The document provides an overview of key financial concepts and metrics for health centers, including operating revenues, expenses, income statements, balance sheets, cash flow statements, and key performance indicators. It discusses gross patient revenue, contractual adjustments, net patient revenue, operating and non-operating income, operating margins, days in accounts receivable, accounts receivable over 90 days, clinical encounters, and comparing metrics to prior years to measure progress. The presentation aims to make financial statements and metrics clear and help readers understand and monitor organizational performance.

1. Health Center Board Member Workshop MPCA Finance 101 Jim Raschke, MBA, FHFMA Finance Director MidMichigan Health Services Roscommon County, Michigan

2. Financial Statements should not be a mystery!

3. Concepts Numbers always tell the truth

4. More Concepts Finance is a simple mathematical equation The financial reports are messengers only, nothing more Everything you do, every decision you make, every efficiency you gain or lose, will eventually impact your finances

5. Are you kidding me?

6. Still More Concepts No number is an island Relationships You need to spend money to make money in order to spend more money in order to make more money……… Make your financial statements make sense to you

7. Hey, come back! I’m not done yet!

8. Even More Concepts Benchmarking To prior period performance To industry standards To what makes sense to you Report Preparation Frequency of report preparation Should be first agenda item in Management meetings

9. Okay, one more!

10. One More Concept The Success of Your Clinic Depends on the Success of Your Financial Management

11. Practice Management Reports Medical Statistical Report For the practice By individual provider On a comparative basis Budget Year to Year Other practices (MGMA Median) Clinical Activities Reports Accounts Receivable Reports Dashboard Indicator Report

12. Financial Statements Income Statements Balance Sheet Cash Flow Statement Cash Projections Key Financial Ratios

13. Income Statements Operating Revenue Operating Expenses Operating Income Non-Operating Revenue Total Income Comparisons Budget Prior Year 12 Month Trend

14. Income Statement Year to Date Actual Budget Prior Year Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452 Provision for Adjustments (356,653) (397,936) (409,435) Net Patient Service Revenue 1,607,138 1,500,449 1,204,017 Other Operating Revenue 464,047 452,755 439,698 Total Operating Revenue 2,071,185 1,953,204 1,643,714 Total Operating Expenses 2,035,416 1,908,265 1,598,732 Total Operating Income 35,769 44,938 44,983 Non-Operating Income 8,172 3,976 (1,407) Total Income $43,941 $48,914 $43,576 Operating Margin 1.7% 2.3% 2.7% Total Margin 2.1% 2.5% 2.7%

15. Operating Revenue #1 Gross Patient Service Revenue Gross Patient Charges Ancillary Services Lab Pharmacy Radiology Cost Report Settlements Wrap-around payments Total Gross Patient Service Revenue

16. Income Statement Year to Date Actual Budget Prior Year Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452

17. Operating Revenue #2 Contractual Adjustments The difference between what you charge and what you are allowed by contract to collect Defined by agreement Medicare, Medicaid, other insurance programs, sliding fee adjustments Does not include Bad Debt, which is an expense

18. Payor Mix It is what it is, the mix of payors!

19. Operating Revenue #3 Net Patient Service Revenue Gross Patient Service Revenue Minus Contractual Adjustments

20. Income Statement Year to Date Actual Budget Prior Year Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452 Provision for Adjustments (356,653) (397,936) (409,435) Net Patient Service Revenue 1,607,138 1,500,449 1,204,017

22. Other Operating Revenue Continuing Grants (330) Rental Revenues Miscellaneous Fees (Health Fair Screening, Occupational Medicine) Pop machine Revenue

23. Income Statement Year to Date Actual Budget Prior Year Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452 Provision for Adjustments (356,653) (397,936) (409,435) Net Patient Service Revenue 1,607,138 1,500,449 1,204,017 Other Operating Revenue 464,047 452,755 439,698 Total Operating Revenue 2,071,185 1,953,204 1,643,714

24. Operating Expenses Personnel Salaries & Wages Benefits Supplies Contract Services Utilities Administration Bad Debt Expense Depreciation Interest

25. Income Statement Year to Date Actual Budget Prior Year Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452 Provision for Adjustments (356,653) (397,936) (409,435) Net Patient Service Revenue 1,607,138 1,500,449 1,204,017 Other Operating Revenue 464,047 452,755 439,698 Total Operating Revenue 2,071,185 1,953,204 1,643,714 Total Operating Expenses 2,035,416 1,908,265 1,598,732

26. Operating Income Operating Revenue Minus Operating Expenses

27. Income Statement Year to Date Actual Budget Prior Year Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452 Provision for Adjustments (356,653) (397,936) (409,435) Net Patient Service Revenue 1,607,138 1,500,449 1,204,017 Other Operating Revenue 464,047 452,755 439,698 Total Operating Revenue 2,071,185 1,953,204 1,643,714 Total Operating Expenses 2,035,416 1,908,265 1,598,732 Total Operating Income 35,769 44,938 44,983

28. Non-Operating Revenue Interest Income Donations One-time Grant Revenues Income from Investments

29. Income Statement Year to Date Actual Budget Prior Year Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452 Provision for Adjustments (356,653) (397,936) (409,435) Net Patient Service Revenue 1,607,138 1,500,449 1,204,017 Other Operating Revenue 464,047 452,755 439,698 Total Operating Revenue 2,071,185 1,953,204 1,643,714 Total Operating Expenses 2,035,416 1,908,265 1,598,732 Total Operating Income 35,769 44,938 44,983 Non-Operating Income 8,172 3,976 (1,407)

30. Net Income All Revenues Minus All Expenses

31. Income Statement Year to Date Actual Budget Prior Year Gross Patient Service Revenue $1,963,791 $1,898,385 $1,613,452 Provision for Adjustments (356,653) (397,936) (409,435) Net Patient Service Revenue 1,607,138 1,500,449 1,204,017 Other Operating Revenue 464,047 452,755 439,698 Total Operating Revenue 2,071,185 1,953,204 1,643,714 Total Operating Expenses 2,035,416 1,908,265 1,598,732 Total Operating Income 35,769 44,938 44,983 Non-Operating Income 8,172 3,976 (1,407) Total Income $43,941 $48,914 $43,576 Operating Margin 1.7% 2.3% 2.7% Total Margin 2.1% 2.5% 2.7%

32. Balance Sheet Assets Current Assets Property and Equipment Other Liabilities and Fund Balance Current Liabilities Long-Term Liabilities Fund Balance (Net Assets)

33. Balance Sheet June, 2006 May, 2006 December, 2005 Assets Cash $697,065 $765,073 $749,766 Net Accounts Receivable 196,960 203,147 184,154 Other Current Assets 407,083 452,382 474,797 Total Current Assets 1,301,109 1,420,603 1,408,717 Net Property & Equipment 2,914,251 2,851,830 2,872,338 Other Assets 9,151 9,389 10,579 Total Assets $4,224,511 $4,281,821 $4,291,634 Liabilities and Net Assets Current Liabilities $669,939 $741,581 $710,766 Other Liabilities 1,293,945 1,312,846 1,405,929 Total Liabilities 1,963,884 2,054,428 2,116,695 Net Assets 2,260,627 2,227,394 2,174,939 Total Liabilities and Net Assets $4,224,511 $4,281,821 $4,291,634

34. Cash Flow Statement Impact of Current Operations Property and Equipment Financing Activity

35. Cash Flow Projections Beginning cash balance Impact of current and projected Operations Add back non-cash items - depreciation Subtract projected capital outlays and payments on principal Twelve months

36. Ready for more?

37. The Numbers Gross Collection Percentage Net Collection Percentage Days in A/R A/R in Excess of 90 Days Old Clinical Encounters This year better than last year?

38. Gross Collection Percentage Gross Patient Service Revenue (GPSR) Patient Charges Capitation Payments Cost Report Settlements Ancillary Services Contractual Adjustments (CA) Third Part Adjustments Sliding Fee Adjustments GPSR minus CA = Net Patient Service Revenue

39. Net Collection Percentage All cash collected divided by all collectible charges (Net Patient Service Revenue) Does not include impact of Bad Debt Should be 85% or higher for FQHCs

40. Days in Accounts Receivable (Gross Pt A/R /Gross Pt Revenue) * 365 Should be below 40.0 Days (Net Pt A/R / Net Pt Revenue) * 365 Should be below 20.0 Days

41. Accounts Receivable > 90 days Accounts Receivable over 90 days divided by total Accounts Receivable Should be less than 20% of total

42. Clinical Encounters By total clinic By provider Current period and year-to-date Trends By CPT codes

43. Measuring your progress!

44. This Year Better Than Last Year Compare all categories to prior year performance Looks at current period as well as year-to-date Always, always, always look at twelve month trends

45. Five Key Things to Watch Number of Encounters Operating Income (or Loss) Accounts Receivable Measures (days in AR, gross and net, payor mix, denial rates) Cash (days cash on hand, daily collections) FTEs, particularly FTEs per encounter

47. Jim Raschke, MBA, FHFMA Finance Director MidMichigan Health Services 989.422.2105 [email_address]