Alameda Health System Fiscal 2 2019 O Operating a and C nd - PowerPoint PPT Presentation

Alameda Health System Fiscal 2 2019 O Operating a and C nd Capital Bu Budg dget First R Revi view Delvecchio Finley, CEO Nancy Kaatz, Interim CFO 1 April 27, 2018

Fiscal 2019 Budget Goals and Principles • Develop a balanced budget that enables AHS to provide the highest quality of services for the population of Alameda County, while fueling AHS’s journey to population health and address community need. • In FY 2019, the significant financial goal is to achieve the established operational target of 5% EBIDA Margin. • The budget process was inclusive to all areas of AHS, and involved input from AHS staff and Clinical leaders. • The budget process aimed to provide a balanced direction and enable resources necessary to sustain clinical operations. • Model salary expense based on weighted average wage rate by job code with vacancy budget at the top of the range. • The budget reflects the operational goals of AHS, and provides the resources to fulfil AHS’s projected direction in FY2019. 2

FY 2019 Budget Process 1 2 3 4 Dec- January Feb-March April - May June- July AHS ELT developed FY2019 AHS Staff and Leadership Budget Process, assumptions AHS staff to finalize TNM DRAFT Objectives and Goals retreat (Feb) receive feedback and draft proforma- presented dashboard draft FY 2019. on proposed operational plan to Board at April Board retreat Volume Statistics (baseline) for FY2019. Budget process for feedback. Board Approval process for developed using quantitative and goals shared with AHS. Budget FY 2019 at June trend projections and shared Budget Oversight committee will Finance committee and at with SBUs for feedback. Budget Training to AHS address any outstanding Full Board June. department leaders. questions and develop final Baseline Budget developed draft of FY2019 Budget. FY 2019 Operational using actual (6 months), and Budget targets distributed to Plan/TNM dashboard for Process benchmarks to inform SBUs/departments. SBUs/Support services to approval (June/ July) recommended targets for review final budget and targets. FY2019 Budget Oversight reviews from Feb-March for all AHS staff to develop operational SBUs/Support services. plan detailed plans- SMART goals and TNM dashboard draft Budget update provided to Finance Committee in March FY2019 pro forma to be presented at Finance Committee in May. FY2019 pro forma to be 3 presented to full Board in May.

Summary Financial Plan ALAMEDA HEALTH SYSTEM Revision Date: 4/20/2018 Summary Financial Plan D R A F T Actual Forecasted Proposed Forecast Forecast Forecast ($ in thousands) 2017 2018 2019 2020 2021 2022 1 Revenue Growth Rate 5.0% 5.9% 2.8% 3.0% 2.0% 2.0% Expense Growth Rate 3.3% 7.2% 1.9% 1.9% 2.0% 2.0% 2 Net Revenue $ 971,991 $ 1,028,894 $ 1,057,475 $ 1,089,199 $ 1,110,983 $ 1,133,203 3 Baseline EBIDA Margin 5.4% 4.2% 5.0% 6.0% 6.0% 6.0% 4 Free Cash Flow (EBIDA) $ 52,407 $ 43,027 $ 52,404 $ 65,352 $ 66,659 $ 67,992 5 Epic Operating Costs $ (968) $ (3,436) $ (32,983) $ (10,025) $ (8,795) 6 Epic Operational Benefits $ 1,700 $ 4,451 $ 5,337 7 Post Go-Live Cash Flow $ 52,407 $ 42,059 $ 48,968 $ 34,069 $ 61,085 $ 64,534 8 Working Capital (8,317) (9,484) (4,764) (5,287) (3,631) (3,703) 9 EMR Days in A/R Effect (15,000) 15,000 10 Supplemental Payments Timing 80,000 (20,000) (10,000) (10,000) (10,000) 11 Cash From Operations 44,090 112,575 24,204 18,782 32,454 65,831 12 Post Epic EBIDA Margin 5.4% 4.1% 4.6% 3.1% 5.5% 5.7% 13 14 Debt Service Requirements (13,252) (13,848) (12,135) (11,612) (7,156) - 15 Net Negative Balance Retirement 4,305 (5,000) (5,000) (5,000) (5,000) (5,000) 16 AHS/County Capital Reserve Fund - 7,000 7,000 7,000 7,000 17 Capital Expenditures (30,974) (60,760) (76,682) (39,571) (24,635) (51,416) 18 Philanthropic Support Kaiser - 6,000 8,000 6,000 - - 19 AHSF Support 2,730 3,000 3,000 6,000 6,000 6,000 20 Total Cash Needs (37,191) (70,608) (75,818) (37,183) (23,791) (43,416) 21 Cash Surplus/(Deficit) $ 6,899 $ 41,967 $ (51,613) $ (18,401) $ 8,664 $ 22,415 CapEx Plan ($000) 2017 2018 2019 2020 2021 2022 22 Facilities (7,300) (10,107) (2,000) (5,000) (5,000) (10,000) 23 Equipment (14,732) (5,000) (2,000) (5,000) (5,000) (19,000) 24 Information Technology (6,815) (6,000) (2,000) (4,000) (4,000) (10,000) 25 AHS Capital Reserve Funds Payments (7,000) (7,000) (7,000) (7,000) 26 San Leandro Rehab (1,993) (15,000) (22,000) - - - 27 SB90 Seismic - AH Kitchen - (4,906) (2,000) (1,000) - - 28 Strategic Opportunities (134) - - - 4 29 Electronic Medical Record - (19,747) (39,682) (17,571) (3,635) (5,416) 30 Capital Expenditures $ (30,974) $ (60,760) $ (76,682) $ (39,571) $ (24,635) $ (51,416)

2019 Operating Budget Detail 5

Fiscal 2019 Budget Assumptions Category Description Volume 1) Overall patient days reduced by 0.2% with a 3.6% reduction in Acute care but a 3.8% increase in Psychiatric patient day and a 1.6% increase in Rehab days from the FY18 forecast volume. 2) ED visits in all three sites are expected to have a lower volume in FY19 due to various alternate access points. 3) Delivery cases are budgeted flat in FY19 from FY18. This is primarily related to an overall drop in birth rate in the Alameda County. 4) Surgical cases are budgeted with a moderate increase in FY19. A projected 7% increase in SLH is due to the recruitment effort of adding a vascular surgeon. New leadership in the Department of Surgery is anticipated with an increase in surgical volume. 5) Ambulatory Clinic visits is projected with 5% increase from FY18 projected volume. The projected increase is due to standardization and improvement in throughput to meet demand. Revenue 1) 2.4% price increase 2) Expected rate increase from the Alameda Alliance and Anthem Medi-Cal Managed Care contracts. 3) Supplemental Revenue is expected to reduce from State. Concerted effort to improve quality measures to maximize supplemental revenue in QIP, EPP and PRIME. Expense 1) Union MOU wage increases are modeled with an overall 3.5% increase in wages. 2) $5M Supply Chain initiative was factored in the FY19 budget 3) A 3% medical supply and 7% pharmaceutical inflation increase were applied. EBIDA % Budget at 5% EBIDA margin. 6

2019 Volume B e Budget et – Sy System KEY GLOBAL STATISTICS PROJECTED FORECAST PROPOSED # % 2018 2018 2019 Change Change Patient Days ( Net of newborns) 208,820 208,821 208,478 (343) (0.2)% Average Daily Census 572 572 571 (1) (0.2)% Discharges 18,923 18,923 19,013 90 0.5 % Deliveries 1,351 1,351 1,359 8 0.6 % Surgeries 9,572 9,572 9,756 184 1.9 % Emergency Services 137,472 137,472 134,988 (2,484) (1.8)% Clinic Visits - Traditional 306,697 307,009 321,347 14,338 4.7 % Other Clinic Visits 39,128 42,165 41,133 (1,032) 100.0 % Forecast ACTUAL PROJECTED PROPOSED $ % 2017 2018 2019 Change Change Patient Days (Net of newborns) 208,640 208,821 208,478 (343) (0.2)% • Acute Medical 76,340 77,075 74,321 (2,754) (3.6)% • Acute Psychiatric 24,673 24,057 24,969 912 3.8% • Post Acute Care 107,627 107,689 109,188 1,499 1.4% Deliveries 1,396 1,351 1,359 8 0.6% Surgeries 9,777 9,572 9,756 184 1.9% • Alameda 2,171 2,276 2,224 (52) (2.3)% • Highland 5,578 5,225 5,309 84 1.6% • San Leandro 2,028 2,071 2,223 152 7.4% Emergency Services 141,458 137,472 134,988 (2,484) (1.8)% • Alameda 16,969 16,768 16,031 (737) (4.4)% • Highland 73,839 71,229 70,653 (576) (0.8)% 7 • John George (Crisis Stabilization) 13,382 12,996 12,642 (354) (2.7)% • San Leandro 37,268 36,479 35,662 (817) (2.2)%

Volume drivers • In Acute Care, strategic growth is anticipated through the development of surgical volumes across San Leandro, and Highland. • Despite trends that indicate decline in overall births in Alameda County, through concerted efforts to improve pre-natal care, AHS anticipates to maintain its deliveries projected for FY 2019. • Drivers for decline in volume are also built in; specifically, the closure of the third floor in San Leandro. • In Post Acute, acute rehab is planning and budgeted to increase census to keep with the increased demand. • ED visits in all three sites are expected to have a lower volume in FY19 due to various alternate access points. • In ambulatory, primary care clinic volume projected with a 5% increase and a 1.2% increase in specialty clinic visits. The projected increase in volume is due to standardization and improvement in throughput to accommodate demand. • In Behavioral Health, PES volumes are expected to decline, but John George is expected to regain its volume in FY 2019. 8

AHS Key Volume Trend AHS Patient Days and Discharges Surgery Volume by Campus 220,000 22,000 12,000 10,000 200,000 20,000 8,000 180,000 18,000 Patient Days Discharges 6,000 160,000 16,000 4,000 140,000 14,000 2,000 120,000 12,000 - FY2017 Proj 2018 Bud 2019 100,000 10,000 Forecast 18 FY2016 FY2017 Proj 2018 Bud 2019 Alameda campus Highland campus Forecast 18 PATIENT DAYS DISCHARGES San Leandro campus Forecast 18 9 Forecast 18