DOM Business Office Orientation

Overview of the funds flows. Setting up Medical Center support agreements and fiscal year-end “true-up” process.


Sections on this page:

Overview

The Department of Medicine Business Office serves as the control point for the department for all issues related to finance and access administration. The Business Office acts as a central point of approval and oversight for several areas including but not limited to:

  • Oversight of the clinical funds flow to the Department and each Division, strategic support agreements and all negotiations between the Department and the UCSF Health System
  • Clinical incentives plan payments
  • 1900 funding and 1900 swaps
  • Division budget process and Period statements
  • Clinical volume (wRVU) budgets
  • Access administration requests for MyReports, PLUS, BearBuy, etc.
  • COA setup and closure

This orientation section will focus on the clinical funds flow and strategic support agreements, COA structure for the four profees projects, the year-end final statement and clinical incentives payments.
 

Description of Funds Flow

Beginning July 1, 2014, UCSF Health implemented a new funds flow to the Campus Departments. In the new clinical funds flow, professional fee revenue and technical (ancillary) revenue accrues to the Health System. The Health System has assumed financial responsibility for the costs of operating ambulatory and inpatient practices (e.g. clinic support staff, facilities, supplies), with the exception of the costs of physician faculty clinical effort.

 

These payments to the department flow on a monthly basis with a true up done at the end of the year. The DOM Business Office oversees this process, with review at the end of the year by the Division (see Year-End Final Statement section below). Payments fall under one of four tiers, and in addition, any payments related to strategic support agreements:
 

Tier 1 wRVU-based payment: The wRVU-based payment represents payment to departments at MGMA rates based on clinical activity. MGMA publishes the median salary by specialty annually and there is a strong correlation between the Health System RVU rate and the MGMA median salary. Each clinical division creates an annual budget for the anticipated number of wRVUs. We multiply the budgeted number of wRVUs times the wRVU rate to determine the clinical revenue for each clinical division’s budget.

 

The Health System assigns Faculty to one (and only one) MGMA subspecialty, which determines the wRVU rate applied. Their assignment is based on the following criteria:

  • Board certification
  • How provider is listed in health plan directories
  • Predominance (51%) of clinical activity

Providers who split time across multiple specialties will receive credit for their assigned subspecialty based on assignment of subspecialty criteria.

 

wRVU payments to departments follow the revenue/expense matching principle. Revenues will follow expenses such that wRVUs generated by employees paid by the Health System will remain with the Health System and wRVUs generated by employees paid by the School of Medicine will be used to calculate wRVU-based payment to Departments.
 

Tier 2 Margin Sharing: Departments share in actual (professional and technical) margin above budget to incentivize growth and expense management. Tier 2 payments depend upon the Health System achieving a margin above budget. In the absence of a margin, at the Health System level, there will not be a Tier 2 payment.
 

Tier 3 Incentive Payment: Faculty who are at least 20% clinical will be eligible to participate in the Health System “IAP” program. IAP incentive payments are based on achievement of UCSF Health organization goals such as quality/safety, patient satisfaction, and finance/operations.
 

Tier 4 Staffing Payment: The staffing payment is reserved for the small number of clinical services for which physician staffing is a requirement for safety, regulatory mandates, or good patient care. In a staffing model, divisions are paid an agreed upon amount per FTE rather than by Tier 1 wRVU-based payment.
 

Benefits: The Health System will reimburse Departments for the actual benefits expense related to faculty clinical time. You will note this by reviewing any copy of an approved division budget, which will show faculty benefits expense as well as a credit for faculty benefits cost in the revenue section.
 

Overhead Expense: The Health System will pay 11.8% of pro fee collections to Department to cover the clinical operating overhead expense within each Department. This payment is retained by the Department to cover the Department’s overhead expenses, and in some cases is redistributed to Divisions in the form of a structural budget adjustment. On a Division’s approved budget, you will see a credit for overhead expense and a debit for the same amount as the overhead expense payment does not flow to the Divisions.
 

Strategic Support Agreements: These are strategic support agreements between the Health System and the Departments that may help cover ongoing expenses, and/or support growth and start-up expenses. For example, strategic support will continue to cover costs such as business plans for new faculty, business development activities and some program support. It is the responsibility of every Division Manager to ensure the Business Office is aware of all strategic support agreements. Ideally, the Division Manager will inform the Business Office at the earliest opportunity of any discussions pertaining to strategic support agreements, including Michael or Ka Man directly in discussions with the Health System, as needed. It is also the responsibility of each Division Manager to retain a list of all strategic support agreements between their unit and the Health System.

The Health System makes the following direct payments on Behalf of Departments:
 

Malpractice Expenses: The Health System pays actual malpractice expenses on behalf of each department.
 

Billing expenses / fees: The Health System absorbs all internal and external expenses associated with coding and billing fees.
 

Dean’s Tax: The Health System pays the actual Dean’s Tax to the School of Medicine on behalf of each Department.
 

Medical Group Fees: The Health System will absorb all Medical Group expenses.
 

Practice Expenses: The Health System absorbs nearly all of the expenses related to ambulatory (outpatient) practices.


Funds Flow and Pay Plan Changes Effective October 1, 2023 

To better align with the new funds flow model effective October 1, 2023, specific profee project IDs (and flexfields where necessary) are used to capture Tier 1 cFTE, Tier 4 cFTE. To learn more about the clinical funds flow change please visit: https://fundsflow.ucsf.edu. 

 

Division-paid NIH cap support, Division-funded roles, Fellowship Director Support, Departmental Support, CBCR/extended leaves, and Med Center Support. For updated list and details, please visit: https://ucsfonline.sharepoint.com/:x:/s/DOMHub-DivisionManagers-UCSFHealth/EbqZ6mm2PcpPvZlikepsHBgBCy-i51V96Jp8w9BrIDLaiA?e=vWdKpD

Divisions should strive to allocate expenses according to the intended use of each of these projects. Compliance with this principle facilitates mission-based analysis at the School and Campus levels. In addition, observance of this principle will allow transactions to flow more easily when Dean’s Office control point approval is required.
 

Year-end Final Statement

After the end of each fiscal year, the Business Office prepares a final statement for each Division. The Business Office usually prepares a draft final statement sometime in late August for each Division Manager to review. The final statement compares the Division’s budget to actual performance and prior year, and includes all wRVUs, strategic support, benefits payments, any structural adjustments (if applicable), all expenses and any margin-sharing credits (if applicable).
 

The Business Office will setup a meeting to go over the final statement with each Division Manager and Chief. This is an opportunity for each Division to ask questions and confirm their agreement with the final statement. The Division Manager should also be prepared to speak to any significant variances between Budget and Actual performance. The Division Manager’s review of the final statement should focus on the following areas:

  • Check wRVUs to ensure all wRVUs were credited to the Division as appropriate. Remember the expense matching principle (wRVUs generated from individuals whose salaries are covered directly by the Health System do not flow to the Department)
  • qRVUs – qRVUs are a relatively recent (as of FY16) program whereby the Health System agrees to fund non wRVU-generating activities it deems of strategic importance. Some common examples include participation in Lean training and workshops, provider wellness training, and other areas. The Health System bases the qRVU calculation on the provider’s clinical effort (cFTE) and a historical average of their wRVU yield. Faculty participants should verify in advance of participating in these activities whether the Health System agrees to supply qRVUs.
  • Verify benefits calculations (Department is credited for faculty provider benefits only).
  • Review strategic support agreement calculations for accuracy and alignment with Division’s records.
  • Confirm agreement with all expenses charged to the profees projects. Any erroneous expenses should be identified and transferred prior to finalization of the year-end statement. Division Managers should communicate with the Business Office if they discover any erroneous charges.

Upon completion of the final statement and after review by each Division, the Business Office zeroes out the four profees projects and transfers any surplus or deficit to the Division’s reserves projects. (The DOM uses shared project 2012811 paired with each Division’s dept ID to house all reserves).
 

Clinical Incentive Payments

Following on from the year-end final statement, Divisions that have agreements to pay out clinical incentives to faculty providers should begin this process immediately upon completion of the final statement in order to facilitate payout of the incentives before the end of the calendar year. The Business Office needs to review and approve each Division’s draft of the incentive payments before they can be processed. The Division Manager should prepare and send a draft to the Business Office, adhering to their clinical incentive plan (if they have one) or otherwise using the Department’s generic clinical incentive plan.
 

It is of critical importance the incentives calculations be laid out logically and agree with information on provider performance that can be verified in DOMBO by the Business Office. The reasons for this are to facilitate review by the Business Office and so that in the event a faculty provider ever raises a question or disputes the calculation of the incentives, the Business Office is able to address their questions – even if the questions arise several years after the year in question. Incentives plans that use individual provider targets must include as a reference the targets for each provider and track any changes that may have occurred to the provider’s targets over the course of the year. All deviations or exceptions must be explained and justified with comments and be applied objectively (i.e. reducing a productivity target for one provider due to FMLA must be extended to all providers who took FMLA, etc.)

Finally, it is important to practice good spreadsheet “hygiene”. What is meant by this is that :
1) formulas should be aligned all the way down each column in a table
2) links to other worksheets should be avoided, instead use VLOOKUP, HLOOKUP or INDEX/MATCH formulas,
3) do not use any external references; all data should be contained within the file submitted to the Business Office.

 

Update on the recent changes to Funds Flow:
 
Since the funds flow model established in 2014, UCSF Health and SOM have recently revised the funds flow, effective October 1 2023. This revision addresses key issues in faculty compensation, productivity incentives and an evolving healthcare environment. Notably, wRVU payment rates are now set at a minimum of the 60th percentile of MGMA benchmarks for FY24 and FY25, and then at the 55th percentile thereafter. This change applies to clinical services with productivity below the national MGMA median for their specialty. A new productivity premium has been introduced, providing increased dollars per wRVU for specialties exceeding their median MGMA productivity benchmarks. The system also enhances funding for ACGME residents and fellows and supports associated administrative costs. While these changes are expected to modestly increase overall DOM funding, especially with high productivity, they come with a reduction in overhead payments to departments—from 11.8% to 9.5%. This reduction, necessitates a revision in the internal DOM funds flow and some budgetary adjustments. The goal is to ensure balanced compensation for clinical faculty while sustaining essential departmental functions and programs across all missions.