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

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Activity Based Cost Accounting and Payment Bundling

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. 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

GL: Jan GL: Feb GL: Mar GL: Apr GL: May GL: Jun GL: Jul GL: Aug GL: Oct GL: Sep GL: Dec GL: Nov WL: Jan WL: Feb WL: Mar WL: Apr WL: May WL: Jul WL: Jun WL: Aug WL: Oct WL: Sep WL: Dec WL: Nov Cost: Jan Cost: Feb Cost: Mar Cost: Apr Cost: May Cost: Jul Cost: Jun Cost: Aug Cost: Oct Cost: Sep Cost: Dec Cost: Nov

Expenses: Salaries, Supply $, Depreciation, ect. Workload: Room Charges, Supplies used Drugs issued, etc Costing Application

Concept: Costs change from month to month

500 600 700 800 900 1000 2 6 3 2 6 5 2 6 7 2 6 9 2 6 1 1 2 7 1 2 7 3 2 7 5 2 7 7 2 7 9 2 7 1 1

Months -----> Cost ($)

Monthly

Due to changes in expenses and workload / census, The costs for an activity can change from month to month

500 600 700 800 900 1000 2 6 3 2 6 5 2 6 7 2 6 9 2 6 1 1 2 7 1 2 7 3 2 7 5 2 7 7 2 7 9 2 7 1 1

Months -----> Cost ($)

Monthly 3 Month Avg

Concept: Costs can be smoothed for patient reporting (i.e. apply a 3 month weighted average)

Costs are “smoothed” but trends are still visible for management. Note: cost trending up!

Annual Costing just gives 1 number per year

GL: Jan GL: Feb GL: Mar GL: Apr GL: May GL: Jun GL: Jul GL: Aug GL: Oct GL: Sep GL: Dec GL: Nov WL: Jan WL: Feb WL: Mar WL: Apr WL: May WL: Jul WL: Jun WL: Aug WL: Oct WL: Sep WL: Dec WL: Nov

Costing Application Expenses Workload Costs Jan – Dec

• Gen. Ledger

Jan – Dec

Workload

Jan – Dec

500 600 700 800 900 1000 2 6 3 2 6 5 2 6 7 2 6 9 2 6 1 1 2 7 1 2 7 3 2 7 5 2 7 7 2 7 9 2 7 1 1

Months -----> Cost ($)

Monthly Annual

• Costs hold consistent for 12 months at a time.
• Management cannot see trends to take action on

Annual Costing vs. Monthly Costing

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
• rganization (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
• f 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

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 $

Trends for Overall Gains/Losses

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
• ur 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.