A Data Driven Agency Succeeds

This time of year, many agencies are busy closing out the year with tax returns and cost report data gathering.  But what we don’t see is some agencies doing something important: analysis.  Agencies need to analyze their cost report data along with their tax return data.


While most expenses are tax deductible, some expenses for cost reporting purposes are excluded.  It is these excluded cost report items that should be reviewed and analyzed.


For instance, is your marketing department or marketing staff required to report measurable results?  Do you provide your staff with targets that must be met and bonuses for targets exceeded?


Measure, compare, analyze – these are the components of agencies that are succeeded and the reason why their cash flow is strong. This is the reason an agency can still be sold for a premium.


A simple monthly tracking report is all that’s needed and should be shared with management so that you can get to the bottom of the data.  It’s nice to have the information on a spreadsheet to review and compare, but if you don’t know where the numbers come from or what they mean, it isn’t going to help.  Successful agencies are data driven – constantly analyzing and in real time, adjusting operations to meet pre-defined targets.


Don’t confuse a data report as financials.  Financials are created from the data so to really understand how your agency got to where it is, you must look at the data.  Are you tracking cash collections vs. billing? Are you tracking visits, referrals and start of cares?  What about PPS data versus private insurance data for agencies heavy on insurance patients?  This is important.  Lumping all patients together and not understanding that cost per visit for a Medicare, Medicaid and private insurance can all be different.


It takes some work to get this data, but with many agencies relying on QuickBooks for financial accounting, this can be done.  Creating a bridge between your electronic records software and your accounting records can be done easily.  Once you have a standard procedure in place, the initial time is worth the investment to get your analysis template ready.


Some agencies that offer Medicaid Waiver services will also want to include a specific section in the analysis that include the amount of hours billed, hours paid and the revenue and associated expense.  As Medicaid Waiver margins are extremely dependent on volume, understanding the relationships between this data is important.


If your agency doesn’t have a trend analysis system in place, we recommend that you begin to work on such a system quickly.  Please don’t hesitate to contact us if you have any questions or need a hand to get started.