDERS Component Example Comparison Midlevel Salary Total Midlevel Salaries/ Regional Salaries Total Midlevel FTEs COMPARATIVE DATA BY MIDLEVEL TYPE: Health Center (1) MGMA Nurse Practitioners $69,692 $67,835 Physician Assistants $70,706 $70,262 Nurse Midwives $86,224 $71,748 Median of all Midlevels $71,842 $70,262 (1) Data extracted from RSM proprietary National Ambulatory Care Database. 13

14 MIDLEVEL COST PER VISIT Component Total Midlevel Salaries & Fringe/Total Midlevel Visits COMPARATIVE DATA BY MIDLEVEL TYPE: Health Center (1) MGMA (2) Nurse Practitioners $32.31 $33.18 Physician Assistants $26.09 $26.01 Nurse Midwives $35.29 $43.98 (1) Data extracted from RSM proprietary National Ambulatory Care Database. (2) Assumes a 15% Fringe Benefit Rate 14

15 DRIVERS OF PROVIDER COSTS-s - PROVIDER MIX Component Example Comparison Example Ratio of Midlevels/Physicians Total Midlevel FTEs / 3 Midlevel FTEs / Total Physician FTEs 6 Physician FTEs =.5 Ratio ISSUES FOR CONSIDERATION: If the ratio is high, physician productivity may decrease due to increased responsibility of overseeing midlevels. Average RVUs per provider must be taken into consideration. Median work RVU productivity: primary care physician 3,512, primary care midlevel 1,888 Are midlevels getting tougher cases? Are midlevels getting acute cases? 15

16 PROVIDER MIX! The national health center median of midlevels to physicians is.55.! Midlevel productivity generally exceeds minimum utilization threshold standards of 2,100 visits, whereas physician productivity generally falls short of 4,200 visits.! Midlevel cost per visit is lower than physician cost per visit.! This does not necessarily mean that health centers should strive to be above the national median. Service intensity and patient need should be considered, as well as overhead coverage considerations. 16

17 COMPONENTS OF COST PER VISIT DIRECT MEDICAL SUPPORT COSTS Drivers of Direct Medical Support Staff (DMS) Costs! Productivity! Ratio of Direct Medical Support Staff to s! DMS Compensation 17

18 COMPONENTS OF COST PER VISIT - DIRECT MEDICAL SUPPORT COSTS! Direct Medical Support Staff includes Medical Support Supervisors, Nurses, Medical Attendants, Phlebotomists, Medical Receptionists, Nurses Aides, and QA Coordinators/Medical Transcribers.! Direct Medical Support Staff should be evaluated based on salary including fringe benefits and in relation to the number of physicians and midlevel providers.! Health centers can develop a model of delivery where Direct Medical Support Staff can increase provider productivity and cost effectiveness (e.g., staff can perform basic tasks, such as checking weight and blood pressure, leaving physicians more time for complicated patient care). 18

19 COMPONENTS OF COST PER VISIT DIRECT MEDICAL SUPPORT COSTS Cost Component National Median! Avg. # of DMS per 2.38! RNs, LPNs, Medical Assistants, Nurse Aides per 1.4! Avg. DMS Salary (1) $34,281! Avg. DMS Cost per (1) $81,558! Avg. DMS Cost per Visit (1) $16.76 (1) Assumes a 23% fringe benefit rate. 19

20 COMPONENTS OF COST PER VISIT DIRECT MEDICAL SUPPORT COSTS Service Category National CHC Ratio to Medical s National CHC Cost per Medical Visit National CHC Average Salary Per FTE Medical Support Supervisors 0.14 $ 1.96 $ 40,882 Nurses - RN 0.48 $ 6.33 $ 38,247 Nurses - LPN 0.53 $ 4.04 $ 25,783 Medical Attendants 0.66 $ 5.55 $ 23,509 Phlebotomists 0.14 $ 1.46 $ 24,640 Managed Care Support (Clinical) 0.06 $ 0.58 $ 38,678 Referral Coordinators 0.12 $ 1.40 $ 23,383 Patient Triage Support 0.11 $ 1.28 $ 27,277 Medical Receptionists 0.63 $ 3.65 $ 21,289 Nurse Aide 0.31 $ 2.54 $ 19,030 QA Coordinator / Medical Transcriber 0.09 $ 0.90 $ 27,884 Direct Medical Support Overall 2.38 $ $ 27,871

21 DIRECT MEDICAL SUPPORT STAFF ANALYSIS Ratio of DMS to Medical s DMS Cost per Medical Visit MD Cost per Visit Health Center A 2.80 $ $ Health Center B 2.45 $ $ Health Center C 1.90 $ $ Health Center D 2.43 $ 7.99 $ National Median 2.38 $ $ Median of Total Direct Support to All s

22 OTHER WAYS TO LOOK AT PROVIDER SUPPORT PROVIDER INFRASTRUCTURE REPORT Exam Rooms per Total Visits per Square Foot Medical Visits per Medical Square Foot % of Total Space Devoted to Medical Health Center A % Health Center B % Health Center C % Health Center D % National Median % * Data is from proprietary Health Center Database maintained by RSM McGladrey Inc. 22

23 OTHER WAYS TO LOOK AT PROVIDER SUPPORT MEDICAL PROVIDER STAFF SUPPORT SUPPORT PER MEDICAL PROVIDER FTE (1) Admin Staff per FTE (2) Billing/MI S Staff per FTE Medical Records Staff per FTE Facility Staff per FTE Enabling Staff per FTE Other Staff per FTE (3) Direct Medical Support per FTE Total Support Staff per FTE Health Center A Health Center B N/A Health Center C N/A 0.58 N/A Health Center D N/A Median - National MGMA N/A (1) Medical s - Physicians & Midlevels (2) Executive, finance & administrative (3) Other includes Non-Medical/Dental and Ancillary 23

24 OTHER WAYS TO LOOK AT PROVIDER SUPPORT TOTAL PROVIDER STAFF SUPPORT SUPPORT PER TOTAL PROVIDER FTE (1) Admin Staff per FTE (2) Billing/MI S Staff per FTE Medical Records Staff per FTE Facility Staff per FTE Enabling Staff per FTE Other Staff per FTE (3) Direct Support per FTE Total Support Staff per FTE Health Center A Health Center B N/A Health Center C N/A 0.42 N/A Health Center D N/A Median - National (1) Includes all providers (2) Executive, finance & administrative (3) Other includes Non-Medical/Dental and Ancillary 24

25 TYING IT TOGETHER VISITS PER SUPPORT STAFF Admin (1) Billing /MIS VISITS PER SUPPORT STAFF FTE Medical Direct Records Facility Staff Enabling Other Staff (2) Support Total Support Staff Medical Visits 3,567 4,792 10,586 14,906 5,592 6,059 1, Total Visits 4,249 6,110 11,611 16,945 6,112 6,453 1, Visits per support ties together both provider productivity as well as staffing ratios. Health centers must consider provider productivity in looking at staffing ratios. If the health center is below national medians in productivity, do they need as many support staff per provider? Or is provider productivity held down by inadequate support? (1) Executive, finance & administrative (2) Other includes Non-Medical/Dental and Ancillary 25

26 INTERNAL BENCHMARKING Non- Staff Visits per Non- Staff Support per Visits Staff Support Productivity Site A 11, ,400 Site B 12, ,857 Site C 15, ,000 Site D 18, ,750 Site E 9, ,500 Average 65, ,514 26

27 COMPONENTS OF COST PER VISIT ENABLING SERVICES COSTS Enabling Services are the supplementary services that enable the provision of direct medical / clinical services, including transportation, interpretation, outreach, translation, case management, and health education. Drivers of Enabling Services Costs:! Range of Services Provided! Intensity of Services Provided! Compensation of Staff Providing Enabling Services! Level of Reimbursement for Enabling Services 27

28 COMPONENTS OF COST PER VISIT ENABLING SERVICES COSTS In studying enabling services costs, the portion of total health center costs attributable to providing enabling services, including both the direct enabling costs (e.g.. Outreach staff salaries) and associated overhead costs, is 25% - 50%. It is important in any study of enabling services costs to quantify costs for nondedicated enabling staff who perform partial enabling services outside of their primary function. Examples of non-dedicated enabling staff include: Bilingual nurses providing translation services for patients Front desk personnel performing eligibility enrollment services 28

29 COMPONENTS OF COST PER VISIT ENABLING SERVICES COSTS Cost Component National Median! Avg. # of Enabling per 0.62! Avg. Enabling Salary (1) $37,344! Avg. Enabling Cost per (1) $23,153! Avg. Enabling Cost per Visit (1) $5.48 Note: Numbers represent only dedicated full-time enabling staff; partial enabling staff excluded (1) Assumes a 23% fringe benefit rate. 29

30 COMPONENTS OF COST PER VISIT OVERHEAD COSTS Drivers of Overhead Costs:! Productivity! Staffing! Compensation of Administrative Staff! Facility Overhead Costs (e.g., Rent, Equipment, Depreciation, etc.)! Administrative Overhead Costs (e.g., Office Supplies, Marketing, Professional Fees, etc.) 30

31 ANALYSIS OF SIGNIFICANT COST COMPONENTS TOTAL OVERHEAD Cost Component Total Facility Overhead Cost / Total Visits Facility Overhead as a Percentage of Total Cost Total Administrative Overhead Cost / Total Visits Administration as a Percentage of Total Cost Total Overhead as Percentage of Total Cost Source of Information Facility - MCR Line 37, Column 5 Administrative - MCR Line 49, Column 5 Total - MCR Line 50, Column 5 Sample Data $398,162 Facility OH / 42,670 Visits = $9.33 / Visit $398,162 Facility OH / $5,701,506 = 7.0% $1,222,706 Admin. OH / 42,670 Visits = $28.65 / Visit $1,222,706 Admin. OH / $5,701,506 = 21.4% $1,620,868 Total OH / $5,701,506 = 28.4% 31

32 COMPONENTS OF COST PER VISIT - OVERHEAD COSTS Overhead can be calculated using line 50, column 5 of the Medicare Cost Report. Costs Small Health Center Medium Health Center Large Health Center National Facility Overhead $ 259,993 $1,147,915 $1,563,565 Admin. Overhead $1,018,078 $1,985,969 $2,501,555 Total Overhead $1,278,071 $3,133,884 $4,065,120 Total Cost $2,736,769 $7,482,627 $12,568,145 Facility OH % 9.5% 15.3% 12.4% $ 8.72 Admin. OH % 37.2% 26.5% 19.9% $30.21 Total OH % 46.7% 41.8% 32.3% $38.77 Visits 21,483 60, ,643 Total OH Cost / Visit $59.49 $51.68 $

33 COMPONENTS OF COST PER VISIT - OVERHEAD COSTS Health Center A Health Center B Total Visits 25, ,000 Executive Director Salary $70,000 $100,000 Executive Director Salary Cost per Visit (overhead cost) $2.80 $1.00 Large health centers have an opportunity to have lower overhead costs due to economies of scale. However, there is very little correlation between health center size and overhead percentage. 33

34 DIAGNOSING YOUR COSTS LOOKING AT OVERHEAD Family Health Center s OPR reviewer noted that their overhead % is higher than average. Is their overhead too high? View 1 Overhead Cost $1,430,796 Total Cost $3,134,992 Overhead Cost % of Total 45.6% National Average Overhead % 35.8% Family Health Center s CPV is only marginally higher than average. View 2 Overhead Cost $1,430,796 Total Visits 29,103 Overhead Cost per Visit $49.16 National Average Cost per Visit $48.82 Because Family Health Center does not have ancillary or other programs, their % of overhead is higher although their overhead expenses are within the norms. 34

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