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HealthWaysBudget

Table 1. HealthWays Clinic, Monthly Expense Budget Report, June 2018
Item June 2018 May 2018 2018 YTD
Budget Actual Variance Actual Budget Actual
Physician FTE 1.0 1.0 1.0 1.0 1.0
Nurse Practitioner FTE 3.0 3.0 3.0 3.0 3.0
Encounters:
Established patients 275 291 286 1650 1671
New patients 25 18 27 150 164
Total encounters
Expenses:
Physician Salaries & Benefits $10,500 $10,502 $10,509 $63,000 $63,149
NP Salaries & Benefits $20,000 $20,992 $20,191 $120,000 $122,001
Clerical (2 FTE) Salaries & Benefits $6,667 $6,771 $6,683 $40,000 $41,978
Total personnel expense
Medical supplies $7,500 $8,136 $7,994 $45,000 $47,883
Office supplies $583 $623 $508 $3,498 $3,407
Rent $2,917 $2,917 $2,917 $17,502 $17,502
Depreciation $333 $346 $346 $1,998 $2,050
Capital Expenses $3,333 $3,480 $3,480 $19,998 $20,439
Overhead $167 $167 $167 $1,002 $1,002
Total non-personnel expense
Total health center expense
Interpretation:
Providers:
The FTEs have not changed, at least for the first 6 months of 2018.
Encounters:
The number of encounters, both new and established, is increasing over the year.
Personnel expense:
Although the FTEs are not changing, the personnel budget is somewhat more than budgeted, particularly the NP and clerical budgets. Management should investigate why this is the case, and better control the personnel budget.
Non-personnel expense:
Medical supplies are over budget. Office supplies are under budget. Depreciation and capital expenses (new equipment) increased over the budget year. Rent and overhead remain stable, but might be expected to increase next year.
Total expenses:
The clinic must carefully control expenses, as its profitability is very low. Possible strategies might include improving staff productivity, reducing the cost of medical supplies, and postponing further capital purchases.

HealthWaysFinancials

Nurse-Run Clinic Scenario
Patient Encounters FY 2018 FY 2017
Established patients 3,348 3,204
New patients 331 287
Total Encounters 3,679 3,491
Cash $5,675 $12,098
Financial Ratios:
Expense per Encounter = Total Operating Expenses / Total Encounters
Total Operating Revenue per Encounter = Total Operating Revenue / Total Encounters
Operating Margin = Net Income/Total Operating Revenue
Days Cash On Hand = (Cash + Cash Equivalents) / (Operating Expenses / Days in Time Period)
Table 2. HealthWays Clinic, Income Statement, FY 2018. Table 3. HealthWays Clinic, Balance Sheet, December 31, 2018.
FY 2018 FY 2017 Current Assets December 31, 2018 December 31, 2017 Current Liabilities December 31, 2018 December 31, 2017
Gross Revenue (charges) $558,520 $497,221 Cash 5,032 9,877 Notes Payable 27,449 50,000
Less write-offs & adjustments 117,254 104,332 Short-term Investments 40,389 34,181 Accounts Payable 78,702 69,412
Net Patient Revenue (collected) $441,266 $392,889 Accounts Receivable 63,392 59,359 Accrued Expenses:
+Other Revenue 209,671 234,953 Supply Inventories, at Cost 16,029 14,918 Salaries & Benefits 38,265 28,274
Prepaid Expenses & Other 2,104 1,876 Taxes 1,419 1,398
Total Operating Revenue $ 650,937 $ 627,842 Total Current Assets $ 126,946 $ 120,211 Interest Payable 3,294 500
Total Current Liabilities $ 149,129 $ 149,584
Operating Expenses
Salaries & Benefits 459,171 445,396 Property, Plant & Equipment (Fixed Assets) Long-Term Liabilities $0 $0
Medical Supplies 97,627 92,418 Cost of PP&E 56,047 55,701
Office Supplies 7,471 7,302 Less Accumulated Depreciation 4,194 3,943 Net Assets
Rent & Depreciation 39,148 37,023 Net PP&E (Net Fixed Assets) $ 51,853 $ 51,758 Unrestricted 28,541 20,569
Other 43,762 47,009 Other Assets $ 1,289 1289 Restricted 2,418 3,105
Total Operating Expenses $ 647,179 $ 629,148 Total Assets $ 180,088 $ 173,258 Total Net Assets $ 30,959 $ 23,674
Net Income $ 3,758 ($1,307) Total Liabilities & Net Assets $ 180,088 $ 173,258
Financial Reports: Quick Tips for Interpretation
•income statement: positive net income indicates profitability
•balance sheet: positive equity indicates that there is a positive net worth, representing the amount remaining if an institution went bankrupt and had to liquidate
•compare changes in reports from prior year(s) to identify trends in financial performance, and with industry standards or internal benchmarks.  
Financial Ratios FY 2018 FY 2017
Expense per Encounter $ 175.91 $ 180.22
Total Operating Revenue per Encounter $ 176.93 $ 179.85
Operating Margin 0.58% -0.21%
Days Cash On Hand 3.2 7.0
Interpretation
Income Statement
The clinic operated at a loss the prior year, this reporting year the clinic made a small profit.  
One thought is about collections. The collection rate should be as high as possible, ideally 90-95 percent. It is likely that a lot of the write-offs and adjustments represent uncollected patient fees. More analysis and strategies to improve collections should be considered.
Balance sheet
The current liabilities are greater than the current assets, so the ability of the clinic to pay its short-term obligations is at risk.
Expense per Encounter:
In the prior year, the expense per encounter (patient visit) exceeded the revenue per encounter, so that the operations of the clinic operated at a loss. It is important that the clinic carefully manages its costs because if revenue is not greater than cost, the clinic is not profitable and might not be able to remain solvent.
Total Operating Revenue per Encounter:
In the current year, operating revenue is greater than expenses per encounter, but the two amounts are very similar. The clinic management must more carefully control costs, or negotiate higher reimbursement, or both.
The clinic's financial health is at risk if it cannot generate adequate profits that cover increases in costs and unexpected expenses.
Operating Margin:
The prior year's net income was negative, thus leading to a negative operating margin. The current year's operating margin is very low. This low operating margin is related to the very low profitability of the clinic.
As stated before, the clinic managers should consider how to improve the collection rate, how to negotiate higher reimbursement, and how to better control costs. Another possible strategy is grant writing and fund raising to increase funding and donations.
Days Cash On Hand
The clinic's days cash on hand is very low, with only three days of ability to pay short-term expenses.
Concerns about meeting short-term obligations are more serious because current liabilities exceed current assets, so it might not be possible for the clinic to meet short-term obligations if there is an interruption in revenue. This puts the clinic at risk of bankruptcy.