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Chapter 5
FQHC Start-up Part D - Finance and
Management
As with any organizational structure, a community health center
must remain viable in today’s market in order to succeed and move
forward. Careful attention to finance and management specifics will
help a health center maximize its utility, remain competitive in its
market and ultimately broaden its scope of services and locations.
The essential components for finance and management of a health
center include:
Creating a Business Plan
A health center business plan provides a structured view of the
overall goals of a CHC by clearly outlining intended targets and
strategies to meet them. While it facilitates the grant process and
also serves as leverage when pursuing alternate financing
opportunities, the real advantage of a business plan is to help the
health center prioritize its needs and lay foundations for achieving
objectives. To this end, a business plan should be clear, concise,
and realistic while still representing the mission of a health
center.
Statement of Purpose
In the statement of purpose a health center clearly outlines its
goals and objectives with respect to health center operations and
future projections. By creating this initial element of the business
plan, a CHC can develop a structured tool to help maintain focus on
its ultimate aims and organize its functions according to those
ends. A thorough examination of factors leading to the initiation of
the health center can guide the creation of the purpose statement.
Market Analysis
A health center market analysis is an indispensable tool in the
business planning process. Gathering proper information on the
surrounding industry climate will enable a health center to become a
competitive health care market participant. Only by knowing the
needs and characteristics of the market can a health center maximize
its share. The major areas of data to consider in this process are:
- Demographic and Health Status Data: Describes the area
population in terms of general demographic data (age, gender,
etc.), socio-economic factors (housing, employment, etc.) and
health status (disease trends, etc.). It is useful to collect data
that is both specific to the target group and gives an overview of
the general population surrounding a health center.
- Geographic Data: Illustrates the area from which the health
center receives patients in terms of counties, zip codes, census
tracts or other characteristics
- Location and Transportation: Consider the location of the
health center with respect to available modes of transportation
for the underserved population
- Market Competitors: Identify the surrounding health care
providers that offer similar services to the community health
center including providers of primary care, dental, mental health,
social services, etc.
- Growth Trends: Comparisons of demographic, geographic and
provider data over time can help show the growth trends in a
health center’s area and assist in making projections for future
programs and services
- Market Trends: Gauging the market trends that could affect a
health center’s business will help keep the CHC ahead of the curve
in business planning. Look at items such as changes in healthcare
delivery or payor systems, new or changing employer industries,
and other factors that impact CHC market share.
Market Analysis Resources:
- Summary Data Sheet
- NACHC
- OURS?
Strategy
Once the health center goals and market assessments have been
established, it is the responsibility of management to devise
strategies for setting the health center apart from the rest of its
competitors. This can be done through the formation of a
comprehensive business plan that lays out the processes needed to:
- attract the target population
- maintain health center financial viability
- establish links with area health networks
- project future expansion and program development
- exploring new markets and products
Based on the strategies put forth in this segment, management
must develop a thorough work plan that details the specific
activities, target dates, and individual position responsibilities.
This implementation plan is a necessity when seeking health center
status.
As a supplement to the above, a contingency plan that accounts
for unforeseen events that a health center might come across should
also be assembled.
Financial Projections
When working with limited funding sources, as health centers
often due, it is imperative to maintain a firm handle on the expense
structure of the organization. To do this, health centers often make
financial projections based on a variety of elements (such as
patient volume predictions, clinical and supplemental services,
provider and support staffing, etc.) and use these findings to make
strategic financial decisions. Though there are many ways to
calculate and analyze fiscal forecasts, health centers can refer to
this segment of the NACHC FQHC start-up manual as a preliminary
guide:
Budget and Accounting
The maintenance of appropriate budgetary and accounting measures
is a vital facet in securing a health center’s fiscal and
programmatic success. In accounting, a CHC must develop a system
that follows Generally Accepted Accounting Principles (GAAP)
carefully tracks organizational finances. Systems should be designed
to meet the specific needs of a particular health center and must
allow for the production of periodic financial reports. These
reports are reviewed by the proper management staff and board
members and offer an accurate view of the current financial state
and the future potential of the health center. The budgeting process
is a collaborative effort between the suitable members of
management, staff and the governing board and is aimed at
successfully allocating health center funds towards programs and
services that deliver on the objectives of the mission. In creating
an effective budget plan, the financial team must incorporate the
financial projections (as outlined above) with a careful account of
all current and prospective funding sources while paying close
attention to the changing characteristics of the market and target
population. A health center should also always provide contingency
strategies within the regular budget plan that addresses potential
emergencies. Budget reports must be reviewed and adjusted regularly
and annual presentations made to and approved by the governing
board.
Billing and Collections
At the core of each community health center’s mission is the
promise of service to those who need it regardless of their ability
to pay. While this is a primary goal of all FQHCs, a health center
must not overlook the importance of adequate billing and collection
methods to gather funds from those individuals that do pay on the
sliding scale. Maximizing efficiency in this area can add to a
health center’s revenue sources and help maintain its financial
stability. Considering the high level of insurance and managed care
participation in today’s health care market, collecting on health
center bills becomes a chief necessity. To make the best use of this
revenue channel, health centers work to:
- Create an adequate and competitive fee schedule
- Maintain prompt and accurate third party payer billings
- Bill patients according to schedule of discounts and in
accordance with local rates
- Follow up on uncollected fees in a timely manner
- Participate in the proper insurance programs for your
population
- Join favorable cost-based reimbursement programs
- Incorporate electronic billing and insurance verification
systems
The ultimate billing and collection systems must be written and
board-approved and as with all health center initiatives, the proper
cultural considerations should be made to lower any barriers to
access that payment may pose.
Audits and Internal Controls
In tandem with the budgeting and billing structures, a CHC must
have proper internal controls in place to closely track the
financial health of the organization. These internal controls can be
developed by the management and board team as the financial tracking
systems are developed.
In addition to financial controls, every health center should
make arrangements to have an annual independent financial audit
conducted using the most recent federal guidelines for non-profit
institutions. This report should include information on the health
center’s compliance to GAAP and should make suggestions for
improvements where needed.
All adjustments and controls must be made in agreement with grant
requirements and board approval.
Structure and Duties (mgmt)
The management team of a health center provides the structure and
guidance needed to achieve success. Depending on the capacity of a
health center management should have leadership in the form of an
Executive/Program Director, Clinical Director, Chief Financial
Officer and Chief Information Officer, though some roles and
responsibilities can be combined as needed. Some responsibilities of
the Management roles are:
- Executive Director/Program Director – provides overall
administrative leadership for a health center and in smaller
setting often embodies the other major leadership roles, direct
link to governing board and is responsible for moving CHC towards
board-established long-term aims
- Clinical Director – responsible for clinical leadership and
development of programs and services
- Chief Financial Officer – provides leadership in financial
arenas and is responsible for fund recruitment and effective
business planning
- Chief Information Officer – offers leadership in creation and
implementation of information systems, responsible for ensuring
efficient flow of information to increase access
Each member of the management team should have the appropriate
training for their specific roles and the organizational
relationship of these roles must be maintained in the business plan
provided to the board. As the size and needs of the health center
change, the management structure should also evolve to stay ahead of
organizational demands.
Relationship to Board
As with other aspects of health center operations, the governing
board has rule over the establishment of a management team. Most
often, the board selects and hires an executive director who then
will establish the management organization with the guidance and
interests of the board in mind. The executive director, over which
the board also retains dismissal power, serves as the direct link
between the governing body and the rest of the health center
management and staff team. Given that the executive director is
ultimately accountable to the decisions of the board, he/she is
often in close contact with the governing body when making decisions
that will impact the direction and operation of the health center.
Role in Strategic Planning
Management plays a central role in the CHC’s annual and long-term
strategic planning process. Bringing together board, staff and
community members, the management team provides the necessary
leadership in developing a comprehensive health center strategy. Due
to their proximity to and understanding of daily health center
operations, leadership is in a prime position to offer critical
recommendations towards progress. The team is also responsible for
making adjustments to the annual operating plan as they deem
necessary to achieving the goals set forth by the board.
Information Management
An organized and accessible data information system is vital to
the fluidity and quality of health center operations. These models
must extend to include all aspects of clinical, financial and
organizational information including data collection, storage,
back-ups, organization and exchange. Proper information systems can
improve internal monitoring, quality assurance measures, access
coordination, statistical data reporting, and planning procedures.
In the clinical setting, health centers should utilize
International Classification of Diseases (ICD) codes, Current
Procedural Terminology (CPT) and relative value units (RVU) to keep
service and cost data and analysis current with today’s practices.
Along with these essential elements, clinical information management
systems must:
- allow for timely and accurate reporting of health and program
statistics
- offer figures on service production and costs
- increase management and coordination of health care access
- feed into quality assurance and utilization management
programs
- protect the confidentiality of all patient information
For Financial information management, the goal is to introduce a
system that:
- tracks, analyzes and reports key figures related to revenue
generation, expenditures, and costs
- supports accounting functions including reimbursement
mechanisms
- is adaptable to the changing health care market
- produces cost information relevant to the development of
financial strategies
With the availability of powerful and cost-effective information
system technologies, more and more health centers are employing
electronic data management methods. Though up-front costs may be
high, health centers are urged to consider the integration of
technology for long-term advantages in efficient and effective data
management. Each health center should incorporate systems
appropriate to its size and complexity and keep programs updated as
resources allow.
Risk Management
Instituting risk management policy and procedure is a requirement
of all health centers and is a logical component in protecting the
interests of the organization, its staff and its patients. Risk
management protocols should be incorporated into the general
policies of a health center and should address:
- potential and actual risks
- regulatory compliance
- fire and life safety procedures
- quality assurance and improvement
- bonding
- insurance
- professional and general liability
Health centers are offered liability coverage under the Federal
Tort Claims Act (FTCA)
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