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1 WEBINAR COLLABORATE WITH PLANTE & MORAN EXPERTS: COST SAVINGS SOLUTIONS FOR SENIOR CARE AND LIVING PROVIDERS TOPICS4THET TIMES plantemoran.com June 3, 2010

2 GETTING STARTED COST SAVING SOLUTIONS FOR SENIOR CARE AND LIVING PROVIDERS Today s webinar begins at 2:00 p.m. Eastern Time (1 p.m. Central, 12 p.m. Mountain, 11 a.m. Pacific) To Join the Audio portion of the Event: 1 (866) (Toll-Free (US & Canada)) +1 (678) (International Dial-in (Toll)) Then ask the operator to connect you to the following conference: Cost Saving Solutions for Senior Care and Living Providers Questions You can submit questions at any time to the Q&A Group through the chat feature located on the right of your webcast console. Presentation Slides You will receive a follow-up with a link to download today s presentation. The webinar archive will also be posted to webinars.plantemoran.com 2 to 3 business days after the webinar. For Technical support, please contact: support@atconference.com Phone or *0 from the conference 2

3 PRESENTERS Chris Joos Plante & Moran Partner Senior Care and Living Services Laurie Solotorow Plante & Moran Senior Consultant Management Consulting 3

4 INTRODUCTION Market factors affecting healthcare h Common operational improvement ideas How to dig deeper 4

5 HEALTH CARE REFORM: THE IMPACT ON LTC Major Sections Policies to improve affordability and accountability\other policy improvements Policies to crack down on waste, fraud and abuse Many tax implications i HIRE Tax Health Care Coverage Mandates Strengthen the class act community living assistance services and supports (CLASS) program 5

6 SHORTFALL IN MEDICAID FUNDING Source: Report on Shortfalls in Medicaid Funding, Eljay, LLC, November,

7 SHORTFALL IN MEDICAID FUNDING 7

8 WILL MEDICARE CONTINUE TO INCREASE? MDS 3.0 & RUG-IV - On for Oct. 1 Therapy Part B caps Part B physicians fee screens 8

9 CAN WE PROJECT THE IMPACT FOR RUG III VS. RUG IV? FY 2010 FY 2011 Rehab Ultra High 38.15% $ % $ Rehab Very High 48.62% % Rehab High 7.38% % Rehab Medium 3.69% % Rehab Low 2.15% % Total Rehab Distribution ib ti % 00% % 00% Extensive Care 42.50% % Special Care 15.00% % Clinical Complex 42.50% % Impaired Cognition 0.00% 00% - 000% 0.00% - Behavior Problems 0.00% % - Physical Reduced Functions 0.00% % - Total Non Rehab Distribution % % Total Rehab Percentage 89.04% 89.07% Total Non Rehab Percentage 10.96% 10.93% Total Medicare Days / Rate 3,650 $ ,650 $ Average Medicare Rate Increase (Decrease) $ (29.10) 9

10 POLLING QUESTION Has your organization successfully undertaken operations improvement activities in the past 3 years? o Yes o No o Don t know 10

11 FIRST STEP TO IMPROVING OPERATIONS Define what operational targets meet your goals Cash Flow Net Operating Margin Occupancy Community Benefit 11

12 BENCHMARK SOURCES 2009 Senior Care Acquisition Report AAHSA CCRC Salary/Benefit Report 2009 State of Senior Housing 2009 S&P Public Finance 2009 Fitch Median Ratios for CCRCs 2009 CARF Financial Ratios and Trends Investment bank research (A2ZCCRC.com) CPA firms with statewide benchmarks AHCA Medicare benchmarks 12

13 REVENUE STRATEGIES & BENCHMARKS Revenue strategies and benchmarks 1. Understand your market 2. Optimize census 3. Optimize i Medicare utilization 4. Optimize third-party reimbursement 13

14 MEDICARE VITALS STATE AVERAGES 14

15 SAMPLE MEDICARE BENCHMARK REPORT INSERT SLIDES FROM SAMPLEMEDICAREBENCHMARKING 4 PAGES 15

16 EXPENSE STRATEGIES AND BENCHMARKS It s most likely staffing Look for productivity benchmarks Determine what is controllable 16

17 INSERT PERCENTILESAMPLESNF 4 PAGES 17

18 OPERATIONS Is your facility s direct care staffing less than 4.0 hours per day? Is your facility s wage and benefit program close to industry benchmarks? High wages lower benefits Lower wages high benefits Benefits as a percent of salaries 22% Salaries/Benefits as a % of net revenue 40-45% 18

19 OPERATIONS Is your facility s FTEs per occupied bed close to industry benchmarks? Benchmark for NF (Ohio) Benchmark for A/L -.45; ILU

20 DIRECT CARE STAFF EXPENSE Per unit/area staffing Utilize benchmark comparisons Hours PD by Care Level Benchmark Nursing Care Assisted Living Memory Care/Assisted Living

21 HOW DO I FIX STAFFING? Understand d your staffing ratios for direct hands-on staff and see how this applies per unit/wing Review all other ancillary positions in administrative nursing staff, clerks, restorative staff, etc. 21

22 HOW TO FIX STAFFING PROBLEMS Aide for Direct Care Staff for 25 Unit # of Residents per staff Estimated Positions Needed # of Positions Per Client Hours per Shift # of days /week # of hours per year CY 2010 # of FTEs RN Ratio 1 to , LPN Ratio 1 to , Aide Ratio 1 to , Housekeepin1 to , Activities 1 to , Social Worke1 to Other 1 to Aide for Direct Care Staff for 25 Unit # of Residents Estimated Positions # of Positions Hours per # of days # of hours CY 2010 per staff Needed Per Client Shift /week per year # of FTEs RN Ratio 1 to , LPN Ratio 1 to , Aide Ratio 1 to , Housekeepin1 to , Activities 1 to , Social Worke1 to Other 1 to

23 DINING STAFF EXPENSE Benchmark (Campus Wide) Benchmark Meals Per Labor Hour Raw Food Costs as % of Charges 33% Labor Costs as a % of Total 33% 23

24 ADMINISTRATION EXPENSE Administration Productivity Benchmark CEO / CFO / COO 0.18 Accounting (Controller, Accounting Staff) AP & Purchasing 0.36 AR & Billing 0.68 HR & Payroll Reimbursement & Budgeting - IT 0.36 Total FTEs Benchmark from Plante & Moran Study: 3.10 Ftes per 100 Beds 24

25 MAINTENANCE STAFF EXPENSE Square Feet Maintained Per FTE Benchmark (Campus Wide) 50,000 25

26 ENVIRONMENTAL STAFF EXPENSE (Campus Wide) Benchmark Rooms Cleaned per FTE Independent Living 4 5 Assisted Living 8 10 Health Care SF Cleaned Per FTE 21,000-23,000 Independent Living 30,000 Assisted Living 20,000 Health Care 8,000 Pounds Laundry Processed Per Labor Hour 50 26

27 NO LOW-HANGING FRUIT Look for long-term solutions Wage Structure PTO program Health insurance 401(k) or 403(B) plans Early retirement Improve processes 27

28 POLLING QUESTION What is currently the biggest operational challenge within your facility? o Wage and benefits program o Admissions Process o Billing Process o Technology Changes o Staffing 28

29 PROCESS A process is any sequence of activities that satisfies a customer or business need or results in an output. It can be very simple, or extremely complex. A process: Has a beginning and an end Uses inputs to produce either a product or a service as its output t Can be broken into a series of small steps or tasks 29

30 WHERE TO START? Operational processes Admissions Account establishment Billing Cash collections Central supply/inventory management Clinical processes Clinical documentation Medication administration Care planning Discharge planning 30

31 WHERE TO START? Identify sources of pain : Increase in AR days Long med passes Scrambling when admitting a resident Identify sources of waste : Value-added vs. non-value added work Redundancies 31

32 WHERE TO START? Use data to help prioritize Example: days in AR relative to payor mix Go with your gut Listen to the feedback provided by your stakeholders 32

33 TARGET AREA : ADMISSIONS One of the most common challenges for senior care facilities Efficiency and standardization Common approach that everyone agrees to follow Up-front information 33

34 TARGET AREA: BILLING Can be dependent on information collected in admissions Knowing gyour payor mix Are your AR days consistent with your mix? Monitoring spend down Technology and other variables 34

35 EXAMPLE: Facility 3 Higher than desirable accounts receivable Payor Mix Max Ideal Days By Payor Weighted Days in AR Days in AR 10/31/07 Care 13.75% Caid 66.41% Other 19.48%

36 EXAMPLE, CONT D: Appropriate levels of aging in A.R. based on current payor mix Facility 1: Payor Mix Max Ideal Days By Payor Weighted Days in AR Days in AR 10/31/07 Care 1.56% Caid 62.56% Other 35.88% Facility 2: Max Ideal Weighted Payor Mix Days By Payor Days in AR Days in AR 10/31/07 Care 7.13% Caid 90.91% Other 1.96%

37 TARGET AREA: TECHNOLOGY What you have What you need Help or hindrance? System integration Cost/benefit analysis 37

38 EXAMPLE MANUAL ADMISSIONS PROCESS + MANUAL BILLING PROCESS. = TECHNOLOGY SOLUTION NEEDED! 38

39 POLLING QUESTION What is the one operational area you would most like to improve in your organization? o Technology o Wage and benefits o Collections/AR days o Admissions o Other 39

40 SUCCESS FACTORS Management support and willingness to change Meaningful target areas Process owners Specific implementation plan (executable) Project management Cooperation 40

41 QUESTIONS? Chris Joos Partner Senior Care and Living Services 614/ Laurie Solotorow Senior Consultant Management Consulting

42 THANK YOU FOR ATTENDING Stay up-to-date on the latest thinking about today s critical business topics via Plante & Moran s webinars that are delivered directly to your desktop. To view a complete calendar of upcoming Plante & Moran webinars, visit webinars.plantemoran.com 42

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