Children’s Health Network

DRAFT

Finance Committee

July 2012

CIN Financial Plan – Additional Operating Costs

Required Network Software and Infrastructure Costs– $400,000 per year for 400,000 Unique Patients

Program Implementation & On-going Costs– $75,000 year 1; $50,000 thereafter

Clinically Integrated Entity Development– Legal fees of approx $150,000 (expensed in 2012)

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Recommendations

Staffing is consistent with other CIN structures and the roles/responsibilities will be needed in the new CHN

CPN Dues compared to others are considerably less (dues for primary care/nonproceduralist in Central Georgia and Integrity Health $2,500/$3,500 per year)

A balance of $2.5 million is needed to maintain favorable income statement/financial health

Operating Margins will need to be 5-10% of revenues $125,000-250,000

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Current CPN Revenue Income

Payer Admin (HP and UCARE)$995,000CHC Community Benefit fee $900,000Affiliation Fees $350,000Other $60,000

Affiliation Fees (approx 700 members)Primary Care (230) $200Specialist (369) $300Other (101) $200Surgery Centers (3) $1,500Hospitals (2) $89,000 (does not inc Gillette)

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Financing the CHNUtilize $500,000 of reserve funds for start-upNew affiliation fees (simple example)Primary Care (230) $600Specialist (369) $600Other (101) $600Surgery Centers (3) $3,000eaHospitals (2) $180,000ea

Dues could increase incrementally over 3 years as CHN builds value (allows for planning an operating budget)

Dues could be adjusted based on financial performance of CHN (dividends)

Investment of 1-3% on all risk payments/quality/capitation payments negotiated by the CHN.

Projected impact to CHN budget

CPN Admin 2012 Budget Total Op Rev $2,305,000

Total Expenses $1,832,000 CPN Earnings (pre tax) $473,000

CHN Admin Yr 1 BudgetIncrease in fees $436,000

CPN Earnings (current) +$473,000Increase in exp (IHC & Legal) -$475,000 Net Op Margin (pre tax) $434,000

Tax est at 42% -$182,000 Net Income $252,000Necessary Margin (10%) $230,500

Nurse triage financing 2012 budget

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Total Operating Revenue $2,460,000 - Payers $160,000

- CPN Subscribers $1,679,000

- Non Subscribers $621,000

Total Expense $2,856,000

CPN Triage Earnings (pre tax) $(396,000)

Nurse Triage RecommendationsNurse Triage is necessary in total cost of care contracts and medical home initiatives Nurse Triage needs to break-even

-Increase dues for CPN members closer to retail prices

-Negotiate with health plans to use of CHN Nurse Triage (remove duplication of services in contracts)

-Identify further cost savings/re-look at hours of service and integration with eCW clinics

-Annual Participation Fee for nurse triage -$/per clinician for maintenance/upgrades of systems.

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Other considerations

Revisit 2012 budget and performance Recommendation on dues (parity b/w specialty and primary care)Sweat equity of physicians (committee work etc)Roles of staff in the new CHN Include Heath System Pediatricians in Quality/Triage (PN, Allina, HP)Negotiate admin fees into all contracts with CHN and apply a % investment back into CHN