Budgeting for behavioral health organizations can be unlike other financial forecasting activities. This especially is true when working with governmental agencies. Most budgets only focus on expenses and revenue, which is pretty clear cut. But when a behavioral health agency contracts with a State or County entity and government funds such as MediCal/Medicaid or Medicare are used, then the budget is a cost-reimbursed one. Most budgets focus on reimbursement based on a fee schedule. For example, a provider sees a client, and then they are paid a fee for that service. The contract then outlines the payments based on the services provided.
A cost-reimbursed budget has three moving parts:
1. The revenue or billing that the behavioral health organization expects to conduct during the contract period, say a year. The budget will have a total amount of revenue that can be billed for the year.
2. The revenue will also have a rate per unit (minute hour), depending on the governmental agency’s requirements. In behavioral health, the rate for mental health services could be $3.00 per minute or a total of $180 per hour.
3. Then there are the expenses for providing that contract over the year. This area includes salaries, administrative overhead, building lease, office expenses, and other areas.
When an agency gets a contract amount, the costs have to equal the revenue, so that there is a balance of services and expenses. For example, if a contract is for $1 million, then the agency should bill that total and also have that amount of expenses. And in using the rate per minute, they need to serve the number of clients the contract wants. At the end of the contract year, the behavioral health organization does a cost report showing their costs and revenue. Depending on the results, the organization could owe the payor money or vice versa, which neither side wants. So getting the budget right is critical.
So how does an agency work all these moving pieces?
1. Start with the revenue. If your agency has a $1 million contract, you figure out your rates per minute. If, as above, all your services were $3.00 per minute, that’s $1 million divided by $3.00 or 333,333 minutes; then divided by sixty it’s about 5,555 hours of people power to bill that amount.
2. How many staff to bill? If your staff do 20 hours per week in billable hours for 48 weeks of the year (take out 4 weeks for vacation, sick, and holiday time), that means each staff bills 960 hours per year. That figure divided into 5,555 means 5.79 full-time equivalents or about six staff.
3. Add expenses. Now you can calculate the staff salaries, benefits, and the other expenses as above. And it should add up to a total of $1 million.
4. And adjust. Budgets never calculate accurately the first time. Here is where you change staff hours, positions, and expenses. Then when you’re done, everything will work; you’ll have the staff needed to bill the $1 million and the expenses to equal that amount.
Praxes provides consulting services including budgeting and forecasting. For more information, please contact us.
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PRAXES is a nationwide behavioral health software, consulting, and training company. No one in the behavioral health industry has a better reputation, and if you give us the chance, we’ll show you why! At PRAXES, our services improve the efficiency and structure of behavioral health agencies serving children and families nationwide. PRAXES brings over 45 years of administrative and clinical expertise. With more than 100 client companies nationwide, we offer the expertise to advance the quality of behavioral health services. We accomplish these goals through our new clinical decision software, our training of best practices, and helping companies meet regulatory standards. At PRAXES, we believe in being creative and fostering new ways to serve children and their families. Our vision is to empower the families our agencies serve with skills that not only improve their functioning, but help them to thrive in their everyday lives. When you give us the chance, you’ll be connected directly to our friendly staff, so you can expect immediate attention to your inquiry. So, don’t wait, call now!
Dan Thorne has unique perspectives on the field of mental health. As a clinician, he has had over 40 years of experience working with clients in the Southern California area. After obtaining his Bachelor’s degree from the University of California at Irvine, he worked with children in the Orange County Juvenile Hall. Here he honed his earliest techniques on at-risk children. After that, he obtained his Master’s degree in Counseling from California State University, Fullerton.
In the 1990’s, Dan turned his attention to the clinical and administrative side of behavioral health organizations. For three years, he was the Assistant Administrator of Starting Point, a chemical dependency facility in Costa Mesa, CA. In 2001, he took an opportunity to be the Director of Harbor View Community Services Center in Long Beach. When he arrived, the Center had only 80 clients and 13 staff. When he left, there were over 400 clients and 75 staff. Dan created several programs through their contract with the Los Angeles County Departments of Mental Health and Child and Family Services. Under his guidance, Harbor View became one of the leading providers of children’s services in Los Angeles County.
While improving the results of the client’s parents at the Center, Dan reflected on his experiences as a parent. His children themselves had special needs such as mental and intellectual challenges, and Dan knew the toll it takes on the parent. In order to help the child, the parent has to be healthy. From this concept, he created his parenting program. After years of refining it, teaching it to his staff at the Center, and then taking the results and comments from these efforts, he became the developer of the current PRAXES program. It is a culmination of Dan’s personal trials and tribulations as a parent along with empirical results and research of over 40 parenting programs.
Our vision at PRAXES is to advance the strength of parents and caregivers of children with special needs (mental health, intellectual, or physical) through education, support, and empowerment. Thus, they can live healthy and functional lives while caring for the child.
Apogee is a clinical decision software designed to help behavioral health practitioners with their treatment and patient engagement. It provides evidence-based and research-based components. Not only do they consist of elements from such practices as Cognitive Behavior Therapy, Seeking Safety, Dialectical Behavior Therapy, Motivational Interviewing, Functional Behavior Analysis, but also the Intensive Models for Parents, Youth, and Children.
PRAXES has over 30 years of accreditation experience. We know what it takes to get your organization accredited. Whether it’s Joint Commission, CARF, or COA, our team can provide an evaluation of your current status and review the standards which need improvements. We will assist you with the policies, documentation, and training required to be accredited.
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