Rejean Carlson, President, OPEN MINDS 2012 OPEN MINDS Best Management Practices Institute February16, 2012 / 11:00am

Transcription

1 Rejean Carlson, President, OPEN MINDS 2012 OPEN MINDS Best Management Practices Institute February16, 2012 / 11:00am

2 Traditional CFO role is changing Linking budgeting and forecasting to strategic planning Managing increasing regulatory requirements Integrating finance and strategy into the organizational culture 2

3 Traditional CFO Role Is Changing 3

4 Our industry may call the chief financial officer in the organization by many different titles CFO Finance Executive Vice President of Finance Controller Fiscal Director 4

5 Controls financials Credit Control Financial statements and budgets Expenditure Monitoring Investment Managing Fund raising Taxation Planning 5

6 Number Crunchers Just numbers Serves as his/her own consultant Capital Raisers Raising profits Improvement Strategic Planners Planning for the future Budget managing 6

7 Expansion Adapting Changing Diversifying Knowledge Management systems coach Communication Working in tandem with CEO Serving the stakeholders 7

8 80% of senior finance executives said that their scope of responsibilities has expanded Managing additional departments Information Technology = 43% Human Resource = 39% Customer Service = 37% 8

9 Managing the IT staff Interface with state contacts regarding Medicaid reimbursement Payroll and human resource functions Receivables management Manage and administer employee benefits program Maintain all personnel and payroll records Supervision of accounting, business office, materials management, medical records, information services, and other departments Orders and tracks all supplies and equipment 9

10 Finance Operations Marketing Management team 10

11 Five Key Areas: 1. Integration of financial functions throughout organization's operations 2. Use of financial metrics 3. Development & implementation of strategic performance management 4. Rate setting & unit cost analysis 5. Evaluation & reengineering of organization processes 11

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13 Goal oriented model Focused on organizational market position Integrated with technology Based on financial metrics from within and outside the organization 13

14 Develop & Implement Take initiative Develop, monitor, analyze IT performance improvement 14

15 Ask yourself: 1. What is our competitor's market rates 2. What is the actual cost a) Fixed cost b) Variable cost 3. Do you need to set a different target cost? 15

16 Evaluation and reengineering Address target cost issues Improve technology Improve access and flow of services for consumers Questions addressed Why is the process important? What activities are required for customers? Can technology help? Could any activities be eliminated? 16

17 Knowledge of CFO goes beyond accounting Business and management expert Target costing ABC Customer centered marketing Continuous Quality Improvement Up to date on industry standards Change leadership Offer analysis 17

18 Unemployment The World Is Flat Economic Outlook Budget uncertainties Federal State Organizational 18

19 Moving away from a cost plus environment Cost plus Limited competition Increasing Competition 19

20 Payer s use of market-rate and risk based financing Payer demands for performance and contracting measures Emerging technologies Increasing regulatory and compliance issues 20

21 1. Collections and cash management 2. Understanding and controlling cost 3. Organizational strategy development 4. Competitive analysis 21

22 Everything billable must be accounted for Accounts receivable must be collected 80% of receivables = 20% bad debt expenses Accounts receivable - timing Good relations with banks = extended credit 22

23 Examine costs closely Control costs Elimination of non-profit generating programs Accurately bid on contracts 23

24 Improving services Assisting organizations Reduce cost 24

25 Know your competitors Know your stakeholders Customers Employees Payers Others? Questions to be answered 1. How do competitors eliminate bad debt expenses? 2. How do competitors incorporate leading methods? 3. How do competitors gain contracts? 25

26 Business Objectives Guidance for the organization Follow and meet deadlines Flexibility Cost, Cash, Capital, and Asset management Performance reporting 46% of CFO s have no plan in place to deal with a recession next year if it happens 26

27 Updating Processes Data content IT systems; software, staff, etc. Strategic Planning/Forecasting Survive in the present, but also be prepared for the future 27

28 How does the CFO manage? Four criteria for managing changing standards and regulations Keep informed Be diverse Stay up to date Remain open 28

29 Management cooperation Leading role Customer relations? CEO relation with CFO CFO = Offensive Coordinator CEO = Head Coach 29

30 Present the big picture 3 Questions must be answered Where does the company stand? What direction is the company heading? What is foreseen in the future? 30

31 Linking Budgeting And Forecasting To Strategic Planning 31

32 Strategic plan Organization s action plans on how to achieve its business objectives and goals Budget Organization s business plan expressed in financial terms 32

33 Strategic Planning Goals Balanced KPIs Business Alignment KPI Targets KPI Drill Down Business Planning Balanced Resources Prioritized Projects Forecasting Expenses Capital Budgeting 33

34 Provides structure, safety and security Helps plan for future Sets targets and goals to achieve Management control 34

35 Budgeting Forecasting Expense budget Constraints Control costs Sales forecast Targets Expand revenue 35

36 1. Unit cost 2. Metrics based management 3. Accurate forecasting 4. Managed care contracting 36

37 Include all direct costs and all indirect costs involved in the delivery of a service Every organizational cost must be accounted for in some services unit cost 37

38 Traditional cost methods assigned costs based on percentage of dollars Activity Based Costing Assigns costs based on cost drivers Direct relationship between cost and organizational effort 38

39 Operational and management reports Key performance indicators Benchmarking and performance targets Management dashboards 39

40 Knowing all the factors that determine a valid forecast You can t forecast using a best case scenario outcome Know what metrics are important to forecast 40

41 Knowing your cost of providing a service enables you to make accurate decision when contracting with payers 41

42 Metric Unit cost Average payer reimbursement rate needed $60.49 Collection rate 90% Average realized revenue for each service provided $54.44 Organization required profit margin 5% Cost of providing service $51.72 Overhead cost per unit of service $17.00 Direct costs salary & benefits $34.72 Employee benefits cost (%) 20% Wage to clinician $27.78 Productivity target (%) 75% Billable hours per week 30 Weeks of paid time off 4 Weeks worked 48 Billable services per year 1440 Annual wage $40,

43 Managing Increasing Regulatory Requirements 43

44 Government entities, feeling fiscal pressure for more tax revenues, are beginning to question the tax exempt status of charities Local government challenges of property tax exemptions increasingly common State governments are starting to challenge tax exemptions At the federal level, regulators and legislators have begun to question the tax-exempt status of non-profit health and human service organizations based on minimal service provision to the uninsured. 44

45 How does your organization define charity care? Does your organization maintain a charity care policy? What effect, if any, has the increase in co-payments and deductibles had on bad debt writeoffs over the past five years? Describe any fund-raising activities conducted in an attempt to supplement fees for services and other revenues. Do your compensation arrangements in any way encourage or discourage the provision of charity care? How do you allocate expenses (direct labor and materials, indirect labor and materials, management, general and administrative, fund-raising, investment, and other) for purposes of determining the amounts you consider to have been expended on your charity care programs? 45

46 Please explain what is the average mark-up of charges over costs? What is the average private pay contractual allowance (charges to payments) weighted by payer? What is the collection rate for self-pay? Please identify what steps your organization has taken to insure that lower level staff, who are actually the front-line staff, are aware of your not-for-profit status and charitable mission and have been instructed to implement the same in their treatment of uninsured patients. Please identify how many lawsuits you have filed against uninsured patients for the current year and the preceding five calendar years and please identify whether or not you are compelled by law to file such lawsuits in order to collect from these individuals. 46

47 Indirect cost rate established for federal contracts Common problems Timekeeping system not detailed enough Unallowable activities Budget line items increase/decrease exceeding limits Lack of source documentation for costs 47

48 Integrating Finance And Strategy Into The Organizational Culture 48

49 Financial sustainability Profitable services not simply increased revenue Everyone in the organization has responsibility for financial goals 49

50 Role of CFO 50

51 CFO must have the ability to communicate financial data to clinically trained program managers CFO must understand clinical operations to interpret program performance metrics 51

52 Does clinical operations equal business operations? Clinical operations Delivery of service Improving access to care Quality of care Business operations Process efficiency Staffing capacity Queuing models 52

53 Business Development Budget preparation Recruiter Compliance Marketing Customer service Quality control 53

54 Management functions widely delegated Business functions in the hands of managers underprepared CFO often has the most experience and expertise in business management! 54

55 What are you able to contribute to this? Internal analysis Strengths & weaknesses External analysis Opportunities & threats SWOT analysis S W O T Strengths Weakness s Opportunities Threats 55

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57 Accountant CPA Externally-oriented problem-solver 57

58 Keys to success for today s CFO: 1. Implement the organization's vision with the CFO s goals 2. Develop tactics that stimulate change 3. Enhance communication skills 4. Focus on managing and leading 5. Strengthen relationships with CEO, employees, and customers 58

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60 2012 Planning & Innovation Institute June 6-8, 2012 New Orleans, Louisiana 2012 Executive Leadership Institute September 12-14, 2012 Gettysburg, Pennsylvani 2012 Technology & Informatics Institute October 17-18, 2012 Baltimore, Maryland 2013 Performance Management Institute February 14-15, 2013 Clearwater, Florida 60

61 The market intelligence to navigate. The management expertise to succeed York Street, Gettysburg, Pennsylvania 17325