LTSS Roadmap - Steps

What does an LTSS program need to know to plan for financial stability?

• You should create a budget that shows income and expenses for your program—or makes an estimate about them, if your program is new.
• You should determine the payers, like Medicaid, Medicare, or other sources, that contribute to your program. By knowing what each payer contributes, you can decide if your LTSS program is meeting its financial goals.
• Based on this information, you can calculate how many patients your LTSS program needs to serve to “break even”—to make enough money to cover its costs.

Keep reading to learn more about the steps your LTSS program should take for financial planning.

Sample LTSS Program Budget

Revenue Sources (Payer Mix)

A pie chart can show how much each revenue source contributes to your LTSS program. This is a program’s “payer mix.” The pie chart below is based on the sample budget, showing how much each payer contributes to the example LTSS program. Patient-generated revenue is the highest, making up 57% of the pie. Patient-generated revenues can be divided further, showing more detail about where patient-generated funds come from.

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Example: Pie Chart of Revenue data

With a current budget and a clear picture of your “payer mix,” you can set goals to increase or decrease certain sources, based on what would be beneficial for your program. These financial goals are called performance targets.

• Example performance targets
  • Generate $750,000 in total revenue
  • Generate 70% of total revenue from patient-generated sources
  • Increase Medicaid revenue to 60% of total patient-generated revenues

Learn the pros and cons of different revenue sources at Who Pays for LTSS?

Break-Even Analysis

In the sample budget above, the program generates zero net income. It neither loses money nor makes a profit. This is known as "breaking even."

Most LTSS program budgets don’t perfectly break even, but doing a break-even analysis is important. It shows you how many patients your program needs, or how many billable services you need to provide, to make enough money to balance your costs, so that you break even in the end. You can estimate the fewest patient encounters necessary to cover the costs of running your program.

Based on what reimbursable services are provided by your LTSS program, you can develop target levels of patient-generated revenue from third-party payers, such as Medicaid.

Break-Even and Cost Per Patient

Different types of LTSS programs have different costs to operate. Facility-based services, like nursing homes, usually have higher costs because they have to maintain a building and provide 24-hour nursing care. Because of higher costs, a nursing home needs more patients (and more revenue) to break even. A tribe who wants to establish a facility-based LTSS program like a nursing home needs to be sure that the demand for nursing home services is large enough to cover their expenses.

On the other hand, HCBS can often be provided at a much lower cost, so fewer patients and services are needed.

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Example: Cost Per Patient Model

Notes on controlling per-patient costs

• HCBS: If your program doesn’t serve enough patients to break even, consider employing part-time staff and providers who split time between the HCBS program and other tribal programs (such as the tribal health clinic).
• Facility: If the beds or rooms in your facility are underutilized, consider broadening the scope of services to include transitional care, for example, to increase your bed or room occupancy level. See this strategy in action in the Tohono O’odham Nation program profile.

Learn about who pays for LTSS next. >