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

Positives
Essentia platform roll-out
Core accounting systems functional and stable
Internal candidates identified for certain key positions
Effort and enthusiasm focused on productivity improvement
Negatives
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
Recommendations

– 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

Contacts
For further information, please contact: George Pillari, Managing Director – Healthcare Industry Group, Cell: (408) 656-7070 gpillari@alvarezandmarsal.com