Planning and Orientation
Flexible Budgeting Implementation
Cost Accounting Training
Facility personnel responsible for the implementation of the Med-Link system will receive
training in cost accounting with specific emphasis on Med-Link implementation and use. This
training will consist of a three day seminar in Minneapolis, Minnesota and continuous training of
personnel on-site. You will be able to send up to 3 staff members to the seminar in Minneapolis.
All out-of-pocket expenses (such as lodging, air-fare, ground transportation and meals) are
borne by the facility. The registration fee for the seminar is included in the Med-Link license
fee.
Facility Level Project Planning
Project planning is a joint effort between HDS and facility personnel. Specific goals of this step
are to define facility specific objectives in implementing a cost accounting, flexible budgeting
and case mix system; assign priorities to the objectives; develop detailed implementation
schedules; and assign responsibilities.
Department Director Presentation
A one-to-two hour training session for department directors is held early in the Med-Link
system implementation. The purpose of the training is to explain basic cost accounting terms and
concepts, define department directors' involvement in the project, and solicit their support.
Med-Link Software Installation
This step is performed by HDS personnel. An explanation of steps performed is given to facility personnel.
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Build Master Files
Master files are used to define facility specific parameters into the system. Once entered,
they require only periodic maintenance as operations change.
Establish Patient Types and Financial Classes
Management reports are reviewed to determine the degree of detail maintained by the facility
with respect to statistical data (procedure volumes, case mix data, etc.). Appropriate master files
are built describing patient types and financial classes for the Med-Link system.
Review Organization and Classify Departments
Each department is classified with respect to the nature of its activities. These classifications
include direct revenue producing (patient and non-patient) and indirect (fixed, variable, benefits
and other). Additionally, a review is made to determine if revenue and associated expenses are
captured in the appropriate departments (matching principle).
Determine Department Groups
Departments are grouped along lines of responsibility (e.g., vice presidents) or by similar
functions (e.g., dietary and cafeteria). Department group descriptions are entered into Med-Link.
Determine Indirect Department Groups
Indirect departments are grouped by like functions and similar cost behavior patterns. Indirect
department group descriptions are entered into Med-Link.
Select Preliminary Service Units for each Department
A review of activities of each direct and variable indirect department is made to determine a
preliminary list of service units. This step will be the basis for subsequent discussions with
department directors.
Download Procedure Descriptions & Frequencies
The procedure master description and master file will be downloaded from your patient billing
system into an ASCII file format. This downloaded file will be used to upload procedure
assumption files into Med-Link.
Create Worksheets for Assignment of Service Units
Worksheets will be developed and printed utilizing the downloaded procedure data. Department
directors will use these worksheets in assigning service units to each procedure.
Establish Expense Classes & Subclasses
Natural expense classification and sub-classifications will be established. Normally, the
classification will follow the facility's chart of account numbering format with little change.
Download Account Descriptions and Balances
The chart of accounts and associated historical or budgeted account balances are downloaded from your general ledger system. This file is converted into a spreadsheet and will be used to upload account assumptions and standards back into Med-Link.
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Build Assumption Files
Assumption files store specific operational data for the facility such as procedure volumes
and account standards. Multiple sets of assumptions can be stored in the system.
Assumptions can be changed individually or with the global assumption change utilities.
Assign Service Units or Standard Values to Procedures
Department directors are interviewed to complete the definition of department service units. The
procedure worksheets are distributed and assistance is provided to the department directors in the
assignment of service units to individual procedures. This phase requires the greatest amount of
the department directors time.
Determine Budgeted, Actual or Standard Procedure Volumes
Budgeted, actual or standard procedure volumes will be entered into Med-Link. These volume
assumptions can be generated by the department heads based on historical volumes, or built into
Med-Link using general parameters as determined by administration.
Load Procedure Files into Med-Link
Service Units and procedure volumes are entered into the procedure spreadsheets and uploaded
into the Med-Link program through the use of Med-Link utilities. This is performed jointly by
HDS and facility personnel.
Establish Labor Standards
We will review actual staffing patterns, management engineered standards (as available), and
interview department directors to determine the cost behavior patterns of staffing with respect to
workload. Upon completion of this step, each labor account will be expressed in terms of fixed
hours, minimum hours and variable hours per each of the service units.
Establish Other Account Standards
All other accounts will be analyzed to determine fixed and variable components. The sources of
information are contractual documents, pricing schedules, etc., combined with interviews of the
department directors.
Upload Account Standards into Med-Link
The results of the account analyses are entered into the spreadsheet by facility personnel. The
account master file and the account standards file are uploaded to Med-Link using a special
utility program.
Establish Transfer Unit Relationships
Analyses are performed to determine the relationships between the service units (transfer units) of the providing indirect departments (e.g., laundry, dietary, etc.) and each of the using departments. Transfer unit relationships are expressed in terms of fixed and variable units per using department service units (for example, 2.8 meals per patient day). The data is entered into Med-Link by facility personnel.
Establish Department Allocation Tables
Manual allocation tables are established for each indirect department not utilizing a system-calculated ("automatic") allocation table. Medicare allocation tables (e.g., square feet, etc.) may
be used as the basis for many of the manual tables, but Medicare tables must be reviewed for
accuracy and modified and expanded as required.
Establish Service Unit Allocation Methods
The appropriate method of allocating fixed indirect costs for each direct and variable indirect
department is determined by your staff and HDS consultants. This data is entered into the Med-Link system by facility personnel.
Perform Costing Functions
The actual costing functions are performed by Med-Link. Time is allocated for unforeseen difficulties such as incomplete data files. After the costing is complete, a full set of Med-Link management reports is printed for review.
A thorough review of management reports will be performed jointly by HDS and facility
personnel for reasonableness, and corrections will be made to the assumptions as required. Any
required re-runs of reports will be accomplished during this analysis process.
Meet with Administration
A meeting will by conducted with hospital administrative personnel to present the reports and
explain their uses as well as any findings we have noted during the project.
Meet with Department Directors
A meeting will be conducted with hospital department directors to present the reports and explain
their uses as well as any findings we have noted during the project. HDS personnel will meet
individually with any department directors requiring additional information or clarification
concerning the reports.
Implement Flexible Budgeting
We will work to train you in the use of flexible budgeting. Specifically, we will define the
reports that will be downloaded on a monthly basis to serve as input into the Flexible Budgeting
module. As a result, you will receive a monthly analysis showing variances for the current month
and year-to-date at the department, account and service unit level.
Implement Case Mix
We will train you in the use of the Case Mix module. We will insure that the interface between
Med-Link and your patient billing system is working smoothly and accurately. You will be
trained in how to retrieve summarized information at patient, payor, DRG, and doctor levels. As
a result, you will have patient detail information presenting costs (fixed, variable, labor) for each
charge item and product line information presenting costs, reimbursement and profitability.
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