alameda health system - acgov.org
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Alameda Health System
Status Report
Long Term Financial Planning
Compliance with the Permanent Agreement
March 9, 2015
Dan Boggan, Jr., Interim CEO
David Cox, CFO
1
AHS Monthly Report –
Cash, Accounts Payable, Operations
2
AHS Cash Forecast
Primary Risk is in June 2015
3
$120,000,000
$140,000,000
$160,000,000
$180,000,000
$200,000,000
$220,000,00020
15 F
CS
T
7/1
1/1
4
7/2
5/1
4
8/8
/14
8/2
2/1
4
9/5
/14
9/1
9/1
4
10
/3/1
4
10
/17
/14
10
/31
/14
11
/14
/14
11
/28
/14
12
/12
/14
12
/26
/14
1/9
/15
1/2
3/1
5
2/6
/15
2/2
0/1
5
3/6
/15
3/2
0/1
5
4/3
/15
4/1
7/1
5
5/1
/15
5/1
5/1
5
5/2
9/1
5
6/1
2/1
5
6/2
6/1
5
Net Negative Balance Forecast
NNB FORECAST DEBT LIMIT
Core Accounts Payable has been reduced to below $20 million.
AHS is now current!
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$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000AHS Accounts Payable
1-30 31-60 61-90 91-120 Over 120
Collections on Patient Revenue Continue to Improve
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$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
Jul SepNov Jan MarMay Aug Oct DecFeb Apr Jun
$ Collected Per Day
$ Per Day
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
Jul Sep Nov Jan Mar May Aug Oct Dec Feb Apr Jun
Cash Collected On Patient Revenue
Cash Collected
• PFS
• Established centralized correspondence unit
• Planned re-org is complete
• Denials unit creation is underway
• Revenue Integrity
• EBEW reduced from $90M in December to $45M to date
• Departmental organizational being developed
• Patient Access
• Training complete for 100+ patient access staff
• Authorization unit has been established and pilot underway for Surgery
• Vendor selection of QA system is underway
• Professional (Physician Billing)
• External assessment completed
• Qualified leadership recruited (March 16th)
• Work Plan is in place
Revenue Cycle - Accomplishments
Toyon Report Work Plan and Status
7
Toyon Findings & Recommendations Action Timeline
1. Establish a culture of accountability, including metrics for key initiatives.
We are refining our annual management process to tie accountabilities to our annual operating plan, and are in the
process of reviewing our organizational structure to ensure that we have clear accountabilities.
June
2. Repair the organizations revenue cycle.
We have a comprehensive work plan in place, have recruited key subject matter experts, are fixing system issues, are changing
processes, have metrics in place, and are showing good progress and interrelationships.
June
3. Achieve benchmark performance on operating expenses and put appropriate controls in place.
The Better II Initiative is now underway, the benchmarking analysis is in process, and the plan includes productivity improvement,
clinical resource management, and supply chain initiatives. June
4. Improve Financial and Operational Reporting We are going to need to "re-map" our Chart of Accounts and
General Ledger to achieve this objective. June
5. Evaluate service line and business unit profitability. We need to complete the interface of DSS to ePSI, and then build a
service line support structure - planning, analysis, operations. April
6. Perform a Strategic Reimbursement Analysis to best position AHS under healthcare reform and track payer mix.
AHS has expanded its relationship with Toyon to encompass all Reimbursement issues, and this analysis is now underway.
May
7. Assess and update the current strategic financial plan to ensure long-term financial stability.
We need to update our long-term strategic plan this year and then develop a financial plan that supports our objectives. To do this,
we need to install and rebuild the Kaufmann Hall financial planning tool, and that is in process.
September
8. Develop a plan to repay the loan to the County. We are currently assessing our ability to meet the proposed terms
of the Agreement through 2018, which is contingent on a successful financial turnaround.
March
Long Term Planning
Capital Expenditures and Debt Service
Required Operating Performance
Compliance Plan – Permanent Agreement
8
Financial Performance Requirements are largely driven by the need for
Cash to fund Capital Expenditures and pay Debt Service.
9
2015 2016 2017 2018 2019 2020
Debt Service -$ 18,681$ 20,252$ 20,848$ 21,726$ 21,726$
Capital Expenditures 6,492$ 28,715$ 36,000$ 39,100$ 32,400$ 24,000$
Total 6,492$ 47,396$ 56,252$ 59,948$ 54,126$ 45,726$
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
2015 2016 2017 2018 2019 2020
Cash Requirements
Debt Service Capital Expenditures
AHS has underfunded capital expenditures in past years and will need to
fund $30+ million per year going forward, peaking in 2018.
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Capital Expenditure Plan 2016 2017 2018 2019 2020
Routine Capital 11,000 12,000 10,000 11,000 12,000
Information Technology 3,000 9,000 6,000 5,000 5,000
ATR Ongoing Maintenance 5,000 5,000 5,000 5,000 5,000
Alameda Kitchen - - 8,100 7,400 2,000
San Leadro Rehab - 10,000 10,000 4,000 -
Highland ATR Move 9,715 - - - -
Capital Expenditures 28,715 36,000 39,100 32,400 24,000
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
2015 2016 2017 2018 2019 2020
Capital Expenditure Plan
Highland ATR Move
San Leadro Rehab
Alameda Kitchen
ATR Ongoing Maintenance
Information Technology
Routine Capital
The Permanent Agreement will drive Debt Service Requirements –
$20+ million per year.
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Debt Service Requirements 2015 2016 2017 2018 2019 2020
NNB Debt Retirement - 5,000 5,000 5,000 5,000 5,000
POB Debt Retirement - 12,681 13,252 13,848 7,726 7,726
ATR Debt Service - - - - 7,000 7,000
Other Debt Service - 1,000 2,000 2,000 2,000 2,000
Total Debt Service - 18,681$ 20,252$ 20,848$ 21,726$ 21,726$
$0
$5,000
$10,000
$15,000
$20,000
$25,000
2015 2016 2017 2018 2019 2020
Debt Service Requirements
NNB Debt Retirement POB Debt Retirement ATR Debt Service Other Debt Service
To fund these requirements, AHS needs to significantly improve
performance quickly, to an EBIDA (free cash flow) Margin of at least 8%.
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$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
2015 2016 2017 2018 2019 2020
Required Improvement $ in ,000
Conservative
Plan
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2015 2016 2017 2018 2019 2020
EBIDA (Cash Flow) Margin
Conservative Plan
$(40,000)
$(20,000)
$-
$20,000
$40,000
$60,000
$80,000
2015 2016 2017 2018 2019 2020
EBIDA (Cash Flow) $
Conservative Plan
The Plan Scenario is necessary to meet the NNB Target and fund capital
expenditures; the Conservative Scenario falls short.
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$50,000
$70,000
$90,000
$110,000
$130,000
$150,000
$170,000
$190,000
2015 2016 2017 2018 2019 2020
Net Negative Balance
Conservative Plan Target
Flexible Maximum Policy – AHS will continue to require 30 -35% Flex
Max due to timing of Supplemental Reimbursement
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120,000,000
130,000,000
140,000,000
150,000,000
160,000,000
170,000,000
180,000,000
190,000,000
200,000,000
210,000,000
AHS Long Term Cash Forecast
NNB FORECAST DEBT LIMIT
• An aggressive performance improvement plan ($67+ million in 2016) is
required to fund capital needs and avoid an Event of Non-Compliance.
• Management Cost Reductions - $20 million
• Revenue Cycle Improvement - $15 to $20 million
• Other Cost Reductions - $40 million
• Other Revenue Opportunities - $20 million
• Due to the timing of supplemental reimbursements, a Flexible Maximum
policy of 30% - 35% will be required in the initial years of the Agreement.
• Due to the possibility on an Event of Non-Compliance, we recommend that
the Agreement retain the County’s current discretion:
• Retain discretion in the setting of the Flexible Maximum Policy, and plan
on a higher percent in the early years of the agreement, then
decreasing each year going forward.
• Establish a process to resolve an Event of Non-Compliance, short of
termination of the Flexible Maximum Policy.
Conclusions and Recommendations
Discussion
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