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Operational and Compliance Considerations for 2022

Operational and Compliance Considerations for 2022

By Brian Ford
Steps to Take Now Heading Into 2022 (Article 4 of 4)

Concluding our series for healthcare services companies, I highlight some operational and compliance considerations. In 2021, many companies welcomed a return to normal with patient volumes and additional stimulus funds. Currently, we’re facing a different set of challenges into 2022 with staffing concerns, supply issues and slower than normal reimbursement. 

Here are four things to consider, some common observations and challenges we’re seeing with companies:

1. Did you receive payment through the CARES Act or other reimbursement (e.g. PPP, PRF or ERTC)?

  • Many companies received, or are in the process, of receiving forgiveness on such funds. Do you have the resources in place to meet the reporting requirements, both now and in the future? 
  • Companies that received multiple rounds of PRF will have future attestations. Is your team continuing to track and report the related expenses? 

2. How are your patients utilizing your telehealth solution?

  • A recent study from McKinsey concluded that “Telehealth utilization has stabilized at levels 38x higher than before the pandemic.” Currently, over 15% of all E&M services are being delivered with a Telehealth solution. For certain specialties, such as behavioral health, telehealth may represent over a third of all patient visits. 
  • During the pandemic, many states permitted limited platforms such as FaceTime. Have you upgraded to a comprehensive software that integrates with your EMR? Is your current set-up (i) compliant and (ii) delivering the best patient experience? 

3. How does your 2022 budget consider:

  • Potential staffing shortages and rising labor inputs. Common concerns we see are (i) clinic staff turnover, (ii) rising wages and (iii) the impact of vaccine mandates. At the same time, a stronger telehealth platform could help mitigate these risks to deliver patient care with less overhead. 
  • Supply chain issues securing medical supplies. Is your team effectively managing inventory and exploring secondary suppliers? Do you have sufficient working capital if new vendors require pre-payment? 

4. How has your revenue cycle team performed over the past year?

  • Have you experienced an increase in denials and/or delay in reimbursement from payors? 
  • With the additional work, is your team effectively managing patient responsibility, including refunds owed? 
  • Have you fully utilized stimulus programs such as supplemental reimbursement through CARES (e.g. uninsured patients, Covid vaccinations, etc)? 

If you’re a business owner, we encourage you to consider how your team is addressing the items we highlighted in this series. Does your team respond, rather than react, to a changing environment? Do you have a trusted advisor working inside the business, asking the right questions around the future health and growth of the Company? We celebrate our healthcare heroes in yet another difficult year, especially those working in underserved markets. 

Brian Ford is a FocusCFO Area President based in Nashville, TN.

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FocusCFO Tribute for Ed Chong

FocusCFO Tribute
for Ed Chong

By Mike Derringer

Ed Chong, CFO, passed away November 3, 2021 at the age of 56. He joined FocusCFO in 2018 and served 8 clients during this time. 

Ed was a leader to his FocusCFO colleagues.

He served on a panel of top CFOs at our All-Hands conference, sharing his years of experience with his peers about questions to ask and how to interact with the client, and how to best add value for their businesses. He was a regular contributor in our weekly CFO training sessions and shared best practices. He recently earned a spot in our ‘FocusCFO Hall of Fame’, recognizing a major mark for client tenure with our company.

Ed’s clients were raving fans. 

He genuinely cared for them as individuals, their business, and their success. 

Tim Zink of Zink Foodservice said, “Ed’s operator background…I always felt was unique and valuable…he could see our business from a different lens than others. He was always a positive spirit, even when times were tough during Covid, he was always looking for ways to help the company…I will miss him greatly.” 

Sanjay Patel of A1 Nursing Care said: “Ed was an amazing person and a wonderful team member. From the very first day, Ed helped bring people and ideas together, and knowing that we had him on our team allowed us to achieve so many great things in the last two years. He will always be part of the A-1 family.” 

Mimi McCann of 5 Star Staffing said, “It’s impossible to be brief when describing the impact that Ed had upon our business, but it can be easily summarized. He kept us here. He began by keeping our doors open, guided us through the quagmire of 2020 and established a successful future for our company. We would not be where we are without him.” 

She continued, “Some leaders are dynamic, some are unflappable. Ed was both. Ed was hilarious, his ability to filter a tough situation through the lens of a classic Seinfeld plot made challenges manageable.” 

“Ed is irreplaceable. We join his family and friends in mourning his departure but do so with the profound gratitude we feel for having had the privilege to work with him.” 

Ed was also a family man. 

Outside of the office, Ed loved his family. He was very proud of his daughters and boasted about them and his wife, as well he should have. They shared his enthusiasm, his joy, and his faith. He had many, many friends, resulting both from business experiences and his outgoing personality. 

We, along with his family and many friends, will miss our friend and colleague. Rest in peace Ed. 

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Columbus Business First’s Fastest Growing Companies

Columbus Business First’s Fastest Growing Companies

2021 Fast 50 List includes 7 FocusCFO Clients

Congratulations to FocusCFO clients Earthly, Luke’s Auto, JT Bates Group, Ohio Power Tool, Steward Construction Services, Arlington Urgent Care and Leading Edje for making the Columbus Business First’s Fast 50 List 2021. We’re honored to walk alongside you! Congrats to all of Columbus’ fastest-growing companies.

BBI Logistics 
Signature Closers LLC
Davenport Aviation Inc
Earthly Wellness 
Clarus R+D
Lower
Summit Technologies 
Restoration LLC 
Lifetime Quality Roofing and Storm 
Pearl Interactive Network 
Foxen
First Ohio Home Finance Inc
Reliant Capital Solutions LLC
Agility Partners 
Richardson Marketing Group
Acoustic Ceiling and Partition 
Golden Reserve LLC
Environmental Remediation Contractor
Feazel
Facilities Management Express LLC
Luke’s Auto
Right Way Medical 
Wolfrum Roofing & Exteriors LLC
Link Real Estate 
Remember Me Gifts LLC

JT Bates Group
Pat Scales Remodeling
Zipline Logistics LLC
WSA Studio
Jeni’s Splendid Ice Creams
Futurety
Cats Only Veterinary Clinic 
Easyit
Test Double
Ohio Power Tool Inc
Jendco Safety Supply
Steward Construction Services LLC
Asset Strategies Group
Ease Logistics Services LLC
Nexceris
Arlington Urgent Care Inc
MCR Medical Supply
Choice Property Resources 
Vision Communities 
Leading Edje
3 Pillar Homes
Everhart Advisors
Overmyer Hall Associates 
Champion Trading Group
Hamilton Capital LLC
Gilbert Group

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All Hands 2021 Award Winners

2021 Award Winners

Congratulations to these Associates for their recent award at the FocusCFO All Hands meeting.

Client for Life Award

Gold Level

Don Cain

CFO, Central Ohio

Tom Flynn

Area President, Central Ohio

Dan Bloom

CFO, Central Ohio

Client for Life Award

Silver Level

Pat Lang

CFO, Central Ohio

Jeff Lacy

Area President, Central Ohio

Jim McKinney

CFO, Central Ohio

Client for Life Award

Bronze Level

Ric Butler

CFO, Central Ohio

Don Cain

CFO, Central Ohio

Darren Cherry

Area President, Central Ohio

Jim Collins

Area President, Southwest Ohio

Scott Davis

CFO, Southwest Ohio

Mike Derringer

Area President, Central Ohio

Jon Doerer

CFO, Michigan

Jeff Farrington

Area President, Michigan

Tom Flynn

Area President, Central Ohio

Peter Geise

CFO, Central Ohio

Greg Gens

Area President, Northern Ohio

Jim Gilbride

Area President, Northern Ohio

Jeff Lacy

Area President, Central Ohio

Pat Lang

CFO, Central Ohio

Jim McKinney

CFO, Central Ohio

Bob Palmerton

CFO, Michigan

Todd Peter

CFO, Northern Ohio

Kyle Rhodebeck

CFO, Central Ohio

Jeff Semple

Area President, Northern Ohio

Skip Vermilya

CFO, Northern Ohio

Mark Vernallis

Area President, Pennsylvania

Todd Whetstone

CFO, Northern Ohio

Lynette Zody

CFO, Central Ohio

CFO Hall of Fame

Gold Level

CURRENT MEMBERS

David Bourke

Director, CFO Services

Bruce Collen

CFO, Central Ohio

Pat Lang

CFO, Central Ohio

Lynnette Zody

CFO, Central Ohio

CFO Hall of Fame

Silver Level

NEW MEMBERS

Sherif Matar

CFO, Central Ohio

CURRENT MEMBERS

Dan Bloom

CFO, Central Ohio

Don Cain

CFO, Central Ohio

Jim McKinney

CFO, Central Ohio

Jim Zins

CFO, Central Ohio

Joe Dougherty

CFO, Central Ohio

CFO Hall of Fame

Bronze Level

NEW MEMBERS

Ed Chong

CFO, Central Ohio

Bob Palmerton

CFO, Michigan

CURRENT MEMBERS

Wendy Brugmann

CFO, Northern Ohio

Will Cooper

CFO, Central Ohio

Dean Cole

CFO, Central Ohio

Kathleen Ferry

CFO, Northern Ohio

David Gouttiere

CFO, Northern Ohio

David Green

CFO, Central Ohio

Todd Peter

CFO, Northern Ohio

Jim Rowlands

CFO, Northern Ohio

Bob Stecki

CFO, Central Ohio

Skip Vermilya

CFO, Northern Ohio

Scott Lee

CFO, Central Ohio

Walter Himmelman

CFO, Northern Ohio

Scott Davis

CFO, Southwest Ohio

Richard Murch

CFO, Central Ohio

Ric Butler

CFO, Central Ohio

Area President Awards

Rookie of the Year

Michael Stier

Area President, Carolinas

Area President Awards

Rising Star

Lesli Matukaitis

Area President, Michigan 

Mitch Willis

Area President, Pennsylvania

Area President Hall of Fame

Gold Level

NEW MEMBERS

Forest Bookman

Area President, Northern Ohio

CURRENT MEMBERS

Mike Derringer

Area President,
Central Ohio

Tom Flynn

Area President,
Central Ohio

Jeff Lacy

Area President,
Central Ohio

Jeff Semple

Area President,
Northern Ohio

Jim Gilbride

Area President, Central Ohio

Area President Hall of Fame

Silver Level

NEW MEMBERS

Jim Collins

Area President, Southwest Ohio

Bob McAdams

Area President, Central Ohio

CURRENT MEMBERS

Darren Cherry

Area President,
Central Ohio

Fred Dannhauser

Area President,
Northern Ohio

Peter Geise

Area President,
Northern Ohio

Bob Miller

Area President,
Central Ohio

Area President Hall of Fame

Bronze Level

NEW MEMBERS

Mark Vernallis

Area President, Pennsylvania

David Tramontana

Area President, Pennsylvania

CURRENT MEMBERS

Jeff Farrington

Area President,
Michigan

Bob Miller

Area President,
Central Ohio

Greg Gens

Area President,
Northern Ohio

2020 Continuous Learning Award

Exit Planning Institute – CEPA

NEW MEMBERS

Kim Cooper

CFO, Carolinas

Mark Clower

Area President, Southwest Ohio

Michael Stier

Area President, Carolinas

Randy Feger

CFO, Pennsylvania

Mike Derringer

Area President, Central Ohio

Greg Gens

Area President, Northern Ohio

David Green

CFO, Central Ohio

Lesli Matukaitis

Area President, Michigan

Jeff Farrington

Area President, Michigan

Tom Bartos

Area President, Pennsylvania

Forest Bookman

Area President, Northern Ohio

Bob Palmerton

CFO, Michigan

Mark Rust

CFO, Pennsylvania

Peter Geise

Area President, Northern Ohio

Rex Bevis

CFO, Southwest Ohio

Lynette Zody

CFO, Central Ohio

VETERANS

David Bourke

Director,
CFO Services

Darren Cherry

Area President,
Central Ohio

Mark Clower

Area President,
Southwest Ohio

Kathleen Ferry

Area President,
Northern Ohio

Tom Flynn

Area President,
Central Ohio

Jim Gilbride

Area President,
Northern Ohio

Brad Martyn

Visionary and Founder
FocusCFO

Jeff Semple

Area President,
Northern Ohio

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Mind the Gap

Mind the Gap

By Michael Stier

Many business owners wonder how much their business is worth and how they stack up against their competitors. Take the traditional “country club valuation,” for instance: A group of four business owners goes out on a Sunday to play a round of golf. One owner has just closed a deal and sold their manufacturing company for millions of dollars. A fellow golfer, who owns a business in the same manufacturing space, thinks, “I could probably sell my company for that.” But what should the business owner sell their business for? What are the owner’s personal and financial goals? 
When talking about buying and selling companies, many business owners get caught up in the purchase price, when the real number they should be focused on is net proceeds. The “net proceeds” of the sale refers to the cash the owners get at the close after taking care of all expenses, such as investment banking and transaction fees, accounting and legal fees, debt from the business, holdbacks and earnouts, seller financing and, of course, taxes.

Although the net proceeds number is critical to determine what your business should sell for, it is only part of the equation. Net proceeds help establish the three financial gaps in your life. Those gaps are the solution to deciding what your business must be sold for in order to live a fulfilled life after exit. 

The Three Gaps: Wealth, Profit and Value 

When thinking about selling your business, timing and what it would fetch, ask yourself the following questions: 

• What do I want to do after I sell? And do I have the money to do it? I.e., Wealth Gap 

• What are the best-in-class businesses in my industry earning? How far is my business from that profit margin? I.e., Profit Gap 

• How valuable is my business if I sold today? If I took it to market right now, would it fetch anywhere near what best in class businesses in my industry might? I.e., Value Gap 

Let’s review each of the different gaps in detail. 

Wealth Gap 

Your wealth gap is the difference between your current wealth and the amount you need in order to live the life you want. To understand your wealth gap, you need to investigate your personal goals and ambitions outside of the business. For example, an owner who wants to own a minor league baseball team in the next phase of their life will need more funds than an owner who wants to retire and live quietly on an old farm. 

Your goals, family, extended family and personal ambitions should all be considered. Once identified, you can determine your wealth gap. Your net worth outside of the business plus the value of your company today equals your goal. In other words, if your goal was $10 million and you had $2 million of assets outside of the business, your wealth gap would be $8 million. 

Profit Gap 

Using this example, the next step in the process is understanding if the business today is, in fact, worth $8 million. To get to the root of this, you can start by calculating your company’s profit gap. At a very high level, a profit gap is calculated by understanding the best-in-class earnings before interest, taxes, depreciation and amortization (known as EBITDA) of businesses in the same industry. Next, assess your current EBITDA performance. 

The profit gap then is calculated by understanding how you can drive toward best-in-class performance by subtracting your company’s current EBITDA performance from the best-in-class EBITDA performance. For example, if your company is currently earning $1 million in EBITDA while the best-in-class companies are generating $3 million in EBITDA, your business currently has a $2 million profit gap. 

Value Gap 

This EBITDA number is then applied to the sale price of the company. Small and lower middle-market companies sell in a range of industry multiples dictated by the private capital market. For example, upon research, a plastic manufacturing company could be selling in a range of multiples from one times the EBITDA to six times the EBITDA, with the best-in-class companies selling at the higher range. 

Given the same industry research, you will be able to identify your company’s value gap. The value gap takes into consideration the best-in-class performance and applies it to your company in its current state. For example, if best-in-class companies are performing at 15% EBITDA to revenue and the current business owner’s company is performing at 10% EBITDA to revenue, the company could improve performance, even at the same level of revenue, and generate another 5% in EBITDA. 

To illustrate this further, imagine a company currently generates $20 million in annual revenue. At 15% EBITDA, this company would generate $3 million in EBITDA, whereas at 10% EBITDA, the company would generate $2 million in EBITDA. Given 15% EBITDA is best-in-class performance, these companies would sell at the best multiples. In this example, if best-in-class companies are selling at six times the EBITDA, that would be an $18 million sale price. An “average” company performing at 10% EBITDA, on the other hand, would likely sell for an average multiple. Let’s assume that multiple is 3.5 times the EBITDA, which would equate to a $7 million sale price. This represents a Value Gap of $11 million between two companies with the same revenue! 

Key Takeaway:

Selling your business involves a lot of strategy, advisors and planning. But without considering your personal goals as well as business value, you will have a hard time determining if you and your business are ready and what your ideal sale price may be. 

Michael Stier is an Area President for FocusCFO based in Charlotte, NC. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, follow us on LinkedIn.

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KPIs to Drive Increased Volume and Profitability

KPIs to Drive Increased Volume and Profitability

By Brian Ford
Steps to Take Now Heading Into 2022 (Article 3 of 4)
Continuing our series for healthcare services companies, we look at the importance of having Key Performance Indicators (KPIs) for operators. In our first article, I highlighted Eight Considerations for Improving Cash Flow for Healthcare Services, followed by the importance of Understanding Multi-location Profitability. This article highlights specific KPIs to benchmark performance across the organization, from which the team can drive increased volume and profitability. Here are some commonly used KPIs that can be tailored for most healthcare services entities:

Leading KPIs

1. Total referrals
2. Total new patient appointments

Tracking referrals is often the first step in projecting future revenue, and it’s even more important to combine that data with new patient appointments. Too often, management teams do not realize how many referrals are lost because they are not properly tracked. Continuing with our examples, the management team quickly realized that most referrals were not converted to patient appointments. Further analysis helped the team identify capacity constraints, where certain providers were in a given location only a few days per month. As a result, new patients could not get scheduled in less than 30 days. After realizing the trends, the management team shifted the clinic and provider schedule, resulting in a higher conversion rate, better relationships with referring providers and most importantly, a better patient experience. 

Lagging KPIs

It’s important to present lagging KPIs consistently on a Date of Service (DoS) basis. Too often, teams look at information not perfectly correlated, by comparing date of receipt cash collections or cash paid for wages, to date of service patient encounters. Due to timing of reimbursement or shifts in the payroll calendar (e.g. 3 pay month), the KPIs can be skewed and not presented consistently over time. Below are three KPIs critical to tracking revenue and profitability: 

3. Net Revenue per Encounter – Calculated as [Collections, net of refunds and recoupments / Unique Patient Encounters]. Some companies might like to take this a step further, and look at Net Revenue / Encounter and Net Revenue / Billable Encounter. Looking at these KPIs on a DoS basis, the management team can measure what they actually earned, when the service was performed. 

4. Total Procedures per Encounter Calculated as [Total procedures performed (e.g. CPT codes charged) / unique patient encounters]. As management teams seek to understand changes in Net Revenue per Encounter, identifying shifts in the procedure mix can help. By way of example, the Net Revenue per Encounter was down meaningfully year over year. However, the management team noted no significant changes in contracted rates. Using this KPI, the team realized the case mix changed and the average Procedures per Encounter decreased from 2.1 to 1.7 due to a provider out on medical leave. As a result, the operations team again shifted the clinic schedule to restore a consistent volume mix at the clinic. 

5. Direct wages per encounter – Calculated as [Wages + taxes for clinic staff (e.g. nurses, techs, scribes, etc.) / Unique patient encounters]. This KPI can be one of the most critical in influencing gross profit for many operators. Going back to our article, Understanding Multi-Location Profitability, the management team deployed clinic staff more efficiently using this KPI. At one under-performing clinic, the team realized staffing costs per encounter were 30% higher than other clinics in the same area. Staff with excess capacity were re-deployed to nearby locations to reduce overtime, resulting in margin improvement at multiple locations. 

These are just a few examples of how our team works with healthcare service companies to (i) understand the historical performance, (ii) develop the right, applicable KPI from which the team can manage, and (iii) collaborate across the organization to help drive growth. 

We conclude our series next time highlighting Operational and Compliance Considerations and touch on some key topics for working remotely. 

Brian Ford is a FocusCFO Area President based in Nashville, TN.

 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, follow us on LinkedIn.

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