el camino hospital & affiliates · established patient centered medical homes to retain a...

El Camino Hospital & Affiliates

FY 2014 BudgetHospital Board Meeting

June 12, 2013

Index

2

Section Pages

Strategy 3

Operating Budget 13

Capital Budget 21

Fiscal Year 2014 Summation 24

- Appendix: Income Statements 26

Strategy

3

El Camino Hospital’s Strategy Embraces Wellness

Strategy

El Camino Hospital will be a locally controlled leader in optimizing

the health and wellness of our communities in Silicon Valley,

differentiated by innovative continuum of care developed in

partnership with physicians, businesses, and payers.

Positioning Statement

El Camino Hospital will first be a value-based health care provider

offering top decile, acute care quality at mid-level pricing, moving

toward continuum partnerships that integrate care coordination and

delivery strategies focused on the Triple Aim of quality, service,

and affordability.

4

Our FY 2013 – FY 2015 Goals

Quality. Within three years, El Camino Hospital’s superior, acute care clinical programs will be at top decile performance on CMS Value-Based Purchasing core metrics; service levels will be at top quartile

performance; El Camino Hospital’s clinical services will extend into the community with our care partners

with quality metrics related to transitions, chronic condition management and “population health”.

Affordability. Within three years, El Camino Hospital’s clinical programs will have operating expenses within 10% of the lowest cost, acute care provider located in the primary and secondary service

area. El Camino Hospital will measurably reduce clinical variation and improve efficiency through clinical

integration with its physician partners. El Camino Hospital will work with payors and physicians to achieve

the goals set forth through risk contracting.

Physician Partnerships. El Camino Hospital will advance physician integration structures and partnerships that enable optimal care management through clinical integration, common incentives and

patient-centered care delivery throughout Silicon Valley. Within three years, El Camino Hospital will have

established patient centered medical homes to retain a balanced medical staff as part of an innovative

delivery system and to respond to the health needs of Medicare participants and their families.

Innovative Business and Community Alliances. El Camino Hospital will advance a wellness program for El Camino Hospital employees with an emphasis on healthy choices and individual

activation, with measurable goals. El Camino Hospital will leverage the innovative nature of Silicon Valley

to translate clinical discovery to the bedside. El Camino Hospital will work with business and community

providers to develop a broader strategy to improve quality and reduce the overall cost of healthcare in

the Silicon Valley.

5

Our Approach is Phased

•

6

Optimize Health & Wellness

Quality & Service

Affordability

Continuum of Care

Innovation in Wellness

Achieve the Triple Aim: Quality, Service & Affordability

Moving Toward

Continuum of Care

Top Decile Quality • Top Decile Core Measures• Reduce Complications & Mortality

Top Quartile Service• Value Based Purchasing

Efficient Operations• Reduce Variation in Practice

• Lean Process Improvement

Competitive Pricing • Pricing within Market• Costs Aligned with Pricing

• Patient access to primary care & chronic disease management

• Coordinated Care Transitions

• Employee Well-Being

• Business & Provider Alliances for Innovative Continuum of Care

7

FY 2013 – FY 2015 Operations Plan Summary

Key Accomplishments for FY 2013

� HealthGrades® “Top Hospital”

� TJC Accreditation

� American College of Surgeons

Commission on Cancer National

Accreditation with

Commendation

� “Gold Seal” Stroke Accreditation

� Los Gatos Stroke Accreditation

� Chest Pain Accreditation

� Magnet Status for Nursing

� Hip Fracture & Joint Care

Accreditation

� Women Certified Top 100

Hospitals for OB, Heart Care

� Intensivist Program

� Preventable Harm Index

� Telemedicine launch

� Wellness launch

� Initiation of PaCT and LEAN

methodology

� Culture-based service initiative

� PAMF affiliation

� Bond rating upgrade to A1

by Moody’s

� Medication barcoding (KBMA)

� Expanded clinical research with

Fogarty Institute

� Nurses Improving Care for

Healthsystem Elders “NICHE”

8

FY 2014 Priority Goals

9

Triple Aim: Quality, Service & Affordability

•PaCT: Triple Aim

•People

Continuum of Care

•Clinical Integration through IT Case for Change

•Market Development Plans

Innovative Partnerships

•Physician Partnerships

•Community Health & Wellness

FY 2014 Draft Shared Executive Goals

10

FY 2014 Draft Corporate Scorecard

11

Quality Affordability

Core Measures Efficiency

DVT Medical-Surgical Length of Stay Improvement Opportunity

foley catheter management Observation ALOS (hours)

Core Measures % of Possible Performance Points 30 day post acute Total Cost of Care

Service Minutes from ED Arrival to Admit to Unit

Communication with Nurses OR Room Turnaround within 35 min

Responsiveness of Hospital Staff Worked Hours per CMI Adjusted Discharge

Communication About Medicines Total Operating Expense per CMI Adjusted Discharge

HCAHPS % of Possible Performance Points Financial Viability

Outcomes Total Operating Margin

Hospital Onset C diff Infection rate Inpatient Operating Margin

Risk Adjusted Inpatient Mortality from MI Outpatient Operating Margin

Risk Adjusted Inpatient Mortality from CHF Adjusted Discharges

Risk Adjusted Inpatient Mortality from Pneumonia Total Days Cash on Hand

Risk Adjusted comlications after percutaneous procedures (NCDR) Days of Accounts Receivable

(NSQIP) Continuum of Care

Patient Safety 30 Day All Cause Readmission

Stage 3-4 Hospital Acquired Pressure Ulcer Rate 7 Day Unplanned Readmission after Discharge

Rate of Patient Falls 30 Day Readmission: Medicare Only

5 Rights Medication Errors / 1000 Adj Pt Days Employee Wellbeing

Mislabeled Specimens per Month Employee Lift/Transfer Injury Rate

Counts of Preventable Harm (0 is Goal) Biometrics Screening Employee Participation Rate

FY 2014 Draft Organizational Goals

12

Performance Measurement

Organizational Goal FY14 Minimum Target Maximum WeightEvaluation

Timeframe

Regulatory Compliance

Joint Commission Accreditation Threshold FY

Financial Viability

Budgeted Operating Margin Threshold FY

Operating Margin re Budget meet 0.5% 1.0% FY

Quality and Patient Safety

Core Measures % of 100 Possible Performance Points 84% 86% 90%

Rate of Patient Falls TBD TBD TBD

Service

Meet the averaged performance for the 3 Service

metrics on the Corporate Scorecard:

- Improve Staff Communication to 75%

- Improve Medication Communication to 60%

- Improve Staff Responsiveness to 64%

TBD TBD TBD

Efficiency

Minutes from ED Arrival to Admit to Unit TBD TBD TBD

Continuum of Care

30 day all cause Readmission (Medicare) TBD TBD TBD

People

Biometrics Screening Employee Participation Rate TBD TBD TBD

Full Accreditation

90% of Budgeted

Finance Committee Discussion Items

13

1) Add Outcomes and Preventable Harm to the list of priorities {Done}

2) Review pricing philosophy and strategy with Fina nce Committee for Board . consideration {FY14 M. King}

3) Include home monitoring capabilities in continuu m of care {FY14 E. Pifer}

4) Further develop concierge program {FY14-FY15 T. Ryba & Foundation}

5) Develop a process to identify new revenue streams , consider innovation,and pursue business development opportunities {FY14 T. Ryba}

6) Develop an employee suggestion program to foster innovation {FY15 M. Zdeblick}

Finance Committee Discussion Items (Cont.)

14

7) Define the role of the physician in reducing vari ation and cost . reduction {FY14 E. Pifer & M. Zdeblick}

8) Brief Board on the hospital’s inventory managemen t processes{FY14 M. King}

9) In partnership with the physicians on the Capita l Planning Committee, . develop a multi-year capital planning process

{FY14 M. King & M. Zdeblick}

10) Identify catastrophic risks, two or three immin ent dangers that may be . totally unexpected that could severely devastate th e hospital (e.g., .hyperinflation, competition). {FY14 M. King}

11) Reserve cash for investment purposes. {Board}

FY14 Operating Budget

15

Assumptions - Revenue

16

Category Assumption

Volumes • Dialysis service volumes will decrease significantly due to the initiation of services at competing facilities and due to Kaiser’s consolidation of its dialysis offerings to fewer sites of service.

• Surgical volume growth expected to continue in Mountain View from Orthopedic & Spine service lines and the initiation of neuro-interventional services.

• With only minor variations, other services are expected to maintain the activity levels being experienced in fiscal year 2013.

Prices • While the price of individual items will be adjusted in response to market changes and in response to their acquisition cost, prices overall are expected to remain at their current levels (i.e., an overall 0% price increase).

Reimbursement • Rates for contracted payers have been projected based on the terms of their individual contracts and based on assessment of the marketplace.

• Medicare sequestration was budgeted to reduce revenues by $5.3 million.• Additional reimbursement of $6.3 million was budgeted for various governmental supplemental payment, including the Hi-tech act, Medicare Disproportionate Share, and Medi-Cal supplemental payments.

• Case Mix Index adjusted upward slightly due to higher expected surgical volumes in spine, orthopedics and neuro-interventional.

Hospital Volumes

17

1.3%

Above

2012

Assumptions – Operating Expenses

18

Category Assumption

Salaries • Staffing was increased to re-assimilate services previously outsourced – Information Services and Health Information Management.

• Staffing was increased for strategic initiatives and in support of expected volume increases, and was decreased due to the expected loss of dialysis volume.

• Wage increases were projected for market adjustments, step increases and contractual agreements.

Benefits • Health Benefits are expected to increase 11%. Updated actuarial projections provided the budgeted pension expense.

Supplies & Other • Supply and drug expenses were adjusted for expected volume changes and by a 4% inflation factor.

• G&A expenses were projected based on current year expenditures, adjusted for non-recurring events.

• The budget includes a $4.4 million targeted reduction in supply expense from management initiatives in this area.

Interest • Interest expense was based on existing indebtedness.

Depreciation • Depreciation was projected from current assets and anticipated capital spending.

Budgeted 2014 Operating Margin Equals FYTD 2013 Run Rate

19

(1) Run rate is operating margin after adjusting for the effect of one-time events.Value shown for FYTD 2013 is as of March.

FYTD 2013 Run Rate FY 2014 Oper Marg

(1)

20

El Camino Hospital Concern Foundation SVMD Total

Inpatient Revenue $1,509,284 $0 $0 $0 $1,509,284Outpatient Revenue 946,516 0 0 0 946,516

Gross Patient Service Revenue 2,455,800 0 0 0 2,455,800

Deductions From Revenue (1,766,903) 0 0 0 (1,766,903)

Net Patient Service Revenue 688,897 0 0 0 688,897 Other Operating Revenue 15,689 12,775 142 0 28,606

TOTAL NET REVENUES 704,587 12,775 142 0 717,503

Salaries 252,277 3,581 1,168 654 257,681Employee Benefits 125,619 2,119 543 258 128,539Supplies & Other Expenses 212,002 5,871 1,659 542 220,073Interest 7,681 0 0 0 7,681Depreciation/Amortization 50,366 73 13 0 50,452

TOTAL EXPENSES 647,944 11,644 3,383 1,454 664,426

OPERATING INCOME 56,642 1,131 (3,241) (1,454) 53,078

NON-OPERATING INCOME 19,284 (950) 5,335 1,454 25,123

TOTAL NET INCOME $75,927 $181 $2,094 ($0) $78,201

Operating EBIDA $114,689 $1,204 ($3,228) ($1,454) $111,211Operating Margin Percentage 8.0% 8.9% 7.4%

All dollar amounts in thousandsTotals may not agree due to rounding

El Camino Hospital & AffiliatesConsolidating Revenue and Expense Budget ($ Thousands)

Hospital Operating Margin will be Impacted by Inflation, Investments in Strategy and Pressure on Reimbursement

21

Category Change % of RevenueDollars

(Millions)

Net Operating Income Fiscal Year 2013 Net Operating Margin 11.0% $ 76.4 M

Operating RevenuesCommercial & Gov't Payor increases, net of

decreases0.2% $ 1.7 M

Operating Revenues Service, Volume & Misc. 0.7% $ 5.4 M

Operating Expense Expense Inflation (Salaries, Supplies, Benefits) -2.4% $ (17.3) M

Operating Expense Capital Spending -0.4% $ (2.6) M

Operating Expense Strategic - Supply Chain/Savings Initiative 0.6% $ 4.4 M

Operating Expense Strategic - Wellness Initiative; Marketing -0.1% $ (.8) M

Operating Expense Strategic - PaCT -0.4% $ (2.5) M

Operating Expense Strategic - Continuum of Care -0.1% $ (.8) M

Operating Expense Strategic - Ortho/Neuro Service Line -0.3% $ (2.0) M

Operating Expense All Other -0.7% $ (5.3) M

Net Operating Income Fiscal Year 2014 Net Operating Margin 8.0% $ 56.6 M

Financial Ratios Continue to Reflect Organization’s Financial Strength

22

Capital Budget

23

Capital Spending

24

Fiscal 2013 Compared to Fiscal 2014 Budget ($ Millions)

Capital Spending

25

Fiscal 2014 Budget

Spending on items over $250k

by Category

26

Excludes land improvements and building additions

Fiscal Year 2014 Summation

27

El Camino Hospital Fiscal Year 2014 Budget SummaryTo ensure the achievement of our strategic intent, we are focused on key initiatives by investing in:•Quality

– Clinical registries, Intensivist program, Palliative care and value based care indicators including: mortality and AHRQ patient safety indicators

– Analysts, systems and methodologies to improve core measures and other quality metrics

•Service– Training, Patient & family advisory committee and leadership to improve service scores in focused areas

•Affordability– Flat pricing

– Assigning responsibility in reducing clinical variation in service lines

– Reducing supply costs

– Implementing cost reductions to partially offset the strategic investments

•Physician Partnerships– Expanding PCMH

– Finalizing the collaborative projects underway with PAMF and supporting the clinical integration efforts of independent physicians

– Growing independent physician strategy

– Clinical programs including; palliative care, neurosciences, and orthopedics

•Payor and Community Partnerships– Developing the infrastructure to handle shared risk contracting and participating in a few shared risk experiments

– Expanding wellness programs for El Camino Hospital employees and community

28

Appendix

Income Statements

29

CONCERN: EAPComparative Statement of Revenue and Expense ($ Thousands)

30

Estimated Budget Fav (Unfav) Change2012 2013 2014 Amount Percent

REVENUESInpatient Revenue $0 $0 $0 $0 N/A Outpatient Revenue 0 0 0 0 N/A

Gross Patient Service Revenue 0 0 0 0 N/A

Deductions From Revenue 0 0 0 0 N/A

Net Patient Service Revenue 0 0 0 0 N/A

Other Operating Revenue 12,361 12,943 12,775 (168) (1.3%)

TOTAL NET REVENUES 12,361 12,943 12,775 (168) (1.3%)

EXPENSESSalaries 3,452 3,470 3,581 (111) (3.2%)Employee Benefits 1,558 1,839 2,119 (280) (15.2%)Supplies & Other Expenses 5,290 5,553 5,871 (318) (5.7%)Interest 0 0 0 0 N/A Depreciation/Amortization 94 76 73 3 3.4%

TOTAL EXPENSES 10,394 10,937 11,644 (707) (6.5%)

OPERATING INCOME 1,967 2,006 1,131 (875) (43.6%)

NON-OPERATING INCOME (495) (1,227) (950) 277 22.6%

TOTAL NET INCOME $1,472 $779 $181 ($598) (76.8%)

Operating EBIDA $2,061 $2,081 $1,204 ($877) (42.2%)Operating Margin Percentage 15.9% 15.5% 8.9%

All dollar amounts in thousands

Totals may not agree due to rounding

31

El Camino Hospital FoundationComparative Statement of Revenue and Expense ($ Thousands)

Estimated Budget Fav (Unfav) Change2012 2013 2014 Amount Percent


Gross Patient Service Revenue 0 0 0 0 N/A

Deductions From Revenue 0 0 0 0 N/A


Other Operating Revenue 77 80 142 61 76.4%

TOTAL NET REVENUES 77 80 142 61 76.4%

EXPENSESSalaries 1,147 1,044 1,168 (124) (11.9%)Employee Benefits 399 443 543 (101) (22.7%)Supplies & Other Expenses 1,760 1,321 1,659 (337) (25.5%)Interest 0 0 0 0 N/A Depreciation/Amortization 12 13 13 (0) (0.0%)

TOTAL EXPENSES 3,318 2,821 3,383 (562) (19.9%)

OPERATING INCOME (3,240) (2,740) (3,241) (501) (18.3%)

NON-OPERATING INCOME 3,379 5,085 5,335 250 4.9%

TOTAL NET INCOME $138 $2,344 $2,094 ($250) (10.7%)

Operating EBIDA ($3,228) ($2,727) ($3,228) ($501) (18.4%)Operating Margin Percentage -4201.2% -3404.5% (2282.6%)



32

Estimated Budget Fav (Unfav) Change2012 2013 2014 Amount Percent________ _________ ________ _______ _______


________ _________ ________ _______ _______ Gross Patient Service Revenue 0 0 0 0 N/A

Deductions From Revenue 0 0 0 0 N/A ________ _________ ________ _______ _______


Other Operating Revenue 0 0 0 0 N/A ________ _________ ________ _______ _______

TOTAL NET REVENUES 0 0 0 0 N/A

EXPENSESSalaries 349 490 654 (165) (33.6%)Employee Benefits 160 309 258 51 16.6%Supplies & Other Expenses 557 126 542 (415) #######Interest 0 0 0 0 N/A Depreciation/Amortization 0 0 0 0 N/A

________ ________ ________ _______ _______TOTAL EXPENSES 1,067 926 1,454 (529) (57.1%)

OPERATING INCOME (1,067) (926) (1,454) (529) (57.1%)

NON-OPERATING INCOME 1,037 872 1,454 582 66.8%

TOTAL NET INCOME ($30) ($54) ($0) $54 99.4%

Operating EBIDA ($1,067) ($926) ($1,454) ($529) (57.1%)Operating Margin Percentage N/A N/A N/A



Silicon Valley Medical DevelopmentComparative Statement of Revenue and Expense ($ Thousands)

33


REVENUESInpatient Revenue $1,408 $1,466 $1,509 $43 3.0%Outpatient Revenue 952 971 947 (24) (2.5%)

________ _________ ________ _______ _______ Gross Patient Service Revenue 2,360 2,437 2,456 19 0.8%

Deductions From Revenue (1,730) (1,755) (1,767) (12) (0.7%)________ _________ ________ _______ _______

Net Patient Service Revenue 630 682 689 7 1.0%

Other Operating Revenue 14 16 16 0 1.0%________ _________ ________ _______ _______


EXPENSESSalaries 214 235 252 (17) (7.4%)Employee Benefits 105 119 126 (7) (5.8%)Supplies & Other Expenses 200 212 212 (0) (0.1%)Interest 8 8 8 0 1.9%Depreciation/Amortization 49 48 50 (3) (5.4%)

________ ________ ________ _______ _______TOTAL EXPENSES 576 621 648 (27) (4.3%)

OPERATING INCOME 68 76 57 (20) (25.9%)

NON-OPERATING INCOME 4 24 19 (4) (18.9%)

TOTAL NET INCOME $72 $100 $76 ($24) (24.2%)

Operating EBIDA $125 $132 $115 ($17) (13.1%)Operating Margin Percentage 10.5% 11.0% 8.0%

KEY HOSPITAL INDICATORS:Total Hospital Discharges 22,593 24,276 24,291 15 0.1%Total Hospital Patient Days 90,800 97,273 97,434 161 0.2%Acute Length of Stay (LOS) 4.0 4.0 4.0 0.0 0.0%Hospital Average Daily Census 248 267 267 0 0.2%

All dollar amounts in millions


El Camino Hospital – Without AffiliatesComparative Statement of Revenue and Expense ($ Millions)

34


REVENUESInpatient Revenue $1,408 $1,466 $1,509 $43 3.0%Outpatient Revenue 987 1,004 947 (57) (5.7%)

________ _________ ________ _______ _______ Gross Patient Service Revenue 2,395 2,469 2,456 (14) (0.6%)

Deductions From Revenue (1,759) (1,781) (1,767) 14 0.8%________ _________ ________ _______ _______

Net Patient Service Revenue 637 688 689 1 0.1%

Other Operating Revenue 26 29 29 0 0.2%________ _________ ________ _______ _______


EXPENSESSalaries 221 242 258 (16) (6.4%)Employee Benefits 107 122 129 (6) (5.2%)Supplies & Other Expenses 211 222 220 2 0.8%Interest 8 8 8 0 1.9%Depreciation/Amortization 49 48 50 (2) (4.8%)

________ ________ ________ _______ _______TOTAL EXPENSES 598 642 664 (22) (3.5%)

OPERATING INCOME 66 75 53 (22) (28.9%)

NON-OPERATING INCOME 8 28 25 (3) (11.8%)

TOTAL NET INCOME $74 $103 $78 ($25) (24.2%)

Operating EBIDA $123 $131 $111 ($19) (14.8%)Operating Margin Percentage 9.9% 10.4% 7.4%

KEY HOSPITAL INDICATORS:Total Hospital Discharges 22,593 24,276 24,291 15 0.1%Total Hospital Patient Days 90,800 97,273 97,434 161 0.2%Acute Length of Stay (LOS) 4.0 4.0 4.0 0.0 0.0%Hospital Average Daily Census 248 267 267 0 0.2%

All dollar amounts in millions


El Camino Hospital & AffiliatesComparative Statement of Revenue and Expense ($ Millions)

35

El Camino Hospital & AffiliatesConsolidating Statement of Revenue and Expense ($ Thousands)

El Camino Hospital Concern Foundation SVMD Total

REVENUESInpatient Revenue $1,509,284 $0 $0 $0 $1,509,284Outpatient Revenue 946,516 0 0 0 946,516

Gross Patient Service Revenue 2,455,800 0 0 0 2,455,800

Deductions From Revenue (1,766,903) 0 0 0 (1,766,903)

Net Patient Service Revenue 688,897 0 0 0 688,897

Other Operating Revenue 15,689 12,775 142 0 28,606

TOTAL NET REVENUES 704,587 12,775 142 0 717,503

EXPENSESSalaries 252,277 3,581 1,168 654 257,681Employee Benefits 125,619 2,119 543 258 128,539Supplies & Other Expenses 212,002 5,871 1,659 542 220,073Interest 7,681 0 0 0 7,681Depreciation/Amortization 50,366 73 13 0 50,452

TOTAL EXPENSES 647,944 11,644 3,383 1,454 664,426

OPERATING INCOME 56,642 1,131 (3,241) (1,454) 53,078

NON-OPERATING INCOME 19,284 (950) 5,335 1,454 25,123

TOTAL NET INCOME $75,927 $181 $2,094 ($0) $78,201

Operating EBIDA $114,689 $1,204 ($3,228) ($1,454) $111,211Operating Margin Percentage 8.0% 8.9% 7.4%

KEY HOSPITAL INDICATORS:Total Hospital Discharges 24,291 24,291Total Hospital Patient Days 97,434 97,434Acute Length of Stay (LOS) 4.0 4.0Hospital Average Daily Census 266 267



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