KATHY KNOBLE-IVERSON: Yes. We're going to try to stay on task here. We're going to start on page nine of some of the info, there's good info in there. It's a little redundant. We've talked about it before, because we think it's really important. But we're going to get you to page nine. We really need to talk about, especially centers that don't have a lot of money in the bank. You need to talk about cash flow. And it's something that as an organization that, I don't know who's responsible, but it needs to be talked about on an administrative level. If you get your cash, if your checkbook gets down to zero or $5,000 every month after, if your payroll was once a month or twice a month, or every other week, you need to figure out how you're going to manage your cash so that you can add an additional service. There might be additional expenses that you're going to incur. If it's someone that's going to be traveling, you're going to have additional travel expenses. If someone needs a particular training or more supervising, oversight, again, I'm going to use assistive technology assessments. In Wisconsin, every assistive technology report has to be looked at by someone who is an ATP, an Assistive Technology Professional. So that takes additional time. It takes someone else's time. You need to know that it's going to tie up staff and that cost should also be built into your hourly rate. So there could also be huge delays in being reimbursed. It just depends on what you're going to do. In Wisconsin, again, once the assessment's done, they have to meet with the counselor and the consumer before you can do anything. And they have to approve and sign off on that report. Once that's done, then you can bill. So if it takes six weeks from referral to source, you're going to have six weeks where there's no income. Then you can bill. In Wisconsin, it easily takes 90 days to get reimbursed, no matter how quickly you do it. We bill VR every time a report's done, we do not wait until the end of the month. We send it out and we bill it. Because then you always have money coming in. But it takes a long time. It will take three or four months, before you have money always coming in from referrals. So you need to figure out how you're going to carry that expense load for those three, four, five, six months. And theres all sorts, yes? AUDIENCE MEMBER: I just have a quick question about that. We're doing some new fee-for-service stuff in our agency. So just talking about that it takes three or four months to get paid, do you send a second invoice, a third invoice or do you just know that it takes that long and you just wait it out. KATHIE KNOBLE-IVERSON: It depends on your relationship. We've learned enough about VR that we, and in Wisconsin, you can track your billing. It has a number on it and we can see where it is in the process. Unless there was a problem with the authorization, we know we have to wait at least 90 days. And then after that. And I have a great accountant and she keeps track of collections, aged receivables, if they're VR, I don't even ask her why we haven't been paid when they're out 90 days. But if they're 120, I want to know why we haven't been paid. DENNIS FITZGIBBONS: Government contracts are notorious for being slow in reimbursing. KATHIE KNOBLE-IVERSON: Very slow. And the VA is even worse. Then again, you're without cash, without money for some extended periods of time. I would encourage you to figure out if you can get some startup money from your source. Look at local foundations. Figure out how much expense, extra expense you're going to be carrying for that amount of time and see if you can't get, most of foundations in our area, when we get an award, they send you the check. You get a check for 20 or $25,000. And you can put that in the bank. And so then your cash flow issue is resolved. Startup money is always a good thing. Or if you have investments. If you have enough money that you can transfer back into your checking account or whatever, do it. We don't have that kind of money yet. So we have to, we're doing better. Personal care, when you do payroll for a pass program. It can wipe you out. It can be hundreds of thousands of dollars, depending on how big you are. So you need to just remember that. Then we're going to go to page ten. And I think it's also really important that your staff have job descriptions. You can't transfer somebody into a situation and them not understand what the expectations are. So if it's something they've never done before, but you have faith that they can rise to the occasion. You need to document that. And you can use your contract that has the expectation sheet in it. You can use that. You can put things right in a person's job description. And I think that's really important. And if there's timing issues. In Wisconsin, if they give you 60 days from the point of referral, might be 30 days. From the time you get that referral, you have to have contact with that consumer within 30 days. That probably should be in that job description also. So that you can use that to show people that that's an expectation of their job. To me, that's really important that you can't put somebody in a situation and them guess. Somebody said that earlier. You can't just guess at what you're supposed to do. And now we're going to get into the financial stuff. So don't sit there and wait until you're so confused you don't know what we're talking about. Ask questions. DENNIS FITZGIBBONS: Feel free to ask questions. And I'm already confused. So don't worry. Whatever you're looking at in terms of getting into fee-for-service, or any kind of funding, you want to know what the market's going to be to begin with. And you want, first of all know what the potential size of the market is, so as I was looking at the notes this morning, I tried to make this real, so I'm going to use the adapted driver evaluation program we have at Alpha One as an example of how this might work for you. When we wanted to know, if we get into this business, long ago, how many people with disabilities in the state of Maine would benefit from it? Because, you certainly don't want to jump into something and make a big expenditure and investment if it's only going to be a handful of people. So we were able to collect the data, which was not easy to do back in the early '80s because that much data wasn't out there about numbers of people with particular types of disabilities that might be interested in this type of service. We had a quick estimate back then that there might be a hundred thousand people in Maine that could benefit back then from this service, which is a good chunk of people. Certainly not all hundred thousand people were going to come to us for a driver evaluation. So then you want to look to a narrower piece, which is what's the likely size that the market's going to be. And you want to look at that. Let's say. Since we know that vocational rehab is probably going to be the payer of choice for these things, you're now narrowing the focus to people who are working age and people who have an immediate need for transportation as a way to meet their work goals and recognizing that VR has a limited budget; they're not going to send everybody who comes in the door. So you keep narrowing that number down. And look at the practicality of your own ability to provide a service. We decided that if we got 50 referrals a year, that would probably be a lot when we started. And a super amount would be about 100. Let's start looking at, what does 50 look like? And then we looked at the community to see what the competition was. Back then, there was no competition. It was the Wild West. We could do what we figured would work and figure it out as we went along. Since then, of course, there has been development of some competition. The question that's important to ask, is it time-sensitive? Is there something here that's pushing you to get into this now or the opportunity's going to be lost and that could be something like an RFP where you need to bid on it and submit a proposal. This does not meet that kind of qualification. It was something we were doing on our own. And then of course, it's always good, not that we don't want to look at the world through rose-colored glasses, but you want to know, what's the worst thing that could happen. Of course, the worst thing that could happen in this case was you don't get any referrals and you made an investment in a vehicle with the adaptive equipment and the training of the person to provide the service, et cetera, so there is an up front investment there in cost. So then you know if you're not getting the referrals, the answer is not you just give up and you go out and you start really working hard with VR, anyone else who might be interested in this to encourage those referrals. And the gates to open so that you get that flow of referrals of consumers coming in. Next, you want to analyze the cost of providing the service. Now, when you look at anything you do, anything that we do, there are fixed cost in the organization that don't usually change. If you own your own building, you have certain costs of maintenance, et cetera, things like that. Or if you rent space around whether you have one office, or multiple offices, rent is a fixed cost. It's not going to change on a monthly basis. May change when the lease is up, but utilities are fairly fixed in cost. Your legal and accounting cost may be fixed so there are certain things that may not be impacted at all by adding a new program, but they may be and you need to be mindful of that too. And then you want to look at the unit cost of the service you're developing. And this can take a number of different forms, but in this case, if you're going to be doing an evaluation, what's the cost of providing an evaluation. And we had a choice back then and we could make it an hourly rate. Or we could make it a combined rate. We started off with an hourly rate, because we thought some assessments might take longer than others and we didn't want to overcharge for what that assessment might be. So we analyzed the cost of the employee, who's going to be, they have a cost to employ them. It's their wages, salary, benefits and all the other things that get factored into employing somebody. And we were going to have a vehicle. And that could be a huge cost, of course, to invest in a lift equipped van, with high-tech equipment inside that can be used by a variety of people. We actually were able to get that whole thing donated early on, so it saved us the cost of doing that. And it's always a good idea to go with something like that when you can if you have some substantial investment costs in something like that. I think it's not necessarily easy, but it is something that is more marketable to look for a donation than something that's a little bit more fuzzy than when you talk about providing a service, such as skills training, it's hard to get someone to donate to cover something like that. But when you need something like a vehicle, we actually had a vehicle donated by a car dealer. That was an easy take after that. And then we went to vendors who sell adaptive equipment. And they knew they would probably get referrals from people getting their assessment, so why not have their equipment in the vehicle. There's lots of ways to get things done. But then you still got to put gas in the vehicle, got to insure it, figure out all those costs that go along with it. And you put the whole package together and now you've got all the cost into it and try to figure out, per assessment, if we're going to do that target of 50 this year, what's it going to cost per assessment to do that? And then you want to build in some wiggle room after that. Because you don't want to do it all at cost, you want to mark it up somewhat and that's really your call on how you do that. I think I gave an example yesterday of a percentage. We marked one thing up by, a CD pass contract up by three percent for contingencies and then two percent for sort of that return on investment so you can reinvest that into the tools that you need to keep effective and up to date. Then you have those other contingencies things that may be additional costs that you're not thinking of as some of the unit costs. So you want to add them in as well. Now we're on to page 14. And you want to then look at your market projections with the unit costs and that's sort of repetition here, but I wasn't around when this service was started. But I'm guessing at what the cost would have been to perform that. And I think that because we ended up starting with an hourly rate, we were charging $125 per hour for that evaluation. And we were probably making about $25 per evaluation. Wasn't a lot of money. Once you factored in all the costs that we had figured out that went with it. As the years went by, we changed the makeup of that and we went from the unit cost per hour to the unit cost per evaluation, which is now $500 per evaluation. And I would estimate we make $125 per evaluation. And we're probably, I think at our peak, we might have been doing 90 per year. And on average, probably 50 per year. Again, this is what I referred to as a boutique service yesterday. We're not going to get, not going to build a skyscraper with the money we make on this. It's going to pay for the employee cost, cover the vehicle costs, and it's going to provide an important service to people with disabilities. And you can, we can reinvest some of that money and saving for new equipment or a new vehicle down the road if we're not able to secure a donation. Add in the fixed costs. We saw no additional fixed costs in order to deliver this service. We didn't need a bigger building, didn't pay more rent, utilities didn't cost more, et cetera. So our, we then wanted to look at our break-even. How long was it going to take us to actually get past doing it at cost and making a little bit of money. And we estimated with some of the things like depreciation, et cetera, are factored in. That the best case, it would take us two years to break even. And likely case would be three years and worst case was we'd be back knocking on VR's door again for more referrals. We actually ended up meeting that best-case estimate and in two years, we were able to recoup the investment cost we made in that based on the number of assessments done in those two years. So you're building a budget on these things. We're on to page 15 now. And that's Kathie. Not going to do yours. KATHY KNOBLE-IVERSON: One of the things I want to share with you is we got a new accountant in our organization a little while ago and she helped me create the most useful tool and I don't care if you're the accountant or if you're the development person or a program person, we sat down and she figured out how much it costs per hour to maintain every staff person in our agency, other than home care. So we have 31 employees and so we have a sheet that tells me exactly, and we broke it out with wages and benefits, FICA, insurance, all of that and then we added the fixed cost, how much, all our offices are the same size. So I know how much an office costs per square foot and how much it cost for a year. We know how much average travel expenses are, we know all of that and so we fixed all that in there. So it's such a useful tool when you're going to write a grant or when you're looking at, how much is this going to cost us to pull this person out? You'll know it costs you, you know, $36.29 an hour if someone's going to do that job, if you're tagging one staff person to do that job. I did it by building a budget. And that's one of the things that I think is really useful, I don't want to be rude. But if you're a program person, you have to think a little bit about the financial aspect of what you're doing. And so when you're building a budget for a program, and, I'm going use the same example, I did use an example in here. I think I did, CCS, DENNIS FITZGIBBONS: May I add something there? KATHIE KNOBLE-IVERSON: Yeah, Uh-huh. DENNIS FITZGIBBONS: That's an interesting way of looking at things. We've actually done the same thing and we know what it costs for every one of our employees who actually can bill for services. So it varies, because some people have been there longer and some have been there shorter, they don't all make the same amount of money. The person who does our driver evals has actually been with us for 23 years. Makes more money than any other independent living specialist in the organization. And we have actually figured out, our controller came to me about two months ago and said, so-and-so now makes too much money to actually make enough to justify keeping her here as an employee. Because there's no program that we deliver where she can generate enough revenue to pay for her being an employee. So that's created an interesting problem for us to address. Because you don't want to lose someone who has such great value and such knowledge. This is a person with 23 years of independent living experience. So if anyone has any thoughts or suggestions on that, I'd love to hear that. Because it is a challenge. KATHIE KNOBLE-IVERSON: Yes? AUDIENCE MEMBER: I've a question. Other places I've worked, I've built the budget, because I'e been not just the program manager, but the development person. And so as we're thinking about sustainability or pulling the plug or those things what do you do, for example, if you project, person A is going to spend 20 hours on this and then you really find out it's taking them 40 hours, like, how do you monitor that and know when to cut it off or say it's okay to incur that additional expense. Who oversees that, which staff, et cetera… KATHIE KNOBLE-IVERSON: This is really interesting. We just had this. We decided to hire community-based skill trainers instead of having our independent living specialists do all the skill training and I asked that exact question to the supervisor. I said, I just saw Amy's time sheet and there was 63 hours on that for two weeks. And she only billed 15 hours. What was she doing? And the lightbulb went on with the two managers. And they go, oh, we haven't been watching that. So I gave them three months to get that person down, there's a certain amount. They need to come in and do their documentation, but that's built into our hourly rate. They need to come to staff meetings. You have to figure out how much extra time for somebody is legitimate. And if they're doing, if they're already on staff and you're pulling out the time, that's easier. If you're bringing a new staff person on, it's harder. And you do need to monitor that. I put that on supervisors. And we use, again, we use MyCIL, my center for independent living. It's a database collection. And it can be used as a really good management tool. And we collect a hundred percent of everybody's time every day. So we know exactly how much time it's taking. AUDIENCE MEMBER: It's a matter of them checking the KATHIE KNOBLE-IVERSON: Yes. The time sheets and the MyCIL, together. So that's really important. And you can build that in. If, we had somebody that we hired, bless her heart, she's wonderful at what she does. But she finally disclosed to us that she has a learning disability. So her documentation takes twice as long as it does for somebody else. So we had to accommodate for that. And we had to make sure that we could afford to have her doing that particular thing. Yes? AUDIENCE MEMBER: Had a question about you as an ADR or manager working on a fee-for-service kind of thing. Do you put some aspect of your time on that or are you still paid out of the CIL part of it as a resource development kind of thing, do you kind of keep that separate? KATHIE KNOBLE-IVERSON: In our agency, we do program budgeting and program accounting so we have these silos and we have an administration budget and that gets allocated back into all the other programs based on payroll. So a portion of me gets allocated back into the fee-for-service. AUDIENCE MEMBER: So some of the fee-for-service dollars are, you have a split cost allocation split with the fee-for-service as well. KATHIE KNOBLE-IVERSON: Fee-for-service right now, we're toying with setting that up as its own separate cost station. So it's easier to monitor. But right now, it's in IL. So I get allocated into IL, a certain portion, I think, probably, 36 percent of our administrative costs goes into IL and then based on the billing for the month, a portion of me gets allocated to every source of income that we have. So fee-for-service is one of those sources of income. That's what an allocation plan is supposed to do. People need to understand it. In our state, VR still does not understand an allocation plan. They have a really difficult time with it. DENNIS FITZGIBBONS: We allocate all our cost as well by program. As a percentage of the total revenue. KATHIE KNOBLE-IVERSON: Yeah. It's not hard to do. We hired somebody outside to come in and make that change for us. We were tracking, my monthly reports were like this, we were tracking every grant separately. And it was a nightmare. And then we at the same time, we purchased MyCIL and they're just, then you have this really nice way to collect information based on funding sources for staff. So we did both at the same time. We did that about nine years ago, maybe ten. AUDIENCE MEMBER: Do you ever find that some of the programs, fee-for-service that you do, might fall under the same cost objective? Do you know what I mean by that? Sometimes funding that might come in that follows along is not very separate from CIL services or core services. KATHIE KNOBLE-IVERSON: That's interesting because I always say, our staff don't know who the heck is paying for what they're doing when it's all the same thing. I'm sorry. They don't. They don't know if federal money is paying for it or state money's paying for it or private grants is paying for it. So especially core services, it gets fuzzy. When a person, and this, again, is very particular to our agency. When there is a funding source attached to a person, we expect to be paid. I don't care if it's a core service or a different service. We expect to be paid. We get $294,000 to serve other folks that have no source of income. It's not enough money. We don't have enough money to even serve people free. It's not free. They're funded by our base IL grants and so if there's a funding source attached to it and we got past this a long time ago. It's okay to ask a consumer if you have an open DVR file. If you get a referral from a county, we get this all the time. We're sending somebody over because they need an independent living assessment. We go, good, that will cost you, and they go, oh, no, no, you do that for free, right? And it's like, no. If you expect us to provide that service because you need that service for that consumer, you will pay for it. If a consumer walks in the door, how many of you had a consumer walk in the door and go, I need you to come over to my house and do an independent living assessment. That's not what they do. They don't come into your agency, they come in because they have housing issues or because they feel they're being discriminated against. So when people come in, we've had it happen. Social workers have set them up or VR counselors and say, I really need you to do an assessment for me. And then we know there's a funding source. And it took some training with our staff to make sure that they're okay asking the question. And I put that on, all our referrals come through our managers. And, two managers in IL and they are the ones that do the ask. We don't make the IL staff do it. The managers do. They make sure they know what the source is. Richard? RICHARD PETTY: Okay. So that we don't get too far off track, let me just do two things. One is underscore that centers are required to do time and effort reporting. You are required to identify cost objectives that, you're required to show how individual workers spend their time according to cost objectives and in most cases, that means funding source to those cost objectives and then if you need some technical assistance with how to go about that, Paula McElwee at ILRU provides technical assistance and can help with that. KATHIE KNOBLE-IVERSON: Richard, I think sometimes, too, people are always making the assumption, we get very little federal money. So when I talk about this, we only get $27,000 from RSA. We are a state-funded independent living center. So there's not the same restrictions on money with DHS. They're incredibly loose about reporting and all of that. So I just want to make sure, Richard will be my gatekeeper here about federal funds. I want to talk a little bit about how you build a budget. I'm sorry. Go ahead. AUDIENCE MEMBER: Hi. I just have a question about billing. Right now, we're in Illinois and we have been doing reintegration with the state and we are switching now because Illinois's been invaded by managed care. And since it's all so new, nobody knows anything, including the people on the managed care side, except that they're supposed to get us on their networks and we're negotiating that. So right now, I'm wondering, one of the services they're most interested in is reintegration. And KATHIE KNOBLE-IVERSON: Can you tell me what that is. AUDIENCE MEMBER: Moving people from nursing home setting back into the community, and this is the crux of the problem, by paying the deposit, the rent for one month, the groceries, household goods, furniture, so we make those expenses and right now, we're billing the state separately. We just give them our receipts and they reimburse us for the set up funds. We call them up-front funds. Then they also pay us a fee for the service. And what I'm wondering is, your opinion on is there any way to combine those? Will they expect to pay us, the funds separately? KATHIE KNOBLE-IVERSON: I would not combine, that money isn't yours. That money that comes in is pass-through money. It's money for the consumer and for their expenses. I would treat those very separately. The money that you get to do the service is your money and you need to make sure you build a unit rate by developing a budget so you know exactly how much it's costing you to do that. AUDIENCE MEMBER: It does vary so much from consumer to consumer, that's what I would like to do. KATHIE KNOBLE-IVERSON: What varies? AUDIENCE MEMBER: One consumer might be going back to their own home and maybe they just needed a modification or KATHIE KNOBLE-IVERSON: You're not clarifying with me. Is it the time that's different? The time it takes? AUDIENCE MEMBER: The cost of the set up funds. KATHIE KNOBLE-IVERSON: But those aren't your costs. That's what I'm saying is that cost is money that's designated for a consumer. AUDIENCE MEMBER: And I'm agreeing. I'm just saying, yeah, and it would be hard to figure in a cost because it changes so much. Yeah. KATHIE KNOBLE-IVERSON: We did that for a while and we got out of that business with the deposits and stuff and we continued to bill the state for that because it was too unpredictable and at that point we did not have good cash flow when we were doing that. So they set up a fund that we could draw down. Once we knew how much the deposit was, we could quickly draw down enough money to do that. They kept a pot of money that was $25,000 that we could draw on within 48 hours to do that. Because we couldn't afford to do it. So I would figure out something with the CMO, the Care Management Organization. AUDIENCE MEMBER: Thank you. KATHIE KNOBLE-IVERSON: Or managed care. AUDIENCE MEMBER: Thank you. KATHIE KNOBLE-IVERSON: Okay. Let's try to look at budget development. And some of this is very basic. But I want you to understand that you don't leave out any expenses. And I'm going to tell you, in our center right now, it's really hard for us because we're seriously considering going to the insurance market, the exchange instead of providing insurance because our insurance has increased 120 percent in the last five years. It's one of our biggest costs other than wages. It's more than rent. It's awful. And so it's hard to think about that. Our rates may change after we do that. We would save about $70,000 a year it's two new staff if we could not provide insurance. But it's a decision our agency is going to make. What I want you to do, and I had some questions earlier, even when I was doing the slides. We only work seven-and-a-half hours a day and have an unpaid lunch. All of our staff are hourly except managers. You need to always take into consideration how many hours in a year people are available to work. People make big mistake, they work, I'm going to use 1,950 hours. They really don't. They have PLT, personal leave time. And we're very generous about that. We have eleven holidays. Training time, mandatory meetings, so they are not available to provide that service during that time. Do you do that too, Richard? DENNIS FITZGIBBONS: We do, yes. KATHIE KNOBLE-IVERSON: So you have to then get it down to, that's, this is how many hours they're available. And that's what you use to base your expenses on. And if you go to the next page, the additional costs, those are just examples. I always include supervisory time, and sometimes it's more if it's a new staff person. If there's mandatory training requirements, if you know someone has to get additional training 20 hours a year, you need to put that in your expense so that you don't eat that or your IL funds do. So make sure that that gets built in. And it can't just be 20 hours, unless you're going to provide all that service or all that training in house. If they have to go someplace, you have to incur those expenses. Got to turn the mike on. AUDIENCE MEMBER: Is it on? KATHIE KNOBLE-IVERSON: There you go. AUDIENCE MEMBER: So what you're saying is when you figure the staff cost, you're only figuring the direct cost of providing the fee-for-service and you don't figure in the indirect cost for each staff member? KATHIE KNOBLE-IVERSON: You can do that. I do figure it in. That's how I do it. There's lots of ways to get to, you can figure out what it costs to pay somebody 20 hours or 240 hours of PLT and you can add that in as an expense rather than backing out the hours. There's lots of, I've played around with it a lot. And I always suggest that those of you who are going, what? Talk to your accountant. They should know how to do that. They should help you be able to sit down and help you figure out how much time people have available and what it costs. If you can get your agency to develop that sheet, that worksheet, it just makes developing a unit rate and helping you figure out, even as a program manager, helps you figure out what's going on in your organization. Then we'll go to a biggy in our state because we're so rural. And I know a lot of you, you have to figure out what you're going to do with travel time. Because you don't know where a referral is going to come from. It could come five hours away or it could be down the street from where your office is. We really try to negotiate travel time as being separate. Some organizations charge a lower rate for what they call windshield time. Others put the full expense in there. For us, it doesn't cost any less for someone to be sitting in the car than it does when they're doing the assessments. So we try to charge the full amount. Managed care in Wisconsin, absolutely will not pay for travel time. Not one of the sites will pay for it. Not even in home care. So we've had to make some decisions about whether we're going to provide services through them because their rates are awful. And we did, for some services, we just decided, we're not going to do it. Skill training is one of them. They want us to come in and do skill training and they want us to do it for $12 an hour. Yeah. I'm sorry. We can't. And even when you show them how much it costs, you need to work that out with the funding source. You need to figure out how much it costs, I assume most of you pay federal rate for people to use their own cars? State rates? State rates. Okay. We lease cars. Priuses. You buy cars -- DENNIS FITZGIBBONS: Not for that type of travel though. KATHIE KNOBLE-IVERSON: Right. Somebody else was telling me that they buy them out of a different program and, yes. And they charge the cost back to the appropriate program, which is, whatever, we save lots of money by leasing vehicles. We have a wonderful relationship with our local dealer. They give us deals and allow us to increase the mileage on our contracts without any additional costs. So again, we're talking about relationships. And they are able to write that off as a donation then to our organization. And I factor, every year, we keep track of every mile everybody drives, every month and we compare that to what it would cost if we just paid everybody mileage for their cars and we just saved thousands and thousands of dollars every year. So it's something to think about. You also need to, we got a question yesterday, I made a general statement about cancellation rates being higher. Depends on who you're working with. And I was referring to the folks that we serve in La Crosse County and Jackson and Monroe County that have mental illness, their cancellation rate is a little higher than normal. And it doesn't matter if it's for, any service. It just happens if we're going there to help them with benefits assessment or if we're going there to help them work on their medication management. They just have a little higher rate of cancellation. So we didn't know that when we got into this and we're trying to negotiate right now with the funding source that we need to have a little higher rate. And we've worked out a process. If we don't get 24-hour notice, the county has to pay us. If we have somebody standing at the front door, we get to bill them for an hour. Now VR won't let us do that. But we're working that out. Again, come back to your funding sources and you have to work those things out with your funding sources. And then you have to figure out what kind of documentation time. You were talking about that earlier. We, in any contract, we don't get any more than 15 minutes for every contact to do documentation. And so you have pretty sophisticated documentation that you have to do, you have to factor that in. Probably going to take people more than 15 minutes. And then you need to monitor that. And the question is who should monitor that? Should be their supervisors. Should be monitoring the documentation. Now, our administrative fee rate last year was 12%. I factor that in when they will allow it. But I'm really up-front about it that this was our administrative cost. And so we factor that in when places will allow it. VR, of course, will not. And the next question is what if the purchaser isn't willing to pay the rate that you need. If you can't break even, why would you provide the service? Now, I've had some other independent living centers in Wisconsin go, well, they're only going to pay us half of what we need, but it got our foot in the door. Well, three years later, they're still only getting paid half of what it costs. And they're still doing it. I don't understand that. What happens then is IL money is definitely subsidizing a fee-for-service program and you need to be careful about that. And I would really encourage everybody to have a cost allocation plan. If you don't have one, try to figure out how to make that happen. And again, at our agency, we remove all costs related to fee-for-service out of expenses and put that back against the income. And again, I have another sample in there of expansion for a new office. These are just examples. If anybody has any questions, we have, we applied for $150,000 expansion grant through an Otto Bremer foundation that's connected to the Bremer banks. It's the only bank in the country that exists, they make money, their purpose, their mission is to make sufficient money and to put 99% of that money back in the communities where they have banks. They have an incredible mission. If you, you want to find out if there's an Otto Bremer bank in your community. I think it's mostly tied to the Midwest, but we just had a new bank open in our community and we've had two site reviews now for the request and we're really hoping. I don't think we're going to get everything we ask for, but I'm hoping we get about a hundred thousand dollars to help offset expansion, securing a new office, all the training we need for staff. So when you do a start-up budget, you need to take that into consideration. Someone else is paying for that startup cost, but when, three months down the road, you have to be able to afford the ongoing expense for that. And we're going to move to page 24. That's you, Dennis. Because if you don't have any questions, these are just good examples, I think, so that you have a sense of what you should put in to a budget. And Dennis is going to talk about price points. DENNIS FITZGIBBONS: So on page 24, this would apply more to what I described yesterday is that commodity-type service, and trying to develop what your rates might be and I used the example here of that great contract we negotiated many years ago to a single unit rate for our CD pass programs. And some of the questions around something like this, the expectations that are involved, who's going to assume market risk and are there contracts or market guarantees. And the risk part, you want to be careful of what, you can't get into something you can't deliver on and you want to know whether there is some kind of assurance from the people you're contracting with, that if you're having trouble meeting the goals, that you're not held liable or responsible for unmet service delivery. And then what kind of contract market guarantees are. What that means is do you know the number of units or the number of consumers that you need to serve in order to accomplish this. And that should be spelled out if you're responding to an RFP or some type of bidding process that should all be very clear in that. You need to know those kind of things of how it's going to work. And then you want to build in that rate of return. Remember the mantra, no margin, no mission. After you figured out your cost, you got to build in that extra bit there to have some security going forward. As well as projecting what the contingency costs are. KATHIE KNOBLE-IVERSON: Can I make a comment? DENNIS FITZGIBBONS: Yes, please. KATHIE KNOBLE-IVERSON: In La Crosse County, we cannot, we compete with for-profit organizations all the time and on their worksheet, if you're for-profit, you can add in a 15 percent profit margin. If you're a non-profit, you can build in zero profit. DENNIS FITZGIBBONS: Right. KATHIE KNOBLE-IVERSON: So you need to remember that. So that's why, if they allow you to put administrative costs or contingencies costs in there already, do that. DENNIS FITZGIBBONS: Yes. You got to have some wiggle room. Because you can't afford to do things at cost for long. Because costs go up. And revenue doesn't. Factor things in the budget now. What we did then and it follows much of what the formula that Kathie developed or her accountant had is, we actually had our controller sit down and look at the number of people who are currently using these services for us and consumer direction. And the number of units, so if a person was getting 50 hours of personal care they could use per week, there's 50 units right there. What did it cost us as an organization to deliver those 50 units? That included skills training, case management, way back when, it used to include assessment, because we were a one-stop shop. And it included the fiscal intermediary work as well. So we have a payroll department and everything was factored into it. So we needed to know what we were paying all the employees who touched the program. We wanted to know, and we had to take the total amount and average it. Because someone making more than others, so you get the average cost of independent living specialists, the average cost of the payroll department costs, factor in the administrative cost as well. Overhead and come to a total, dividing that then by total number of units you're projecting to serve and come up with that unit cost. And then add the rate of return and the contingency costs. And back in the day, that turned out to be a number of $7.50 per unit. KATHIE KNOBLE-IVERSON: That you would add? DENNIS FITZGIBBONS: No. That was the total we were going to bill per unit. And that, that included both the contingency and the rate of return. Then it turned out, of course, with 500 to 600 consumers that we were serving, and you imagine on a weekly basis, if there's an average of 40 units per consumer, we actually were delivering about a million and a half units of service per year. And we built in the contingency, actually was a 5% combined rate of return and contingency. We then had a profit of five percent of the total of a million and a half units times $7.50. Okay? Little bit complex. And this was something we had the luxury of doing after delivering the program for 20 years. It didn't start as this commodity type of business where it's recurring revenue that's going to come in every time you bill to Medicaid and the money comes back in two weeks later. We began with a 15-person pilot program and it built over the course of 20 years from those 15 people to the 5 or 600 people. So we had time to adjust and learn and accumulate some of the profits that came with the service so that we could buy the IT equipment and databases and things we needed and make those investments as we went along before we got to the point we were look at this type of rate development. Early on, we were paid differently. And as Kathie advised, see if you can get paid up front. The reason we were successful with this is the first program we started, we were paid up front for 20 years. So we didn't have to make any big investment in making that service work. It was when Medicaid, and that was a state-funded program. So they had the luxury of paying us up front. When Medicaid got involved, then we were paid in arrears and that certainly has caused its own nightmares along the way because they don't always pay on time. When the budget discussions are going on in the legislature, sometimes they get a little tight at the end of the fiscal year, we've sometimes gone two months without being paid. And so you got to have that line of credit or other resources in order to fill that gap. And sometimes, just when the state is not feeling like being nice. We've had a receivable actually exceed a one and a quarter million dollars about two years ago, which put us in a crisis mode. Cash flow was terribly impacted. We were at the bank, asking for an extension on our line of credit. Lots of things that are important that have to be managed all at one time. So anyway, look at the budget over time, analyze cash flow. Not everything happens all at once. Some costs are front loaded, some soft cost, like legal and accounting. You can usually predict what they're going to be. Technology investments, this is really important because you always have to keep up with technology. You want things that are going to meet your needs, give you the data collection ability that you want to have so you know what you're doing. KATHIE KNOBLE-IVERSON: And I would suggest that you build in renewal of technology in your budget. Get a cycle started and start to build in replacements, whether you have your own server, whether you rent sever time, whether you're in the cloud, it's whatever you use, how sophisticated you are, you need to replace it. And that was a huge mistake for us. We didn't do that for a while. And now I'm replacing a third of our computers every year. So that we can stay on top of things and don't have a crisis. Question? Gotta use the mic. AUDIENCE MEMBER: Usually that's, those come under fixed base assets, right? You can depreciate that over what, five years? DENNIS FITZGIBBONS: You can, but it's still a significant cost expenditure from a cash flow point of view. AUDIENCE MEMBER: Thank you. KATHIE KNOBLE-IVERSON: Depends on how big you are. DENNIS FITZGIBBONS: You can expense it nicely, but you still got to pay for it. So then, human resources, the recruitment and training, Kathie's done a nice job explaining that. Other overhead, unit cost, track volume growth over time. If it's this recurring revenue type of thing, the revenue will continue to increase, but your expenses are not liable to increase at the same time because you're then getting that volume type of benefit from the more people using the service. Identify a lag in revenues versus expenditures. They can kill you. That was the issues I talked about with being reimbursed for, especially a large program like CD pass. You got to have those reserves. Identify long and short-term cash needs. And financing and/or the line of credit. We ran into problems during the economy going south few years ago and these combined issues with the department of human services paying late that our bank, which had always been very friendly and cozy with us for many years, decided they weren't going to be so friendly anymore. They wanted monthly reports on what we were doing to fix the situation and they became a real pain to work with. And we said, you know, you keep this up, we're going to find another bank. And they didn't think we could, but we did. And the other bank was happy to have us and we have since turned things around and it was a good thing to do. But it was not an easy decision to make, but an important one. Pay close attention to collections. Fee-for-services are worthless if they aren't paid or collected. Receivables need to be tracked, aging receivables, you need to pay a lot of attention to and have a plan on how to address those. Know your payers. Some are chronically slow, VR has been mentioned over and over again. Human services for CD pass can be very slow. Collection issues must be factored into budgets and cash flow and there's a high interest rate on lines of credit. KATHIE KNOBLE-IVERSON: And I want to share, we got into children's waiver services, doing assessments for kids in their homes. And the county was paying for it and it went just as slick as could be and all of a sudden we got an e-mail that goes, as of Monday, you're going to start billing through WPS, which is a national, one of the services WPS provides is billing. And they didn't have a training. They said, here's a website. Go for it. And try to figure it out. It took us months. Because the referrals that we were getting didn't have the information on them that WPS needed. So it created this mess so we didn't get paid for those services for four months. And now we figured out how to use the system. If you can go back, okay, you're doing WPS, we need somebody to come over here. We should have insisted. But we weren't one of the big players that somebody comes and trains us so we knew what to do. Things change and you need to be prepared for that. And that comes back to a contingency plan if cash flow is an issue in your organization. DENNIS FITZGIBBONS: Yeah. Next slide. Put it all together. Once the financial picture is complete, the organizational capacity comes into play. We, as a matter of practice, on almost anything we do, always have someone from outside the organization who is a partner of some sort, take a look at, someone that really understands these things, even though we have a great financial controller who works for us and a CFO, we go to our accountant to get their eyes to look at these things, go to an attorney to make sure everything makes sense from a legal point of view. You don't want to leave yourself at risk unnecessarily. And you want to go then to the bank to make sure that that line of credit is, if you need one, you've got it in place and you've got a strong relationship with that bank or bank representation so that when something goes askew, you can pick up the phone and you're going to have that ability to get a higher rate or higher line and be able to manage whatever particular issue is coming up. KATHIE KNOBLE-IVERSON: One of the things that no one talked to me about when we decided to get into personal care was workers' comp. And what that was going to do to your organization. So if you're creating a service that's going to put a different demand on what staff do, check into the worker's comp. See what category they're going to put them in and try to figure out, because if they do it, if it happens mid-year and they've already established your rates, you're good for that year, but next year, if you need to report a new category, we mistakenly had, we were an intern site or a site for folks for DVR that came in and they would, we would pay the wages and they would bill us and we had a truck driver who used a forklift who was getting paid for us for eight weeks as an intern for work experience. He got hurt. And it caused us a nightmare. And a truck driver is high rates. Got added to our list for years. And I learned quickly, I went to workers' comp school. I went and talked to insurance folks and figured out, she said don't you ever do that again. DVR has to pay the wages. They are not your employer. They need to be responsible. I made them sign those agreements so if someone's hurt on our site, it's somebody else's responsibility, not ours. So it's those kind of things that you have to think about when you're developing your costs. Especially if it's, got somebody out doing something that has more liability attached to it. And you should also check in with your liability insurance carrier. Yes? AUDIENCE MEMBER: Just to add to that too, one of the most recent audit things I got was having to pay workers' compensation insurance, at least in Montana, on your volunteers. So you have to valuate that and make sure you're paying workers' comp on that. That was just one of those labor-related things that was outside my attention at that point, but we ended up having to pay for that too. Your point is well taken. Be very cautious about that. DENNIS FITZGIBBONS: Good comment. KATHIE KNOBLE-IVERSON: Yeah. DENNIS FITZGIBBONS: So in wrapping up, I would say avoid the pit falls. Be realistic about everything. Seek a thorough external analysis, even though we've got fantastic people who work for Alpha One at every level, you want to always get another set of eyes on things just to make sure. Because they're coming in unbiased. And they've got a different view than we may have internally. Protect proprietary elements of your operations plan. There are certain things that all of us do that are ours. And we don't need to share them with the outside world. So it's like trade secrets, so to speak. But it's part of what we own as an organization. And we need to protect that as well. You don't have to give away everything when you get into a contracting process. And if people are expecting everything, then, again, you got to make a decision, do we want to do that and get some external advice on whether you should or should not. Expect competition, because it's, that's how things work in this country. People see dollar signs and they go chasing them and so if there had been a lot of things, a lot of talk here about managed care and how they're getting into some of the business that's been traditionally independent living business, and that's real competition. It makes a big difference in our lives. Use your plan, stick to your plan, but be flexible. Because that's what life is all about. KATHIE KNOBLE-IVERSON: Things happen. DENNIS FITZGIBBONS: Just when you think you got it all figured out, something can change. So I guess that would be the end of that. KATHIE KNOBLE-IVERSON: Any questions? DENNIS FITZGIBBONS: Okay. Use the mic please. AUDIENCE MEMBR: I actually wrote them down. Kathie, you had, can you please address the potential for conflict of interest in doing the IL assessments with the IL philosophy if assessment reveals a person needs 24/7 care? KATHIE KNOBLE-IVERSON: That's a tough one. You can make that recommendation and then assign them to a staff person to do some advocacy. We get a lot of our advocacy business from consumers who are participating in managed care. In Wisconsin, all our managed care organizations are losing money. They're not meeting the department or commission or insurance commissions' requirements to have a certain amount of money set aside. So they're cutting services all over the state. We can hardly keep up with referrals. So if we go in and do an assessment and recommend that someone needs 24-hour care that would be our recommendation. If that person wants to appeal that decision, because, more than likely in our environment, they would not get 24-hour care. So we could help that person appeal. That's been one of the issues that we have constantly sort of bickered in particular with managed care. They want us to leave the advocacy hat at home when they pay us. And we've made it really clear. We don't get a lot of referrals from managed care because advocacy comes with our package. If we see something that's unethical or illegal or, you know, smacks of discrimination, we are going to deal with it. And so, lots of times they go other places. AUDIENCE MEMBER: And that can be part of the cycle too, if a person is recommended for the nursing care facility, then they can go into the community transitions program. Yeah. The second question then is about managed care. The challenges with managed care, the low reimbursement rates and the cutbacks. KATHIE KNOBLE-IVERSON: What state are you from? AUDIENCE MEMBER: Colorado. So in the spirit of the IL philosophy, it seems we need to rev up our systems advocacy and address these gaps. And this leads me to wonder if CILs need to increase revenue-generating programs, fees-for-services then we need to continue to allocate budgets for advocacy. So what do you recommend for managing budgets for advocacy and what percentage of budgets for cost allocations. DENNIS FITZGIBBONS: Good question. KATHIE KNOBLE-IVERSON: That's a big one. DENNIS FITZGIBBONS: Got an hour? KATHIE KNOBLE-IVERSON: Yeah. And we, that's one of the things that our staff just want time for because it's why they're there. They want to do advocacy. And sometimes, they are going I just don't have enough time in the day to do what I need to do. So we made sure that if there's an advocacy issue, that that person doesn't, and we have some big ones that take hours and hours and hours and hours and hours. So we make sure that a person is able to say, I need not to have a referral for the next three days so I can work on this situation. And we respect that. So that they can have the time they need to do that particular issue. Systems advocacy in our state is done on a statewide basis with all our centers. And there is mixed, advocating that we want managed care statewide, because there's 17 counties that don't get it. And we're also advocating that they need to get their act together, because the quality of their services in some counties is horrible. So it's a really interesting balance that we have. I'm not a fan of managed care at all. Our other system was horrible also there was horrible waiting list. No more waiting list in Wisconsin for adults. With developmental disability or physical disability or if you're elderly. You don't have to wait more than 15 days to get services set up. So that's the payoff that you have. DENNIS FITZGIBBONS: And advocacy doesn't have to be just about managed care. What we do as advocates, we've got to manage internally and make sure we're paying attention to that. And it's individual by CIL. And I would say, I spend probably 50% of my time in systems advocacy if not more and the gentleman who serves in the legislature who works for us probably spends about hundred percent of his time on that. Plus, we have a consultant that we budget in annually that does a lot of our public policy work as well. So it's almost two and a half full-time people paying attention to that because the rank and file IL specialists are not able to pay attention to systems type things, they were informed about it, they certainly alert us to the issues they learn about as do consumers, but we pay a lot of attention to that. And we pride ourselves on the systemic change that we've been able to make in the state of Maine. And we want to continue to do that. But it's challenging.