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 postacute 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. To 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 GL: Feb Cost: Feb WL: Feb Expenses: GL: Mar GL: Apr Cost: Mar Cost: Apr WL: Mar WL: Apr Workload: Salaries, Supply $, Depreciation, ect. GL: May GL: Jun GL: Jul Cost: May Cost: Jun Cost: Jul WL: May WL: Jun WL: Jul Room Charges, Supplies used Drugs issued, etc GL: Aug Cost: Aug WL: Aug GL: Sep Cost: Sep WL: Sep GL: Oct Cost: Oct WL: Oct GL: Nov Cost: Nov WL: Nov GL: Dec Cost: Dec WL: Dec
Concept: Costs change from month to month Cost ($) 1000 900 800 700 600 500 Due to changes in expenses and workload / census, The costs for an activity can change from month to month 200603 200605 200607 200609 200611 200701 200703 200705 200707 200709 200711 Monthly Months ----->
Concept: Costs can be smoothed for patient reporting (i.e. apply a 3 month weighted average) Cost ($) 1000 900 800 700 600 500 Costs are smoothed but trends are still visible for management. Note: cost trending up! 200603 Monthly 3 Month Avg 200605 200607 200609 200611 200701 200703 Months -----> 200705 200707 200709 200711
Annual Costing just gives 1 number per year Expenses GL: Jan Costing Application Workload WL: Jan GL: Feb WL: Feb GL: Mar WL: Mar GL: Apr WL: Apr GL: May GL: Jun GL: Jul Gen. Ledger Jan Dec Costs Jan Dec Workload Jan Dec WL: May WL: Jun WL: Jul GL: Aug WL: Aug GL: Sep WL: Sep GL: Oct WL: Oct GL: Nov WL: Nov GL: Dec WL: Dec
Annual Costing vs. Monthly Costing Cost ($) 1000 900 800 700 600 500 - Costs hold consistent for 12 months at a time. - Management cannot see trends to take action on 200603 Monthly Annual 200605 200607 200609 200611 200701 200703 Months -----> 200705 200707 200709 200711
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
Sample Detailed Cost Information LOS Nursing Labor Therapy Labor Medical Labor Lab Radiology Pharmacy Direct Supplies Indirect Total Costs Daily Cost Total Reimb Daily Reimb Gain / (Loss) Daily Gain / (Loss) 20 $ 2,733 $ 1,534 $ 671 $ 54 $ - $ 387 $ 1,085 $ 4,729 $ 11,193 $ 559.66 $ 11,417 $570.83 $ 223 $ 11.16 17 2,278 1,256 268 66 79 560 568 3,842 8,918 524.59 9,187 540.42 269 15.84 31 4,544 2,908 254 18 55 382 838 8,975 17,974 579.81 18,323 591.08 349 11.26 14 1,848 984 287 77-191 539 3,137 7,062 504.43 7,554 539.60 492 35.17
Sample of Executive Summary Report Trends for Overall Gains/Losses 2015 / 2016 Month Average LOS Average Cost/Day Average Reimb/Day Average Gain/(Loss) /Day Average Gain/Loss /Stay October 24 $ 547.05 $ 505.86 $ (41.19) $ (901) November 21 472.36 489.78 17.42 486 December 21 467.42 477.37 9.95 707 January 22 475.67 483.87 8.20 174 February 26 549.38 475.63 (73.75) (138) March 22 511.18 513.18 2.00 145 April May June July August September Rolling Average 23 $ 503.84 $ 490.95 $ (12.90) $ 79
Monthly Review Also Includes: Top Five Losses and Top Five Gains for each month. Discuss the impact of comorbidities what caused each of the results for these 10 patients. What can we learn; what could we have done differently? Look at the average LOS, Cost, Reimbursement and Gain/Loss for Hospital Readmission Penalty Dx s: CHF Stroke Pneumonia COPD Joints Sepsis What would our colleagues at the hospitals find interesting or helpful about this data?
Where do we go from here? We need to continue to analyze and operationalize our data As we have more historical data will be able to share the results with our partners Begin to share our findings and accomplishments with our partners in preparation for bundling More informed decisions on our admission practices Possibly utilize the data for budgeting by nursing unit Look at the implementation of the system in areas such as LTC and Adult Day Care Looking at adding some additional hours to support this system as we move forward.