Cascadia Behavioral Healthcare – Assessment of Financial Condition

From September 10, 2008. Read the fully formatted PDF version here.

Created by Alvarez & Marshall for the Healthcare Industry Group.

Presented to the Cascadia Behavioral Healthcare Board of Directors, and the Multnomah County Dept. of Human Services.

I. Statement of Work
Work initiated on 25-Aug-2008 pursuant to contract with Multnomah County

    Assess Cascadia’s current business plan
    Develop remediation plan that is:
    “realistic, attainable and feasible”
    Provide recommendations on:
    Creation of new business plan
    Cash controls
    Financial projections

Can Cascadia be a viable and sustainable business?

I. Statement of Work

    A&M staff onsite at Cascadia since 25-Aug
    Financial and operating expertise
    Reimbursement and billing cycle expertise
    Analysis of data and discussions with staff
    Senior management
    Clinical directors
    Accounting and billing staff

II. Findings
Current Situation

    Essentia platform roll-out
    Core accounting systems functional and stable
    Internal candidates identified for certain key positions
    Effort and enthusiasm focused on productivity improvement
    Unflattering media coverage
    Difficult recruiting environment
    Fee-for-Service management

Cascadia needs to use its recent progress as a springboard to building a sustainable and viable business.

II. Findings
Several focus areas for improvement

    Revenue Cycle
    Includes the billing and collection process starting with patient scheduling and ending with collection and reconciliation of cash
    Productivity Management
    Includes the management of Cascadia’s Fee-for-Service (FFS) billings, which comprise 30%+ of revenues
    Management and Board Reporting
    Includes operational and financial metrics to be measured and discussed each month with senior management, the board, and key outside constituents.

II. Findings, Revenue Cycle

    – Hold weekly Revenue Cycle meetings with stakeholders to achieve consistency and improve communication between clinical sites and CBO
    – Define Up-Front collection policies and work toward consistency among all sites
    – Activity forms should be universal among sites so any pre-biller can input charges into the system quickly and accurately. This will help with staffing in the CBO as well as increase productivity
    – Educate Site Staff on the enrollment process to ensure proper information is reported in the Essentia System. Reimbursement source data must be entered correctly at enrollment to ensure proper billing and reimbursement
    – Track all denials by reason code to determine sources. Work cooperatively with payors to minimize denials
    – Prioritize denials work to improve efficiency
    – Track the success of denial overturns
    – Work closely with Verity to monitor caps on a monthly basis

II. Findings, Revenue Cycle

    Standardize processes around Essentia platform
    Collect A/R above 60 days
    Hire strong manager to direct billing office

II. Findings, Productivity

    Designate a productivity Czar
    Create single point of accountability/ownership for FFS business
    View improvement as an ongoing process, not a destination
    Achieve 50% productivity, as forecasted in FY2009 budget
    Create appropriate metrics
    Motivate staff with measurement of trailing 90-day and trailing 30-day performance
    Avoid single point-in-time measurements/conclusions
    Address PTO issue
    Deliver/discuss results with all constituents

II. Findings, Productivity

    Manage productivity at the level of Clinical Director
    Push responsibility to field managers, not the players (clinicians)
    Allow Directors to mix and match staff, schedules, duties in order to hit team-level productivity targets
    “Local Knowledge” from Directors will inform productivity numbers, and most importantly, the productivity trends
    Treat productivity as part of overall solution
    More group sessions
    Smarter scheduling
    Respect reimbursement caps

II. Findings, Management and Board Reporting

    Standardize key metrics across company
    Monthly reporting package to include financial statements, productivity measures, billing/collecting measures, employee turnover, and tracking of all other metrics key to the viability of the organization
    Package should contain executive summaries, as well as detailed tables of data and management commentary
    Create accountability deep into the organization
    Productivity and billing metrics should touch all managers and most employees
    Combine with measures of patient care and quality for a complete picture of the company
    Arrange face-to-face monthly meetings with key board member(s)
    Senior management to present results v. plan each month, vetted by key board member prior to board meeting
    Feature an employee or team each month to make a short presentation to the board – in person

III. FY2009 Budget

    Budget process needs to be formalized
    Involvement from stakeholders across the company
    Iterative and collaborative process
    Financial toolsets are good
    General ledger and budgeting systems are easy to work with and staff are comfortable with them
    Company has the ability to change assumptions and reproduce budget in near real-time
    Financials reporting needs to mirror organizational structure
    Financial responsibility spread across several business units or profit centers, each with an individual accountable for all results
    Eliminate/reduce myriad and mostly inconsequential allocations of costs and staff
    Everybody needs a boss

III. FY2009 Budget

    Current draft budget indicates average loss of approximately $60k/month
    Budget and organization realigned according to business units
    Reasonable assumptions made throughout, does not include unrealistic changes to the company
    Where is the low-hanging fruit to improve next iteration of the budget?
    Divest Downtown Clinic $35k to $60k per month
    Consolidate admin staff $15k to $40k per month
    Realign clinical unit management $10k to $25k per month
    Next budget iteration should be able to produce breakeven or better results without stretching assumptions
    Ongoing analyses should be of the “run-rate” of Cascadia as it divests businesses and realigns costs
    Monthly profitability should be targeted for mid-FY2009, with key changes and improvements to occur during the next 90 days

III. FY2009 Annual Budget

    Clinics Other Ops Admin TOTAL
    Revenue 11.9 28.8 40.7 0.0 40.7
    Direct Expense (5.8) (16.8) (22.6) 0.0 (22.6)
    Indirect (5.1) (8.8) (13.9) (4.9) (18.8)
    Net Contribution 1.0 3.2 4.2 (4.9) (0.7)

III. FY2009 Budget, Monthly Savings Opportunities

    Low High
    Eliminate Downtown Center 35 60
    Admin staff 15 40
    Benefits/OT/PTO 20 40
    Other Admin 10 25
    Clinical Units 10 25
    Maintenance reserves 10 20
    Janitorial 10 15
    HUD property 10 15
    Residential oversight 5 10
    Prop Mgmt 5 10
    130 260

IV. Action Items for Cascadia

    Analyze Budget v. Actual Performance for Jul-Aug
    Assess new profit-center configuration
    Appoint lead director
    Initiate monthly reporting package
    Clean-up Accounts Receivable
    Meet with payers, collect everything over 60 days
    Adopt processes to reduce denials, improve collections in future
    Remember that garbage in equals garbage out
    Make Productivity a Positive, not a Negative for Cascadia
    Design and implement measurement systems
    Resolve PTO issues
    Involve all stakeholders

For further information, please contact: George Pillari, Managing Director – Healthcare Industry Group, Cell: (408) 656-7070