high performance ems financial analysis jonathan d. washko, bs-emsa, nremt-p director of strategic...
TRANSCRIPT
High Performance EMSHigh Performance EMSFinancial AnalysisFinancial Analysis
Jonathan D. Washko, BS-EMSA, NREMT-PDirector of Strategic Development – REMSA
President – Washko & Associates, LLC
Session OverviewSession Overview
Defining and Calculating Schedule Costs
Defining Direct & Indirect Costs Calculating the Types of Costs per
Unit Hour Calculating the Costs of Accurate
Coverage
A Short Poem…A Short Poem…
A dollar spent (or wasted) A dollar spent (or wasted) here, here,
Cannot be spent (or Cannot be spent (or wasted) there.wasted) there.
HPEMS Financial AnalysisHPEMS Financial Analysis
So why are we discussing this in an SSM class? The changing of shift schedules and
deployment plans have a direct economic impact on your system (either good or bad)
Mistakes made in not recognizing the financial impacts of these changes can have DIREDIRE consequences (CLM / CEM Concept)
Hopefully we can show you the pitfalls and mistakes made by others in order to keepkeep youyou from making a CEM!
Schedule CostingSchedule Costing
Where men are men and the CEM’s & CLM’s run freeWhere men are men and the CEM’s & CLM’s run free
Schedule CostingSchedule Costing Flexible schedules and work weeks are
necessary in order to efficiently and effectively match supply with demand
Schedule costing allows you to determine how much each type of schedule costs and its impact on your budget
Helpful knowledge when designing schedules to meet demand to ensure the most efficient schedule possible
Two Types of Schedule Costing Models Non-adjusting (traditional approach) Adjusting (controversial approach)
WARNING – WARNING – WARNING – WARNING
This CANNOT be emphasized enough
If these calculations get screwed up…
it’s gonna HURT!
BAD!!!
Schedule CostingSchedule Costing
Defining Schedule CostsDefining Schedule Costs
Non-adjusting compensation model (Traditional approach) Base hourly field wages remain the same no matter
the length of the work week Scheduled overtime costs / compensation rise and
fall based on hours worked Creates disparate annual compensation between
providers based on length of scheduled work weeks Creates an inappropriate inverse pay to workload
relationship This approach, if you are not careful, will bite you in
the A$$, especially if you use quite a bit of scheduled overtime in your schedules
Wage Conversions Made Simple
Employee working 40 hours a week base (5x8)Paramedic Hourly Wage = $16.83
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week TC = Total Annual Compensation
Using the “count up” method
((40 + 0 + 0) x 52) x $16.83 = $35,000
Non-adjusting Compensation ModelNon-adjusting Compensation Model
Wage Conversions Made Simple
Employee working 45 hours a week base (5x9)Paramedic Hourly Wage = $16.83
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week TC = Total Annual Compensation
Using the “count up” method
((40 + 5 + 2.5) x 52) x $16.83 = $41,570.10
Non-adjusting Compensation ModelNon-adjusting Compensation Model
Wage Conversions Made Simple
Employee working 48 hours a week base (4x12)Paramedic Hourly Wage = $16.83
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week TC = Total Annual Compensation
Using the “count up” method
((40 + 8 + 4) x 52) x $16.83 = $45,508.32
Non-adjusting Compensation ModelNon-adjusting Compensation Model
Defining Schedule CostsDefining Schedule CostsAdjusting Compensation Model (a.k.a. Straight
Time Equivalent Model – Controversial approach) Base hourly field wages adjust based on the length of the
scheduled work week and shift length Scheduled overtime costs / compensation are built into
the employee’s annual compensation Equalizes annual compensation between providers based
on length of scheduled work weeks Creates an appropriate pay to workload relationship
(which is what makes this legal in the US) Gives you maximum flexibility to produce Unit Hours and
shift configurations that are affordable This approach is what gave SSM a bad reputation as a
means by which to save money for obvious reasons
Defining Schedule CostsDefining Schedule CostsAdjusting Compensation Model (a.k.a. Straight
Time Equivalent Model – Controversial approach)…continued… Employee’s hourly wage adjusted based on the length
of the shift worked in OT situations PT / PRN wages also adjust based on the length of the
shift worked Causes your payroll folks to get a bit excited. Need to
ensure payroll systems can handle various rates by provider if using this method
Is not an easy approach to sell (hence the “where men are men” statement), but can economically turn the tides for many systems (reduction or elimination of subsidy, improvement of profits, improved employee compensation, better equipment, etc.)
Hourly Wage STE Conversions Made Simple
Employee working 40 hours a week base (5x8)Paramedic Base Annual Wage = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week TC = Total Annual Compensation
Using the “count up” method
$35,000 ÷ ((40 + 0 + 0 ) x 52) = $16.83 / Hour((40 + 0 + 0) x 52) x $16.83 = $35,000
Adjusting Compensation ModelAdjusting Compensation Model
Hourly Wage STE Conversions Made Simple
Employee working 45 hours a week base (5x9)Paramedic Base Annual Wage = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week TC = Total Annual Compensation
Using the “count up” method
$35,000 ÷ ((40 + 5 + 2.5 ) x 52) = $14.17 / Hour((40 + 5 + 2.5) x 52) x $14.17 = $35,000
Adjusting Compensation ModelAdjusting Compensation Model
Hourly Wage STE Conversions Made Simple
Employee working 48 hours a week base (4x12)Paramedic Base Annual Wage = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week TC = Total Annual Compensation
Using the “count up” method
$35,000 ÷ ((40 + 8 + 4 ) x 52) = $12.94 / Hour((40 + 8 + 4) x 52) x $12.94 = $35,000
Adjusting Compensation ModelAdjusting Compensation Model
Work Week Non AdjustHourly
Non AdjustAnnual
AdjustedHourly
AdjustedAnnual
40 Hours $16.83 $35,000.00 $16.83 $35,000.00
45 Hours $16.83 $41,570.10 $14.17 $35,000.00
48 Hours $16.83 $45,508.32 $12.94 $35,000.00
Adjusting vs Non-adjusting Adjusting vs Non-adjusting Compensation ModelCompensation ModelImpact ComparisonImpact Comparison
Can you see why this gave SSM such a bad reputation?
Defining Direct & Indirect Defining Direct & Indirect Financial Models and the Cost Financial Models and the Cost
per Unit Hourper Unit Hour
Defining Direct & Indirect CostsDefining Direct & Indirect Costs
HPEMS Financial Overview Most HPEMS systems cost budget and/or pro
forma new business using the Direct and Indirect method
This approach provides a framework to easily build financial models that can be automatically adjusted by changing transports, unit hours and UHU projections
This enables the capabilities of “what if” scenario modeling for system changes based on changing assumptions and performance variables
Defining Direct & Indirect CostsDefining Direct & Indirect Costs
Direct Costs (Above the line) Those costs involved directly in the
production of unit hours Typically variable in nature based on hours
worked, miles driven, number of ambulances equipped, per call fees (like contracted dispatch or billing services), etc.
Strongly effected by Unit Hour Utilization and system efficiency
What is being priced and for what purpose will effect what expenses go into what category
Selling services vs budgeting for services
Defining Direct & Indirect CostsDefining Direct & Indirect Costs
Examples of Direct Costs Field Wages Field Payroll Taxes Field Benefit Costs Field Uniforms Field Training Ambulance Depreciation Medical Equipment Depreciation Medical Supplies And so on…
Defining Direct & Indirect CostsDefining Direct & Indirect Costs
Indirect Costs (Below the line) Overhead costs Typically fixed costs that do not vary with the
addition or subtraction of unit hours Seldom effected by Unit Hour Utilization but
may be effected by department efficiency What is being priced and for what purpose will
effect what expenses go into what categorySelling services vs budgeting for services
Defining Direct & Indirect CostsDefining Direct & Indirect Costs
Examples of Indirect Costs Management Overhead / Allocations Facilities Costs Support Services Overhead General Expenses Legal Expenses Utilities Communications Costs Fixed Asset Deprecation And so on…
Defining Marginal & Fully Loaded Defining Marginal & Fully Loaded Costs per Unit HourCosts per Unit Hour
Marginal Costs Per Unit Hour All the costs associated with producing one more
unit hour These costs are typically variable in nature The calculation of this number enables
organizations to assess the effects of taking on new business on a marginal basis (increasing transport volumes)
It also allows for the costing of system inefficiency and the cost of Lost Unit Hours
Assumes that overhead and support services do not expand or contract when business volumes change (+/-)
Calculated by taking total Direct variable costs divided by the total number of Unit Hours
Defining Marginal & Fully Defining Marginal & Fully Loaded Costs per Unit HourLoaded Costs per Unit Hour
Direct Expense Description Costs
Paramedic & EMT Wages, Benefits, Taxes $123,564
Fuel $9,086
Vehicle Maintenance (no labor) $6,432
Employee Uniforms $250
Employee Training $1,500
Disposable Medical Supplies $3,254
Vehicle & Medical Equipment Depreciation $800
Total Direct Expenses $144,886
Total Unit Hours 2,587
Marginal Cost per Unit Hour $56.00
Marginal Cost Per Unit Hour
Defining Marginal & Fully Loaded Defining Marginal & Fully Loaded Costs per Unit HourCosts per Unit Hour
Fully Loaded Costs Per Unit Hour All the costs associated with running an
EMS agency on a per Unit Hour basis The calculation of this number allows for
benchmarking and comparisons against other services, bidders, system designs and budgetary variance reporting
Calculated by taking the total Direct variable and Indirect Fixed costs and dividing by the total number of Unit Hours
Defining Marginal & Fully Defining Marginal & Fully Loaded Costs per Unit HourLoaded Costs per Unit Hour
Indirect Expense Description Costs
Management Wages, Benefits & Taxes $42,132
Support Services Wages, Benefits & Taxes $25,154
Facility Costs $2,500
G & A Costs, Legal Fees, Etc. $1,100
Fixed Asset Depreciation $500
Total Indirect Expenses $71,386
Total Unit Hours 2,587
Indirect Cost per Unit Hour $27.59
Marginal Cost per Unit Hour $56.00
Fully Loaded Cost per Unit Hour $83.59
Fully Loaded Cost Per Unit Hour
Cost per Unit Hour FactsCost per Unit Hour Facts Average cost / unit hour divided by UHU = cost per
patient transport Cost per patient transport divided by collection rate =
average user fee at zero subsidy The industry range of average cost per unit hour is
$25 to $80 (1988) Marginal cost/unit hour ranges from about 40% to
60% of average UH costs Direct street labor costs (non-management) make up
more than 50% of total average unit-hour costs Unit Hour costs are powerfully affected by economies
of scale Unit-Hour cost is a poor predictor of clinical quality Unit-Hour cost is a poor predictor of cost per patient
transport Unit-Hour cost is a poor predictor of subsidy
requirements Far less money is wasted in the production of unit
hours than is wasted from squandered unit hours
Calculating the Costs of Calculating the Costs of Accurate CoverageAccurate Coverage
A Real World Example….
The cost savings of an all ALS model versus tiered ALS & BLS model
The effect of using Adjusted versus Non-adjusted Schedule Costing
Costing CoverageCosting Coverage
Client of Washko & Associates looking to convert from a tiered ALS / BLS model to an all ALS model
Wanted to assess the impact of this conversion to determine the savings (if any)
Also wanted to look at the impact of moving to a 48 hour work week from a 40 hour work week
Wanted to assess the impact of both the non-adjusted and the adjusted schedule costing approach and their impacts to the bottom line.
The Impacts of Shift Configuration Changes WITHOUT STE Adjustments and a Comparison of ALS versus Tiered Model Savings
The Impacts of Shift Configuration Changes WITH STE Adjustments and a Comparison of ALS versus Tiered Model Savings
Questions & Contact Information
REMSAPhone: 775-858-5700 x140Email: [email protected]: www.REMSA-CF.com
Washko & Associates, LLCHigh Performance EMS Consulting ServicesPhone: 775-240-6125Email: [email protected]: www.WashkoAssoc.com