JUDITH HOLT: No pressure on you at all.

Basically, you don't figure this out right and you lose money and you can't afford to lose money.

You figure it wrong, charge too much, you price it too high, you're not competitive, they don't want your services.

No pressure on Cara to tell you exactly how to do it right, but I think it's important that you think through this carefully.

Now, if I can have all of your attentions for just one minute.

Okay, conclude conversations.

This is an important comment.

Thank you.

Basically, I need you to ask questions when you have questions.

What Cara is going through is procedural, and if you forget one point or you don't understand one point, you're not going to be able to follow the rest.

So Cara has asked specifically that you ask questions when you have questions.

And we'll have folks, we'll have Paula and Dawn who will have mics that they can run to you.

So everyone understands you need to ask questions, before you get lost, when you're just wandering a little.

Ask the question. Go ahead, Cara.

CARA STEIDEL: Hello, everyone.

I am the last presenter.

And I'm really okay with that.

Because when my children were in preschool, child care, day care, whatever, the teacher used to say, they played candy land or whatever you do when you're four years old.

They would say, wow, Joe, way to go.

You got first place.

David, you got second first place.

Amy, you got third first place.

I am the last first presenter.

And I am okay with that.

Welcome to Setting Rates 101.

There will not be a quiz.

There will not be a final and there will not be a paper.

But please take my phone number and call me with any questions that you may have because it is a procedural thing.

It is, it does build with this.

Hopefully what you're taking home with you today, you'll be able to take to your finance person and they'll be able to go right through it and that this will make sense.

If you don't have a finance person and you really serious about getting fee-for-service, start thinking about finding that person now.

Because it is a unique requirement of what you're going to be providing.

It is different than grant management.

It doesn't mean it's harder than grant management, it's just different and you do have to learn that and it is really helpful when someone with a little bit of background and expertise in that area can provide that information that you're looking for.

JUDITH HOLT: Does anyone have questions yet? 

CARA STEIDEL: No quiz.

No final. No paper.

JUDITH HOLT: Just checking.

Go ahead.

CARA STEIDEL: And I turned us off.

All right, I promise I did not do this after I heard everything, everybody talking about collaboration.

But the first thing, If you take nothing home with you today, and I mean nothing, if you don't understand the process or procedure, but understanding that setting a rate requires collaboration from your whole organization.

You have experts in your organization that are able to talk about what they're going to do, what they're going to do next.

They bring expertise, what their program.

The program managers can tell you how they're going to do their programs.

The executive and administrative side, your development, we have a director of development who writes a lot of our grants.

They bring information to the table.

It's really no different than when your meeting with someone from VR, you need all the information together at the same time to put that information together.

It doesn't mean you're meeting every day, everybody in the same room at the same time.

It's an ongoing conversation.

Like I may talk with our program manager for awhile and say tell me how you're going to do this.

Sort of my canned response to everybody is every word that you say I can convert to a number in some way.

Every word, when you're doing something converts to a number.

It's no different than when you're developing a grant budget.

Every activity that you're going to do in that grant converts to a number.

So I get that information.

And I go on my little island.

They leave me on my little island and I do calculating and come back.

Whoa, this number doesn't make sense.

We got to talk about it again.

So everybody needs to be involved for a long time when doing this, when doing budget development, or rate development.

I heard a lot again and we talked about it before, it sounds like a lot of people had ARRA funding before they started their fee-for-service program.

We were fortunate to have grant funding before we started a lot of our fee-for-service programs.

But what we did when we were awarded the grant, first of all, we went whoa, we got the grant.

And then the second after we celebrated that little reception, acknowledgment that we received the grant, we started thinking about, okay, our goal is to go fee-for-service.

We have to start thinking about that on day one.

Never walk into your finance person's office a week before, maybe two days before you need something and say, hey, Cara, this guy is on the phone and wants to know what we'll charge him for the service we have.

Could you get that for me? When do you need it? I told him I'd call him back this afternoon.

Doesn't work because I will give you a poor rate.

I'll do the best I can because that's what I'm here to do, but it won't be as good as it could be.

So when you are, start thinking about that on day one.

This is where you have to start thinking about it's okay to brag about yourself, I think is what I will say.

Program managers are experts in that program and they can tell you how they're going to run that program, but they have to start doing some research so that when this rate all of a sudden pops out on a piece of paper, you're going to be able to see if that rate makes sense and the reason you're going to do that is you're going to know about similar programs in the community.

You probably know about that already.

That's information you already have that you're going to be able to use for developing a rate.

Know what the prevalent rate for the service is in the community.

If you're lucky enough that you're the first time that you've invented the whole new thing, then you're a little lucky because no one has that service yet and you can really determine what that rate is going to be.

But if you are competing, it's a business.

You are competing with other people providing that rate, know what their rates are because when you calculate that rate, you need to be able to compare it to their rate to see if it makes sense.

So start doing that research on day one. The uniqueness of your program, the uniqueness of your work product, we talk about how to get into VR, we talked about how to get into the schools.

If you have a great service, they're going to want to hear what you have to say and then the important thing is to establish a reasonable rate, a competitive reasonable rate to offer that service, but start bragging about yourself and this is why you need us.

I think Dave just talked about it, you can't live without us.

You definitely want to have a service like that.

AUDIENCE MEMBER: Chicago, again.

Hi, everybody. I couldn't help it.

What if the competitive rate is zero.

So, in other words, like in Chicago there is a lot, there is like, we use HUD money for community block grant money comes to the city and it gets used for a lot of different small programs and a lot of community-based organizations.

You know the parent training information centers, so in terms of a niche or uniqueness things like that, we gotta get like super boutique I think in our independent living center.

But, if you're competing, it's similar to what I think Dave was talking about which is when, or no it was you, somebody said I used to give this for free and now I want to charge for it.

So that's what I want to know about setting rates and being competitive.

CARA STEIDEL: What we actually had that situation with our transition services with, we with fortunate to have a four year grant to start developing that.

And through the end of that grant we're like how are we going to convince people they want to pay for this when we've been providing it for fee for so long.

We did have to communicate that it was a grant.

The grant was ending.

That is the reality of it all, but again we developed a quality program that people couldn't live without.

And when that community got around that this is a quality program and it got around the community from our parents, from Seth, from Joe, this is why you want to be in this, people recognize that we either have to pay for this or we don't have it.

That's our choice.

So we would rather have it because it's good and it's quality and it's serving us well.

None of this works without good work product.

None of it works.

It would be like if we all had an iphone that didn't work.

Why would I spend $200 on an iphone if it doesn't work, it's the same kind of thing.

If you have a quality service and it works, people will be interested.

One thing to do, too, after you really know what you need, is get ready to talk about yourselves. Get ready to do that.

Start thinking about when you're doing a grant, grants can be handcuffing in way because you said this is what you're going to do with your money and they expect you to do that with their money.

And as you are doing that and you think we should have done this differently it would work a lot better if we did it another way.

I have a question.

RICHARD PETTY: Just to come back to Ronnie's questions, maybe to answer one part of that also, if you're asking if someone else is providing this service for free AUDIENCE MEMBER: That's part of it or yourself.

RICHARD PETTY: If someone else is providing service for free, then you're probably going to have an uphill climb trying to charge for it unless you're doing something that's value added for where you are.

You're in a tough place.

CARA STEIDEL: You might want to consider a different way to approach the fee-for-service.

What can I do differently than I'm offering a different service than what they are doing.

If you have two programs that are equal and one is free and one is not, that is a no brainer.

Of course I'm going for free.

No brainer.

Now we really are going to, after this one we are really going to look at numbers, I promise.

Before you start looking at the numbers, we talked about you will have to convert all your thoughts to numbers.

And that's sort of my responsibility to keep asking those questions of my program manager who will tell me how many staff members you think you need to be able to do this.

How much do you think, you're going to 15 conferences a year.

That's not true, but we're pretending.

You're going to 15 conferences a year, how much is that going to cost? You can figure all that stuff out.

You're going to travel across the state and travel across the state 30 times a year.

You can determine what your travel costs are.

It's really no different than developing a grant budget, but the advantages is you have your grant budget, if you are starting with a grant.

You have your grant budget as a basis so you can then make changes off that grant budget.

If you're doing your grant writing well, a lot of this collaboration takes place during the grant writing.

You've already done a lot of research.

Now you have the experience and the experience will tell you what to change on your budget.

So here come the numbers.

My intent is not to make this, the numbers are just there for representation.

They don't represent one of our budgets.

They don't represent maybe what a new budget would be.

It's just to show what you the process procedure will be.

I try to make the numbers relatively easy and work out so the conversation can flow.

The first thing we want to talk about, we have our grant budget which I was talking about, we want to start with our grant budget.

That already existed before we started this whole process.

Now we're in the midst of the grant budget and coming to the end and saying we've got to do this fee-for-service now, what are we going to have to do to provide that service? I just don't pull up a number and say, oh, our program staff costs are going to go from 120,000 to 150.

This results because the program manager has said to do this project, to do it well, I need this number of people.

And then I take that number of staff members, multiply it by their salaries, and determine what that cost is going to be.

That can go up and down on an ongoing basis during this whole process.

But that is just, these are the items that we changed or theoretically changed when we were doing this budget.

If we change our program staff, you have to change your program benefits.

We could have had to change rent, but we didn't for whatever reason.

I made the assumption we didn't change that.

Assumptions, make good, intelligent assumptions.

A lot of times people are really uncomfortable saying this is how many people I am confident that this is how many people I will need to do this service.

It's okay to say, you know, I'm not 100 percent, but I'm 95 percent and that will be backed up by the research you've already done in the community and what the demands for the service are.

So it's all backed up by what you've already done and now it's just being converted to a number.

Start up costs, we said that was going to change because lucky for us the grant provided our start up costs.

Start up costs being laptops for all our staff members.

Desks, people need desks to start up.

That we're saying on an ongoing basis that's not going to be as high because the grant allowed us to start up with that.

The other changes are travel.

During that time period, we just determined we have a lot more travel than we anticipated.

We probably ran out of travel money during the grant process.

We probably weren't able to do a grant revision to get reimbursed for that travel.

But we're recognizing now on an ongoing basis on a long-term basis our travel expenses are going to be that.

So the first thing you're doing in the whole process is determining what your total budget for the new program is.

Remember this number, this 364, because that's going to carry through.

The 364 over there.

That's going to carry through to the next slide.

So you have, you know what the whole thing is going to cost now.

All right, now we know what it's going to cost.

What do we charge per hour? We're getting there.

AUDIENCE MEMBER: Cara, another question.

I'm really sorry.

Just think about having to work with me all time, okay? CARA STEIDEL: I work with them. It's okay.

AUDIENCE MEMBER: Okay, when we, because we have managed care in now and so we did a fee menu for our community integration program, getting people out of nursing homes.

And when I did the calculations for, let's think, okay, like per staff person, how many people could be, get the outcome that you want to pitch to your funder.

Like is this where that smart assumption comes from? CARA STEIDEL: Right. Exactly.

Like you knew based on your experience or based on the research you've done that each staff member could serve, I'll say five people, just keep it easy.

So if you had five staff members, then you're going to be able to serve 25 people.

So that's a key assumption.

Those assumptions have to be good.

AUDIENCE MEMBER: So what I was thinking about, and this is a question I wrote down on paper so you can tear that up, was that we weren't so hot about case notes.

And so in terms of data, so what I'm trying to get at is like the trends of our past was not very well collected.

You know, and I think that's actually common around a lot of places.

This is like my fourth Independent Living Center I've work at where data collection is not one of our strengths because we tend to help and then we're moving on to something else.

So I'm kind of curious about that piece, too, if you're not so good on data collection.

CARA STEIDEL: Your data collection may not have been good but your intuition is very good.

So if you're saying based on my experience we can serve ten, I'm going to be respectful of that experience.

I may say, well, tell me more.

Tell me more.

I'm not going to go show me the number.

I'm not going to necessarily say that.

I'd love to have the number.

I love numbers, but I'm not going to require that.

I'm going to trust your intuition and your expertise on why you think that.

AUDIENCE MEMBER: Well the funder might ask me, the funder is going to question.

We have a reputation probably because of our history with the funders.

So like the state, kind of going back to this whole issue of being an advocate with funding resource like we've angered in some respects some of the state agencies, right? So we then therefore have a credibility problem.

You see what I'm saying? CARA STEIDEL: I do.

If the funder is requiring you to keep data, you really need to keep data.

That's a disciplinary thing that you have to culturally have to do.

AUDIENCE MEMBER: Right, but this is also related to like, like the presenters were talking about passing the torch down.

What if you had people that worked before you that are a whole lot older than you and they just kind of didn't give a crap about that and then now you get to eat a big bowl of poop because of what they didn't do.

CARA STEIDEL: I don't know.

I'm not sure how to respond to that.

That's a difficult one.

I don't know.

I would have to, that's what is great about fee-for-service, you get rid of that data collection requirement.

It's really a nice thing.

You're now on your own.

You're not cubby holed by your funders for the information they want.

Although it's good to know, but I would still have to rely on your intuition because now you're actually thinking about, I'm starting a new business.

I'm starting a whole new thing.

AUDIENCE MEMBER: I just had a quick question under the budget you have a category, other.

CARA STEIDEL: I'm glad, other.

Other is everything that I didn't want to list there.

It could be almost anything.

AUDIENCE MEMBER: Is that movable money then or is that just stuff you didn't feel like putting in a category? CARA STEIDEL: Stuff I didn't feel like putting in a category.

I just didn't want to bog us down with so many lines that it got ugly.

RICHARD PETTY: Just another response to Ronnie's questions.

This is important is that if you don't have that data, and you know bad if you didn't, but if you don't have it, another thing that you can do is pick up the phone and talk to other people who have done this.

If you don't think your intuition is good, if you don't think you can back that up enough to have a good number, then go find out what other people are charging.

Their circumstances will be different.

Break it down to a level where you can decide what fits your center and what doesn't fit your center.

Their rent costs may be different.

Their fringe may be different.

There may be all sorts of things that are different, but go down to a level of detail that's fine enough so that you'll know what you can apply to your circumstances and what won't apply and keep working with it that way until you get a rate that seems close.

CARA STEIDEL: And that level of detail is required and that's what takes some time.

Sometimes I do have to hide in my office and go through that level of detail.

Sometimes I have to go to my program manager and say I need more detail.

Even if we don't have the number in front of us we talk about it until we develop a number.

Every word can be converted to a number at some point or every action can be converted to a number at some point.

The next thing we're going to do, and this is really for the first year to see if you're going in the right direction.

We want to determine what did minimum costs of the program are.

Sometimes we used to call that incremental costs or added costs.

These are just, we have a CIL and we are operating as a CIL right now.

This is before we had any fee-for-service.

And these were costs of our CIL.

Now we're going to start program A.

These are the costs that I know I'm going to have to add to have this program.

And this is going to be important later to see what your minimum billable time will have to be to make this successful for at least the first year.

So your minimum costs are going to be those things that you definitely will have to add to have this program for at least a year.

So in our case, our program director, this is our fee-for-service budget.

That's what we think on an ongoing basis we're going to have to do.

To have this program, we need a program director.

To have this program, we need the direct program staff; but maybe we don't need them to be in, maybe we don't have to increase our rent by 5,000.

I'm saying we have to add a new building or add new space.

Maybe we can squish them all in the same room at the same time which we did and it worked out really well, and maybe we won't turn the lights on as often so our utilities will go down and maybe we won't buy them any paper.

So those are the kinds of things we say.

You know what, we've got to get by here without.

And maybe this support staff, this is me.

I like to feel I'm valuable, but in this case I'm going to be there whether this program is there or not.

So to assign my cost to them on an additional cost is not, I don't have to do that.

Our Executive Director, those type of things, other overhead costs that I don't want to go into that exist, the copy machine, the expense of the copy machine.

We're going do have that any way whether we have this program or not, we have that type of cost any way.

So the minimum, minimum, minimum cost of adding this program is almost $280,000.

Again, keep these numbers in mind because they are going to roll forward as we move on.

Okay, how many, I think what's next is billable hours.

This isn't as really complicated as maybe we all think it is.

And it really goes down to I made that assumption.

My assumption is, or we, I didn't, not me, we made the assumption that we were going to need, first I'm taking a step back.

Sorry.

How many hours can one possibly work in a year? We want to determine that.

How many billable hours are available? Wouldn't it be great if we could bill for every single hour we exist at work or working? Well, we can't, but let's at least figure out what one person could theoretically do in one year.

So you take a 7.5 hours, this is for a full time person.

They are working 7.5 hours a day, 37.5 hours a week.

7.5 times 5 is 37.5.

There are 52 weeks in a year.

Let's assume working every day of the year, every week.

The maximum, maximum, maximum the number of hours you can get out of a person is 1,950 hours.

Max.

That's if they bill every single moment of every single day and they never, ever take vacation, holiday or are ever sick.

But that's not reality.

So what we are going to do is we are going to subtract holidays.

I assume there are 11 holidays in the year.

Sick time, I assumed your employees get ten days a year.

And vacation, I assume three weeks vacation.

Now, not everybody gets three weeks vacation when they start.

I just want to point out is when we're doing these assumptions and Dave actually said this, I think it was Dave or maybe Peter, I don't remember which one, this rate we're developing isn't just for next week.

This rate is really for a number of years because the likelihood that you'll be able to change this rate every other week, every year is unrealistic.

So we want to have a rate that's going to be good for awhile.

So if you're hiring all these people today, they might all age up or their years of service may age up where they do have three weeks of vacation.

So I picked three weeks because that's kind of in the middle of our benefit package.

So I assume three weeks of vacation.

So you have to subtract that benefit time from the total hours that are really available.

So you as an employee can work about 1,680 hours a year.

That's truly what's available to be billed.

I see a question.

We need a mic up here.

AUDIENCE MEMBER: But if you have paid holidays, paid sick time, paid vacation, how come you deduct it then from the overall? Does that come from another budget? CARA STEIDEL: No, we're not deducting dollars.

This these just hours.

It may make more sense when we go on.

We're not saying we're not going to charge people for, how do I say this, the cost of having that person available, we can only charge them the time that they are available to work.

So we are actually going to make the rate go up because there is less hours to divide by the total costs, okay? Now, how many hours are available to the program? We're talking about this slide when spreadsheets first came out and yes I was employed at that time, one of the things that a mentor said to me, he said, and we were using Lotus.

This was before Excel.

Said spreadsheet software is great.

Every number looks correct.

Every number is perfect.

Just because you used Excel doesn't mean it's right.

Okay? It's going to be evident on this slide because I have an error on this slide but it looks good.

Okay, total hours available to the program per person, remember? 1,680.

Number of people on the staff, remember we said we need five people to work this program? That was five people, if my memory is correct, is $150,000.

There are those five people.

We need five people.

This next number, stop right here.

This is really an important number.

This number over here is really, really important.

How much time can somebody realistically be expected to bill.

You know you are here today.

You couldn't bill for your time here today.

You're in a meeting with your boss.

You can't bill for that time.

Realistically, what can be a realistic expectation of how much your staff can be expected to have billable time? This is really critical.

If you expect, if you do not have this as part of your calculation, you will have an artificially low rate, or you will burn every staff member out really quickly saying that they have to bill for every second that they're in the office.

Because it just realistically can't happen.

70 percent we have found to be reasonable.

But we may find out that that's not reasonable while this calculation goes through or we may find that when we get the rate, is it too high or too low? Are we going to have to make that go up just to make this work.

If you have to make that go up over 70 percent, be careful, because it really is hard.

You really do need that time for administrative time or you have to be really aware of how you're able to bill.

I think Joe has a comment.

This is my colleague, I'm a little nervous.

JOE MICHENER: No, I just wanted to go back to the intuition thing.

This is a good example of a conversation Cara and I had over the course of several weeks and Rick and I had over the course of several weeks of how much time we could bill for, percentage wise, out of a person's day, week, month, whatever the case may be and still provide quality service.

You know, we're talking about providing 70 percent billable time, what happens in that other 30 percent of a person's time? That's the administrative duties, figuring out your schedules, making the phone calls, doing your billing, figuring out your mileage and I know from being a vocational coach for many years that that was feasible.

That if we wanted to provide quality service, and 70 percent is hard, a lot of our staff struggle with that.

To fit in everything you have to possibly do in that time is very difficult, but you can manage, we've determined, we can manage and still provide quality service with that number.

If a vocational coach had to provide 75 percent billable time, that would significantly affect the product and the service we were providing.

So this number Cara and I talked about back and forth over the course of several weeks to try to figure it out.

CARA STEIDEL: Thank you, Joe.

So that's a key number.

You really do, and he kept saying it is quality work.

It's quality work.

It doesn't matter what our rate is if it's not quality work, it doesn't matter.

It could be free and they wouldn't want, they might want it if it's free.

Never mind.

Okay, the next here is we have one program director.

Here is another significant number right here.

Percent of billable time for our program director is 50 percent.

If your program director, remember Amy talked about how her Executive Director responsibilities have changed and she's not writing the report anymore because that director needs to be directing.

They need to be expanding the program.

Making contacts in the community.

Making sure the staff Is providing quality product.

To expect them to have the same amount of billable time as a direct staff member of that product, program is really unrealistic.

It's unrealistic to expect your program director to be able to provide that supervisory staff time that's needed if you are at the same rate.

50 percent is really too high.

It's really, really too high.

But remember it's the first year.

We want to see what our rate can be that first year and we know we're in a growth process, but our ultimate goal is for that number to be zero.

That really is the ultimate goal.

We're not there, but ultimately when the program is growing and the program is developed correctly and you are at the right spot and you are providing quality service and people cannot live without you, that should be zero.

That's ideal.

And here is my error.

If I said one person can work 1600 hours, and my program director is going to work half of that, how could that be 2940? Amy said it's because they are an exempt employee, which may be true.

That number should be 840.

It should be half of 1680.

That number should be 840 because it's half of the time that someone is available.

Which means this number will change, but doesn't it look pretty.

This number should be, hold on, should be 6,720 hours.

It's important.

That is a bad error because that would really lower our rate which you'll see later on.

It will really lower our rate art artificially.

Did I look at the slide a million times? Yes.

Did I look at it one more time and think oh my gosh that is not right? Too late to have it changed, confession, there it is.

Just because you've done it on Excel doesn't mean it's right.

Now we have our total hours available to bill, which are, I'll use the wrong 8800 hours -- AUDIENCE MEMBER: Cara, can you just repeat what the correct number is so folks can make that.

CARA STEIDEL: The correct number here, the 2940 should be 840.

That's a lot of hours that I messed up.

I can tell you how I messed up.

This 2940 is 50 percent of this 5880.

So this formula in this cell is wrong.

But this should be 840.

Which to get that number it's 1680 at 50 percent or divided by two or half.

Is 680 hours.

It's saying this was calculated 1680 times 5 times 70 percent which is 5880.

So this should be 640 and this number should be 6720.

So now just to review, we have total costs for the program, total billable hours for the program.

Now we can do costs per hour.

Let's do our little correction that 8820 should now be 6720.

But this is really great to see when the finance director makes an error and what a difference it can be.

It's a good learning experience.

Originally, to get the total program costs, this came from prior, remember when we figured out what the total costs for the year were, they were $364,000 for the program.

And now we just calculated what our billable hours were, which are 6720, but in this case it's 8820. Divide, total program costs which you have worked really, really hard to determine.

It just doesn't drop from the sky.

That took weeks.

In fact, if you look at this conference today, this is the last session and this is billable time and the time that is required to explain billable time, but all the time we took on Tuesday and Wednesday getting to this point before a number was even looked at, that's really the thing that happens when you're doing this.

I'm like a translator.

There are a lot of times when I'm sitting in the meeting and not saying a whole lot, I'm just listening and saying this means we need this expense or this cost so I'm learning from my colleagues what costs are going to be.

It takes time to gather all that information.

Then you calculate this rate.

Then you go back and you say does this make sense? And then you calculate it again.

And then you go back and ask them if this makes sense.

Lucky you if you can do this one time and you nail it the first time you do it.

Because it really doesn't happen.

So you have the total program costs divided by the billable hours.

And let's use the incorrect billable hours for a moment.

If you divide 364,000 divided by 8,820, you will get 41.27.

That is the wrong rate.

Because if you use the correct number, in this case this is 6,720.

The real rate is 54.16.

That's what the rate is saying.

That's what you're saying is the going rate for this program.

Now, let's pretend I didn't discover this error and we came up with 41.27.

Now we have a rate.

I bee line it over to my colleagues office and say, I shouldn't have to did that because they've told me what the competitive rate is and let's say the competitive rate is $52.

That's what providing a similar service, no one is providing our service.

We are unique.

We provide something really unique.

That's the ideal situation.

But let's say it's $52.

And I walk over there and we must have done something wrong.

This rate is too low.

We can't, what did we miss? So that would force us to go back.

What did we miss? Well, Cara made an error in this case, but that is why you need to have that information.

You need that information before you even start this so when you get to your point of your billable time, you have that.

So the real rate is $54.16.

And our competitor, competitor because we're in a business and this is a business of selling our service and providing services, our competitor is $52 an hour.

Now we're at 54.

What are we going to do? I think our first thought process is to say we're better than they are and this is why.

Don't just say we are better than they are just because we are.

You have to have reasons why, what is the unique aspect of your program that you can justify charging someone two dollars more per hour.

Because I guarantee you the provider is going to say, but we can get this for $52.

And you want to charge us 54.

Now you may never be able to get through that hump.

You may have to charge 52.

That's when you start saying, okay, can we do it at 52? What do we have to eliminate? Maybe we won't be able to travel as often? Maybe we won't be able to provide certain things that we hoped to provide.

Maybe the program manager is going to have to do more direct billing for awhile until we get ourselves off the ground.

That is why it's so critical to have your competitor's information and what their hourly rate is.

Now, every time we've established a rate for a fee-for-service product or service, it's never been done once.

This is an ongoing thing.

This is an over simplified procedure of what you do but it is the basics of how you have to get there.

AUDIENCE MEMBER: Hello.

So this might be an overcomplicated question, but this rate is assuming that all of your staff work all of their billable hours and is that guaranteeing that you're going to turn a profit only if you work all of those billable hours completely? Does that make sense? CARA STEIDEL: That's an excellent question and it's not overcomplicated.

We just calculate if all staff billed 70 percent of their time, okay, and the answer, you asked the question about the benefit time.

Well, we took that out so we made the rate go up.

If we would have left the hours of benefit time in there our rate would be artificially low.

So when people took vacation, we're actually building into the rate the cost of vacation and benefit time.

But to ask your question, this is like we're getting this program off the ground with the intent that we're going to be able to grow this.

As we grow, yes, we have to add staff members but some other item costs will go down per unit.

But, yes, that's exactly what we're saying.

We're just looking at this, okay, this is just what we have to do to cover our total costs, which lead right into the next thing.

It's perfect segue.

Remember we determined what the minimum costs of the program were? That's the question we asked, okay, we're just starting this.

What are the chances of us being able to sell everything? I have a question and we'll go back to this.

AUDIENCE MEMBER: Hi, maybe I missed it, but this gentleman here from, Joe, when he said that within the 30 percent might be administrative tasks that seem related to the billable, to the fee-for-service.

Wouldn't that be included as hours, as billable hours only because, for example, when we're filling out our IL time, we include the time that we take actually entering it into the system.

CARA STEIDEL: Joe, you want to, first I commend you.

These a great way to think about billable time because we have had to educate our staff on what really billable time is.

And sometimes they say that's not billable time, but maybe it really is.

That's a great comment.

You do have to kind of think outside of the box.

We're so used to providing a direct service and that's through direct billable time and sometimes entering that information into our data collection system and it's for John Smith, that can be billable time.

A lot of people don't think of it that way, but I'm not answering your question.

I'm just saying how you have to think about billable time.

JOE MICHENER: And I can just add it's really based on the guidelines of your funder and what you're permitted to bill for.

For our Career Path program, for our vocational services, we can bill for direct service to our consumers, to our customers.

So documentation, I'll give you a very concrete example.

A job coach goes to a job and coaches somebody on that job for two hours.

And they come back to the office and enter the documentation for that.

OVR says we can bill for that time.

We're on that job, not for the documentation of it.

So it is really the guidelines and every funder is different.

Our county offices have different rules for what we can bill for.

And that all has to be equated into your rate.

Our rate covers the 30 percent of nonbillable time.

CARA STEIDEL: And you really want to, by taking those hours out and making that 70 percent, that's giving you some buffer room when things don't go exactly as planned.

There are things that happen in life that you, your work day, that you're not going to be able to bill.

In our situation it's because of who we're providing the service to.

They are very specific on what is not billable time.

PAULA MCELWEE: There may be another complicating thing in the back of your mind, I'm not sure.

Many of your organizations have a cost allocation plan.

You have multiple funding sources and you have to keep special track of staff time related to cost allocation.

That still has to happen and it is not the same thing at all.

So it happens kind of parallel independent of this.

But this is a determination of what do we need to do to break even or make money and that's not the same thing as how you're going to allocate your costs.

It's a completely different ball of wax.

AUDIENCE MEMBER: So our agency, we sort of start, we're always up front with funders, but we start on the assumption that the documentation of the service is part and parcel of the service.

Not your time sheets, or filling out your mileage reimbursement requests, but progress notes and we say that, you know, assuming the funder, assuming you want progress notes and even if you don't, we want them for our own purposes, the consumer's purposes and we will spend no more than 20 percent of the total service time which equals service delivery plus documentation.

And then hopefully the funder won't balk at that and if they do, as Joe was saying, you have to crank up your rate because you have to write those progress notes.

CARA STEIDEL: It's one way or the other.

But knowing that billable time, billable time percentage rate is really, really critical and we actually monitor every employee with that.

They are aware of what they are billing.

They are aware if they are ahead or behind. So you will have to monitor that.

Now we're answering the question, this is the first year we're doing this.

What is the minimum amount of billable time we have to bill out to even make this work for at least a year? Because when you're starting a business, you have to accept that the first year may not go exactly as planned.

It may take a few years to get this thing off the ground.

So one of the decisions, we always go what is the minimum we have to do just to cover our additional costs? So remember awhile ago we determined what our bare minimum costs were.

Like I wasn't included.

Amy wouldn't be included.

The chair they sit on wouldn't be included.

Those type of things.

We determined that was almost $280,000.

And our program rate that we just calculated, which is incorrect, is $41.27.

Or if you want the correct number, that's $54.16.

If you take the minimum, just the added costs that we incurred in the program, divide it by the program rate, it tells you what your minimum billable hours for the year have to be just to cover those minimum costs.

So when we first started SLIRS.

I remember Amy used to say this a lot to the SLIRS staff, because SLIRS is our Sign Language Interpreter Referral Service and it is fee-for-service, there were months where it was really slow, just really, really slow, and we were not covering our costs on that and those were the months where Amy said there are going to be some months where the CIL supports SLIRS and there are going to be other months where SLIRS supports the CIL and that happens especially during the first year because it's new.

You're just getting it off the ground.

Lucky for you if you're so overwhelmed you have to just keep hiring.

That's great, but a lot of times that doesn't happen.

Ultimately, you want to get past that, but you at least want to know what your minimum billable time has to be for the first year.

So in our case that number, this 41.27 should be 54.16.

So this number would be 5160.

First thing we did when we got that number, I walked over to the office again and said, okay, here is the minimum billable time for the year.

Now if you divide that by your number of staff members and I'll just say five and taking the program manager completely out of that, can each member bill about 1,000 hours a year? Does that make sense? Do we have the work to do that? Are we getting the demand from our resource, in this case it could be vocational rehab.

Are we getting that? Are we getting that information? Are we getting that back? Are they telling us, yes, we have that.

It's your intuition again.

But your expertise that drives your intuition that's going to tell you, yes, that will work.

So that's really how you do a rate.

You determine what your total costs of the program are.

You determine what your staff is, you determine how many billable hours you realistically can expect them to do.

And you get a rate.

And then you look at the rate and you say does this make sense? Is this going to work in the community? Can I sell this? You have to sell it to your consumers.

Does that make sense? So the actual process of calculating the rate doesn't take long.

It's a very short process, but the reality of the work that goes behind that is very extensive.

And it all really comes down to every action you do, every idea you have, every piece of research you've done converts to a dollar somehow.

Eventually it becomes part of the rate.

So the more you tell your finance person the more the finance person learns about your program, the better your rate will be.

No more numbers.

Done with the numbers.

But we do want to talk about cash flow.

We have been so fortunate that our consumer of these fee-for-service products that we have has always been someone who will pay their bills.

They may pay them a little late.

They may dispute how they want to pay them, but they pay them.

We are so lucky in that regard.

AUDIENCE MEMBER: How long did you run at a loss? CARA STEIDEL: Well, Career Path AUDIENCE MEMBER: with the SLIRS? Which caught me off guard when I first heard that.

CARA STEIDEL: for SLIRS I have to think about it for a second.

I would say the first year, first when we looked at SLIRS, we looked at when we said profit or loss, we were really just looking at covering our minimum costs first.

So the first year we probably didn't cover our minimum costs.

AUDIENCE MEMBER: One year.

CARA STEIDEL: Right.

And we were very fortunate.

And that shows you how great of a need for that service was.

And again it goes back to your research.

We were finding out how great the need was because we started the grant and seven days we had a phone call.

We were so fortunate that we fell into it, we didn't fall into this, but we were given the opportunity to provide this service.

But obviously it's really, really needed.

And then there was a moment where we were going, a lot of our sign language interpreter referral services is medical-related.

So like we had some 24 hour interpreting services because someone was in the hospital for a lengthy period of time for 24 hours.

Well, you know, it just was amazing as far as the income we were bringing in, but then that doesn't always happen.

So a lot of that is dependent on to what's going on in the deaf community.

When you really think about it, it depends on what kind of demand there is for the product and that you cannot predict.

We will have waves like that.

So the first year when we would have those dips, it really dramatically impacted us because we didn't have that history of other clients to fill that in, but now we're seeing more of a consistent type of demand for our service.

And SLIRS is a little unique, too.

When I talked about the type of customers that we utilize, a lot of our fee-for-services were paid by OVR or were paid by waiver supports coordination which is all part of the state of Pennsylvania.

So even though they may delay payment because of budgetary reasons, we do eventually get paid.

SLIRS is a whole different thing.

Sometimes we're billing a private individual.

Sometimes we're billing a hospital that I honestly don't know if we'll get paid for.

That is a dilemma from a social services standpoint.

If we put a customer on hold and we're not providing a sign language interpreter, the only person that's really hurt is the consumer.

That's a huge dilemma for us.

I don't know if the hospital knows it's a huge dilemma for us and takes advantage of that, but that's a dilemma.

If we suddenly say we can't provide services to you any longer because you're not paying us, who gets hurt? It's our ultimately is the deaf individual.

AUDIENCE MEMBER: I might be jumping ahead, or if you want to save this question for after this portion, but just going back to the beginning, I guess this is assuming that this is a new program like a new grant or something that you're just starting up.

For existing programs that we want to start considering turning into fee-for-service, are there additional things to consider? Or do you just kind of follow the same format? CARA STEIDEL: You really follow the same thing, but you are at a huge advantage because you've been providing the service for a long time.

So you really know what the costs of that service are.

That's why it's great to get a grant.

One of our grants was only for eight months.

It was really not enough to get our hands on that.

One grant was for four years.

If you've been providing this as a part of your program, you know your costs and you're way ahead of the game.

It is the same procedure, you're just way a ahead because you really have the expertise now.

All right so depending on your type of customer, that will determine whether somebody is paying you or not, but you do have to rely on a delay.

You're providing the service.

You're sending out the bill.

Maybe 30 days later you're being paid if you're lucky.

30 day is really good.

Let's say 60 days you're being paid.

So during that time you might have cash flow problems and we talked about this a little bit when we first opened SLIRS we were worried about making payroll.

I was not there at the time.

I do not have that experience, but getting that line of credit now, go back if you do not have a line of credit right now, when you return, please encourage your board, whoever you need to encourage to get it, get one.

Even if it's a small amount, just get one.

If you're going to go into fee-for-service, that will take you through.

It should take you through those cash flow times.

It can be difficult to get that line of credit.

AUDIENCE MEMBER: This is Christina and I have a quick question.

I didn't know the answer.

When we were calculating the direct staff hours, I know you calculated the number of hours that they would work, which was 70 percent of their time for 52 weeks.

But I didn't see where you calculated like what they got paid.

So how do you calculate the wage? CARA STEIDEL: Well, that went back when we did the total cost and that's based on my colleague's expertise.

What kind of person do we need to bring in here.

What is the going rate for that position? And we need five of them? So I think in my example I said five staff members and I made the assumption it was $30,000 a year.

Doesn't mean that's the right one, that just means that's what I chose.

AUDIENCE MEMBER: Got you.

CARA STEIDEL: All right, collections, I hate collections.

I really do.

Strong word, but I don't like it.

That is the reality of going fee-for-service.

You do have to, some people just don't want to pay you.

It just is what it is.

So you have to be aware and you do have to stay on top of it, but I will say a lot of times it's because they've lost the invoice or we have not invoiced exactly the way they wanted them to.

And instead of calling us and telling us, they just don't pay us.

But those are the type of things that you do have to acknowledge that you're going to have to put some work into that.

That is not billable time.

I'm not saying any part of direct service providers do collections, but there is a kind of thing where that's not billable time no matter how you package it.

When providing a service to, I'll call any type of business or any type of customer or consumer, understand where their cash source comes from.

Because if they're having trouble with their cash source, they're going to have trouble paying you.

That's again why you need a line of credit.

If you were providing to an individual family and they are going to privately pay, you really need to evaluate what your policy is going to be on that.

And I would highly recommend it being paid a little bit up front because, especially if you provided this fee, this service for free before.

It's really going to become quite, there is going to be invoice shock when they get the invoice.

They may or they may not.

You may have a great experience with this family or they may never pay you.

Really evaluate that policy.

Do your research on that family, understand where they are coming from and you may want to ask for part of the payment up front.

AUDIENCE MEMBER: This is Ronnie again.

I'm curious about, and maybe you can't answer this, but staff, getting staff used to charging consumers and asking for that payment or have you decided structurally how collections have been? Like, I'm just imagining like a front line staffer.

They present whatever the product is going to be so to speak.

Do they then before I can move forward on this, you need to talk to X. person in my agency or do they collect there? Do you know what I mean? I want to know because I sort of feel like this would be, it's going to be organizationally.

It has been a shift for us, but in terms of collections for private pay, like how to get staff to be on board with it? CARA STEIDEL: What we would do in private pay situation is the, Joe would actually talk with the program director.

Would actually sit down with the family and say this is our policy.

And if I needed to be involved in that meeting, I would.

But what happens after, let's say they are delaying their payment.

Since they have a relationship with Joe, he would actually be their first contact.

And then maybe I would have to become involved with that contact.

So it really, for private pay, it's a little unique because the direct staff does have that relationship with the family, but we take it out of the direct staff providing the service.

So they don't have any conflict on that.

It becomes an organizational type of thing.

But the most important thing is they know that up front.

They know what they are signing on to.

That's the most important thing.

Now, you've done everything right.

Everything is going well, but someone still doesn't pay you.

It's just the reality of doing business.

So plan on bad debts.

Or don't beat yourself up tremendously for a bad debt.

You want to have as low amount as possible, but there will be, if you're doing private pay and you're doing it for two individuals or, I mean our SLIRS cover the gamut, we have hospital, attorneys, schools, private, funeral, all sorts of things wherever you would need a sign language interpreter, that covers it all.

It's a little different from our other fee-for-service where we're billing the state primarily.

They could be billing me because I asked for an interpreter.

The reality is it's going to happen sometimes.

We actually had a well represented, one of our area provides service for youth, declared bankruptcy and they owed us money at the time.

So we lost, we had a bad debt.

There is nothing wrong with that.

That's the reality of doing business.

You want to minimize it as much as you can.

So once you establish all, once you establish your rate and you've established what's required to do a rate and now you're ready to go, this is so much different than operating a business on a grant thing.

Because a grant, the money comes in and you use the money just the way you said you were going to use it, and you don't have any money left over at the end.

Ideally, what happens is you develop this program and you develop it well and your fee-for-service is structured correctly and it starts to grow.

You are able to develop income.

I mean, that's okay.

It's a good thing.

And then that frees you up as far as what decisions you can make for the rest of your organization because it's unrestricted money.

But the reality, but you also have to recognize in the beginning you're not going to generate that income because in the beginning you have to sell your service.

It's sort of, I'll go back to my iphone example.

At one point they were only selling five iPhones a year and now they are selling a bizillion, who knows how much they are selling.

But they've generated that business and now you can't live without it.

So they are able to generate that income.

So it does change the way the opportunities for what you can do with the money.

And that allows you when you start to generate income, and different fee-for-services allow you different income.

Like there is a lot of, your fee-for-service at one point might be extremely, extremely low the income you're generating and another fee-for-service will hows you to generate more income.

That's something to think about when you're deciding where you want to go fee-for-service.

There is nothing wrong with providing a great quality product and providing great services, but also earning income.

There is nothing wrong with that.

It's reasonable income.

It's going to improve the program you're providing.

Because hopefully, you're putting this money back into the program.

If we generate additional income, what a great opportunity for us to develop something that isn't provided fee-for-service-wise.

That gives us the option to maybe provide additional services to somebody that we can no longer bill for.

That's the type of income I'm talking.

It goes right back into the program.

It goes right back into benefiting our consumers instead of being limited by our funding.

So have fun.

JUDITH HOLT: Any last questions for Cara? I want to see if she wants a job in Utah.

I seem to have a little static going back there.

And thank you.

That was a great program.

And very, very clear and very to the point.

I have a question for you though.

So how long do you chase bad debt before you just acknowledge it's going to be there? CARA STEIDEL: That's hard to give like a direct answer to that.

It depends on the customer.

Like when somebody goes bankrupt, okay, we're done.

I'm not calling them anymore.

I talk about this one hospital, it's like I know they're eventually going to pay us.

I just have to keep hounding them and hounding them, that takes a lot of time.

It's real annoying.

And then there might be a private pay where you may just have, there isn't a direct answer.

You just have to use your gut to determine, you know what, I'm not getting anywhere this is not a positive thing anymore, we are done with you.

JUDITH HOLT: And acknowledge the point that Cara made was important, if you do a business there will be some bad debt.

Hopefully not a whole bunch, but there will be some.

It's not your fault.

That's just with business that happens.

I think we're going to have, yeah, you're going to get about five minutes early.

No, I can't do that.

Could someone give Amy the mic.

This morning we got, everyone had to compress their presentations just a little bit and Amy had a really important slide she wanted to discuss that she skipped in order to give the other folks their time.

So I wanted her to have a chance to kind of speak to the issue about how do you balance your advocate role and your new role in fee-for-service. Thanks, Amy.

AMY BECK: Thank you.

I thought our perspective on when I answered that question in my notes, it was a little bit different.

I think it was slide 11 in mine.

You know, the role, and I'm going to use our Sign Language Interpreter Referral Service to explain to you that I think there have been times when it's been challenging to be the advocate and also to be a service provider.

You know, our agency has chosen not to provide some services because we felt that we could not remain in our core role of advocate, but in the sign language interpreter world, if someone is calling in to our, it's possible that our sign language interpreter referral staff, will get a call from someone saying I want to complain because a doctor did not provide an interpreter to me.

We realize that as a business our thinking there may not be as strong as we want it to be.

That person would immediately, that consumer gets referred to our core services and advocacy.

And that is handled separately.

The sign language program will not be involved on that except to pass that on.

And then also if we get, if our advocate staff get a call saying, you know, I'm working with someone.

We really need to get them a sign language interpreter, do you know where we can get an interpreter or having an advocacy issue, we need an interpreter.

We direct them to contact the office of deaf and hard of hearing for a list of interpreters and referral services.

We do not put ourself in that conflict.

So that is what I was talking about when we keep some distance between our roles and our staff functions.

And it could also happen in terms of our transition services as well where we may need to refer someone to another organization that does advocacy.

We have some great partners in our community who do wonderful advocacy and we have to keep our eyes wide open and my staff, our directors are great at coming to me to say is there a conflict here? And they know I'm going to mull it over a little bit and really look at it from all sides because I want us to be squeaky clean and the bottom line is that our consumers get fair advocacy.

So I did mention that when we've dealt with things is to have open communication with OVR and if we ever felt there has been any possible concern, which has been rare, but occasionally we have had a parent who was a very vocal parent.

Maybe one of those parents we talked about who is overly involved or their identity is their child and we have one parent who also worked in a state, the same parent worked in a state disability organization.

And we've really had to be careful with that.

We were very careful whether or not the parent always did a good job of keeping her role of parent and maybe, I can't really speak to that, but we were very clear about that in thinking about that how we're going to deal with that.

We are going to treat that consumer the same way as every other consumer.

But if we felt our role was compromised we are going to refer it to another organization.

JUDITH HOLT: I'm glad you were able to go over that slide.

I think clearly Cara showed you how to think thoughtfully about going through, figuring out what a billable rate was.

And some of the challenges you have in fee-for-services.

On the other hand, you'll never forget your advocacy role.

And one of my best images that I'll take away from this conference that I'll have forever is yesterday afternoon when the presenters were over in this corner kind of debriefing and there was a group of about 20 advocates over in that corner with these two or three folks from the hotel and I thought, oh, my, do they understand that these folks are advocates? This is not your run of the mill customer, okay? But that was such a great, and y'all were being very calm, getting your points across and not letting anyone wiggle out of it too much.

And I thought what a great image that was for me of how the disability community can really make a difference.

And the difference is not just in how we change and do fee-for-service because that's good and that's great, but it's also in going back to what our core is, and that's advocacy.