Critical Access Hospital - Gold Standard Performance

Transcription

Critical Access Hospital - Gold Standard Performance
Presentation to:
CAH Executive Leaders
Critical Access Hospital
Gold Standard Performance Summary
2004/2005 Report Based on 2003 Data
LarsonAllen
A Road Map to Gold Standard Performance
April 4, 2006
Presentation Overview
•
Report background
— Data analyzed
— Capturing the “Best Performers”
— Other information
•
Insights into Industry Performance
— “Value” of CAH Status
— Financial and Operational Performance Metrics
— CAH Status: A License to Spend?
•
Financial and Operating Performance Characteristics and
Gold Standard & Top Performing CAHs
•
A Road Map to Gold Standard Performance
•
Implementing the Gold Standard Performance Paradigm
— Key attributes to keep in mind
© 2006 Larson, Allen, Weishair & Co., LLP
2
Introduction to CAH Gold Standard Performance Summary
Gold Standard Performance. At LarsonAllen that term is synonymous with Success.
LarsonAllen’s Critical Access Hospital Gold Standard Performance Summary© report was
issued in September 2005. The Report is a comprehensive study on financial performance
of the nation’s most successful Critical Access Hospitals based on comparative financial
analysis of over 750 Critical Access Hospitals, demographic review of rural communities,
and interviews with leaders of Gold Standard Performing Critical Access Hospitals. We
believe this report highlights a number of policy and operational issues facing rural health
providers. We also believe this report will facilitate discussions amongst Critical Access
Hospital leaders about opportunities to continue to improve performance while continuing to
meet the challenges of providing high quality health care.
© 2006 Larson, Allen, Weishair & Co., LLP
3
Background on Data Analyzed
•
•
•
•
Comprehensive assessment of financial and operational performance
characteristics of Critical Access Hospitals across the country
Data obtained from 2003 and 2002 Medicare Cost Report information
750 reports analyzed, 634 used in preparation of ratios and benchmarks
Performance of multiple groups was analyzed
—
—
—
—
—
•
All CAHs
Large Hospitals (>$11M Net Patient Revenues)
Small Hospitals (<$5.5M Net Patient Revenues)
Mid Size Hospitals ($5.5M to $11M Net Patient Revenues)
Different pricing and cost profiles
Multiple financial and operational performance indicators evaluated
—
—
—
—
—
—
—
—
Profitability
Cash and Net Asset Position
Utilization
Staffing
Cost Performance
Overall Pricing
Overall Discount Rates
Revenue and Cost Relationships
© 2006 Larson, Allen, Weishair & Co., LLP
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Capturing the Best Performers
Ultimate Goal
1. Identify the best
2. Measure the best
3. Learn from the
best
4. Be the best
© 2006 Larson, Allen, Weishair & Co., LLP
5
Capturing the Best Performers
The LarsonAllen “Debt Capacity Index” (DCI)
© 2006 Larson, Allen, Weishair & Co., LLP
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Capturing the Best Performers
Measuring Overall Financial Strength
Cash
Reserves, 15%
Net Assets,
5%
Revenues, 5%
Key Metrics Defined
Profitability: Debt Service Coverage
Revenues: Debt Service % of Revenues
Cash Reserves: Cash to Long Term Debt
Net Assets: Debt to Total Capitalization
Profitability,
75%
© 2006 Larson, Allen, Weishair & Co., LLP
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Capturing the Best Performers
Comparing Overall Financial Strength
GOLD STANDARD PERFORMANCE METRICS
2004 Operating Revenues
$38,721
DEBT CAPACITY INDEX
38%
© 2006 Larson, Allen, Weishair & Co., LLP
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Other Information: Interviews with Gold Standard Performers
•
•
•
•
•
•
•
•
•
•
System affiliation
Medical staff composition, working relationships, recruitment plans
and competition
Array of programs and services offered and those being planned for
both Medicare and non-Medicare
Accreditation status
Market service areas including demographics trends and competitor
analysis
Managed care and third party contracting strategies including the
level of current volumes and anticipated changes
Pricing methodologies and strategies
Current and planned capital investments in the health facilities, both
in technology and renovations/replacements of buildings
Employee retention and recruitment strategies
Why are they successful?
© 2006 Larson, Allen, Weishair & Co., LLP
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Gold Standard Research: Interviews
• 35 Gold Standard facilities for potential interviews
— Approximately 60% to 70% of facilities interviewed
• Response has been very positive
• “Non Quantifiable” Critical Success Factors (based on interviews)
— Strong Leadership and
Management
— Medical Staff is Key!
• Relationships
• Range of Specialties
— Quality of Care
— Innovation in Meeting the
“We believe our commitment to our
physicians, our patients and our employees
makes this a better community and a better
place to live. We are proud of all we are able
to achieve on behalf of our community”
CEO, Gold Standard Performer
Communities Needs
— Community Support
© 2006 Larson, Allen, Weishair & Co., LLP
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Insights into Industry Performance
© 2006 Larson, Allen, Weishair & Co., LLP
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“Value” of CAH Status
Our Experience
“Typical” net revenue benefit of CAH vs. PPS status of
between 3% and 10% of revenues.
© 2006 Larson, Allen, Weishair & Co., LLP
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Financial Performance Metrics: CAHs
KEY FINANCIAL PERFORMANCE METRICS
All
Revenue Indicators:
Operating Revenues
($000s)
Profitability Indicators:
Operating EBIDA Margin
Operating Margin
Total Margin
Debt Service Coverage (1)
Liquidity Indicators:
Net Days in Accounts Receivable
Days Cash on Hand (All Sources)
Cushion Ratio (1)
Cash to Debt
Capital and Leverage Indicators
Average Age of Plant
Debt to Capitalization (1)
Facilities without Long Term Debt
(1) - for Facilities with Long Term Debt
Small
$7,603
$3,885
Mid
Large
$7,777
$15,702
4.4%
-0.8%
2.4%
2.18x
-0.7%
-4.2%
0.1%
-0.19x
4.6%
-1.0%
2.4%
2.02x
8.3%
2.0%
3.7%
3.87x
59
62
7.1x
70%
57
45
7.9x
100%
59
67
6.7x
67%
58
60
6.0x
71%
11.5
30%
87 (14%)
13.0
23%
26 (26%)
11.3
27%
28 (11%)
9.3
30%
7 (7%)
© 2006 Larson, Allen, Weishair & Co., LLP
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National Performance Overview
CAH vs. All US Hospitals
Key Indicators: CAH vs. All US Hospitals
Key Financial Metrics
Profitability
Operating Margin %
(1)
2003
CAH
(2)
All U.S.
Hospitals
CAH vs
All U.S.
Hospitals
-0.8%
1.6%
-150.0%
2.4%
2.4%
0.0%
62
80
-22.5%
Debt to Total Cap
30%
27%
11.1%
Other
Average Age of Plant
11.5
9.8
17.3%
Excess Margin %
Liquidity & Leverage
Days Cash (All Sources)
Source:
(1) LarsonAllen national database derived from Medicare cost report data – All CAHs
(2) 2005 Ingenix Almanac of Hospital Financial and Operational Benchmark (2003 data)
© 2006 Larson, Allen, Weishair & Co., LLP
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Insights into the Financial Results
•
•
•
•
CAH performance lags median hospital performance
Significantly reliance on non-operating sources
Larger facilities outperform smaller facilities
Long-term viability of small CAHs still in doubt
• Relative to small and
mid sized CAHs, data
calls into question the
“sufficiency” of small
hospital pricing and
contracting results
© 2006 Larson, Allen, Weishair & Co., LLP
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Operational and Cost Performance Metrics: CAHs
OPERATING AND COST PERFORMANCE METRICS
All
Utilization Indicators
Medicare Cost Based Utilization
Medicare Utilization IP Days (Acute+Swing)
Medicare Acute Days
Overall Inpatient Revenue % of Total Revenue
Medicare OP Utilization %
Adjusted Days
Staffing and Cost Indicators
FTEs per AOB
Acute FTEs
Selected Costs per Day
Routine Nursing per Day (All Days)
Routine Cost Per Day (Fully Allocated)
Surgery Costs per Adjusted Day
Emergency Costs per Adjusted Day
Medicare Ancillary Cost per Day
Medicare Surgery Cost PPD
Medicare ER Cost PPD Cost PPD
Other Ancillary Costs PPD
Swing Bed Ancillary Cost per Day
Charge and Discount Information
Overall Medicare CCR
Inpatient Charges per Day
CAH Cost Based Discount %
Non-CAH Cost Based Discount %
Provider Based Entity Information
% of Facilities with Provider Based SNFs
% of Facilities with Provider Based Clinics
Small
Mid
Large
33%
77%
742
36%
37%
5,160
42%
84%
430
41%
40%
3,008
34%
78%
731
36%
37%
5,371
31%
72%
1,437
34%
34%
9,213
6.62
88
5.72
46
6.36
87
6.53
145
$393
$731
$34
$86
$565
$37
$68
$460
$213
$449
$773
$9
$49
$460
$3
$39
$418
$182
$394
$741
$33
$84
$558
$34
$64
$459
$217
$356
$711
$73
$113
$672
$103
$102
$467
$238
74%
$1,435
26%
26%
89%
$1,130
11%
27%
76%
$1,396
24%
24%
62%
$1,875
38%
28%
26%
53%
20%
59%
24%
49%
36%
64%
© 2006 Larson, Allen, Weishair & Co., LLP
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Insights into the Operating and Cost Performance Results
• Overall cost based utilization is 30% to 40%
• IP Medicare % poor proxy of overall cost based
utilization
— IP Medicare Utilization = 77%
— OP Medicare Utilization = 37%
• Significant resources expended to provide 24
hour emergency coverage Î $400,000+
annually
• CAHs have significant contractual adjustments
beyond Medicare program
© 2006 Larson, Allen, Weishair & Co., LLP
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CAH Status: A License to Spend?
YE 2003 vs. 2002 Financial Performance
of Critical Access Hospitals *
($ in Thousands)
Revenues & Expenses
2003
2002
% Change
Operating Revenues
$7,734
$7,100
8.9%
Operating Expenses
Key Financial Metrics
Profitability
$7,868
$7,028
12.0%
Operating Margin %
0.0%
0.6%
-106.2%
Excess Margin %
Liquidity & Leverage
2.5%
3.5%
-28.1%
67
63
7.6%
Cash to Debt
79%
80%
-1.3%
Debt to Total Cap
Other
27%
26%
4.1%
Average Age of Plant
11.2
11.3
-1.4%
Days Cash (All Sources)
Strong revenue growth
Expense growth significantly
exceeded revenue growth
Significant margin erosion
(expenses)
Cash position stable
Limited capital investment
* - includes only facilities who were CAH for all of 2002 and 2003.
© 2006 Larson, Allen, Weishair & Co., LLP
18
Financial and Operating
Performance Characteristics
Gold Standard
and
Top Performing
Critical Access Hospitals
© 2006 Larson, Allen, Weishair & Co., LLP
19
Gold Standard and Top Performing CAHs
Gold Standard
•
•
•
•
35 facilities in 17 states
8 Small facilities (<$5.5M Revenues)
13 Large facilities (>$11M Revenues)
14 Mid Size facilities
TOP PERFORMERS
•
Small Hospitals: 22 Top Quartile Performers < $5.5M Revenues
— Selected Small Hospital Gold Standard Performers
— 12 Additional Facilities
•
Large Hospitals: 18 Top Quartile Performers > $11M Revenues
— Selected Large Hospital Gold Standard Performers
— 13 Additional Facilities
•
Mid Size Hospitals: 18 Top Quartile Performers $5.5M to $11M
Revenues
— Selected Mid Size Hospital Gold Standard Performers
— 12 Additional Facilities
© 2006 Larson, Allen, Weishair & Co., LLP
20
Where are the Gold Standard Performers?
© 2006 Larson, Allen, Weishair & Co., LLP
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Where are the Gold Standard and Top Performers?
3
2
1
1
13
2
1
6
4
1
1
5
12
1
1
2
1
1
1
3
1
1
1
1
1
2
1
1
1
© 2006 Larson, Allen, Weishair & Co., LLP
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Market Characteristics of the Typical Gold Standard CAH
Median Population
of Home County
12,000
(7,100 – 16,700)
% Change in Median
Population of Home
County
-2.0%
(-4.0% – 1.4%)
Age 65+ % of Home
County Population
18.1%
(14.8% – 20.5%)
National Average = 14%
© 2006 Larson, Allen, Weishair & Co., LLP
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Gold Standard Financial Performance Highlights
Median CAH
(All Facilities)
Gold Standard
Profitability Indicators
Operating EBIDA Margin
4.4%
15.4%
-0.8%
9.4%
2.4%
10.4%
62
146
70%
124%
Average Age of Plant
11.5
9.8
Debt to Capitalization (1)
30%
23%
87 (14%)
16 (46%)
Operating Margin
Total Margin
Liquidity Indicators
Days Cash on Hand
Cash to Debt
Capital and Leverage Indicators
Facilities without Long Term Debt
(1) - for Facilities with Long-Term Debt
© 2006 Larson, Allen, Weishair & Co., LLP
24
Gold Standard Financial Performance: Implications for Typical CAH
Gold Standard
Characteristic
Impact on Median CAH if
Gold Standard Performance Achieved
• 4x Operating EBIDA
$600,000 - $800,000 more profits
• 2x Cash Reserves
$1.7M more cash
• Newer Plant Assets
Almost 2 Years Less Average
Plant Age
• Lower Debt Levels
More Conservative Debt
Philosophy
© 2006 Larson, Allen, Weishair & Co., LLP
25
Gold Standard Operating Performance Highlights
UTILIZATION AND CHARGES
Median CAH
(All Facilities)
Gold
Standard
STAFFING AND COST PERFORMANCE
Median CAH
(All Facilities)
Utilization Indicators
Medicare Cost Based Utilization
33%
40%
Medicare Inpatient %
77%
76%
Gold
Standard
Staffing and Cost Indicators
Medicare Outpatient %
37%
40%
FTEs per Adjusted Occupied Bed
Charge and Discount Information
6.36
138
132
Surgery
34
54
Emergency Room
86
56
All Other Ancillaries
293
298
Support and Administration (1)
463
436
70
72
402
311
Surgery
37
86
Emergency Room
68
50
460
508
Overall Costs per Adjusted Day
Average Charge per Inpatient Day
1,435
Overall Markup %
135%
143%
74%
80%
Non-CAH Based Collection %
6.62
1,586
Acute Nursing
Capital Expenses
All Other Services and Costs
Medicare Inpatient Ancillary Cost per Day
All Other Ancillaries
(1) - including employee benefits
© 2006 Larson, Allen, Weishair & Co., LLP
26
Gold Standard Financial Performance: Implications for Typical CAH
Gold Standard
Characteristic
Impact on Median CAH if
Gold Standard Performance Achieved
• Higher Global
Charges
$500,000 to $750,000 more revenues
• Lower Staffing
Levels
4 to 5 less FTEs
• Lower ER Costs
$150,000 Less ER Costs
• Lower Admin and
Support Costs
$140,000 Less Support Costs
© 2006 Larson, Allen, Weishair & Co., LLP
27
Financial Performance Overview
Top Performers by Size Group
KEY FINANCIAL PERFORMANCE METRICS
Small CAHs
Mid CAHs
All
Small
Revenue Indicators:
Operating Revenues
($000s)
Profitability Indicators:
Operating EBIDA Margin
Operating Margin
Total Margin
Debt Service Coverage (1)
Liquidity Indicators:
Net Days in Accounts Receivable
Days Cash on Hand (All Sources)
Cushion Ratio (1)
Cash to Debt
Capital and Leverage Indicators
Average Age of Plant
Debt to Capitalization (1)
Facilities without Long Term Debt
Number of Facilities
(1) - for Facilities with Long Term Debt
$3,885
Top
Performers
$4,016
All
Mid
$7,777
Large CAHs
Top
Performers
$8,070
All
Large
$15,702
Top
Performers
$17,163
-0.7%
-4.2%
0.1%
-0.19x
13.4%
8.1%
10.3%
5.60x
4.6%
-1.0%
2.4%
2.02x
15.6%
8.4%
10.0%
7.52x
8.3%
2.0%
3.7%
3.87x
15.0%
8.2%
9.8%
4.58x
57
45
7.9x
100%
67
193
9.7x
124%
59
67
6.7x
67%
67
195
18.8x
131%
58
60
6.0x
71%
54
157
6.1x
102%
13.0
23%
26 (26%)
99
11.3
14%
5 (23%)
22
11.3
27%
28 (11%)
433
10.4
28%
3 (17%)
18
9.3
30%
7 (7%)
102
9.3
34%
2 (10%)
18
© 2006 Larson, Allen, Weishair & Co., LLP
28
Operating and Cost Performance Overview
Top Performers by Size Group
OPERATING AND COST PERFORMANCE METRICS
Small CAHs
Mid CAHs
All
Small
Utilization Indicators
Medicare Cost Based Utilization
Medicare Utilization IP Days (Acute+Swing)
Medicare Acute Days
Overall Inpatient Revenue % of Total Revenue
Medicare OP Utilization %
Adjusted Days
Staffing and Cost Indicators
FTEs per AOB
Acute FTEs
Selected Costs per Day
Routine Nursing per Day (All Days)
Routine Cost Per Day (Fully Allocated)
Surgery Costs per Adjusted Day
Emergency Costs per Adjusted Day
Medicare Ancillary Cost per Day
Medicare Surgery Cost PPD
Medicare ER Cost PPD Cost PPD
Other Ancillary Costs PPD
Swing Bed Ancillary Cost per Day
Charge and Discount Information
Overall Medicare CCR
Inpatient Charges per Day
CAH Cost Based Discount %
Non-CAH Cost Based Discount %
Provider Based Entity Information
% of Facilities with Provider Based SNFs
% of Facilities with Provider Based Clinics
Number of Facilities
Top
Performers
All
Mid
Top
Performers
Large CAHs
All
Large
Top
Performers
42%
84%
430
41%
40%
3,008
47%
74%
474
36%
39%
3,306
34%
78%
731
36%
37%
5,371
41%
82%
835
39%
39%
5,265
31%
72%
1,437
34%
34%
9,213
5.72
46
5.45
49
6.36
87
5.79
88
6.53
145
5.92
157
$449
$773
$9
$49
$460
$3
$39
$418
$182
$390
$749
$13
$46
$460
$25
$41
$394
$213
$394
$741
$33
$84
$558
$34
$64
$459
$217
$395
$753
$47
$67
$479
$65
$45
$369
$199
$356
$711
$73
$113
$672
$103
$102
$467
$238
$347
$699
$73
$92
$645
$126
$79
$440
$261
89%
$1,130
11%
27%
85%
$1,226
15%
25%
76%
$1,396
24%
24%
72%
$1,349
28%
19%
62%
$1,875
38%
28%
62%
$1,793
38%
24%
20%
59%
99
9%
36%
22
24%
49%
433
28%
22%
18
36%
64%
102
30%
55%
18
© 2006 Larson, Allen, Weishair & Co., LLP
33%
76%
1,599
31%
36%
10,796
29
A Road Map to
Gold Standard
Performance
© 2006 Larson, Allen, Weishair & Co., LLP
30
CAH Gold Standard Performance Paradigm
© 2006 Larson, Allen, Weishair & Co., LLP
31
A Road Map to Gold Standard Performance
1. Gold Standard Performers “Price for Success”
Average Medicare Inpatient Charges
Per Patient Day
$1,700
Gold Standard Performers
have…
1) Higher Overall Charges
2) Higher Overall Markups on
Costs
$1,600
$1,500
$1,400
$1,300
All CAHs,
$1,435
Gold
Standard,
$1,586
Gold Standard
facilities Price for
Success!
Gold Standard
11% Higher than
Median CAH
$1,200
$1,100
$1,000
Avg Charges PPD
© 2006 Larson, Allen, Weishair & Co., LLP
32
A Road Map to Gold Standard Performance
2. Gold Standard Performers Collect More Revenues
from Non-Medicare Payors
Gold Standard Performance Have Higher Non-Medicare Collection Levels
Average Collection %: Non-Medicare Sources *
81%
80%
79%
78%
77%
76%
75%
74%
73%
72%
71%
Gold
Standard,
80%
Gold Standard
facilities collect a
higher amount of
non-governmental
revenues.
Gold Standard
8% Higher than
Median CAH
All CAHs,
74%
Non-Medicare Payment %
*- Based on Net Patient Revenues less Medicare Cost based reimbursement
Gross Patient Revenues less Medicare Revenues
© 2006 Larson, Allen, Weishair & Co., LLP
33
A Road Map to Gold Standard Performance
3. Gold Standard Performers Have Superior Cost
Performance
Gold Standard Performers have…
1) Lower Overall Costs
2) Lower Staffing
3) Lower ER Costs
Average Costs per Adjusted Day
$1,500
$1,450
Gold Standard
have Lower Cost
structures
Gold Standard
9% Lower than
Median CAH.
All CAHs,
$1,486
$1,400
$1,350
$1,300
Gold
Standard,
$1,359
$1,250
Overall Costs per Adjusted Day
© 2006 Larson, Allen, Weishair & Co., LLP
34
A Road Map to Gold Standard Performance
4. Gold Standard Performers Have Stronger
Procedural and Ancillary Services
Gold Standard Performers have higher levels of procedural and
ancillary services.
© 2006 Larson, Allen, Weishair & Co., LLP
35
A Road Map to Gold Standard Performance
5. Gold Standard Performers have outstanding
physicians and excellent relationships with their
Medical Staff and community.
Gold Standard Performers have…
1) “Outstanding” local physicians
2) Excellent relationships with their physicians and communities
“The physicians in our community are
outstanding. They are really committed to
the health of our area and have been very
innovative in their efforts to improve the
health of our region.”
CEO, Gold Standard Performer
© 2006 Larson, Allen, Weishair & Co., LLP
36
A Road Map to Gold Standard Performance
6. Gold Standard Performers aggressively grow
revenues and manage costs.
Gold Standard
Performers
more
aggressively
grow revenues
and manage
expense growth.
© 2006 Larson, Allen, Weishair & Co., LLP
37
Impact of Gold Standard Performance on Capital Spending Capacity
© 2006 Larson, Allen, Weishair & Co., LLP
38
Implementing the
Gold Standard
Performance Paradigm
Key Attributes to Keep in Mind
© 2006 Larson, Allen, Weishair & Co., LLP
39
CAH Ancillary Cost Calculation
Medicare Cost Report is Complex
Worksheet A
Inpatient and Outpatient Ancillary Services
Direct Costs
Worksheet D-Series
(As Adjusted/Reclassed)
Calculates Medicare Cost
Worksheet B
Fully Allocated
Costs
Cost to
Charge
Ratio
Medicare Charges
X
Provider Summary Report
(By Insurance Code)
=
Medicare
Cost
Worksheet C
Charges
Worksheet E Series
Compares Medicare Cost to Interim
Payments and Calculates the
Settlement
© 2006 Larson, Allen, Weishair & Co., LLP
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Impact of Strategic Management Initiatives for a CAH
Impact of Cost Reductions on Overall Profitability
Direct Cost Per Procedure
Sample
Hospital
Administrative & General
Operation Plant
Laundry
Housekeeping
Dietary
Nursing Admin
Medical Records
Adults & Pediatrics
ICU
Nursery
Skilled Nursing
Operating Room
Delivery & Labor
Radiology - Diagnostic
Laboratory
Respiratory Therapy
Physical Therapy
Emergency
$
0.12
$
0.06
$
0.01
$
0.03
$
0.06
$
0.03
$
0.01
$
232.61
$ 1,786.29
$
189.96
$
56.82
$
463.79
$
139.52
$
67.34
$
14.48
$
21.27
$
16.45
$
101.80
Peer Group
Median
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.11
0.04
0.01
0.01
0.04
0.02
0.02
202.79
208.48
68.91
78.82
141.64
94.59
61.59
8.30
2.82
15.81
104.97
Potential Cost
Reduction
Opportunities
Less Cost Based
Reimbursement
Lost Under
CAH
Net
Opportunity
$
$
$
$
152,000
182,000
39,000
133,000
185,000
140,000
(68,000)
(70,000)
(12,000)
(52,000)
(38,000)
(88,000)
84,000
112,000
27,000
81,000
147,000
52,000
93,000
33,000
10,000
(68,000)
(25,000)
(4,000)
25,000
8,000
6,000
257,000
4,000
42,000
218,000
120,000
25,000
(114,000)
(2,000)
(20,000)
(131,000)
(89,000)
(16,000)
143,000
2,000
22,000
87,000
31,000
9,000
1,633,000
$
(797,000)
$
836,000
= Unfavorable Positions as Compared to Peer Group
© 2006 Larson, Allen, Weishair & Co., LLP
41
Impact of Strategic Management Initiatives for a CAH
Impact of Cost Reductions on Overall Profitability
COST CONTROL EXAMPLE IN A CAH FACILITY (Simplified Example)
Ancillary Costs
Cost
Net Revenue Net Margin
Prior to Cost Prior to Cost
Reduction
Reduction
Cost After
Cost
Reduction
Net Revenue
After Cost
Reduction
Net Margin
After Cost
Reduction
Assumed Interim
Payment Based
on Original Cost
Structure
Third Party
Settlement
Receivable/
(Payable)
Commercial Insurance
Medicare
2,500
2,500
4,500
2,500
2,000
-
2,000
2,000
4,500
2,000
2,500
-
4,500
2,500
0
(500)
Total
5,000
7,000
2,000
4,000
6,500
2,500
7,000
(500)
Cost to Charge Ratio
Assumed Expense Change
0.5000
0.4000
(1,000)
© 2006 Larson, Allen, Weishair & Co., LLP
42
Impact of Strategic Management Initiatives for a CAH
Impact of Price Changes on Overall Profitability
PRICE INCREASE EXAMPLE IN A CAH FACILITY (Simplified Example)
Ancillary Costs
Cost
Net Revenue Net Margin
Prior to Price Prior to Price
Increase
Increase
Cost After
Price
Increase
Net Revenue
After Price
Increase
Net Margin
After Price
Increase
Assumed Interim
Payment Based
on Original Cost
Structure
Third Party
Settlement
Receivable/
(Payable)
Commercial Insurance
Medicare
2,500
2,500
4,500
2,500
2,000
-
2,500
2,500
4,950
2,500
2,450
-
4,950
2,750
(250)
Total
5,000
7,000
2,000
5,000
7,450
2,450
7,700
(250)
Cost to Charge Ratio
Assumed Price Change
0.5000
0.4545
10%
© 2006 Larson, Allen, Weishair & Co., LLP
43
Key Analysis Groupings: Gold Standard Research
•
•
•
•
•
•
•
•
Gold Standard: Based on LarsonAllen selection of national best
performing CAHs (N=35)
All Facilities: Based on All CAHs as of FYE 2003 (N= 634)
Small Hospitals: Facilities with $5M or less revenues in 2003 (N =
99) that were CAH for a least 2 years
Best Small Hospitals: Facilities with $5.5M or less revenues in 2003
(Large Hospitals) with best overall financial performance (N = 22)
Large Hospitals: Facilities with $11M or more operating revenues in
2003 (N = 99) that were CAH for a least 2 years
Best Large Hospitals: Facilities with $12M or more revenues in 2003
(Large Hospitals) with best overall financial performance (N = 18)
Mid Size Hospitals: Facilities with $5.5M to $11M operating
revenues in 2003 (N = 400)
Best Mid Size Hospitals: Facilities with $5.5M to $11M operating
revenues (Mid Size Hospitals) in 2003 with best overall financial
performance (N = 18)
© 2006 Larson, Allen, Weishair & Co., LLP
44
Contacts
The full Critical Access Hospital Gold Standard Performance Summary
(2004/2005 report based on 2003 data) is available on our Web site at
http://www.larsonallen.com/healthcare/cahgs.asp. If you would like to receive a copy,
or have any other questions regarding LarsonAllen and how we might serve you,
please contact any of the following members of the CAH Gold Standard
Development Team.
Rob Schile, Principal
LarsonAllen
612-376-4592
[email protected]
David Schuh, Principal
LarsonAllen
612-376-4761
[email protected]
Matt Claeys, Principal
LarsonAllen
612-376-4736
[email protected]
Jim Rice, Principal
LarsonAllen
612-376-4571
[email protected]
Nancy Rehkamp, Principal
LarsonAllen
612-376-4625
[email protected]
Dan Larsen, Manager
LarsonAllen
507-434-7055
[email protected]
© 2006 Larson, Allen, Weishair & Co., LLP
45