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MRHC Financial Sustainability

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MRHC Financial Sustainability

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  1. MRHCFinancial Sustainability Darryl Linnington

  2. OVERVIEW • Financial sustainability • Tenets (not a publicly traded company) • MRHC • Changing financials • Governance Institute – 7 Questions

  3. Financial Sustainability • Tenets • Working capital • Serviceable debt • Business plan • Top line growth NOT http://m.newsok.com/oklahoma-hospital-charges-patients-almost-10-times-cost-of-care-report-says/article/5426847 • Positive margins • Reinvestment • Business intelligence • Back-up plan

  4. MRHC • Positive working capital • Little debt a/o 05/15 • Rigorous budget development • Several growth initiatives • Projected positive earnings • Facility master plan (reinvestment) • Service line analysis (still in development) • Correct, reduce or eliminate losses

  5. MRHC - Working Capital • Revenue cycle • Build depth in department • Reward consistency in performance • Exit long-term lending (turnover to bank) • New focus/lead for clinic accounts

  6. Serviceable Debt • New metric • Regulator on borrowing • Proposed debt to cap 33.3% • Capacity $24m ($2.2m pmt per year)

  7. Business Plan • FY2016 Budget Next Meeting • Detailed document/schedules

  8. Growth Initiatives • Geriatric psych • Urgent care • Gastroenterology (recruit) • Intensivists • Transitional care • Others …

  9. MRHC - Positive Margins • FY15 – estimated $7m • FY16 – still in development w/ margin growth • Collection goals • Labor productivity targets • Supply savings goals

  10. MRHC - Facility Master Plan • Continuing major works • Elevators, generator, etc. • ALSO – facelifts various areas • $2.2m+

  11. Service Line Analysis • Carve out Clinics • Confirm: • Thriving (ex. Ortho, ED, etc.) • Marginal (ex. Home Health, RHC) • Negative (ex. Obstetrics, SNF)

  12. Under-performing • Consolidate Rehab and SNF • Reduce expense burden • Cross utilize staff (clock each side) • Re-purpose vacated unit • OB • Another option - Obstetrician • ?Bundled payment for OB? • Facility improvements

  13. Changing FinancialsEntity • Merged PHA • Opportunity cost • Beneficial use • Higher asset base • Spin-off Clinics • Own financial statement • Own financial targets & accountability • Start-up losses • Quicker break-even

  14. Changing FinancialsBalance Sheet • Debt versus cash • Down-payment versus cash buy • For hard assets – PPE • Other strategic initiatives – service line • New metrics • Days cash @ 140 (currently) • Debt to cap 33% ($22m capacity) • Others TBD w/ time

  15. Changing FinancialsOff Balance Sheet • Physician partners • Payers & reimbursement • Replacement cash stream • Alignment • New models (ex. Co-mgt) • Distributions – cash requirements

  16. Changing FinancialsRevenues • Reimbursement methodology • Quiet revolution • Quasi-government • Volume versus rate • Patient acquisition • Take it or leave it • Risk sharing (w/ attribution) • Underwriting • Unrecorded liability - valuation

  17. Changing FinancialsMargins • Service line versus expense management • Focus on core business • Margin flux – enter, exit

  18. Governance InstitutePrimary Revenue Sources - TODAY • High Volume, High Margin  Sustain/Grow • Emergency Room • Imaging • High Volume, Low Margin  Improve Margin • Laboratory • Physical therapy • IP Medical • Home Health

  19. Governance InstitutePrimary Revenue Sources - TODAY • Low Volume, High Margin  Partner/Grow • IP Surgery • IP ICU • Cathlab • Low Volume, Low Margin  Improve $ or dc • Physician Clinics (negative margin) • Deliveries (negative margin) • Skilled Nursing (negative margin)

  20. Governance InstitutePrimary Revenue Sources5 Years Later VALUE TO PAYERS & PATIENTS • Centers of Excellence • Orthopedics • Interventional Cardiology • Disease Management • Pulmonology (ex. COPD) • Hypertension (ex. Screenings) • Health Promotion • Men (Urology) • Women (multi-disciplinary)

  21. Governance InstituteShift from FFS to PFV“They’re at the gates & they’re ….” • Oklahoma slower to adopt • Public payers (including Sooner-care) • Insurances • Pilots/demonstration projects • Willing partner • Experience counts • “Quiet revolution/the under-ground”

  22. Governance InstituteSigns & Symptoms of PFV“Let’s see what develops…” • Public payers • Medicare VBP • Sooner-care Readmissions • Network development • Physician ACO’s (rumors?) • Product launch w/ provider • St. Francis • St. John • Early adopters • Success • Fail • ACO examples (9 of the pioneers dc’d)

  23. Governance InstituteOptimizing FFS & PFV • Primary care (urgent care, residency) • Health screenings (needs assessment) • Care coordination (transitional care) • Increased competencies (Intensivists) • Centers of excellence (Ortho co-mgmt.) • Bundled payment (ex. OB w/ our MD’s)

  24. Governance InstituteMedicare Reimbursement • Breakeven on Medicare? • YES • Margins slim (~5%)

  25. Governance InstituteCommercial Business @ Medicare Rates • Projected net income FY15 $7m • Reduction in net revenues <$6.2m> • Adjusted margin $0.8m • Again, slim positive margins on Medicare • Ex. IP admit MCR Pmt $8.5k, CO Pmt $13k

  26. Governance InstituteIf Reimbursements Fellto Medicare Rates • Necessitate: • Close Obstetrics • Close Skilled nursing • RIF (non-clinical) and/or wage rollback • Adopt productivity standards of for-profit • Trim capital spending plans

  27. Governance InstituteAccess to Capital • Risks • Days cash • Attract physicians/specialists • Market share • Sustained SHOPP funding • Managed Medicaid • Showing top line growth • Age of plant (money monster) • Keep commercial rates • Government recoupments

  28. Governance InstituteAccess to Capital • Mitigating factors • Conserve cash, borrow/re-cycle responsibly • Recruiting – multi-track • Zero reliance on SHOPP funding • Service line clustering/branding/marketing • Pro-active facility re-investment • Payer rates – “Silence is Golden” • Recoupments – Physician documentation!

  29. Governance InstituteUnder-performing Service Lines • Obstetrics • Space spruce up • Skilled nursing • Consolidate with IRF (i.e. rehab) • Clinics • Separate company • Own performance targets

  30. Looking Ahead SOME QUESTIONS • Copper Top/Downtown Imaging • Ownership/structure • Development partner • Urgent care • Primary care • Go-it-alone versus strategic partners • Cardiology • Specialists - partners

  31. New World • Tension • Current contracts (comfortable shoes) • Stepping out taking risk (pilots) • Marketing (costs not assets) • Place (urgent care – 4 points of compass) • Price (contracts) • Promotion (service line) • Rapid (but silent) change • With partners • Limited resources – highest and best use