Money Management

     Next to reliable response times and excellent patient care, the most important aspect of running an EMS agency is having good, sustainable agency financing. An agency's funding and fiscal health is the lifeblood of its daily operations and future.

     A budget is one thing we all have in common, whether we're public, private, for-profit, not-for-profit, municipal, county, regional or a special district service. Budgets are created on an annual basis, but they should be monitored and used daily.

     Following is an overview of the importance of managing budgets. How well you manage your budget may indicate the long-term survivability of your organization.

Analyze and Plan
     One of the foundations of accounting is compiling financial information for analysis and strategic planning. There are four key things that financial information assists management in addressing:

• Helps monitor day-to-day operations;
• Allows better planning;
• Helps identify sentinel events that occur in the organization that appear as deviations from management plans;
• Allows managers to choose solutions to problems based on data.

     An organization's annual management plan, road map or blueprint is formally described as its budget. Budgeting must be applied to management's long-term strategic planning process to be effective. In a sense, the budget is the agency's management plan, expressed in numbers.

     The budget by itself is not very helpful without daily, weekly and monthly round-the-clock information that tells how well your management plans are working. Daily "flash" reports (quick assessments of progress) help management quickly focus on key performance areas that need immediate attention.

     The following is a discussion of some key performance indicators (KPIs) that every manager should watch on a daily basis.

Revenue
     Cash Flow: Obviously, the most important aspect of being able to meet your employee payroll is the amount of cash coming in every day. Our most important budget tool is the daily cash report, which is set up at the beginning of each fiscal year. We calculate the total number of business days that mail (with payments) will actually be received, then set up our budget targets for annual, monthly and daily collections. Each day's collections are compared to the amount of money in the target categories.

     Days Sales Outstanding: how long it takes to get the bill out the door, and, ultimately, how long it takes to collect the money.

     Responses and Transports: How many are you are doing? How many responses result in a transport? How many transports go out of town? These all affect your Unit Hour Production.

     Emergency vs. Non-emergency: How many transports are categorized as emergency versus non-emergency? This is an important aspect for your billing office, because higher rates are generally charged for emergency responses.

     Collection Percentage: Of all the revenue you are billing out, how much are you collecting? This is a measure of your billing operation's effectiveness. A recent municipal survey indicated the average collection percentage for EMS agencies in the nation is 51% of the amount of retail revenue they generate.

     Other income-related activities are analyzed to plot actual and predict future performance. Transport activities generate the major part of most agencies' income and therefore have a major effect on your income. This information should be monitored daily.

Expenses
     The next key area to look at after income performance is operational expense performance. Operation performance is measured with numerous, detailed KPIs. These KPIs also help you see how your operation is running against your budget plans.

     Unit Hour Analysis: This looks at how efficiently the operation is running. Unit hours cost money. Using those hours efficiently is the key to operating effectively.

     Unit Run Time on Call: This also shows how efficiently your crews are performing. Hospitals that hold ambulances for patient beds have a major negative impact on operations and slow response times, and may necessitate staffing additional units.

     Personnel: Personnel costs are the largest part of any organization's budget. These must be analyzed in numerous ways. Direct Labor, Overtime and Indirect Labor data will indicate how close you are to your staffing budget. They will also tell you payroll variances, so you can adapt operations to address them.

     Accidents/Injuries: These expenses must be tracked and managed closely, because medical or legal costs can get out of hand quickly.

Trend Analysis
     All of these revenue and expense categories need to be trended. That is, compared with several like indicators on a daily, weekly, quarterly and annual basis. Only when you start to make comparisons, will you truly understand the direction your agency is heading.

     These and other key indicators help you manage your budget and understand your agency's activity. Budget information impacts almost every other management decision you will have to make. Do we need to call in extra crews because there is an unusual transport demand? Do we need to shut down a unit or two and let the crews go home because demand is unusually light? Can we afford new defibrillators or that new ambulance? What is our full-time head count, and can we start construction on the new station this year?

     If your management is closely watching budget and key performance indicators every day, these decisions are a lot easier to make, based upon the numbers.

Chuck Kearns, MBA, EMT-P, EMD-4, is the director of Pinellas County (FL) EMS and Fire Administration and the executive director of the Pinellas County Emergency Medical Services Authority. Author of numerous articles and a featured speaker at many national conferences, Chuck has been involved in public safety since 1980 and a paramedic since 1984.

Chuck Kearns is a featured speaker at EMS EXPO, October 11-13, in Orlando, FL. For more information, visit www.emsexpo2007.com.