Hospices, like all other providers, are continually working with information and data. It’s entered into databases, on forms, and saved throughout the organization in reports. But that information is not always compiled and reviewed as frequently as it should be. At cost report time and during the cap filing periods, providers look at some information, but not all.
Why the bigger hospices are able to continue to be growing and always have a good idea of why they’re doing so well isn’t a mystery anymore. It all comes does down to data and information. Hospices that rely on regular analysis of metrics related to performance, operations, and financial status all have one thing in common: strong cash flow and stable, growing profit margins.
Approaching these statistics and gathering them takes some time, but in the end, you’ll be happy you did – as an investment in your hospice, but also as a way for you to get down into the detail of what makes your agency tick. This monthly exercise (or weekly, if you are capable) will give you a window into revenue, expenses, quality of patient care, and utilization.
In order to effectively track your internal metrics, you’ll want to create an Excel spreadsheet that allows you to manipulate information and set up a clean data table. This spreadsheet will be transformed into a dashboard report as you fill in each period. Some providers will run this report weekly and others will have a monthly setup. The most important thing right now is to start. If you have already been doing this, then you are one step ahead. Information that your hospice’s dashboard should contain needs to be grouped by topic.
For instance, clinical and operational data is one half of the report. The other half is financial data. Together, you will see how the operational side effects the financial side and how the financial side effects the clinical side. You can’t not look at both and really understand how well or poorly your hospice is performing.
Operational Indicators to Track:
- Average Daily Census (Number of patients served.)
- Average Length of Stay (How long do patients stay on service?)
- Median Length of Stay (Middle number of days of service.)
- Visits per Day by Discipline (Breakout average visits being performed by staff.)
- Days by Level of Care (Continuous vs. Routine)
- Discharges by Type (Revocations, Transfers, Live)
- Deaths (We’ll let you figure that out!)
- Conversion Rate (How many patients do you receive as referrals vs. admit?)
- Diagnosis, Top 5 (Number of patients with the top 5 admission reasons)
- Staffing Productivity (For some hospices, this is a totally separate report with a separate set of metrics.)
Financial Indicators to Track:
- Gross Profit Margin (Direct costs in dollars and as a percentage of revenue.)
- Net Profit Margin (Your net income – how much is left after direct and overhead expenses, in dollars and as a percentage.)
- Overhead Rate (Your fixed costs and administrative costs for running the hospice.)
- Revenue by Level of Care and by Payer Source (Medicare, Medicaid, and Private Insurance by Routine or Continuous Care.)
- Revenue by Patient per Day
- Total Cost by Patient per Day
- Cost per Visit (Breakout how much it costs to perform each visit by discipline.)
- Cost of Drugs per Patient
- Cost of Medical Supplies per Patient
- Cost of DME per Patient
- Average cash on hand and Days of Cash on Hand
- Days Sales Outstanding (A/R)
- Billing – Unbilled claims and why!
This is a good place to start! Some hospices add more information or take some away because they can’t easily (or without reinventing the wheel) get the data from their software providers. If your software company has a decent report module or feature, most of this information should be readily available.
Some additional information that must be separated is done through your accounting records (see our article on accounting data and the importance of having a good bookkeeper!). Direct costs- the costs associated with providing care to patients and overhead costs – the cost of running the business to support your clinical field staff are separate groups of expenses. Let’s review some examples to clear up any confusion. Some expenses will need to be allocated accordingly.
|Direct Expenses||Overhead Expenses|
|· Clinical Field Staff Wages
(Clinicians that provide actual patient care. This does not include clinicians who work strictly in the office.)
· Benefits (Health, dental, life, etc.)
· Payroll Taxes (Federal, State UI)
· Workers Compensation
· Contract Labor
· Medical Supplies
· Drugs & Infusion Expenses
· Inpatient Facility Costs
|· Management Staff (Owners, Directors)
· Office Admin Staff (Medical Records, IT/MIS)
· Billing, Bookkeeping, Payroll Staff
· Human Resources & Personnel
· Staff Educators
· QA QI Staff
· Marketing and Liaisons
· Payroll Taxes & Benefits
· Rent & Utilities
· Professional Fees
· Bad Debt (Uncollectable A/R)
· State Corporate Income Taxes
While this list isn’t exhaustive, most hospices will have most of these costs and maybe some others. It is important to classify expenses so you have a true understanding of your gross profit and net income. At the end of the day, your net income is going to decide whether or not you’ll be in business for many years to come regardless if you are a for profit or non-profit provider.