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Healthcare Legislation: New Revenue Means New Forecasting

  • By Andrew Deichler
  • Published: 7/22/2015
The private sector felt the impact of budget cuts across municipal and state governments during the recession. But for one provider of behavioral health and human services, a new revenue stream emerged from President Obama’s signature health care law. And, with it, a new challenge for its finance team.

Joel Johnson, CEO and president of the Human Resources Development Institute (HRDI), told AFP that, like many organizations during the recession, his organization focused on cutting expenses and sustaining business operations, while minimizing its cash output. HRDI is largely government funded, therefore, budget cuts at multiple city and state governments forced the organization to revise its processes.

“You always hear that mantra of doing more with less, but the reality is, you do less with less,” Johnson said. “We looked at where we were bloated, where we could afford to shift funds, and where we could streamline things without impacting operations or quality.”

New opportunities

Although budget cuts continue to be an issue for HRDI, the implementation of the Affordable Care Act (ACA) has created a new customer base for the company. As a result, HRDI’s finance team faces the task of projecting new revenue from an unfamiliar market—never an easy task. “With federally funded and state funded grants for the uninsured population, they now have insurance and we have an opportunity to provide care for them,” he said. “Also, the expansion of Medicaid in many states and the introduction of managed care health services in Illinois has created a vast new payer mix for us to provide services to different people. It’s diversified our funding stream, affording us an opportunity to grow.”

Evelyn Willis, MBA/CPA, CFO of HRDI told AFP that since the Medicaid expansion, the organization has seen a decline in Medicaid dollars from the Department of Illinois Department of Human Services (DHS). However, that money is now coming from a new source. “Managed care organizations (MCOs) are now contracting with the DHS,” she said. “Our dollars haven’t actually expanded, but we have about 10 MCOs that we work with, when previously we only worked with the DHS.”

The MCOs budget differently than the HHS, and only allow HRDI to provide so many hours of service before requiring authorization for the service to continue. However, from a financial standpoint, working with MCOs has been beneficial because they generally pay faster than the DHS, Willis explained.

Since this is only the second year of the Medicaid expansion, MCO revenue has mostly replaced revenue from the DHS. However, Willis is optimistic that numbers will increase in the future. “We’re getting more people who previously were not eligible for Medicaid, so we will probably see expansion in the level of funds because the number of MCOs has increased significantly,” she said.

Growth and expansion

Over the last three years, HRDI has expanded its footprint in Illinois and is looking at growth opportunities for its operations in Alabama. “We’re seeking acquisition opportunities to merge with another entity. We are also investing in both facility and technology improvement so that we are compliant with the ACA and we make our clinics desirable to not only the Medicaid population that we’ve always served but the commercial insurance population,” Johnson said.

There were of course mandatory expenses that came along with the ACA as well; for example, HRDI was required it to obtain electronic health records. “That was a big investment that we had to make,” Johnson said.

Johnson noted that HRDI is gradually moving from a human services model to medical services model, which will likely result in the organization’s revenue taking a hit in 2015. “But two to five years down the road, the investment that we’re making now is going to pay off,” he said.  

A longer version of this article will appear in the July/August issue of AFP Exchange.

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