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Board of Directors Workbook


The Business of Hospice for Board Members

WORKBOOK 8: 3rd Edition

CEO Preparation for the Model – Workbook 1 Vision & Values – Workbook 2 Creating Your Model – Workbook 3 Alignment of Systems – Workbook 4 Model Workshop/BluePrint – Workbook 5 Model Curriculum – All Staff - Workbook 6 Model Curriculum – Leadership - Workbook 7 Model Curriculum – Board of Directors - Workbook 8

________________________________________________________________Multi-View Incorporated Systems

PO Box 2327Hendersonville, NC 28793

828-698-5885 or multiviewinc.com

©Copyright 2010 Multi-View Incorporated Systems: 3rd Edition of 81


Table of Contents

Welcome to the Hospice Board!...............................................................................................4What is Hospice?......................................................................................................................5How is Hospice Paid?...............................................................................................................8

Medicare Hospice Benefit..................................................................................................8Physician Services.........................................................................................................9

The Reimbursement is Expected to Cover ALL Costs....................................................10Residential Care in Hospice............................................................................................10

What is Palliative Care?......................................................................................................11CAP – Aggregate and Inpatient..........................................................................................12

When does CAP hit? Is it a version of Hospice Hell?.....................................................12Dealing with the Medicare Aggregate CAP.....................................................................13The Aggregate CAP is Good, but there is a Flaw............................................................14Monitoring Medicare CAPs..............................................................................................14

Vision & Values.......................................................................................................................15Vision.................................................................................................................................. 16Values.................................................................................................................................17Mission................................................................................................................................18

The Subject of Values.....................................................................................................20Making Sure That Our Values Include Financial Balance.......................................................21

The Role of Financial Reserves in a Hospice..................................................................21Reasons to be Profitable and Build Reserves.................................................................21The Medicare Threat.......................................................................................................23What Will Happen When Medicare Cuts Occur?.............................................................24The MedPAC Recommendation (the U-Shaped Curve)..................................................24

Learning the Business of Hospice..........................................................................................26The Three Primary Categories of Cost............................................................................26The Use of Net Patient Revenue (NPR)..........................................................................27An Example of How to Compute NPR - Net Patient Revenue.........................................27

Classification of Costs.........................................................................................................29Understanding Hospice Measurements, Key Concepts & Definitions.................................30Lower Costs Are Not Always Better....................................................................................34The War of Single Percentage Points.................................................................................34

You Can’t Operate Your Hospice Based on Averages....................................................35Understanding Costs...........................................................................................................36

Hospice Homecare..........................................................................................................36Indirect Costs...................................................................................................................37Inpatient Units..................................................................................................................38Benefits............................................................................................................................38

Financial Fiduciary Responsibility.......................................................................................39Recommended Financial Reports...................................................................................41





Board of Directors Workbook The Executive Dashboard...............................................................................................41The Financial Aspects of the Model.................................................................................43

What is the Model?.................................................................................................................44Why Should a Hospice Create a Model?................................................................................44

The Benefits of Creating and Using Models....................................................................46Breaking Down the Barriers.............................................................................................46Financial Disdain for the Numbers, especially Money.....................................................47Overcoming the “Great Dilemma”....................................................................................47Avoid being Dependent upon Community Support..........................................................47There is More than Enough to Fund World Class Hospice Care.....................................48Financial Reserves..........................................................................................................48

Examples of Model Designs...................................................................................................50The Four Areas of Design Work that Impact Everything.........................................................51The Model is NOT Financially Driven!....................................................................................52No Budgets!............................................................................................................................53

The Model Does Not Use Budgets but Rather NPR........................................................53Gaining Perspective and the Reality Check............................................................................58

How can you get your benchmarking results?.................................................................59The Decision Dashboard.....................................................................................................61

Your Role as a Board Member...............................................................................................64The Responsibilities of the Board of Directors....................................................................65

The Fiduciary Duty of Care..............................................................................................65Compliance Function.......................................................................................................66Increased Focus on Quality and Patient Safety...............................................................67Cost Efficiency and Duty of Care.....................................................................................67Prior Board and Other Experience...................................................................................68Hospice Cultural Hallmarks.............................................................................................68Examination of Motives...................................................................................................69Asset or Liability?............................................................................................................69The Cardinal Sin..............................................................................................................70Recognizing your Contribution.........................................................................................70No-Nos for Board Members.............................................................................................71Relationship Trouble with the CEO..................................................................................72

All CEOs Make Mistakes..............................................................................................73Mission Fulfillment...........................................................................................................73Andrew Reed, CPA.........................................................................................................74

Hospice Finance 101..........................................................................................................75Physician Billing...............................................................................................................76CAP.................................................................................................................................77Cost Report.....................................................................................................................77

Index................................................................................................................................... 78






Welcome to the Hospice Board! Welcome to the Hospice Board of Directors! It should be considered an honor to serve this organization and ultimately the patients and families that benefit from our specialized way of caring. A member of the board is an important role and serves a unique and critical function.

This workbook will help you develop into a more effective board member by helping you understand our Vision & Values, the business of hospice, our approach to hospice management (the Model) and the role of board members. In addition, we will learn:

Where our focus should be What we should be doing What we shouldn’t be doing as a board member What specific reports should be used by board members As well as highlighting some of the danger points that we need to be conscious of as

we move into the future of hospice

A member of the board plays a key role in the hospice, including providing oversight functions, advice and representing the best interests of the communities served. It is important that board members recognize that each member must become part of the organizational culture and have a basic understanding of how the organization operates.

The ModelThe Model is a modern approach to hospice management this organization has embraced. The Model is an approach to operating a hospice as an integrated, coherent and coordinated system of care based on quantified Best Practices provided by MVI. The goal of the Model is to create a predictable high-quality experience that is financially balanced. The Model forces a hospice to define itself, measure performance and challenge itself to be an ever-improving organization.

MVI provides the conceptual framework and many of the supporting systems needed to create and sustain the Model at your hospice. This is “the formula or recipe” we recommend based on years of experience assisting, observing, and measuring hospices. This cumulative and collective insight has led us to the belief that the culture of a hospice is the heart of the matter...and it will be the inability of many hospices to change culture that will be their demise in future years. All other things are subservient to the culture as culture shapes the thinking and behavior of an organization.






What is Hospice?According to the NHPCO (National Hospice and Palliative Care Organization),Hospice is considered to be the model for quality and compassionate care for people facing a life-limiting illness or injury. Hospice and palliative care involve a team-oriented approach (Registered Nurse, Physician, Certified Nursing Assistant, Social Worker, Chaplain) to provide expert medical care, pain management, and emotional and spiritual support expressly tailored to the patient's needs and wishes. Support is provided to the patient’s loved ones as well (such as Bereavement Counseling).

The focus of hospice relies on the belief that each of us has the right to die pain-free and with dignity, and that our loved ones will receive the necessary support to allow us to do so. The focus is on caring, not curing and in most cases, care is provided to you in your own home. Hospice can be provided in freestanding hospice facilities, hospitals, and nursing homes and other long-term care facilities. Hospice is available to persons of any age, religion or race.

Hospice focuses on caring, not curing and, in most cases; care is provided in the patient's home.

Hospice care also is provided in freestanding hospice centers, hospitals, and nursing homes and other long-term care facilities.

Hospice services are available to patients of any age, religion, race, or illness. Hospice care is covered under Medicare, Medicaid, many private insurance plans,

HMOs, and other managed care organizations.

How Does Hospice Work?

Hospice care is for any person who has a life-threatening or terminal illness. Most reimbursement sources require a prognosis of six months or less if the illness runs its normal course. Patients with both cancer and non-cancer illnesses are eligible to receive hospice care. All hospices consider the patient and family together as the unit of care. (Note: the 2009 rate for Routine Home Care was $135 per day)

The majority of hospice patients are cared for in their own homes or the homes of a loved one. “Home” may also be broadly construed to include services provided in nursing homes, hospitals and prisons.

Typically, a family member serves as the primary caregiver and, when appropriate, helps make decisions for the terminally ill individual. Members of the hospice staff make regular visits to assess the patient and provide additional care or other services. Hospice staff is on-call 24 hours a day, seven days a week.





Board of Directors Workbook Who is the Hospice Team?

Hospice care is a family-centered approach that includes, at a minimum, a team of doctors, nurses, social workers, counselors, and trained volunteers. They work together focusing on the dying patient’s needs; physical, psychological, or spiritual. The goal is to help keep the patient as pain-free as possible, with loved ones nearby until death. The hospice team develops a care plan that meets each patient's individual needs for pain management and symptom control.

It is important to find out what the role of the patient's primary doctor will be once the patient begins receiving hospice care. Most often, hospice patients can choose to have their personal doctor involved in the medical care. Both the patient's physician and the hospice medical director may work together to coordinate the patient's medical care, especially when symptoms are difficult to manage. Regardless, a physician's involvement is important to ensure quality hospice care. The hospice medical director is also available to answer questions you or the patient may have regarding hospice medical care.

The team usually consists of:

The patient' s personal physician Hospice physician (or medical director) Nurses Home health aides Social workers Clergy or other counselors Trained volunteers Speech, physical, and occupational therapists

What Services Does the Hospice Team Provide?

Among its major responsibilities, the interdisciplinary hospice team:

Manages the patient’s pain and symptoms Assists the patient with the emotional and psychosocial and spiritual aspects of dying Provides needed medications, medical supplies, and equipment Coaches the family on how to care for the patient Delivers special services like speech and physical therapy when needed Makes short-term inpatient care available when pain or symptoms become too difficult

to manage at home, or the caregiver needs respite time Provides bereavement care and counseling to surviving family and friends.





Board of Directors Workbook In many cases, family members or loved ones are the patient's primary care givers. Additionally, hospice recognizes that loved ones have their own special needs for support. As a relationship with the hospice begins, hospice staff wants to know about the primary caregiver's priorities. They also want to know how best to support the patient and family during this time. Support can take many different forms. This includes visits with the patient and family members; telephone calls to loved ones, including family members who live at a distance, about the patient's condition; and the provision of volunteers to assist with patient and family needs.

Counseling services for the patient and loved ones are an important part of hospice care. After the patient's death, bereavement support is offered to families for at least one year. These services can take a variety of forms, including telephone calls, visits, written materials about grieving, and support groups. Individual counseling may be offered by the hospice or the hospice may make a referral to a community resource.






How is Hospice Paid?Hospices are not unlike most modern healthcare organizations in that they are paid for their services by Medicare, Medicaid, and Commercial Insurance as well as from private individuals. Most hospices receive 75-95% of its patient revenue from Medicare. Since Medicare is the primary source of revenue, we will focus our attention the Hospice Medicare Benefit.

Medicare Hospice Benefit

Under the Medicare Hospice Benefit, Medicare pays for hospice care normally on a daily basis, except for Continuous Care which is reimbursed on an hourly basis. These are referred to as hospice “levels of care.” There is a set rate for each day of the patient's election of hospice care. There are four dominant levels of payment that may be made, depending on the type of care provided on a given day. The daily rates (normally referred to as the Per Diem) are set on a regional basis and are adjusted for the costs of providing care in that area. The cost variations generally relate to the cost of labor. Hospice services are covered under Medicare Part A.

Routine Home Care (RHC) - This daily rate covers care provided to patients who are at home (defined as the patient's own home or wherever the patient considers home, such as a nursing home). The Routine Home Care Per Diem is by far the most frequent level of care. At least 80% of the total (aggregate) days of care provided by a hospice program must be at home. The average hospice receives $135 per day for RHC.

General Inpatient Care (GIP) - This daily rate pays for inpatient care when necessary for pain control or acute or chronic symptom management that cannot feasibly be provided in other settings. Hospice programs are responsible for providing general inpatient care directly or for making arrangements with an appropriate provider (a hospital, a nursing home with 24 hour RN coverage, or another hospice provider with inpatient capability). The average hospice receives $518 per day for GIP.

Inpatient Respite Care - This care must be provided by the hospice program in an approved facility (hospital or nursing home with 24 hour RN coverage) when necessary to provide a respite to family members or others caring for the hospice patient. Respite cannot be provided for more than 5 consecutive days. Though this is part of the Medicare Hospice Benefit, it is by far the least utilized as most hospices only receive approximately $10 extra per day to cover normal hospice costs AND cover the costs for the facility which the patient temporarily stays. If there is a flaw in the hospice Medicare Benefit, this is it. It just doesn’t work or make sense. The average hospice receives $140 per day for Respite Care.






Continuous Home Care - This is an hourly rate rather than a daily rate and covers care at home during a period of crisis. At least 8 hours of Continuous Care must be provided in a 24 hour period that begins at midnight and ends at midnight. At least 50% of the care must be provided by nursing (RNs or LPNs) with an RN supervising. The other 49% MAY be provided by Hospice Aides. If a hospice fails to meet any of these criteria, a Routine Home Care rate is billed.

These are the 4 fundamental levels of care and ways that hospices get paid. However, there are other forms of payments from Medicare beyond these. These pertain to payments for various physician services.

Physician Services

Hospices have always had physician involvement. However, physician services are becoming more and more common and extensive in hospice. Therefore it is good to have a basic understanding of hospice physician reimbursement.

Medical Director Services - Physician services related to oversight of the plan of care by the hospice program's medical director are covered in the daily rates paid to the hospice program. There is no additional reimbursement for hospice medical directors and this oversight function.

Attending Physician Services – Attending physician services for clinical care to the patient and family are not covered under the Hospice Benefit. These services can be billed directly to Medicare Part B as normal. All other hospice services are paid through Medicare Part A.

Consulting Physician Services – If a physician specializing in an area of medical practice is needed, these physician services are called consulting physician service. Since the hospice is being paid to professionally manage the care of the patients, Medicare dictates that the payment for such services comes through the hospice. In other words, the hospice bills Medicare and then pays the consulting physician based on its contract with the physician. There should be a contract between the consulting physician and the hospice regarding the terms of payment. This “pass-through” from the hospice is a form of control for the hospice to oversee the care.

Hospice Physician Visits – Visits by a hospice physician are paid in addition to the normal daily rates. It is common, especially for hospice with Inpatient Units, to bill for physician visits. However, an increasing number of hospices are billing for physician services provided in the home setting. Normally, patients at a GIP level of care are visited daily by a physician.






The Reimbursement is Expected to Cover ALL Costs

It is important to understand that the Medicare Hospice Benefit is expected to cover ALL costs associated with providing hospice care including nursing, hospice aides, social work, spiritual care, bereavement services, volunteer services, and all medications, durable medical equipment, medical supplies, mileage, therapies, as well as other patient-related items in addition to ALL overhead such as rent, administration, utilities, computer expense, etc. The hospice is paid these set rates (normally referred to as Per Diems) regardless of the costs associated with providing hospice care. Even if it costs a hospice $10,000 a day to provide services for a patient, the hospice will only receive the rate set for the level of care. Hospice is a true managed care system. Therefore, a hospice must manage its reimbursement well. This is where MVI plays an important role.

Residential Care in Hospice

Though not part of the Hospice Medicare Benefit, many hospices engage in the practice of providing “residential care” in hospice facilities. Residential care is where a hospice patient “resides” or lives in a hospice facility. Hospice is paid the normal daily routine care per diem and also charges the patient/family or other sources for the room and board (R&B) services. The amounts hospices charge to “residents” in hospice facilities ranges widely from $100 to $400 per day. Many hospices have great difficulty collecting R&B charges. Hospices that are successful in their R&B collection effort are deliberate, explain the charges clearly before a patient is admitted to the hospice facility and often collect 2-3 months payment in advance.






What is Palliative Care?Palliative Care (pronounced PAH-LEE-UH-TIVE). For the last thirty years, palliative care has been provided by hospice programs for dying Americans. Currently these programs serve more than 1 million patients and their families each year. Now this very same approach to care is being used by other health care providers, including teams in hospitals, nursing facilities and home health agencies, in combination with other medical treatments to help people who are seriously ill.

To palliate means to make comfortable by treating a person’s symptoms from an illness. Hospice and palliative care both focus on helping a person be comfortable by addressing issues causing physical or emotional pain, or suffering. Hospice and other palliative care providers have teams of people working together to provide care. The goals of palliative care are to improve the quality of a seriously ill person’s life and to support that person and their family during and after treatment.

Hospice focuses on relieving symptoms and supporting patients with a life expectancy of months, not years, and their families. However, palliative care may be given at any time during a patient’s illness, from diagnosis on.

Palliative Care Programs can take a variety of shapes in hospice including any combination of those listed below and more! Palliative Care is much less defined than hospice at this time.

Physician and Advance Practice Nurses/Nurse Practitioner Hospital-based Nursing Home-based Centralized Office – where patients come to a single place for palliative care






CAP – Aggregate and Inpatient Medicare has two forms of capitation for hospices: The Inpatient CAP, which does not allow total GIP patient-days to exceed 20% of total Medicare days. I have personally never witnessed a hospice exceed the Inpatient CAP. The highest I have seen a hospice run is about 19%. The other is the Aggregate CAP, which is the maximum amount of cash a hospice can receive from Medicare during a period that runs from November 1st to October 31st. The Aggregate CAP is computed by multiplying the number of Medicare admissions from September 28th to September 27th by an annual rate set by CMS, currently $23,014. If a hospice exceeds either of these CAPs, the “excess” monies must be returned to your FI (Medicare Fiscal Intermediary – the folks that send your Medicare money). Usually, payment plans can be set up if you don’t have the cash, but it is not pretty in any case. ALL Medicare payments to the hospice are counted including Routine, General Inpatient, Respite, Continuous Care, Consulting Physician, Medical Director payments, etc.

Too many hospices take pride in saying “we are far under CAP. ” Well, the truth of the matter is that this is not a good thing. It means that we are providing perhaps “brink of death” care and that we haven’t gotten the message out that the best hospice care is when we have patients for longer periods of time. Hospices need to be managing “to CAP” and not away from it. Who ever thought of the idea of an “Aggregate CAP” should be commended. While there are certain entities that want to complain about the CAP (usually folks who have gone over) and call it “unfair,” it is, in the MVI mind, a good thing. However, it should be managed! Here are some questions to ask yourself: Is our hospice uneasy about keeping long living patients? Do we understand that to make the fiscal model work, we must have long living patients to

offset short living patients? Could our documentation education process be improved so that the documentation

would support keeping more patients on service? (Think of clinical educators as revenue makers!)

Are we training the medical community to refer late by the types of patients we admit or don’t admit?

When does CAP hit? Is it a version of Hospice Hell?

Hospices exceed the aggregate CAP when times are GOOD. The financial statements couldn’t be better. Census is at an all-time high. Everybody is feeling great! Then the LETTER arrives stating that your hospice has exceeded the aggregate CAP and that you need to return $XXXXX to the FI. Not only do you owe for the last CAP year, you are already into the NEXT CAP year…and unless you take some immediate action, you will owe even





Board of Directors Workbook more! Then, if the FI is in the mood and feels that their CAP calculation methodology was incorrect in prior years, they might even dig back into past years to see if you exceeded the aggregate CAP according to the new calculations. I would say that this definitely lends itself to a flavor of Hospice Hell.

Perhaps we should look at what leads to CAP issues, not as an admissions problem, but a discharge problem. Hospices need to admit patients that meet criteria, but determining “when their time will come” is far from an exact science. Therefore, it is better to err on the side of admitting the “grays”, gaining a firsthand experience and history with the patient, and then discharging if necessary according to the facts that you know. If the discharge process or utilization review is flawed, then you could face a CAP problem.

Dealing with the Medicare Aggregate CAP

If you’ve hit the Aggregate CAP, here are some suggestions: Pump up Admissions. The closer you get to September 27th the MORE valuable each

admission becomes. Get an admission on September 27th and you redeem $23,014 in CAP money. Hire more marketers. If they get two admissions, they’ve almost paid for themselves. Goal: MAXIMIZE admissions!

Chances are you have a disproportionate percentage of patients who are not declining and may need to be discharged. The closer you get to September 27th the LESS valuable it is to discharge patients. Earlier discharges are better. You must always do the right thing. Palliative Care is a good backdoor.

Open an IP Unit! It would have to be a quick deal, but theoretically it would work. IP units draw short-living patients. Optionally, run more IP in qualified facilities. This would be your best bet in an excess CAP situation.

It is important that we recognize that CAP is calculated on “cash” payments from the Medicare System. It is NOT based on the accrual basis or on your Accounts Receivable.

“As far as CAP is concerned, all Medicare admissions are good. It doesn’t matter if we are only able to serve the patient for 1 day, 1 hour or 1 minute! Each admission frees

up about $23,014 of CAP headroom, plus it should be part of our mission.” AR

Here is an illustration of the Medicare CAP calculations.

• Aggregate– MCR Admissions X CAP Rate– Example: 200 X 23,014 = $4,602,800

• Inpatient________________________________________________________________

Multi-View Incorporated Systems PO Box 2327

Hendersonville, NC 28793828-698-5885 or multiviewinc.com


Board of Directors Workbook – Less than 20% of MCR Patient-Days can be at the GIP Level of Care– Example: If MCR Patient-Days total 20,000 in a year, then only 4,000 days can

be at the GIP Level of Care

The Aggregate CAP is Good, but there is a Flaw

I think that the hospice CAPs are good. They help to protect the industry from abuse. To remove the CAP would be a mistake. If there is a flaw in the Aggregate CAP, it is that the CAP amount is not indexed by service area. A hospice in California being paid a routine rate of $240 a day will use up its CAP more quickly than someone in Corn County, Iowa, who is getting $112 per day. This could easily be fixed by indexing the Aggregate CAP amount in the same way that CMS sets the other level of care rates.

Monitoring Medicare CAPs

I rarely see a hospice with an Inpatient CAP problem. But I have seen many hospices have problems with the Aggregate CAP. The Aggregate CAP can creep up on an unsuspecting hospice and turn “what appeared to be a great year” into a “nightmare year.” A healthy hospice has a “residual” of long-living patients. They are needed to offset short-living patients. However, this residual “build-up” of patients is what catches hospices off guard. And then one day, you exceed the CAP. The key is to deal with it early or even better, remedy the situation BEFORE you have an Aggregate CAP problem. Here is how to monitor the CAP: An indication that you may be close to the Aggregate CAP is to calculate the Median LOS

on LIVING patients…NOT terminated patients. If your hospice is close to 170 days, you’re very close to trouble. ALOS based on terminated patients is of no value here because the patients driving the CAP are not included in the calculation! Think about it.

Calculate and forecast your CAP amount. Multiply the number of Medicare admissions by the rate. You can also prorate the rate when doing an interim calculation. This is the “earn as you go” method. It works. It is simple and effective. NOTE: To be conservative in your estimate, EXCLUDE all patients that have previously elected the hospice Medicare benefit. Even if you are going to receive a pro rata share of the CAP amount for a patient, it is better to err on the side of conservatism.

In your patient management system, look for a CAP report. Allscripts used to have one as well as other major systems.






Vision & ValuesAs a board member, it is important that you understand and buy-in to the Vision and Values of the hospice. These are more than just words and platitudes in a binder or on the wall. They are living tools that are used to shape culture at our hospice.

Vision and Values are essential in the creation of culture… Without such a foundation, our work would lack consistency, cohesion and direction. Such lack of coordination will confuse public and internal perception and render a sub-standard overall hospice.

So the first order of board member business is an examination of Vision and Values. Do you believe in them? This is the prerequisite. All other things are secondary to the answer of this question. The problem with many hospice board members is that they are not really part of the organization. This is evidenced when troubles come and they leave the organization. Board members can often be the least vested with little sense of ownership, leaving management with the long-term problems to solve. Please keep this in mind as you serve on this board. You may be on the board for a term of 3 to 6 years maybe longer. But there are people at the hospice that have invested perhaps their entire working career. Think of them as you make decisions.

As you are a part of this hospice, you must have a genuine concern for people with a limited life expectancy and believe in the mission. Hospice is a cutting edge philosophy of care where the entire family unit is cared for…unlike most traditional forms of healthcare. It is a remarkable thing…a true team approach, incorporating various professional disciplines working in harmony with the community in a spirit of volunteerism within a managed care payment system that saves the entire Medicare system billions of dollars annually. Hospice is a model of healthcare that needs to be emulated by other flavors of healthcare. It is a perfect example of social entrepreneurism.






VisionWrite the Vision of our hospice below. What are your thoughts?

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□ Is the Vision compelling?□ Does it use sensory images?□ Does it excite you?


ValuesWrite the Values of our hospice below. What are your thoughts?

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□ Are the Values easy to understand?□ Do they make you feel good?□ Is a clear financial element present?


MissionIf your hospice has a Mission Statement, write it below. What are your thoughts?

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Board of Directors Workbook Definitions:

Vision : Defines where the organization wants to be in the future. It reflects the optimistic view of the organization's future.

Mission : Defines where the organization is going now, describing why this organization exists.

Values : Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities.

There are many ideas and opinions regarding the ideas of Vision and Mission Statements. Most hospices summarize goals and objectives in a Mission and/or Vision Statement.

MVI tends to see the Vision Statement as the overall direction of your hospice. It is a point of FOCUS. We prefer a short, “memorable” phrase that creates a statement of current and future positions. We do know that in order to become a World Class hospice, a compelling Vision needs to be cast. In our world view, simple is not only best…it is genius! However, be aware that Vision Statements can be short or long; it is a matter of effectiveness and preference.

A Vision Statement is a vivid idealized description of your hospice that inspires, energizes and helps you create a mental picture of your future. It can include an element of NOW that is part of traditional Mission Statements. It’s OK to break the rules to fit your

Vision.

While the existence of a shared mission is extremely useful, many strategy specialists question the requirement of a Mission Statement. Vision Statements are often confused with Mission Statements; however, they can serve complementary purposes. There are many models of strategic planning that start with Mission Statements. Therefore, it is useful to examine textbook explanations here:

A Mission statement tells you what the hospice is now. It concentrates on present; it defines the customer(s), critical processes and it informs you about the desired level of performance.

A Vision statement outlines what a hospice wants to be. It concentrates on future; it is a source of inspiration; it provides clear decision-making criteria.

The Vision describes a future identity and the Mission describes why it will be achieved. A Mission Statement defines the purpose or broader goal for being in existence or in the business. It serves as an ongoing guide without time frame. The mission can remain the same for decades if crafted well. Vision is more specific in terms of objective and future state. Vision is related to some form of achievement if successful.






If your hospice chooses to have a Mission Statement, it should not resemble the Vision Statement as this would confuse people. The Vision Statement can galvanize the people to achieve defined objectives, even if they are stretch objectives. A Mission Statement provides a path to realize the Vision in line with its Values. These statements have a direct bearing on the Model.

To become effective, the hospice’s Vision Statement must (as theory states) become assimilated into the hospice’s culture. Leaders have the responsibility of communicating the Vision regularly, creating narratives that illustrate the Vision, and acting as role models by embodying the Vision, creating short-term objectives compatible with the Vision, and encouraging others to craft their own personal Vision that positively impacts the hospice.

The Subject of Values

The subject of values doesn’t receive enough attention in most organizations. Values are normally not on people’s minds. How many people who apply for positions at your hospice ask, “What are the values of your organization?” It is a rare bird indeed! At this hospice, Values are taken very seriously.

Values are essentially the core beliefs of the organization. Values impact behavior including interactions and decision-making processes. They are what people believe in your organization. Values are demonstrated in staff behavior. Our hospice has deliberately crafted the Values we foster and they are recognized as acceptable behavior. Values are a tool used to shape the culture of our hospice.






Making Sure That Our Values Include Financial BalanceOne of the main points of revisiting a hospice’s Vision & Values is to make sure that the financial or business aspects are included. In many hospice mission and value statements, virtually nothing is mentioned about this. Yet, without proper attention, a hospice may find itself merging with another entity or closing its doors if the financial and business aspects are not satisfied. The following is an effort to help us understand the “why” so we can incorporate these often excluded components into our culture.

The Role of Financial Reserves in a Hospice

Reserves play an important role in a hospice. Reserves are a symbol of strength and capability. They decrease stress and anxiety. They provide a physiological as well as a very real material advantage. Hospice leaders need to have a clear idea of the value of having financial reserves. They are part of the Vision of a World Class organization.

How much does a hospice need? These are important questions. A hospice needs enough money to fund its Vision. This may sound like an easy, pat answer, but it is the truth. Some hospices need $100,000,000 in the bank. Some need $10,000,000. Many need less. A hospice that has cash in the bank can rapidly move on projects such as inpatient units, new programs, drive competition out, etc. Not having cash reserves may eventually mean the end for many hospices.

Reasons to be Profitable and Build Reserves

This section is repeated in many of the MVI materials because it is so important. The reason a hospice needs to be profitable and thus build reserves is simply the fact that an organization cannot survive in the long-term without reserves. An event or combination of events WILL occur in the future of every organization that will test its capabilities. No hospice is immune to these challenges. Money makes things easier.

We also need to have top-of-mind awareness of the reasons why we need reserves so that we respond to daily decisions with balance. This is part of the culture shift. Every staff member should be aware of WHY being profitable and building reserves is critical. Here is our stock list of reasons:





Board of Directors Workbook Can your hospice outlast changes in Medicare? Changes in Medicare can last a long

time, even decades before relief comes after over-reactions by those in control. A hospice needs to have reserves to outlast these seasons.

Can your hospice outlast ADRs (Additional Data Requests) and focus edits? Severe FI (Fiscal Intermediaries) focus edits and other revenue withholding mechanisms can severely disrupt Medicare payments for the better part of a year when combined with sequential billing.

CMS is actively seeking to reduce Medicare payments. Reviews of cost reports, ADRs, CR5567, phase-out of the budget neutrality act all point to an effort to reduce reimbursement. If history means anything, in the future, our rates will be decreased.

There are ever-increasing competitive pressures in hospice. At present, there are more hospices or “hospice-like” services.

Costs are increasing. Consider DME. It is an area that is increasing rapidly due to a limited number of vendors and higher operating costs like the cost of gas. Nursing costs will continue to increase due to the nursing shortage.

A hospice needs funds to weather PR (Public Relations) disasters. If your hospice is accused of killing a person, I guarantee that you will have a few “dry” years in the community support department. We have seen large hospices cease to exist in a matter of months after major PR disasters.

A hospice needs funds to take advantage of opportunities that arise. This could be the purchase of a nursing home that could be converted into an Inpatient Unit or to acquire a hospice in a contiguous service area. Money in your pocket is a great thing.

A hospice needs reserves for “management surprises.” What if accounting has done a poor job of reporting Pass-Through expenses? Pass-Throughs can be substantial amounts…even millions. We have witnessed cash-short hospices merge or cease business over Pass-Though surprises.

Lawsuits are becoming more of a problem in hospice. They can be VERY expensive and also lead to a PR disaster if mishandled.

Occasionally, a hospice can have a “super duper” high cost patient. If you have money salted away, you can weather the situation. If not, you may be looking for a partner to merge with.

Hospices need money to possibly undercut competitor margins by introduction of additional products and services.

Hospices need funds to take care of indigent patients. This has been the classic response…and it is as true today as ever.

Some hospices are one patient away from bankruptcy. It is just good common sense to build reserves. It is a “nice feeling” to be able to afford to care for high cost and indigent

patients or to build an Inpatient Unit and say, “No problem!” It just feels GOOD!






The Medicare Threat

CMS and Medicare Fiscal Intermediaries can place incredible burdens on a hospice. They can shut down a hospice overnight or choke it to death by truncating cash flow. Here are examples of how CMS and Medicare FIs can put a hurt on a hospice:

Medicare ADRs (Additional Data Requests) – Tons of time and effort go into sending documentation to the FI to review. A hospice will not get paid for these claims until the FI has made a determination in favor of the hospice. If a negative determination is made, the hospice must appeal the case to an Administrative Law Judge (ALJ). In my experience, most ALJs rule in favor of the hospice. So, it is worth fighting declined billing.

Getting a Medicare FI Ticked Off – If you get on the bad side of a Medicare FI, watch out! I don’t care how big your hospice is or how long you have been in business - don’t do it. They can crush you. If you are having problems with an FI, the best thing you can do is hop on a plane and see them. Tell them how great they are and how stupid you are. “Teach me how to do it right,” you should say. It is all about the relationship.

GIP and Continuous Care are being scrutinized for abuse. Post Payment Edits – These are requests for immediate recoupment of funds. This is

where an FI demands immediate payment of long-living patients. They are usually large, from $100,000 to $300,000. This can hurt the hospice that is short on cash. You have 10 days to remit payment.





Board of Directors Workbook Medicare is reducing rates. It is inevitable considering the nature of government to overspend and sometimes make poor decisions with unintended consequences. Here are some ideas to consider:

1. It has happened historically (look at the other modes of healthcare).2. The government will not allow any mode of healthcare to make too much

money.3. The tendency of government is to introduce more regulation for control

purposes. There is an inherent loss of innovation (freedom) of “how” hospice care is delivered with more regulation.

What Will Happen When Medicare Cuts Occur?

When Medicare decreases hospice reimbursement and rates, at least 3 things will happen:

There will be a decrease in the number of new hospices Financially weak hospices will fold or seek merger partners Financially competent hospices will adjust models, keep on trucking and see it as a

huge opportunity

The MedPAC Recommendation (the U-Shaped Curve)

Discussion of the MedPAC recommendation for hospice payment system reform is beyond the scope of this manual. However, because this is an important topic, we will lend our opinion, trying to offer a balanced view that is not politically compromised or burdened by deep ideological investment that can be difficult to set aside once created. Best ideas should always win…patient first and financially balanced.

We applaud MedPAC for introducing new thinking about this subject matter. It has stimulated thought and has forced hospice to carefully consider what we do and how we are paid. We must not be afraid of new thinking. Let us consider the financial and patient/family aspects.

The Financial Aspect

The most elegant way to reform and improve the hospice payment system is to simply lower the Aggregate CAP, index it by area, calculate it quarterly and immediately withhold payments from providers that exceed it.

In addition, we suggest the addition of a few simple modifiers:





Board of Directors Workbook o Increase the volunteer percentage from 5% to 8% to foster more community

involvement. This gets hospice into communities and links our industry back to its roots. We are a movement that came from the front porches and church basements of this country. Too many hospices have forgotten our roots.

o Set a maximum discharge percentage that is quite low so that hospices must keep the patients it admits, especially high-cost patients. We are managed care. We must be able to take high-cost patients (from traditional healthcare modes) and provide quality care for less. Example: We must care for a patient that would cost the Medicare system $250,000 in a traditional healthcare setting and do it for less…$100,000, $70,000, $40,000, a lower amount. Too many hospices have run from high-cost patients. We are supposed to be managed care organizations, experts at cost management within a system that limits or capitates payments.

o Hospice must admit all patients that meet criteria. This would help to eliminate “cherry picking” patients. If an organization wants to be in the hospice business, it must serve all patients that meet criteria and cannot run from high-cost or complex cases.

The Patient/Family Aspect

The MedPAC recommendation is primarily a financial-based model. It does not adequately consider what happens or will happen to patients and families. There will be unintended consequences. Here is the greatest unintended consequence from our experience with over 700 hospices.

Patients that receive great hospice care live longer.

To be fair, anyone studying the data would never be able to pick up on this point. If the payment system incentivizes short-length of stays and patients receiving great hospice care inherently live longer, we have two conflicting goals. If a hospice provides great care, it will be penalized financially. At least within the present system, patients and families have enough time to have a great hospice experience. The MedPAC recommendation will relegate hospice to a shorter length of stay, “brink of death” service which is far from the original goal of the Hospice Medicare Benefit.

When we look at what happens to patients that are discharged from hospices with CAP problems, what happens? Typically, 50% of these patients die in a very short period of time. The “rug of comfort and safety” is pulled from beneath them and they decline. We have seen this phenomenon many times in the course of our work. Sadly, it has never been studied and quantified (which we suggest is possible). Hope, comfort and overall great care cause people to live longer. This is the human condition.






Learning the Business of Hospice

The Three Primary Categories of Cost

There are three major categories of cost in hospice. We might think of these as the “overall” or comprehensive view. They are:

Direct Labor Patient-Related Indirect Costs

Here are some definitions for each:

Direct Labor - Labor expense that is directly involved with the provision of care such as RNs, LPNs, Hospice Aides, SWs, Chaplains and visiting physicians. It does NOT include supervisors or managers even if they perform occasional visits. Bereavement, Volunteer, Triage, Admissions and On-Call areas are also considered Direct Labor. The staff of these areas provides direct care. All other labor costs are considered Indirect Labor.

Patient-Related Costs – Costs such as Medications, Medical Supplies, Therapies, DME, etc. These are sometimes referred to as Ancillary Costs. Other Patient-Related costs are: Ambulance, Bio-Hazardous Waste, Clinical Mobile Phones, Clinical Pagers, Lab, Outpatient, Mileage, etc.

Indirect Costs – Costs other than Direct Labor and Patient-Related costs. They can be categorized into three sub-categories:

o Indirect Labor – All labor that is NOT Direct Labor: CEO, CFO, Clinical Managers, Medical Director, QI, Education, Medical Records, HR, Finance, IT, Housekeeping, Maintenance, etc.

o Facility-Related – Costs related to your building or structure from which your organization coordinates or provides services. Included are: Rent, Utilities, Building Maintenance, Building Depreciation, Property Taxes, Building Loan Interest, etc.

o Operating Expense – This category of Indirect Costs include all costs that are not Facility-Related or Indirect Labor. These costs include: Answering Service, Bank Service Charges, Audit Costs, Office Supplies, Printing, Postage,





Board of Directors Workbook Telephone, Marketing Supplies, Continuing Education, Dues and Subscriptions, Computer Support, Computer Expense, etc.

Each of these areas can be denominated by a number. For Model purposes, we use a percentage of Net Patient Revenue (NPR). These percentage amounts should be clearly established and compared to actual performance, at least on a monthly basis. They might be as follows:

Cost Category Example of Your Model

MVI Suggested Model

Average Hospice

Direct Labor 40% 38% 42%Patient-Related 16% 18% 19%Indirect Costs 28% 30% 35%

The Use of Net Patient Revenue (NPR)

MVI encourages the use of percentages of Net Patient Revenue (NPR) rather than Patient-Day costs for hospice financial measurement. This deviates from traditional hospice practice and the explanation will follow. However, first we must define Net Patient Revenue.

Net Patient Revenue – Revenue earned for the provision of services to patients from sources such as Medicare, Medicaid, Commercial Insurance and Private Pay. It is less contractual allowances and bad debt. It does NOT include pass-through income such as: Nursing Home Room and Board, Contracted IP, Contracted Respite or Consulting Physician Services. It also DOES NOT include Community Support or Fundraising. It is very important that you have a clear understanding of this term because most comparison data is based on a percentage of Net Patient Revenue (NPR).

An Example of How to Compute NPR - Net Patient Revenue






Medication costs are $25,000 for the month. Net Patient Revenue is $300,000.

To compute Medication costs as a Percentage of Net Patient Revenue, you would divide $25,000 by $300,000.

$25,000 divided by $300,000 = .083 (rounded)

Convert .083 to a percentage (multiply by 100) and you get 8.3%.

Medication costs in this example are 8.3% of Net Patient Revenue.

Why should have hospice use Percentages of Net Patient Revenue rather than Patient-Day costs for hospice financial measurement?

• Comparability – Percentages are comparable with other hospice programs to help us gain perspective (The difference between Professional versus Amateur hospice leader). Patient-Day amounts are OK for a few areas, like Patient-Related. They fall apart when comparing differing areas of the country, especially anything that relates to salaries and wages. Salaries and wages can vary widely throughout the country. These differences; however, are often off-set by reimbursement that takes these labor factors into account such as CBSA codes for Medicare. Thus, the Percentages of Net Patient Revenue would be more similar while Patient-Day amounts would vary greatly.

• Creation of a Model – Percentages are better suited for the creation of a Model. Percentages are “scalable,” meaning they can be used by any size of hospice. In addition, when rate changes occur, percentages easily translate to operational measures.

• People Understand Percentages – Most people can conceptualize percentages pretty well. If everyone knows that the pie is 90% (10% set aside for profit), they can understand that if something is increased something else has to decrease.

We are not saying that Patient-Day measurement is wrong or that it should not be used. It works very well with Patient-Related costs. However, recognize its short-comings whenever there is a labor component.






MVI INSIGHT:

The superior hospice would not simply emulate a model based on the “averages” of other hospices. It is much better to create your own based on what would truly benefit patients and families in your respective service area.

Classification of CostsClassificationItem

Patient Revenue

Direct Labor

Patient-Related

Pass-ThroughRevenue

Pass-Through Expense

Indirect Labor

Operational Expense

Facility-Related

Other Program

Dev

Example: Medicaid Routine Revenue

X

1. RN Salaries X2. CNA Salaries X3. Medications X4. DME X5. Therapies X6. Medicare Routine

RevenueX

7. Medicaid Room & Board Revenue

X

8. Contracted Medicare IP Revenue

X

9. CEO X10. Finance Salaries X11. Rent X12. Development

SalariesX

13. Pediatrics Salaries X14. Admissions X15. Director of Nursing X16. Medical Director

(oversight function)X

17. Physician (performs visits)

X

18. Office Supplies X________________________________________________________________




Board of Directors Workbook ClassificationItem

Patient Revenue

Direct Labor

Patient-Related

Pass-ThroughRevenue

Pass-Through Expense

Indirect Labor

Operational Expense

Facility-Related

Other Program

Dev

19. HR X20. Clinical Team

LeaderX

21. Computer Expense X22. Telephone X23. Continuing

EducationX

24. Education Salaries X25. QI/PI/Compliance X26. Utilities X27. Nursing Home

Room & Board Expense

X

28. Community Bereavement

X

Understanding Hospice Measurements, Key Concepts & Definitions Patient Days = ADC multiplied by the number of days in the period. OR the

aggregate number of days patients were on hospice services for a period of time. Patient-Days are the most common hospice financial measurements. They are relatively easy to compute and are accepted in other forms of healthcare such as hospitals and nursing homes. Patient-Day measurements are inferior to Percentage of Net Patient Revenue.

ADC or Average Daily Census = Total patient days in a period/number of period days. This is the standard measurement of hospice size.

FTE or Full-Time Equivalent = Working hours in a period/the number of FTE hours. Normally, the number of annual hours used to compute an FTE is 2080. On a monthly basis, the average is 173 hours. On a weekly basis, it is normally 40 hours. If an employee worked 1040 hours, they would be considered half an FTE or 0.5. An FTE of 1.0 means that the person is equivalent to a full-time worker; while an FTE of 0.5 signals that the worker is only half-time.

Average Length of Stay (Terminated Patients) = Total patient-days for terminated patients/The number of terminated patients. Average Length of Stay (ALOS), like most measurements, has its flaws. ALOS should be looked at suspiciously. First, does the measurement number include the Inpatient Unit? This will skew overall hospice numbers downward. Also, low ALOS in the Inpatient Unit isn’t a bad thing. You want





Board of Directors Workbook EVERY patient - whether they live one minute or one hour for CAP purposes. However, you want Hospice Homecare ALOS as high as possible without exceeding CAP. Second, ALOS, as most hospices compute it, only counts terminated patients via death or discharge. Therefore, some patients will NEVER be included in the calculation! It can be a dangerous measurement to rely on and it has misguided many hospices into millions of dollars in CAP paybacks.

Median Length of Stay (Living Patients) - This measurement has importance when CAP is a factor. It provides a truer picture of the overall mix of patients. It is NOT in the standard reporting of most patient management systems. The best way to obtain this measurement is via an export of a list of your current patients on census with each patient’s respective SOC (Start-of-Care) date into Excel. Subtract the current date (today) from the SOC date in a separate column. Then use Excel’s =Median (cell range) formula to calculate your Median LOS.

Number of Visits Per Week – This is the count of the number of visits per clinician per

week (see the chart for goals). This practice provides a sense of respect for the professionalism for each discipline and allows clinicians to “take as long as needed to do a World Class visit.” However, it also should be stressed that the minimum expectation is the minimum. If the minimum is 20 visits a week for an RN, then 19 is not acceptable on a routine basis.

Number of Admissions Per Week – This is the count of the number of admissions per Marketing FTE per week. Weekly measurement has become the Best Practice for monitoring effectiveness. All admissions (not referrals) from the assigned “paper routes,” accounts, or territories are credited to the Marketing person. A top hospice marketer will produce 8-12 admissions per week from their assigned territories or accounts. Five would be a minimum.

Number of Visits by Discipline per 8-Hour Day = Total number of visits/(Total time worked/8). This is the best way to judge clinical productivity on a daily basis, in our opinion, as it converts all time worked into an 8-hour day. The focus should be on WEEKLY visits. However, to determine what is needed on a weekly basis, a daily amount is often needed. Avoid communicating productivity in daily terms.

Visit-Hours by Discipline per 8-Hour Day = Total number of visit-hours/(Total time worked/8). This measurement provides the best measurement of visit-hours of clinical staff. This measurement helps productivity and is critical if a hospice wants to understand costs by patient, diagnosis, payer, referral source, physician, clinician, etc.

Computed Caseloads = ADC/(Salaries/Average Hourly Rate/FTE Hours) NOTE: Normally an

FTE is 2080 hours annually or approximately 173 per month. Salaries would be for a specific discipline such as RNs, CNAs, SW, etc.





Board of Directors Workbook This measurement cuts through “perceived” or reported caseloads which tend to be exaggerated by 2 to 3 on average. It provides a “real” caseload per FTE.

Days in Accounts Receivable = Accounts Receivable/Annual Revenue X 365 or Period Days/AR Turnover Rate which is Net Patient Revenue divided by Patient Accounts Receivable. This is a measure that most managers and leaders should be at least familiar with. It provides the average number of days it takes to collect a bill.

Facility Mix = Total number of patients in nursing homes and assisted living communities/Total number of hospice patients. This is a key measurement that can have a huge bearing on a hospice’s profitability. It measures the percentage of patients residing in nursing homes and assisted living communities.

Patient Mix over 365 Days = Number of patients that have been on hospice service for more than a year/Total number of patients. An often overlooked measure that is vital to financial success. An adequate number of patients must live for extended periods of time to offset short-living patients.

Revenue Per Payroll Dollar = Net Patient Revenue/Total Payroll Dollars. Since payroll is the primary key to mastery of hospice finance, then the relationship between revenue and payroll costs is significant.

Death Service Percentage = Total Program Deaths/Total Deaths in Service Area. This is the true indicator of hospice penetration.

Admission/Inquiry Percentage = Total Number of Admissions/Total Number of Inquiries. Notice this is NOT Referral/Admissions. Many hospices live in the world of excuse and “sanitize” their conversion numbers. All inquiries should be counted.

Same Day Visit Percentage = Total number of admission or informational visits in a day/Total number of Inquiries in that same day. This is an important measurement that provides some indication of the ability to “sell” services. The goal of Intake is to get same day visits.

Pass-Through - A Pass-Through is where the hospice bills on behalf of another entity that cannot bill for itself, due to government regulations. The hospice then reimburses the contracted entity (hospital, nursing home, consulting physician) based on the contract between them. There are 4 major types of Pass-Throughs. They are:

o Nursing Home Room & Boardo General Inpatient in Contracted Hospitalso Consulting Physician Services





Board of Directors Workbook o Respite Care in Contracted Facilities

What is the best practice discovered for treating Pass-Throughs and why?

Pass-Throughs are controlled by grouping them in the Patient-Related section of the Chart of Accounts. An account is created for each Pass-Through revenue and expense so they can be analyzed for specific problems. The “net” amount is displayed on the Statement of Income and should be mathematically explainable. If Pass-Through revenue is used in calculation of Net Patient Revenue, it has historically caused hospices to falsely believe their financial performance is better than it actually is, as the offsetting expenses have not been properly accrued.

It can also materially diminish comparability with other hospices based on Net Patient-Revenue, as the inclusion of Pass-Throughs inflates revenue. Grouping the revenue and expenses provides an easy and practical “control” for users of financial statements. The wording also creates questions from Board Members and others that allow an educational opportunity. Not using this type of control has resulted in numerous hospices closing their doors as they operate with artificially inflated bottom-lines.

Development Return Ratio = Total revenue from community support and fundraising/Total expense for the Development Function. This measurement is basically a ROI (Return on Investment) calculation. It measures the number of dollars returned from each dollar invested in the attempt to garner community funds.

Contribution Margin - Contribution Margin is computed by subtracting Direct Expenses from Direct Revenue. It is used to measure the performance of revenue producing hospice segments like homecare teams and inpatient units. The “contribution” is the amount of excess from direct operational costs left to pay for Indirect Costs and provide for some level of profit. 36-40% is solid Contribution Margin for a hospice team.

Measurement Average Acceptable Excellenta.

Average Length of Stay (Terminated) 60 90 ??

b.

Median Length of Stay (Living) 120 160

c. Days in Accounts Receivable 52 48 42d.

Revenue Per Payroll Dollar 1.60 2.00 2.50

e.

Facility Mix 23% 35% 50%





Board of Directors Workbook f. Patient Mix over 365 Days 10% 15%g.

Death Service Percentage 36% 40% 50%

h.

Admission/Inquiry Percentage 65% 75% 85%

i. Same Day Visit Percentage 100%j. Development Ratio 3:1 4:1 6:1

Lower Costs Are Not Always BetterWhen reviewing the Percentage of Net Patient Revenue financial measurements in the following sections, please understand that we tend to look at lower costs as better. However, this is not always the case. In fact, many times it is better for some costs to INCREASE. The point is that there is a need to lower costs in some areas and increase costs in others to create a World Class hospice. If you could lower ALL costs and still provide World Class care, it would be great. However, that is usually not the case.

Example: If you believe that increased CNA services are World Class, then this cost would increase. If you believe that Open Access involves increased Therapies expense, then you would plan on this element of cost increasing. However, at the end of the day, the bottom-line needs to be producing at least 10%.

The War of Single Percentage PointsYou may not think a single percentage point variance is a big deal. But each percentage point is a big deal. As we look at profitability in the hospice world, it often boils down to single percentage points. So many times, a hospice is doing well financially, but the operational profit is not due to one area of excellence. Rather, it is a percentage here and a percentage





Board of Directors Workbook there and the CUMULATIVE effect is surprising. Now, this may be fine and all…but if a single area or category of cost goes out of control, the entire positive residual may be in jeopardy. If your profit is due to a percentage point here and a percentage point there…and you know it, then you know just what a balancing act you are performing!

“Building reserves is a war of single percentage points.” AR

Many people think that profitability is about having great cost controls in one or multiple areas of a hospice. That is not usually the case. It is more about having good costs in MOST areas…and it comes down to single percentage improvements. It is easy to self-justify if we are over industry averages in a cost category and rationalize that it is not a big deal. But it is! It is this attitude that robs us from performing to our full capabilities.

One thing that you should realize is “what” is possible. A hospice can achieve a 20% Operational Net Income WITHOUT compromising quality.

“We must realize that most hospices waste tremendous amounts of money.” AR

You Can’t Operate Your Hospice Based on Averages

In the following charts of hospice costs on a Percentage of Net Patient Revenue, you will notice that the total of averages does not match the totals for categories such as Direct Labor, Patient-Related or Indirect Costs. All data points in our benchmarking systems are independent calculations, including totals for categories. In our validation processes, we EXCLUDE elements that we believe are suspect. However, just because a data point is excluded does not mean that the TOTAL is invalid. It may mean that data points may not be segregated and therefore are lumped together so that individual data points are not accurate, but the total is. Most hospices have a combination of areas that are higher or lower than the averages. It is the mix that is important. Realize that you must have some areas that are below the reported averages to be financially successful.






Understanding CostsHospice Homecare In the table below are costs expressed as percentages of Net Patient Revenue (NPR). Average, acceptable and excellent amounts are displayed for each measure.

Cost Category Average Acceptable Excellenta. Total Direct Labor 42% 38% 33%b. Total Patient-Related 19% 18% 16%c. Contribution Margin 39% 44% 51%d. Total Indirect Costs 35% 30% 26%e. Indirect: Salary Costs 23% 19% 17%f. Indirect: Operational Costs 8% 7% 6%g. Indirect: Facility-Related 4% 4% 3%h. Net Operational Income 4% 14% 25%

Direct Labor (Benefits included, 22%)

i. Nursing 17.90% 16% 13%





Board of Directors Workbook j. CNA 6.29% 6% 6%k. SW 4.76% 4% 3%l. PC 2.06% 2% 1%m.

Physician 1.28% 2% 2%

n. On-Call 3.86% 3% 3%o. Admissions 3.09% 3% 3%p. Bereavement 1.54% 1% 1%q. Volunteer 1.21% 1% 1%r. Other

Direct Labor Subtotal NA* 38 33Primary Patient-Related Items

s. Medical Supplies 1.49% 1.5% 1.25%t. Therapies & Outpatient .77% 3% 2%u. DME 4.55% 4% 3.5%v. Imaging & Diagnostics .07% .06% .15%w. Ambulance .35% .35% .4%x. Pharmacy 6.90% 7% 6%y. Lab .15% .15% .12%z. Mileage 2.99% 3% 2.5%

Pass-Throughs & Other 1% .5%

* Each benchmark average is an independent calculation including totals; their sum rarely equals the sum of the data points in a category. Some numbers may be rounded up for ease of memorization.

Indirect Costs

In the table below are costs expressed as percentages of Net Patient Revenue (NPR). Average, acceptable and excellent amounts are displayed for each measure. Salaries INCLUDE benefits.

Indirect Salaries (Total Organization) Average Acceptable Excellenta. Administrative Salaries ** 6.16% 3.5% 2.5%b. Clinical Management Salaries ** 5.73% 5.5% 5%c. Compliance/QAPI 1.17% 1% 1%d. Education .82% 1% 1%e. Finance Salaries 2.77% 2.25% 2%f. HR 1.14% .75% .5%g. Marketing Salaries 2.29% 2% 2%h. Medical Director 1.47% 1% 1%i. Medical Records Salaries 1.26% 1% 1%j. MIS Salaries 1.20% 1% .5%________________________________________________________________




Board of Directors Workbook k. Other .61% 0% .25%

Indirect Salaries Subtotal NA* 19Indirect Operational (Total Organization)

l. Computer Expenses .76% .7% .5%m.

Continuing Education+ .74% 1.3% 2%

n. Dues, Licenses & Subscriptions .34% .3% .3%o. Insurance .68% .65% .6%p. Office Supplies .43% .35% .3%q. Postage/Mailings/Printing .41% .38% .35%r. Telephone .58% .5% .5%s. Marketing .65% 1.5% 1%


** These areas are the most “messy” regarding benchmarking because accounting can lack sufficient breakout. Administrative can also be impacted substantially by economies of scale. A hospice’s Administrative Salaries DECREASE with size. Clinical Management Salaries can also decrease with increased census, although sometimes it is less impacted than Administrative Salaries.

Inpatient Units

In the table below are costs expressed as percentages of Net Patient Revenue (NPR) for a typical Hospice Inpatient Unit. Average, acceptable and excellent amounts are displayed for each measure.

Cost Category Average Acceptablea. Total Direct Labor (includes all unit staff) 64.93% 60%b. Total Patient-Related 12.72% 12%c. Indirect Costs 29.39% 24%d. Contribution Margin -7.04% 4%

Direct Labor (Benefits included, 22%)

e. Nursing 40.54% 33%f. CNAs 13.25% 15%g. SW 2.42% 2.5%h. Physician 3.86% 4%





Board of Directors Workbook i. Admissions 2.05% 2%j. BC, VC, PC Other 2.5% 3.5%

Indirect Labor (Benefits included, 22%)

k. Administrative Labor (manager, ward clerk, etc.) 14% 12.5%Primary Patient-Related Items

l. Medical Supplies 1.87% 2%m.

Therapies & Outpatient 4.19% 4.15%

n. DME .43% .4%o. Oxygen .46% .4%p. Ambulance 1.04% 1%q. Pharmacy 4.04% 4%r. Linen .96% 1%s. Food 1.75% 1.5%


Benefits

Benefits are usually 22% of Salaries and Wages.

Financial Fiduciary ResponsibilityThe financial duty of care or fiduciary responsibility looms large with any organization and hospice is no exception. A hospice will cease to exist when it runs out of cash. Period. And I’ve seen it happen many times from hospices with thousands of patients per day to hospices that serve only a handful of patients each day. For-profit, not-for-profit, it makes no difference, the financial aspect, if not managed well, will sink any hospice program. Therefore, it merits considerable attention.

The Board is charged with the responsibly of making sure the organization is financially sound. However, most board members do not understand enough about the business of hospice to interpret the financial statements well and really understand what is happening within the organization. Generally, most board members go immediately to the bottom-line or look at the budget comparison with very little knowledge of the line items or categories of operations. If the bottom-line is positive, then “Hurray” or if it is negative, let’s cut administration or nursing without understanding specifically where the problem is.





Board of Directors Workbook How do you know that the budget you’re comparing performance to is valid? How do you know if it’s based on sound practice? Most don’t. We understand that the bottom-line needs to be positive, but how much should it be? Is any positive amount good enough? What is included in Net Income? Does it include community support? These are the questions that need to be answered?

Most hospice board members receive little training regarding the financial aspects of hospice. If you’re reading this manual, obviously your hospice has made the decision to provide this training because it wants the people that are ultimately making the strategic decisions for the organization, to know what they are doing. Board members should not be nit picking, or focusing on unimportant things such as bottled water expense or suggesting shortsighted remedies to common hospice problems. Rather board members should be concentrating on the important things.

The problem here is that most hospice board members have a hyper-sensitivity to financial matters because they are somewhat familiar territory with most members. Combine this with the fact that most hospices unknowingly provide poor financial statements and the result is that a hospice can go off course without knowing it and waste tremendous resources. Now I know that I am stepping on a few toes here, but this IS our area of expertise at MVI. We know this area perhaps better than anyone in the business. The reality is, is that nobody, even myself, could interpret what is happening at a hospice, especially from a board level, with the financial statements that are provided to 85% of the board’s of hospices in this country.

Now this is not entirely the hospice management’s fault, though they should understand their educational role, but often a matter of the hospice staff responding to financial presentation formats requested by the board, who has limited knowledge regarding hospice operations. And of course, the hospice staff scramble to accommodate the Board’s request, even it is excessive and kooky. I remember preparing for days for board meetings with 50 page packets of financials and schedules and other information, which frankly, I doubt many people actually read. Recognize that Hospice staff “jump” at Board requests and will spend countless hours trying to accommodate the requests. There are only so many hours in a day and realize that other things are going to be dropped or put aside to satisfy your request. Therefore, don’t burden them with whims. Make thoughtful recommendations and simplify whenever possible.

As an MVI client, we have provided your hospice with our suggested financial statement formats based on the Quantified Best Practice s in our industry; which is hundreds and hundreds of hospices. As a board member, you might want to make sure that you are using these financial statement formats. Our contact information is in this manual or can just Google Multi-View Incorporated/hospice. The financial statements need:

to be concise, only a few pages in length





Board of Directors Workbook offer perspective, not only of your hospice’s performance, but how its performance

compares with hundreds of other hospices

In addition, the financial statements should use our standardized classification system so that they are comparable to other hospices. They should also infuse of various quality measures. Just because a hospice is hitting its financial numbers does not necessarily translate into quality services to patients and families.

And now the BIG concept! Your financial statements should tell you how your hospice is doing compared to its own proprietary Model . That is, a comparison of your hospice’s performance with your own intentional and deliberate performance standards that create a predictable high-quality experience for everyone using your services. This is what MVI calls the Model.

MVI INSIGHT:

The Model is a big concept for a board member to understand and it is covered in many of our other workbooks, audio messages, and films. You will also want to listen to the audio message, The Model, which is only 14 minutes long. This message will get you up to speed regarding this modern approach to managing a hospice.

Recommended Financial Reports

The worst statements are “lumped” financials where business units are not broken out in sufficient detail to make informed decisions. If your hospice has an IP unit, Community Bereavement, Palliative Care, Home Health or other strategic business units, they need to be segregated from hospice homecare operations. Hospice homecare is the Mother Ship. It is the basis for all other hospice business segments and always needs to be segregated from all other business segments. It needs to be separate from IP units, palliative care programs, and other programs. Our recommended financial statements for general board use are:

a Balance Sheet an Income Statement in an MVI format based on standardized classifications for

comparably and avoidance of confusion and two reports that come directly from our systems





Board of Directors Workbook o the Executive Dashboard from the MVI Benchmarking Application (BA)o the Executive Facts report from the MVI Management Application (MA)

These reports automatically segregate and classify all of the major components of the hospice in the SAME logical formats. These reports, in conjunction with the Model, create the organizational transparency that so many entities desire.

For the finance committee, we would additionally recommend:

a Statement of Cash Flows a periodic review of Aged Accounts Receivable (AR) and Accounts Payables (AP)

Accounts Receivable should always be a great concern for a hospice board member as delays in payment due to documentation issues as well as delays from Medicare payers will drive a hospice out of business quickly unless it has adequate cash reserves.

The Executive Dashboard

The Executive Dashboard from the Benchmarking Application is particularly powerful for board members because it contains most all of the economic indicators as well as many key quality indicators regarding insight as to what patients and families are receiving. Above all, the Executive Dashboard provides perspective. This perspective is what separates an amateur hospice board from a truly professional and competent board. Without this information, your hospice is flying blind. Without this benchmarking information with a side-by-side comparison of your hospice’s performance, you are operating on a “Trust me baby” level, which is NOT in line with the duty of care requirement.

Executive Dashboard Excerpt






Sample of Search Criteria Input Screen available for all MVI clients.

The Financial Aspects of the Model

Now, let’s talk about the Model, at least the financial aspects of the Model. Again, we have published a lot on the subject matter, but as a board member it is important that you become very comfortable with the Model concept.

The Model is a modern approach to hospice management. It is used by the most progressive and advanced hospices in our country, both in terms of quality and profitability. The basic idea behind the Model is that of intentional design of hospice services. That is, rather than rely upon a somewhat organic operational approach, which most hospice have, the hospice would create a high-quality predictable experience.

There are two huge problems in hospice today.

We have a quality problem and





Board of Directors Workbook a financial or business problem

The quality problem stems from the fact that there are huge variability issues in hospice…among hospice providers as well as among individual clinicians in each hospice. A patient/family can have a great hospice experience with Nurse A and a mediocre experience with Nurse B. A patient/family can have a good experience with Hospice Aid A and a crappy experience with Hospice Aid B. The Model systemizes the experience into teachable and predicable stages that increases the overall average of care.

Simultaneously, it addresses the financial or business problem. The problem is that our hospices cultures have tended to recoil from anything that associates or links hospice to the idea that it is a business. Starting with patient and family in mind, the Model works itself backwards and translates the care experience into quantifiable measurements along with all of the supporting administrative functions. The Board of Directors is part of this equation.

What is the Model?

The Model is the intentional design of a hospice culture that simultaneously balances purpose and

financial realities to create a sustainable World Class experience.

The Model is an approach to operating a hospice as an integrated, coherent and coordinated system where all entities and persons involved experience something special and World Class. The Model approach is needed by hospices for many reasons ranging from quality issues to changes in the hospice economic environment. The Model forces a hospice to define itself, measure performance and challenge itself to be an ever-improving organization.





Board of Directors Workbook MVI provides the conceptual framework and many of the supporting systems needed to create and sustain the Model at your hospice. This is “the formula or recipe” we recommend based on years of experience assisting, observing, and measuring hospices. This cumulative and collective insight has led us to the belief that the culture of a hospice is the heart of the matter...and it will be the inability of many hospices to change culture that will be their demise in future years. All other things are subservient to the culture as culture shapes the thinking and behavior of an organization. The definition of the Model displayed above conveys the key concepts.

Why Should a Hospice Create a Model?There are two primary reasons for a hospice to create a Model:

To Provide a Predictable High-Quality Experience. To Operate a Financially Viable Hospice Now and in the Future.

The hospice industry faces two huge problems. We have a Quality Problem and a Financial or Business Problem. The Quality Problem stems from the tremendous variability of care within our industry. This variability exists among different hospices as well as among the clinical staff within each hospice. Patient and families can have a great experience with one clinician and a horrible experience with another. The Financial or Business Problem is that too many hospices are not building sufficient financial reserves by operating sound business models. In fact, most hospices have a severe cultural problem in that many detest the idea of being real business with the same financial realities as other enterprises such as payrolls needing to be met, supporting functions needing to be performed, infrastructures maintained, and money set aside for the financial “surprises” that loom in the Medicare reimbursement system. The hospice world is constantly changing. It seems that change is the nature of the universe. Rather than viewing change as negative, see it as the natural order of things and that change is really the only hope we have for a better tomorrow.

There are many changes and issues in the hospice environment that make the adoption of a sound and intentional Model important.

Proposed Medicare rate cuts Proposed changes to our payment system (MedPAC recommendations) Increasing governmental scrutiny Ever-increasing competition CAP






All of these major factors point to a need to increase quality and decrease overall costs. It is important to understand that, for most hospices, there must be an “overall” decrease in costs. It is important; however, to understand that many areas of cost will need to be increased to provide a World Class experience. Others will need to be decreased. The key word is always BALANCE.

MVI INSIGHT:

We must leave behind the idea that there is a direct correlation between spending and quality. Spending more money in areas does NOT mean that higher quality will result. Giving areas attention WILL increase quality.

The Benefits of Creating and Using Models

There are many reasons for a hospice to adopt a Model. A good Model should include financial and operational measures. What will it do for your hospice? It will dramatically improve everything…internally and externally. Here is a partial list of benefits:

It causes a hospice to think about what it specifically provides or aspires to provide ideally.

It defines the work of the hospice. It can be used to get everyone on the same page. It provides “optimal” measures to compare against actual performance. Either you are

“in” or “out” of the Model . They are flexible and change with fluctuations in patient volume. With a Model, “budgeting” takes hours and not months. It helps a hospice build reserves. It will improve your value proposition to referral sources and consumers. A hospice can grow larger by operating with precise information rather than on gut-

feelings or opinions.






Breaking Down the Barriers

There are “barriers,” silos and invisible divisions in hospice. Aren’t we supposed to be the interdisciplinary, role respective and caring compassionate people that make the world a better place? Hospice needs to be a united team, where everyone is on the same page and is moving in the same direction. This is not what happens in many hospices. There are “us versus them,” “clinical versus administration,” “care versus the dollar” mentalities that separate people. These separatist ideas and attitudes are stupid and childish. They have no place in the modern hospice. It is about all of us - each performing his or her duties with professionalism and grace.

Financial Disdain for the Numbers, especially Money

Without air, humans do not survive. Money is the equivalent in the hospice world. It is important that we value and embrace the idea that it is OK to think about care AND financial balance. On a personal level, if the hospice stopped paying you for your efforts, your life might become a little more uncomfortable. For most people, this would be more than an inconvenience; it would threaten our ability to continue. The same logic applies to our hospice. Here are some great reasons to be profitable and build reserves:

Medicare Reimbursement Cuts Ever-Increasing Competition Public Relations (PR) Disasters Increasing Costs Management Surprises Ability to Take Advantage of Business Opportunities To Care for Indigent and High Cost Patients

Overcoming the “Great Dilemma”





Board of Directors Workbook Many hospice people have trouble with the idea that hospice is a “business.” There is an “internal conflict” that some find disturbing as there is a perception that the linkage to money somehow lessens the commitment to the mission. We call this the “Great Dilemma.” This internal conflict must be resolved within our hospice cultures.

Many people in hospice think that profitability is wrong. They think that it is “evil” to do this work and make money. This mindset must go. It is not only right for our hospices to be profitable; it is the only way to survive! This anti-profit mindset is not compatible with reality. If you are unable to become comfortable with operating within a sound business model, you should “self-select” yourself from the hospice to make space for someone else.

Avoid being Dependent upon Community Support

Hospices that have not built adequate reserves and are reliant upon community support are ONE public relations disaster away from being bankrupt. If a very negative accusation, whether true or untrue, is disseminated in a community, community support will drastically diminish and even “dry-up.” In these cases, it is almost impossible for a hospice to change its mode of operations and culture fast enough to outlast the situation. This is one of the primary reasons why it is so critical for a hospice to learn to operate with only Medicare, Medicaid, Commercial Insurance, and Self-Pay revenues.

There is More than Enough to Fund World Class Hospice Care

Let’s just say this…there is more than enough money in hospice to fund a world class experience right now. But it has to be intelligently directed, which brings us back to the Model.

With every area of the hospice denominated by these NPR amounts, two wonderful things happen. (1) The organization is unified (people see that their actions impact each other and that no one lives in a silo) AND (2) a powerful organizational transparency is created almost immediately. Remember, the SAME financial formats and reports are used throughout the entire organization with NPR amounts clearly associated with each area.

If a hospice has the foresight to teach these amounts to all staff…from front-line staff, to volunteers, to the board of directors, suddenly anyone in the organization can evaluate at least the financial performance of the organization. No longer are board members dependent upon “trust me baby” financials. It’s right there…and if the Executive Dashboard Report is used, you see your hospice’s performance compared to the rest of the hospice world, as well as with the MVI Model. Now the MVI Model amounts are our suggestions for the everyday hospice in America. And in the absence of your own proprietary Model, they should be used. The MVI Model amounts are the default. However, if your hospice has developed its own





Board of Directors Workbook proprietary Model, then your custom amounts take precedence. After all, the Model is not about making all hospices look the same. It should be about creating a great experience customized to the communities the hospice serves. Your hospice might provide a slightly different scope of services or more Hospice Aid or therapies. In hospice, we have the ability to shape the experience unlike other flavors of healthcare in that the patient and family can say “hold the pickles and mayo for me, but I would like that secret sauce!”

Financial Reserves

In the future, hospices are going to need cash and in many cases, a lot of it. My advice is that a hospice builds its reserves to 7-9 months of current operations. This may sound like a lot, but as healthcare reform looms and Medicare payers tighten their payment processes and challenge payments, the payment process is only going to slow down. Yes, your hospice may ultimately collect what it is owed, but can you afford to operate until you get paid? This form of financial constipation will come in waves over the next decade, and only the hospices with cash that have operated efficiently will be left standing. All others will be assimilated into larger hospice corporations. NOW is the time to fill your storehouse…and it will be done with the Model.

You can be certain about this…the Model will never go out of style or not be en vogue. The Model is built for change. It is build for Medicare rate cuts. It is built to withstand competitive pressures and quality challenges…and your hospice is doing it or you wouldn’t be using this workbook!






Examples of Model DesignsThere are many examples of hospice overall Models. For convenience, when discussing Models, we often use three consecutive numbers which represent the various major categories of cost. For example, 38/18/30 would mean:

38/18/30

Direct Labor Patient-Related Indirect Costs

The MVI Model – 38/18/30 This used to be 38/22/30. However, so many hospices can achieve the 22% Patient-Related goal that it needed to be lowered. This produces a profit of 14%.





Board of Directors Workbook Typical Hospice Model – 42/19/35 A typical hospice will have a Model of 42/20/35. This is often an “organic” model of business that has evolved over time. This produces a profit of 3%.

Andrew’s Model – 38/17/27 Many people think that the MVI Model is Andrew’s Model. However, it is not. The MVI Model is a model that is “achievable” for a typical hospice. Andrew’s Model would be 38/17/27 which would render an 18% profit. Key deviations would be:

Increasing RN/Nursing/SW/PC Caseloads Doubling Hospice Aid Services Doubling Volunteer Services Adding Homemakers as a service component Patient-Related costs would be reduced to the 80% percentile by using select vendors Most all Indirect Costs would be slightly less than the MVI Model producing a

CUMULATIVE 3% savings.

Maximum Efficiency Hospice Model – 32/12/23 How efficient can a hospice become? We don’t know. However, a hospice can provide a high quality service for far less cost than most hospices can imagine.

The Four Areas of Design Work that Impact EverythingAt the heart of the Model are four areas of design work that are essential to truly successful Model implementation. They are:

Team Designo What disciplines, caseloads, costs?

Visit Designo What are the visit structure/teachable stages of the visit? How many, how long?

What are the key messages and communication? What does the documentation need to look like and when is it done?

Product Designo What are the physical products such as teaching/communication tools used to

enhance the experience? Supporting Services Design

o What are the supporting services/functions, costs, specific practices?





Board of Directors Workbook The first three of these areas (Team, Visit and Product Design) focus on patients and families since this is the heart of what we do. The design of Supporting Services is important as these functional areas are necessary to serve the people on the front-lines of care, providing help and assistance to make the provision of care possible. When a Model is properly implemented, it results in superior hospice care which is balanced. As we dream about “what” and “how” hospice care can be provided, the Model tools give us a great indication of the financial implications of our design choices.

The Model is NOT Financially Driven! Many people may view the Model as simply a financial tool to monitor and control costs. Although this is true and many hospices will use it expressly for such purposes, the true goal of Model implementation is to create a high-quality predictable experience. Having quality and financial balance are not mutually exclusive goals.

MVI INSIGHT:

The Model begins at the frontlines of care and all other functions are viewed in relation of how they support that care. The Model should not be communicated as financial tool or your hospice will only derive a small portion of the Model’s value. The Model is not just about NPR amounts. It is about the intentional design of care to create a high-quality experience that is financially balanced.





Board of Directors Workbook It is important that our consciousness regarding hospice finances is heightened and is proportionally balanced with the purpose of hospice. Purpose is still the primary reason we are in hospice. Financial aspects are secondary, albeit essential.

No Budgets! The Model Does Not Use Budgets but Rather NPR

As a board member, the Model will represent a departure from traditional management approaches. Two areas of special note are:

The Non-use of traditional Budgets And the use of NPR or Net Patient Revenue as the primary financial measurement

Don’t be alarmed at the thought of not using a budget. These ideas are tried and true and have an almost magical impact on a hospice. Let’s discuss both of these points.

When you think about traditional budgets, they do not make much sense. The process is started about mid-year, they take months to complete, they require huge portions of time and even emotional energy, people submit greatly exaggerated amounts because they know their submissions are going to be wacked by the CFO, and then the organization gets 3 months into the budget year and patient volume is materially different than projected. Then come the calls for a re-stated budget as the volume variance masks the efficiency variance, so that





Board of Directors Workbook board members can’t tell whether the variances are volume-based or efficiency-based. Ultimately, the budget and budget process end up being one of the most non-value adding activities for most organizations. When, by contrast, a hospice could create a Model that would be used perpetually and simply adapted when necessary or advantageous.

With a Model approach, the best attributes of the traditional budget process are kept such as census goals. However, the period to period financials are flexed according to patient-volume. This totally eliminates the volume variance problem. All that is left is the efficiency variance which is compared to actual hospice performance. If a budget is needed for external use such as governmental reporting or for foundations or other entities, a budget can be produced by projecting the current Model 12 months into the future. Once established, the Model is used perpetually and is modified as needed. Thus, all of the time and effort is saved. But this is not the big win. The greater benefits come from:

the clear establishment of operational standards for all areas; simplicity of the business model, in that the same measurements can be used for long

periods of time, thus saving communication and educational problems; unification of the hospice; and organizational transparency.

When operational standards are clear, then accountability becomes a matter of monitoring and addressing performance with rewards and consequences. Most hospices have an accountability problem. The Model goes a long way towards solving this problem.

The Model simplifies the hospice business, segregating the various components into logical groupings and classifications so that informed decisions can be made based on precise information. We have found that hospices that do “less well” have higher satisfaction scores than hospices that try to do a lot sloppily.

The Model uses NPR or Net Patient Revenue as the primary unit of financial measurement at the hospice. There are many other measures of course, but NPR is what you will use as a board member to judge financial performance as part of your fiduciary duty of care.

Your hospice should have or be developing its NPR amounts. As a board member, you need to become familiar with these amounts. Become familiar with the Model NPR amounts and use them to evaluate your hospice’s performance.

The mathematical equation to calculate NPR is quite simple. We can take any financial revenue or cost amount and divide it by Net Patient Revenue. This amount is only Medicare, Medicaid, Commercial Insurance and Private Pay. It is less Bad Debt and Contractual Allowances. It does not include Pass-Throughs or ANY community support. That is, it does NOT include any donations, memorials, fundraising or any gifts. It is strictly earned revenue. It helps us answer the question, “Could our hospice make it without community support?”





Board of Directors Workbook Because community support can go south. Experience one really bad PR disaster, whether substantiated or not, and see what happens to community support. And it will happen. There are community hospices that were dependent upon community support with hundreds of patients a day that have been wiped out in a matter of months due to inadequate cash reserves and dependency upon community dollars.

One of the most noticeable “shifts” a hospice will experience when implementing the Model is an absence of traditional budgets. Within a true Model system, the hospice does not use a budget for management. Rather, the hospice operates based on a dynamic and flexible system that allows a hospice to critically evaluate past performance as well as forecast the future.

The absence of traditional budgets is a big mindset change for many hospices, CEOs, Boards of Directors and especially CFOs. Many hospices will not be able to completely move to an operational world without budgets for several years. This is the direction that we encourage. Also, we realize that the “outside world” and many traditional Board members will still want “budgets.” The Model system can produce a traditional static budget as needed to appease adamant individuals. The Model can also satisfy other entities such as banks, governmental & regulatory organizations, related organizations, etc. The budget will be based on the current Model projected into the future.

There are many reasons why the modern and progressive hospice will not use the traditional static budget.





Board of Directors Workbook Almost Instantly Outdated – Static Budgets often lose their comparative value with

fluctuations in patient volume. Any increase or decrease in census will cause material overage or underage in census-sensitive areas. Often the budget will have to be “revised.” Also, static budgets are normally all but ignored by the end of the year! All focus is on “next year’s budget.”

A Waste of Time – Most hospices spend tremendous time (months) creating the budget. It is truly one of the most wasteful uses of resources and energy in most hospices. A budget is usually outdated within the first months unless census approximates the budget (as mentioned above).

The Idea of Budgets is Negative – Budgets do not excite people. They are not motivating. They are the opposite. Budgets are limiting, truncating, and stiff. The term budget doesn’t stir the imagination and garner much enthusiasm or cheers. A “Model,” or whatever term you want to substitute, is alive and flexible. A new name also accommodates the best ideas.

Budgets Offer Little Comparability or Perspective – Traditional budgets are difficult to compare to other similar organizations. Few aspects of budgets lend themselves to comparison to gain the much needed perspective that separates true hospice professionals from amateur hospice leaders.

When we contrast the Model with traditional budgets, the choice is obvious:

The Model is always based on Current Census – The Model automatically adjusts every category based on Net Patient Revenue (NPR) which is derived from census. You are always comparing “apples to apples” with the Model approach. In accounting, you have two types of variances, volume variances and efficiency variances. The Model eliminates the volume (census) variance and all that remains is the efficiency variance. With a traditional budget, these two variances are “combined” making decisions drastically more difficult.

The Model Established Standards - The Model forces a hospice to establish financial and operational standards. Areas include: caseloads, weekly visits, visit durations, costs parameters, etc. These standards apply regardless of fluctuations of patient volume!

Transparency – The Model based on NPR creates the immediate transparency that so many organizations seek. Percentages are widely understood by most people. Because the Model uses percentages as the common unit of financial measurement for all areas, anyone that is familiar with the Model amounts could easily evaluate the performance of any department or area. This would mean that if the Model were taught throughout a hospice, ANYONE, from staff member to Board of Director to volunteer, could judge financial performance.

Comparability – Because the Model is constructed on a Percentage of Net Patient Revenue basis, a common unit of measurement, results are easily comparable to other hospices. In fact, each line item is comparable so, a hospice is not even limited to comparing grand totals or broad categories. Again, perspective and insight into the





Board of Directors Workbook overall hospice world separates the hospice professional from the amateur hospice leader.

Once Established, the Model takes Little Time to Maintain – The Model is a perpetual system. It continues to be used indefinitely until the decision to change it is made. There is no need for months of effort to create something new. A Model can be changed in minutes, if needed.

The Model is Flexible – If the Model needs to be changed it can be altered in minutes to accommodate the new direction. It is not the alteration of the Model, mechanically, that is what is time consuming. It is the “what” and “how much” questions that require much mental work. However, this is exactly where we should be spending our time, thinking of improvements rather than thinking about the mechanics of measurement.

The Model is More Easily Understood – People “get’ the Model concept. It is that simple! They understand easily that the “pieces must work together” by the mere mention of the word Model.

The Model Still has Static Goals – A well developed Model will have static or established goals. These are similar to the goals in the traditional budget in that normally annual goals are created. The Model establishes goals as well. However, the goals or targets pertain to things like ADC, Model percentages, productivity measurement, etc. It does not pertain to static dollar amounts for each area of the hospice. Also, we recommend the use of the term “goal” rather than target or other term. Goal has a less negative connotation.

The Model can produce a Traditional Budget when one is Needed – Need a budget report for the United Way or the Board of Directors that does not understand a Model approach? The Model System can produce an annual budget in minutes as the current standards are projected into the next twelve months. These amounts can be uploaded via F9 into your accounting system to produce a traditional budget report.

The Model becomes a Forecasting Tool – Relating to the point noted above, the Model can be used as a forecasting tool. A hospice can change the standards in the Model and project operational performance into the future. The Model becomes a decision support tool.

We are completely biased regarding the use of the Model over traditional budgeting. It is a “no-brainer” in our opinion. It is the way of the modern hospice.






MVI INSIGHT:

Transparency – The Model based on NPR creates the immediate transparency that so many organizations seek. Percentages are widely understood by most people. Because the Model uses percentages as the common unit of financial measurement for all areas, anyone that is familiar with the Model amounts could easily evaluate the performance of any department or area.

Gaining Perspective and the Reality Check As a Board Member, it is important that you have perspective regarding the ever-changing hospice world. It is also important to realize that you have immediate access to it. The Model is derived from MVI’s proprietary benchmarking data. You have an idea about the Model at this point. You will understand it VERY well as you serve on this board. However, now would be a good time to take a hard look at your hospice operations compared to other hospices.






If you are implementing the Model, you will need perspective...especially financial perspective since so much of the Model is about increasing the business consciousness at the hospice. This perspective will come from MVI Benchmarking.

How can you get your benchmarking results?

You can ask for this report to be sent to you by MVIB staff (772-569-9811). You can ask the CEO, CFO or other person at your hospice, to run the reports for you. The system can be installed on your PC and you can run the reports yourself.





We recommend that hospice CEO’s and other primary leaders have the MVI Benchmarking System installed

on their computers.


The CEO and other leaders should have direct access to this information. Having to ask the CFO or other financial person is simply unnecessary since the system is so easy to use.

What you should be paying particular attention to is the Percentile Rankings columns. They are included in every report. The 50th percentile would mean that your hospice is “in the middle” for a particular data point. Half of the hospices in the query you selected are above you and half are below you. If an area is in the 77th percentile, 23% of the hospices are better than you and 76% are worse than you.

The data in this example is for illustration purposes only. The numbers are from a test database.





If your hospice percentile rankings are bad, resist the impulse to reject the data.

Look at it and understand it. This will fuel you to make the necessary

improvements.

A little discontent is a good thing…


This is where many hospice leaders falter. If the percentile rankings are not very good, the leader retracts. The human capacity for “self-justification” is almost unlimited. A courageous leader recognizes that it is only when we face the quantified facts that we can really improve. Realize that the Benchmarking System (BA) is changing daily as hospices are constantly updating their information since it is largely an automated process. The overall fact is that hospices are improving their performance year after year. As an industry, we are getting better.

To gain access to the Benchmarking System (BA), call the MVI Benchmarking office at 772-569-9811. They will help install the application in minutes and give you your pass codes. They will also provide a short training, if necessary. The system is quite intuitive and relatively easy to learn and interpret.

NOTE: The Benchmarking System (BA) should be on the CEO’s, CFO’s, or other key financial staff member’s computer at minimum. Many hospices also have the application installed on Clinical Leaders’ computers.

,

The Decision DashboardThere are several utility tools that the hospice leaders should become “familiar” with regarding the Model. The primary one of board member interest would be the Decision Dashboard since it is one of the primary tools your hospice will use to monitor your performance in relation to your Model on an on-going basis. The Decision Dashboard is what you will have when the Model is implemented and you have subscribed to this level of service (there is an additional month cost associated with it). The following is main screen:





If your hospice percentile rankings are bad, resist the impulse to reject the data.

Look at it and understand it. This will fuel you to make the necessary

improvements.

A little discontent is a good thing…


The Decision Dashboard

At first, you may be a bit overwhelmed at the “data density.” This initial feeling will quickly diminish as you become accustomed to the dashboard and learn to quickly go to the areas that need attention. What sets the Decision Dashboard apart from other is this:

This tool is a true decision support tool.

Specifically, what does this mean?






MVI INSIGHT:

The Decision Dashboard provides the ability for ANYONE in the organization to quantify the financial impact of proposed changes to

currently attainable performance without being dependant upon accounting staff.

Therefore, a Clinical Leader or any person within the hospice could suggest a change or a combination of changes and the dashboard would do the complex calculations of quantifying the financial ramifications based on current performance…that is…where your hospice is NOW. For example, in moments, you could quantify the financial impact of changes to:

Average Caseloads Weekly Visits Visit Durations Wage Adjustments Benefits Adjustments Overall Model Adjustments Patient-Related Items Indirect Areas Extracurricular Programs

The dashboard will automatically calculate the impact of such changes. This is not just about pretty packaging and slick programming. The Model System is fused with proprietary knowledge and alerts that could not be produced by just good programmers. There is a depth of knowledge coded within the system that will make leaders more aware and focused on their respective area, as well as the ramifications on the ENTIRE HOSPICE. In addition, built-in “What If” calculators are available for many areas. What if caseloads were decreased? What if visits were five minutes shorter? What if Indirect Costs were 2% less? What if Medicare cuts our RHC rate by $10? What if? How would these changes impact the hospice? The Model Maker is a powerful tool to quantify the impact of changes!

There are several things that are significant about this tool:






It is automatically produced after your hospice uploads its data for MVI Benchmarking. It is based on your currently attainable performance. If you made changes to current

performance, what would be the financial impact NOW! Your hospice’s Model is incorporated into the tool so you can easily judge

performance. There are indicators (alerts) showing any area that is outside of the upper and lower

control parameters that your hospice establishes. They are marked in colors. Anything within your upper and lower control parameters is not highlighted. Thus allowing you to focus on the areas that need attention.

MOST IMPORTANT: Any person in the organization can see the ramifications of proposed changes. Therefore, from the financial perspective, precise information is obtained so that resources and energy can be intelligently directed. Not only can the person proposing a change see the result, it can be used to show others and to teach. Therefore, the Decision Dashboard is a great teaching tool…and teaching is the core of the Model organization.






Your Role as a Board Member

Board Member Role:

Key Points:

Exercise Fiduciary Duty of Care. You are to be an Example in the community as well as be a positive

influence on the CEO and all staff members. You are to work Productively and Directly with the CEO. Understand the Model, especially NPR amounts for:

o Direct Labor o Patient-Relatedo Indirect Costs

Avoid Micro Management. Contribute to the hospice.

.

As corporate responsibility issues fill the headlines, the activities of corporate directors are being watched closely. Health care boards of directors have the unique opportunity to take leadership by putting in place quality systems that will advance both their organizations’ respective missions and the nation’s health. A member of the board of directors has many different responsibilities.






The Responsibilities of the Board of Directors

MVI INSIGHT:

The basic fiduciary duty of care principle requires a director to act in good faith and with the care that an ordinarily prudent person would exercise under similar circumstances.

This principle is being tested in the current corporate climate.

The Fiduciary Duty of Care

The Board needs to keep abreast regarding the facts of the business and overall direction of the hospice on a general level and not the operational level. The details of why “Mary Sue walked out” would be an example of an operational issue that would be inappropriate on a board level.

The basic fiduciary duty of care principle requires a director to act in good faith and with the care that an ordinarily prudent person would exercise under similar circumstances.

The fiduciary duties of directors reflect the expectation of corporate stakeholders regarding oversight of corporate affairs. Personal liability for directors is a reality in today’s corporate world. This liability includes removal, civil damages, and tax liability, as well as damage to the director’s reputation. Of the principal fiduciary obligations or duties owed by directors to their corporations, the one duty specifically noted by corporate compliance programs is the duty of care. As the name implies, the duty of care refers to the obligation of corporate directors to exercise the proper amount of care in their decision-making process.

State statutes that create the duty of care and court cases that interpret it usually are identical for both for-profit and non-profit corporations. Non-profit corporations are formed to achieve a specific goal or objective (such as the promotion of health), as recognized under state non-profit corporation laws. It is often said of non-profits that “the means and the mission are inseparable.” This is in contrast to the typical business corporation (for-profit), which is often formed to pursue a general corporate purpose.






In most states, duty of care involves determining whether the directors acted

in “good faith,” with that level of care that an ordinarily prudent person would exercise in similar

circumstances, and in a manner that they reasonably believe is in the best interest of the corporation.

In considering directors’ fiduciary obligations, it is important to recognize that the appropriate standard of care is not “perfection.” Directors are not required to know everything about a topic they are asked to consider. They may, where justified, rely on the advice of management and of outside advisors. A director has a duty to attempt in good faith to assure that:

a corporate information and reporting system exists, and this reporting system is adequate to assure the board that appropriate information

regarding applicable laws will come to its attention in a timely manner as part of day-to-day operations.

Compliance Function

In addition to the challenges associated with patient care, health care providers are subject to huge amounts of and sometimes very complex sets of rules governing the coverage and reimbursement of medical services. Because federal and state-sponsored health care programs play such a significant role in paying for health care, non-compliance with these rules can present substantial risks to the health care provider. The board should reasonably assure itself that the compliance function is appropriately free of undue constraints and that the chief compliance officer is able to provide the board with objective information, analyses, and recommendations.

The concept of “checks and balances” in the compliance reporting process is important, regardless of who has formal responsibility for the compliance program. Direct reporting to the board and alternative reporting processes may also promote the integrity of the compliance program, while respecting the operational preferences of management.

Increased Focus on Quality and Patient Safety





Board of Directors Workbook There is currently an increased focus on quality and patient safety. This means that oversight of quality is being recognized as more of a core fiduciary responsibility of health care organization directors. Health care organization boards have distinct responsibilities in the areas of quality of care and preserving patient safety because these areas are at the core of the health care industry. They also effect the reputation of each health care organization. Quality is also emerging as an enforcement priority for health care regulators.

Directors are also expected to make inquiries to management to obtain the information necessary to satisfy their duty of care. Important new policy issues are arising with respect to how quality of care affects matters of reimbursement and payment, efficiency, cost controls, and the working relationships between providers and individual and/or group practitioners. Part of the oversight function that board members are expected to review include how the organization handles issues of patient safety, appropriate levels of care, cost reduction, reimbursement, and how the providers and practitioners work together.

This is likely to include:

being sensitive to the emergence of quality of care issues, challenges, and opportunities;

being attentive to the development of specific quality of care measurement and reporting requirements (including asking the executives requesting periodic updates from the executive staff on organizational quality of care initiatives and how the organization intends to address legal issues associated with those initiatives.

staff for periodic education); and requesting periodic updates from the executive staff on organizational quality of care

initiatives and how the organization intends to address legal issues associated with those initiatives.

Cost Efficiency and Duty of Care

Perhaps one of the most critical—and often misunderstood—components of health care quality is the relationship between overall quality and cost efficiency. It is becoming more widely understood that quality and efficiency work together and not against one another as elements of an effective health care system.

Health care organizations, with oversight by their boards of directors, will be required to be mindful of the anti-kickback statute, the physician self-referral (Stark) law, civil money penalty statutes, the Health Insurance Portability and Accountability Act (HIPAA), federal tax-exemption standards, and antitrust law, among other legal areas.

Prior Board and Other Experience





Board of Directors Workbook You may be new to the board or maybe you’re served on the board for a long time. Maybe you have served on many boards. Regardless of your experience level, there are things that board members need to understand relating to serving in this oversight capacity.

You may have come to the board with much experience. The experience could be in various industries or you can read financial statements well. Perhaps you have operated a large company. This is all wonderful and valuable knowledge, but it doesn’t mean that there is a direct correlation to the workings of a hospice. Just because it was done this way or that way at the bank or at the factory with the big smokestacks on the edge of town does not mean that it translates to hospice care. Even if you have tons of experience with large healthcare providers, recognize that hospice is has its own unique characteristics as well as elements common to the human condition.

With this said, and again, not to diminish valuable input, be careful and thoughtful when you introduce ideas, seeking to understand before spilling off pat answers. As you gain experience, your input will become more deliberate. On the other hand, a fresh set of eyes is always a good thing and the quote “lack of experience” can bring in new insights. However, keep tact and grace in mind and a spirit that seeks to understand first.

Hospice Cultural Hallmarks

We are dealing with people at one of the most traumatic times in their lives. Hospice is different in that the people that work at the hospice literally see themselves as “called” to this work and view it very much as a ministry. It is NOT all about numbers and margins. It is about patients and families. Also you will find that hospice people are not as jaded as people in other flavors of healthcare. This ministry-mindset or intention does, in fact, set hospice apart.

This ministry-mindset has an unintentional byproduct in that most hospices are not very business oriented. In fact, they often disassociate with any idea of “linkage to money.” I have spent a great deal of my life trying to improve the business balance in the hospice world. We have to mature organizationally, especially in the financial area, keeping intact the essence of what makes hospice great, WITHOUT disturbing the mission and the uniqueness. This is an example of where your influence as a board member is needed. In addition, we realize that it usually takes an “outside influence” or view from a different perspective for an area to improve greater than a 30% deviation from the norm. Your experience and influence will play a role in the introduction of new and exciting insights that may take the hospice to a higher operational place.

Examination of Motives

An examination of motives is in order as a member of the board. ________________________________________________________________





Are you sincerely interested in the minimization of human suffering? Are you genuinely concerned with this particular hospice organization?Are you on the board as something the company you work for requires? Do you like to see your name in the margin of the letterhead?Do you have an agenda, possibly with another healthcare entity? Perhaps a conflict?Or are you really here to serve and want to assist the hospice in its overall upward momentum and believe you have a contribution to make?

If your motives for being on the board are honorable, great! If not, it is time to gracefully step aside and move on.

Asset or Liability?

You should bring something to the board. You need to be an asset. The hospice needs impact players that can support the organization and be an asset. Are you an asset or a liability? We have seen far too many boards that were a liability, needlessly holding a hospice back, truncating its advancement with outdated and small-mindedness. So are you an asset or a liability?

Now, I’m not trying to be condescending, but the truth is that most hospice board members do not really know much about hospice operations. Perhaps we have a few general ideas about hospice, but many times the depth level is quite shallow. Don’t be too hard on yourself. You’re in the same boat as most hospice board members across the country! And, by the end of this workbook; you will be able to evaluate things with vastly expanded confidence and awareness.

Many board members come to hospice thinking that it is an easy business. However, the reality is that hospice is a complicated business. When you consider all that a hospice does and how it is paid, it is not a simple thing to do, especially if hospice work is being done well. Combine this with the fact that many hospice’s have other programs such as IP units, Community Bereavement, Residential Units, Adult Day Care, Palliative Care and other extra-curricular programs each with different work processes and you can see how a hospice can become a quite complicated organization.

In a nutshell, hospice receives a flat or set amount for each day for the various levels of care, regardless of the costs incurred. It is a true managed care system. Hospice is a capitated system, meaning that the amount of money a hospice receives is limited through several methodologies and is expected to cover all costs associated with the terminal condition even if the costs are greater than the reimbursement. The key is the management costs in relation to the mix of patients…patients with a wide variety of needs and illnesses. It has to be





Board of Directors Workbook managed in the aggregate or the whole. For example, if a patient is on hospice for 30 days, the hospice receives on average, approximately $135 a day and must pay all costs associated with the terminal condition regardless of whether or not the costs exceed the reimbursement. Too many of a certain type of patient or too many patients that live for only a short period of time cause a hospice financial hardship. There needs to be a balanced mix of patients that live long enough to enable a quality hospice experience and that help a hospice spread its costs over the population of patients it serves. Theoretically, a hospice’s operations should reflect the demographics of death in its community, segregating out those that could not benefit from hospice services.

The Cardinal Sin

As a board member, you must help your hospice avoid the cardinal sin. The cardinal sin for a hospice is to utter the words that communicate the message that we cannot take new patients because we are busy, short-staffed or somehow have a compromised intake ability. Hospices NEVER recover from such words. A hospice can provide excellent service to a community for decades and for some reason that is beyond my understanding, they will never forgive a hospice that puts out this message. In fact, I would terminate anyone at a hospice that ever utters these words in public. If you want to see your hospice census plummet and not recover…even to the point that you will have to change your name because of the distaste in the public palate, then allow this message that we can’t take new patients to get out.

Recognizing your Contribution

Recognize your contribution. What are you bringing to the organization? The contribution will vary according from board member to board member.

Is your contribution to use your influence, your connections, your access to people that could advance the hospice?

Is it your spirit of volunteerism, your fire and passion for the vision? Hospice was born on the front porches and in the church basements of this country…by people that received no compensation for their efforts. Is volunteerism highly esteemed at your hospice? Or have we become more of a sterile quote “professional” hospice? Do we remember our roots?

Is your contribution of your technical experience legal, financial, HR, IT, management areas?

Are you on the board for your financial resources? Are you on the board for your connections and associations with key strategic entities

such as a hospital system or nursing home or physician practice? ________________________________________________________________





There are many ways for you to be an asset to your hospice and it is important to be aware of what the hospice is expecting from you.

Here is an important question. Do you financially contribute to the hospice? You should be making a financial contribution to the hospice periodically and it doesn’t have to be a large amount. Many hospice board members do this automatically and I have found that the best board members habitually write a check to the hospice. Giving just time is not good enough. Writing that check is an acid test that separates the truly committed from the “what’s in it for me’ers.” You should be making a financial contribution as well as a contribution of time. Writing personal checks separates the true believers from those less vested. It is a shame on many boards that few members give financially. I would recommend a minimum donation be required as a condition of serving on the board. Communicate this upfront when interviewing board candidates. Even if your hospice has millions in the bank, you need to give. What if everyone decided not to give? As a board member, especially for a community hospice, you need to lead by example. How can you ask others to give financially if you don’t contribute yourself?

No-Nos for Board Members

There are a number of “no-nos” for hospice board members. They are:

Allowing line staff to directly access the board bypassing the organizational structure or other established communication processes

Crossing the line between oversight and operational matters Placing unwarranted and excessive administrative burden on hospice staff Creating a nonproductive working relationship with the CEO for invalid reasons

Does your hospice allow line staff to come directly to board members or is the chain of command followed? This is an important point. The most dysfunctional hospices, that I’ve witnessed, allow line-staff to come directly to board members, thereby undermining the efforts of the CEO. If this is common practice at your hospice, the hospice is not going to be a stable organization and needs to mature. How can a CEO move things forward, especially if the situation is challenging…doing what really needs to be done, without upsetting a few people? The great hospice CEOs are always making changes that advance the hospice…and the changes are not always appreciated.

As a board member, you have to distance yourself from the line-staff…of course in a courteous and graceful way and interact directly with the CEO. It is the CEO that you will be holding responsible. Now in the course of your involvement, you may hear jabs or complaints from staff, but you have to be fair-minded and know that you are only hearing half of the





Board of Directors Workbook story…now sometimes you will get insight that may be helpful, but you have to maintain your objectivity and deal with the situation managing the expectation. Most of the time, this type of interaction is inappropriate (the board member and staff member have probably crossed the line into meddling). Both staff and board members need to be educated as to what is appropriate as well as what is not appropriate.

Relationship Trouble with the CEO

From time to time, there will invariably be relationship issues between board members as well as with the CEO’s relationship to specific board members. It will happen. Some people just do not work well together and as a CEO, it is difficult to gauge whether or not you can work with a person with only a few brief meetings. Obviously, there are times when the CEO must be challenged as part of the duty of care. However, the relationship should not be allowed to be counter-productive. I have seen excellent CEOs leave hospices because a new board member wants to flex their muscle. On the other hand, poor performing CEOs need to be driven from the organization, as the organization can never grow beyond the capabilities of the leader. If a board member has trouble working with or has a low trust relationship with the CEO or vice versa, then the board member or the CEO need to leave the organization. High trust is paramount for healthy organizations. The decision as to who should leave should be made after careful consideration of the “entire” organization. In most cases, it is the board member, unless CEO’s performance disappointing. Some basic questions that should be answered in light of the progress the hospice has made over the last few years?

Is the morale of most staff high? What would be the opinion of top leadership of the CEO and the hospice? Have quality measurements improved? Has the census increased? What impact has the CEO had on the donor community? Is the CEO building cash reserves?

Most of the time, if a CEO is making sufficient progress in these areas and a board member/CEO relationship is of a low-trust nature, the board member should gracefully resign.

All CEOs Make Mistakes

With this said, all leaders make mistakes. Some mistakes of judgment can be forgiven. Others that put the public trust in the organization at risk cannot. A leader will learn his or her most profound lesson through their mistakes and ultimately be a better leader.






Mission Fulfillment

And lastly, let’s talk about mission fulfillment. Census is always of great concern at a hospice. In fact, in many ways, census is the #1 financial indicator. As we say, “high water covers a lot of stumps.” A hospice can have many things going wrong, but if census is high, many sins are covered…at least financially speaking.

Census tells us another important thing about our hospice. It answers the question “are we serving everyone that needs or could use our services?” I know why I am in this business. It is simply a matter of reducing human suffering. To not serve people that need us when we have the ability to help is wrong. Therefore, the question again is “are we serving everyone that needs or could benefit from our services?” The next question would be “are we serving them well…even with an excellence uncommon in the healthcare world?” Is your hospice’s level of service what you would want your Mom, Dad or loved one to receive?

Can we afford to make a mistake when we only have one chance to get it right? Can our organization be financially viable in the future…and be there for those that will one day need hospice services?

These are the questions for the Board. You are the oversight. You have the duty of care. You hold the future of the organization. You have the ability to influence it to greatness, mediocrity or failure. It is a great responsibility to serve on this hospices board.

I wish you well as you make your contribution and together, let’s make the hospice experience great.

~ Andrew






Andrew Reed, CPA

Andrew is one of the most influential people in the United States regarding the business operations of hospice. He has introduced many service innovations that have improved not only economic performance, but patient care simultaneously. He has assisted in the creation of some of the most successful hospice business models centered on the ideas of World Class Hospice and Designing the Perfect Hospice. He has worked with hospices for 19 years, and has served as the CFO of many hospice programs during that time.

Andrew formed Multi-View Incorporated (MVI) in 1996 to provide assistance to hospices specifically in the area of business operations. Andrew has personally visited hundreds of hospices, and MVI has worked with over 700 hospices of all sizes and in all regions of the country.






Hospice Finance 1011. List the 4 primary reimbursement forms (levels of care) of the Hospice Medicare

Benefit.

1) Routine Home Care2) General Inpatient Care3) Continuous Care4) Respite Care

2. Respite Care can be used a maximum of _______ days per episode. [5].

3. Continuous Care must be at least ____________ hours and ______% must be ______________________. [8, 50%, nursing]

4. A Continuous Care day begins at midnight and ends at ______________. [midnight].

5. The Hospice Medicare Benefit is part of Medicare Part ________. [A]

6. Attending Physicians continue to bill Medicare Part __________. [B]

7. The hospice Medical Director bills Medicare part ________. This is a per-visit fee and it is in addition to the normal level of care billing. [A]

8. Consulting Physician Services are billing to Medicare Part ______ and are billed by the hospice on behalf of the physician. A __________ needs to be in place for Consulting Physician Services. The reason this is billed through the hospice is that it is the hospice’s responsibility to _________________________________. [A, contract, professionally manage the care]

9. The Hospice Medicare Benefit is divided into periods. Patients are reviewed for appropriateness and either recertified or discharged during the Utilization Review process. The number of days in the first periods are:

Period 1) 90Period 2) 90Period 3) 60Period 4) 60





Board of Directors Workbook 10. When a patient is in a hospital for Inpatient care, the hospice must have a

__________ with the hospital. The ____________ is paid for the day of discharge/death as contrasted with the way hospitals are normally paid on the day of discharge/death. [contract, hospice]

11. Medicare FIs (fiscal intermediaries) pay the _________ of the billed amount and the rate set by CMS. If you bill less than the rate set by CMS, you will receive what you billed and the FI is under ______ obligation to pay a hospice the difference. [lesser, no]

12. One of the biggest problems in hospice billing is late or incorrect _______ of __________ information. [level, care]

13. To alert a Medicare FI that a patient has elected hospice, a _______ is sent. [NOE or 81A]

14. To elect the Hospice Medicare Benefit, what needs to occur?

1) A physician needs to sign a certification of terminal illness (6 months or less)2) The patient needs to sign a consent statement or election statement

15. _______ is a prospective payment system option for hospices and allows a hospice to receive a set amount per month based on forecasted Medicare revenue. It is used by few hospices, but it can be useful for cash flow management. [PIP]

16. The acronym ADR means ______________________________. [Additional Data Request]

17. _________________ billing is where the hospice must get paid for the previous Medicare invoices before subsequent invoices can be paid. All invoices must be paid in order. [Sequential]

Physician Billing

18. A physician rounding in a hospice inpatient unit can bill for acute patients usually _________ a day depending upon the patient’s need and the hospice’s ideals of care. [once]






CAP

19. The Hospice Medicare Benefit has two CAPs, ________________ and _______________. [Aggregate, Inpatient]

20. The _________________ CAP limits the number of Medicare GIP days to __________%. [Inpatient, 20%]

21. The _________________ CAP limits the total amount that a hospice can receive from the Medicare system within a year. It is computed by taking an amount set by CMS and multiplying it by the number of Medicare _____________________. This CAP period runs from _______________ to ________________ and is based on the cash payments made by the FI. The Medicare Admission period is not the same and runs from _________________ to _______________. [Aggregate, Admissions, November 1st , October 31st ,September 28th, September 27th]

Cost Report

22. The Hospice Medicare Cost Report is due ___________ months after your fiscal year-end. Hospices are required to be on the ____________ basis of accounting. [5, accrual]






Index

AAccounts Payable, 41Accounts Receivable, 13, 31, 33, 41

Days in Accounts Receivable, 31, 33Admission/Inquiry Percentage, 32, 33Admissions, 13, 26, 29, 31, 32, 36, 38, 77ADR, 76Aggregate CAP, 12, 13, 14Ambulance, 26, 36, 38Attending Physician, 9, 75Average Caseload, 62Average Daily Census, 30Average Length of Stay, 30, 33

ALOS, 30, 33

BBad Debt, 54Benchmarking, 41, 58, 60, 63, 74Benefits, 36, 38, 46, 62Bereavement, 5, 10, 26, 29, 36Best Practice, 4, 31, 40Best Practices, 4, 40Billing, 76Board, 1, 4, 15, 27, 29, 32, 33, 39, 40, 43, 55, 56, 57, 58, 64,

65, 68, 71, 73Board of Directors, 4, 32, 33, 43, 57, 65Budget, 53, 57

Static Budget, 55Building Reserves, 21

CCAP, 12, 13, 14, 30, 45, 77

Aggregate, 12, 13, 14, 77Inpatient, 12, 14

Caseloads, 31, 50, 56, 62Cash, 41Cash Flow, 41Chaplain, 5Chart of Accounts, 32Clinical Leader, 60, 62Clinical Manager, 26CMS, 12, 22, 23, 76, 77CNA, 26, 29, 34, 36, 38Community Bereavement, 29, 41, 69Community Support, 27, 47Competition, 47Compliance, 29, 66Computed Caseloads, 31

Computer Expense, 26, 29, 37Consulting Physician, 9, 12, 27, 32, 75Continuing Education, 26, 29, 37Continuous Care, 8, 9, 12, 23, 75Contractual Allowance, 54Contractual Allowances, 54Contribution Margin, 33, 36, 38Cost Report, 22, 77

DDashboard, 41, 48, 61, 63Days in Accounts Receivable, 31, 33Death Service Ratio, 32Definitions, 19, 30Depreciation, 26Development, 29, 33Development Return Ratio, 33Direct Labor, 26, 27, 29, 35, 36, 38Discipline, 31DME, 22, 26, 29, 36, 38

EEducation, 26, 29, 37Excel, 30Executive Facts, 41

FF9, 57Facility Mix, 31, 33Facility-Related, 26, 29, 36Finance, 26, 29, 37, 75FIs, 23, 76Fiscal Intermediaries, 22, 23, 76Forecasting, 57Fundraising, 27

HHealth Ins, 67Hospice Hell, 12, 13HR, 26, 29, 37, 70

IIdea, 56Indirect Cost, 26, 27, 33, 35, 36, 37, 38, 50, 62Indirect Costs, 26, 27, 33, 35, 36, 37, 38, 50, 62Indirect Labor, 26, 29, 38





Board of Directors Workbook Inpatient CAP, 12, 14Inpatient Unit, 9, 22, 30, 38Inquiry/Admission Ratio, 32, 33Insurance, 8, 27, 37, 47, 54Investment, 33IP Unit, 13IT, 26, 70

LLab, 26, 36Leadership, 1Learning, 26Level of Care, 14Linen, 38Lower Cost, 34

MMarketing, 26, 31, 37Measurement, 33Medicaid, 5, 8, 27, 29, 47, 54Medical Director, 9, 12, 26, 29, 37, 75Medical Records, 26, 37Medical Supplies, 10, 26, 36, 38Medicare, 5, 8, 9, 10, 12, 13, 14, 15, 22, 23, 24, 27, 28, 29, 41,

45, 47, 48, 49, 54, 63, 75, 76, 77Medicare Cuts, 24Medicare Part A, 8, 9Medicare Part B, 9Medications, 10, 26, 29, 36, 38Mileage, 10, 26, 36MIS, 37Mission, 15, 18, 19, 20, 73Misys, 14Model, 1, 4, 20, 27, 28, 40, 41, 43, 44, 45, 46, 48, 49, 50, 51,

52, 53, 54, 55, 56, 57, 58, 61, 62, 63Models, 46, 50Money, 21, 22, 47Mother Ship, 41MVI, 1, 4, 12, 19, 21, 27, 39, 40, 41, 44, 48, 50, 58, 60, 63, 74

NNet Patient Revenue, 27, 28, 30, 31, 32, 34, 35, 36, 37, 38, 53,

54, 56NOE, 76Nursing Home, 27, 29, 32

Facility Mix, 31, 33

OOffice Supplies, 26, 29, 37On-Call, 26, 36Open Access, 34Operational Costs, 36

Opportunities, 47

PPalliative Care, 5, 11, 13, 41, 69Pass-Throughs, 22, 29, 32, 33, 36, 54Pastoral Counselor, 36, 38, 50, 59Patient Mix, 31, 33Patient Mix over 365 Days, 31, 33Patient-Days, 14, 30Patient-Related, 26, 27, 28, 29, 32, 35, 36, 38, 50, 62Payroll, 32, 33PC, 36, 38, 50, 59Percentage, 30, 32, 33, 34, 35, 56Percentage of Net Patient Revenue, 30, 34, 35, 56Perspective, 56, 58Pharmacy, 36, 38Physician, 5, 9, 12, 27, 29, 32, 36, 38, 75, 76Physicians, 75PIP, 76Postage, 26, 37Printing, 26, 37Product, 51Professional, 28Profitability, 34

QQI, 26, 29Quality, 44, 67

RRatio, 33Registered Nurse, 8, 9, 29, 31, 50Reimbursement, 10, 47Rent, 10, 26, 29Reserves, 21Residential, 69Respite, 8, 12, 27, 32, 75Revenue Per Payroll Dollar, 32, 33

SSocial Work, 31, 36, 38, 50Standards, 56SW, 31, 36, 38, 50

TTelephone, 26, 29, 37Therapies, 10, 26, 29, 34, 36, 38Triage, 26, 36Turnover, 31





Board of Directors Workbook U

Utilities, 26, 29

VValue, 20Values, 1, 4, 15, 17, 19, 20, 21

Visit Design, 51Visit Durations, 62Visits, 9, 31, 62Volunteer, 10, 26, 36, 50

WWar, 34World Class, 19, 21, 31, 34, 44, 45, 48, 74





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