Activity Based Cost Accounting and Payment Bundling 1 Agenda - PowerPoint PPT Presentation

Activity Based Cost Accounting and Payment Bundling 1

Agenda • Introduction of Speakers • Fast Facts about Jewish Senior Life/Jewish Home of Rochester • Determining the need and uses for an Activity Based Cost Accounting System • Overview of the system • Factors considered, informational needs and challenges faced during implementation • Current utilization & the future!

Speakers • Travis Masonis – Jewish Senior Life - CIO • Michael Ryan- Cost Flex – Vice President • Patricia Hughes – Jewish Senior Life - Assistant Director of Finance • Debbie McIlveen – Jewish Senior Life – CFO

Jewish Senior Life Background • Long Term Care facility with 362 Beds with 68 Transitional Care beds (TCP) • 84 Medical Adult Day Care slots • CCRC with 90 independent living apartments; 60 Assisted Living units and 18 Memory Care beds. • Outpatient Rehab, Physician House Calls program • Companion Services and other community services Please note the cost accounting system is currently utilized in the Jewish Home (nursing home) only at the present time.

Rationale • Shift from Fee-For-Service to Payment Bundling • Preparation to negotiate Post-Acute portion of a bundle • Utilization of historical data to understand costs based on diagnoses and other demographic data • Other operational efficiencies and analysis around non-bundled patients • Mitigation of uncertainty in costs and risk.

The Requirements • A company willing to provide SNF friendly pricing • A software company whose business IS healthcare cost accounting and understood our needs • A product that was either built for Long Term/Post Acute Care (LTPAC) or could be modified to work with LTPAC. • There were limited options that would fit our needs. • Need to interface with existing billing, clinical and general ledger software packages.

The Selection Process • Management determined what data was desired. • Staff involved in the decision • Clinical, Financial, IT, EMR/Billing software vendors • Interviewed a few companies • Determine ability to interface with existing software packages • Took over six months to identify the firm • Final selection – Cost Flex

Necessary Electronic Information • This information comes primarily from the Billing/Census systems • Patient Charges • Includes charge codes, descriptions, quantities, $ amounts, posting and service dates • Patient Cash • Posting dates, transaction codes, amounts • Patient Adjustments • Patient Demographics • RUG, Age, Sex, Financial Class, Insurance, diagnoses codes, procedure codes

Challenges • Finding the right solution • Activity Based Cost Accounting was relatively unexplored in post- acute care • Cost of the systems and implementation • MS-DRG availability • It has been difficult to obtain MS-DRG information on discharged hospital patients. • Used hospital discharge diagnosis/post-acute admitting diagnosis instead, to evaluate patient costs. • Using a hospital centric system in Post Acute Care • RUGS, per diem room charges, RVU’s

Challenges (cont.) • What data is useful to us? • Do we look at cost per RUG? Cost per diagnosis? Cost per diagnosis with comorbidities? Are outliers skewing the results? • The more historical data you have, the better you are able to predict and create cost trends. • Was historical data captured the way we needed it in our current systems? • ICD10 conversion

How Cost Accounting Works - Concepts 1. Your Expenses - money you spent that month - are your Costs 2. Cost Accounting is simply taking known Expenses (salaries, supplies, etc) and restating them on known patients you cared for.

Concepts of Patient Costing 1. The cost of a patient is simply the sum of the cost of things we provided to the patient 2. T o cost a patient we will cost the “things we did for them” – room and bed, supplies consumed, drugs consumed, therapy services, medical services, nursing, etc. 3. Maxim: To cost it you must count it

CostFlex is a Monthly Costing Process Costing Application GL: Jan Cost: Jan WL: Jan Cost: Feb GL: Feb WL: Feb Cost: Mar GL: Mar WL: Mar Workload: Expenses: Cost: Apr GL: Apr WL: Apr Cost: May Room Charges, GL: May WL: May Salaries, Supply $, Supplies used Cost: Jun GL: Jun WL: Jun Depreciation, ect. Drugs issued, etc Cost: Jul GL: Jul WL: Jul GL: Aug Cost: Aug WL: Aug Cost: Sep GL: Sep WL: Sep Cost: Oct GL: Oct WL: Oct GL: Nov Cost: Nov WL: Nov GL: Dec WL: Dec Cost: Dec

Concept: Costs change from month to month Due to changes in expenses and workload / census, 1000 The costs for an activity can change from month to month 900 Cost ($) 800 700 600 500 3 5 7 9 1 1 3 5 7 9 1 0 0 0 0 1 0 0 0 0 0 1 6 6 6 6 6 7 7 7 7 7 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 Monthly Months ----->

Concept: Costs can be smoothed for patient reporting (i.e. apply a 3 month weighted average) 1000 900 Cost ($) 800 700 Costs are “smoothed” but trends are still visible 600 for management. Note: cost trending up! 500 3 5 7 9 1 1 3 5 7 9 1 0 0 0 0 1 0 0 0 0 0 1 6 6 6 6 6 7 7 7 7 7 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 Monthly Months -----> 3 Month Avg

Annual Costing just gives 1 number per year Costing Application Expenses Workload GL: Jan WL: Jan GL: Feb WL: Feb GL: Mar WL: Mar GL: Apr WL: Apr GL: May WL: May Gen. Ledger Workload Costs GL: Jun WL: Jun Jan – Dec Jan – Dec Jan – Dec GL: Jul WL: Jul GL: Aug WL: Aug GL: Sep WL: Sep GL: Oct WL: Oct GL: Nov WL: Nov GL: Dec WL: Dec

Annual Costing vs. Monthly Costing 1000 900 Cost ($) 800 700 600 - Costs hold consistent for 12 months at a time. 500 - Management cannot see trends to take action on 3 5 7 9 1 1 3 5 7 9 1 0 0 0 0 1 0 0 0 0 0 1 6 6 6 6 6 7 7 7 7 7 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 Monthly Months -----> Annual

Knowing your Annual Cost of patients vs the Monthly Cost is like knowing the Average Depth of the lake vs how deep it is where you are right now.

Considerations of LTC costing vs Hospital Costing 1. Create patients by month for costing trends 2. Attaching cash to correct “monthly patient” 3. “Non Patient Cash” i.e. insurance settlements can be large. 4. Get more activities from other feeds in organization (i.e. Labs, Pharmacy, Radiology)

System Setup • Where does the data come from? • Billing software • Accounting software • Online purchasing software • Invoice detail from third party vendors • What do we do with all of this data? • All of the data is then uploaded into Cost Flex • Each cost is stepped down from Nursing Home to Transitional Care Unit to Patient and allocated as a direct or indirect cost • Reimbursement is then attached to the stay to calculate a gain or loss

Costs Accumulators • Direct Costs – related to the care of the patient • Nursing Labor • Therapy Labor • Medical Labor • Pharmacy • Lab • Radiology • Direct Supplies • Indirect Costs – overhead costs stepped down to the patient • Support departments • Facility Costs – utilities • Depreciation and Interest

Reimbursement • Reimbursement • Direct payments • Accounts receivable balance • Allocation of overhead revenue (Contributions, discounts, etc) • Allocates all costs and reimbursements at a daily level • Determines daily gain/loss that provides analytical tools for admissions and nursing management

Report Utilization • Developed a “team” to review the data on a monthly basis: • Clinical Coordinator from TCP • Finance Staff • Admissions Coordinator • Administrator • Several iterations of the reports that we wanted to use • What metrics to measure that will allow us to use this data strategically? • Determine what will provide the most useful for our partners?

Operational Challenges • Not having a dedicated position for creating the reports and analyzing the data. “Another thing” added to the to do list! Not being able to spend as much time on it as we would like. • Developing financial and clinical understanding for the “other” side. • Not having enough historical data to really develop trends at this point • Trying to operationalize our findings – how do we change our practices based on this. • Not real time….looking at things after the fact. But at least now we’re looking at it. • Not being able to benchmark yet with other facilities only to ourselves. • Will be changing clinical and billing software…will require re -working all of the systems.

Demographic Data Used • Length of Stay • Financial Class – actual payor • Admitting source • Discharge Source • RUG score • ICD Admitting Diagnosis • Number of episodes/admissions during this stay