Determining Programmatic Costs is a Critical Piece In Performance Management

State: UT Type: Model Practice Year: 2019

The Salt Lake County Health Department (SLCoHD) provides service to approximately 1.1 million people. The County is the most populous in the State, comprising approximately 37% of the state's population. The demographics of the population: roughly 79% white, 2% African American, 1% American Indian, 4% Asian, 2% Pacific Islander and 12% some other race or combination of 2+ races. The County's population by ethnicity: roughly 82% Non-Hispanic and 18% Hispanic. Salt Lake County, like many western Counties, continues to see a steady increase in population, approximately 11% from 2010 to 2018. With this increased population, comes an increased demand on public services. During this same time frame, the County has not increased property taxes to match the growing demand on services. Public Health, like many other public services, has had to consequently juggle demands so that emerging health issues are addressed while continuing to provide traditional services. Because of this growing stress on tax dollars, it is important that Public Health understand the cost of the services they provide, because without this understanding it is difficult to expend for efficiencies, manage budgets wisely and recoup the cost for services when sole benefactors can be identified. To develop an accurate picture of program costs, the SLCoHD developed a comprehensive review process. The goals of the process were to (1) Develop an accurate picture of program costs, so that the Department could compare these costs to peer counties to understand if programs were operating efficiently and smart; (2) Work with industries, where applicable, so that understanding could be established through the fee compilation process; (3) Develop fees that are reflective of program costs, where sole benefactors of services can be identified, paying attention that affordability is paramount to preserving public health; (4) Review program costs every three years so information remains current; (6) Share process with other Utah local public health departments to build consistency around fees. Historically our fee schedule, although based on some understanding of time associated with providing services, was not a systematic process that included all necessary components. Most direct costs were identified, but the indirect costs were virtually not included and where they were it was haphazard. Over four years ago, the Department implemented a very thorough and deliberant approach to the fee review process. With the Department's fiscal manager, a process was developed which incorporated both the time involved in performing the services that have associated fees and the indirect costs which include overhead. Program staff were included in review of time, so that all elements were included in the determination of the time associated with the performance of services (support staff, travel, time to perform service, office time, etc.). With County guidance, the Department determined that fees should be updated every three years. On a yearly basis, the fiscal manager compiles the Division level cost which includes both direct and indirect expenditure. Because on the three-year cycle, we project out what these costs will be based on historical information. An average for these three years, per Division, is determined and then divided by hours of service in a year, from which we determine hourly cost. This hourly rate is applied to the time that program staff have attached to various services, from which we arrive at what our fee should be. These fees are then compared to other Local Health Departments (LHD) in Utah and with peer Counties outside of Utah. If we believe the programs for which these fees are being developed, should bear the true programmatic costs as benefactors of the services are specific, we then vet with industry representation where applicable. Food establishment inspections is an example of where the cost of performing this service is passed on to industry as the public who benefits from this service are primarily those that eat at these establishments. The cost to perform drinking water inspections does not have a sole benefactor as we all benefit from clean water, similarly, the public at large benefits from immunization and STD programs. We have had a lot of positive feedback because of this deliberate process. Comments from industries impacted by these changing fees have shown that they appreciate the increased understanding and have mainly been supportive because they see how the resulting fees are covering program delivery costs. The Department has shared with Summit County Health Department, a smaller local health department to the east of Salt Lake County. Summit, like Salt Lake County, has had great feedback on their thorough and comprehensive process.
The funding of local health programs can be challenging. Determining where scarce tax dollars should be dedicated in the face of many existing and emerging public health issues can be a delicate balancing act. Determining the true cost of public health programs is an important component in developing an effective and resilient financial management system. Knowing how much it costs to run a program, including all aspects of that cost from direct to indirect, allows a Department to compare their costs to like sized departments which provides an opportunity to ensure that programs are working efficiently and smart. A critical piece of this is that the comparison is done with Departments who also are considering and capturing all costs associated with a program, because without this the comparison cannot be accurate. Furthermore, having a true understanding of cost can provide an opportunity, to have associated fees for service covering the entire program costs. Should tax dollars be used to fund programs where sole benefactors of the services can be identified? If a person never eats at a restaurant, should their tax dollars be used to fund restaurant inspections? There are many public health programs where sole benefactors cannot be identified. Programs such as immunizations, STD/HIV, drinking water and air pollution protection provide public health benefits to innumerable people; we as a public benefit from protection and preventative programs and sole benefactors cannot be identified. A key piece in the process that SLCoHD developed, was to compare fees that resulted from this process with other Utah LHD's and peer counties. Through this comparison, we found that many Departments, in Utah and in other states, reported that their fees were not a product of thorough review, but largely a result of cost of living adjustments. In many cases, the fees had not been revised in 10+ years. Because of this experience, the SLCoHD felt it was important to share our process with other Utah LHD's to build consistency and increase understanding. Having a variety of fees for similar services, that change based on County line, can be confusing to industries that have establishments in different counties. SLCoHD believes that building a unified understanding of the time and cost associated with services, will help other LHD's determine where precious tax dollars should be directed and develop justifications for systems that may increase efficiencies but require up front capital expenditures. A deliberant distribution of limited tax dollars to programs where fees cannot cover program costs will allow for more thoughtful review to ensure that monies are being distributed based on need and outcomes. If program costs are never correctly quantified, how can Department's understand where monies should be distributed? Likewise, if Department's never compare their costs to like sized areas, how do they know if their programs are working efficiently and smart? Developing a basis for this comparison to occur is an important step, as our Department found the comparison piece is hard because most Departments do not have a thorough program review process. Communities will benefit from the implementation of this process as it will allow LHD's to understand their financial landscape and make decisions based on that sound understanding. Limited tax dollars, can deliberately be focused on supporting programs where sole benefactors cannot be identified and freed up from programs which overtime have become tax reliant simply because fees are outdated and not comprehensive. The process has been in place for over 4 years, over which time SLCoHD has updated all Department fees and is now in the process of updating fees that were part of the initial review. As part of the second review, the Department looks at program costs/revenues over the past 3 years to ensure that the review resulted in a fee that was representative of costs and therefore revenues and costs are in sync. The reviews done to date, demonstrate that in the first year revenues exceed costs, second year revenues & costs are close and then third year cost exceeds revenues. This information provided justification for continuing the 3 year review. Our experience in interviewing local health departments primarily in western states and some eastern states, to obtain fee information, illustrated the lack of deliberate program cost assessments. In some states, direct costs are included but seldomely indirect costs. Further, what is considered as an indirect cost in inconsistent. The development and implementation of this process has been very beneficial to our agency because it has increased our understanding of program costs, it has allowed us to make good financial decisions with sound data and it has improved our relationships with many different industries because they understand the process fees are established through and they are appreciative of the transparent and deliberate process.
SLCoHD developed the program cost review process in conjunction with Salt Lake County's Human Services Department and Health Department program managers. The goals of the process were to (1) Develop an accurate picture of program costs, so that the Department could compare these costs to peer counties to understand if programs were operating efficiently and smart; (2) Work with industries, where applicable, so that understanding could be established through the fee compilation process; (3) Develop fees that are reflective of program costs, where sole benefactors of services can be identified, paying attention that affordability is paramount to preserving public health; (4) Review program costs every three years so information remains current; (6) Share process with other Utah local public health departments to build consistency around fees. Program staff were integrally involved in the first goal in that Health Administration worked with program managers and field staff to discern time involved in service delivery. Management and staff input provided the information necessary to determine program costs. Through this process, efficiencies have been found in timeliness mainly due to the implementation of tablets and other electronic equipment used in the gathering of patient or program information. Program information development is the first step, from there program managers canvass both LHD's in Utah and peer counties to determine the fees charged for service delivery and the range of services provided. This canvassing provided needed comparison information, but also illustrated the need for fee consistency. Those canvassing were amazed to find that in some areas fees had not been updated for over a decade and when done are just updated with cost of living indices. Program managers and staff are also involved with the vetting of proposed fees with industry. All impacted industries are contacted and noticed that feedback is solicited in the proposed fees. When requested, meetings have been held with industry representatives to explain how the fees were determined and the comparison to other LHD and peer counties is shared. This transparency with industry has led to improved understanding in the fee development process and development of trust. Department staff had received feedback that demonstrates the appreciation from industry in seeking their input and for developing a thoughtful and deliberate process. The Department has committed to a three-year review cycle. At the completion of three years, program revenues are compared to costs, if a gap exists then a review will commence but if in sync then another evaluation will occur the following year. All proposed fees, once shared with industry, are presented to the Department's Board of Health for approval and then from there are presented to the County's Fee Review Board and then County Council for final approval. At each of these steps, Department staff must explain the steps involved in the review, how the resulting information is compared to other LHDs, and then vetted with industry. The costs associated with the implementation of this process are minimal and should be viewed as a needed exercise in performance management. Program managers and staff should understand the financial aspect of their programs as this provides them with needed information for sustainability. Grant and tax funded programs should understand their program costs as this information should guide programmatic decisions such as additional employees, equipment purchases, travel etc. It further provides needed information about how much it would cost to sustain the program if grant dollars ended or tax dollars decreased. Rather than scamble for this information in the event of these occurances, be prepared and plan. Comparison information provides many opportunities to LHD's to see if efficiencies can be realized through program changes and equipment investments. Sadly, this comparison is currently very difficult because when it is done, LHDs don't all collect the same information in program cost assessments. We should learn from each other, so when possible, developing consistency around this information would provide needed and valuable information.
Evaluating the success of the implementation of the program cost review process included both process and outcome evaluation. The effectiveness of the steps implemented in the program cost review process to achieve the expected outcome of comprehensive program cost information from which fees can be established was evaluated based on the success of the enactment of proposed fees. There are internal evaluations built into several steps in the process in that the information collected is shared and vetted with industry, Department Board of Health, County Fiscal Review Board and the County Council. At each of these steps, the process is shared and open for comment and evaluation. To date, the Department has successfully reviewed, proposed and now implemented nearly 200 revised and updated fees that are associated with the nearly 26 Department programs. If the process was not sound, then the review and evaluation that occurs at each of these identified steps, would have provided that feedback. Instead, the Department has received accolades from industry, the Board of Health, fiscal managers that make up the County's Fiscal Review Board and finally members of the County Council. Further, the model shared with Summit County Health Department, has had similar positive feedback from their Board of Health, County Manager and industry representatives. The review process further has an outcome evaluation piece in that the implemented fees and the resulting revenues and program costs are quantified annually and compared to determine if the review process correctly captured program costs. If a piece was missing in the review process, then the resulting fee would not correctly capture the program costs and in the first year of implementation a gap would exist. Since the review process has been in place for over 4 years, the Department has had the opportunity to complete these annual evaluations and determine if the resulting fees are representative of program costs. Where programs are mindfully not implementing fees that are reflective of program costs because of the public health benefits, the revenue & cost comparison is still completed. The program costs included indirect costs so that program managers have a complete understanding of program costs. SLCoHD is working with other LHD, like Summit County, in the program cost review process to share lessons learned from our process to build consistency. If we are successful with this piece, then resulting fee comparisons will be more meaningful and lead to broader discussions about program efficiencies. If program costs in one health department are drastically higher, when costs are consistently captured, to another health department's costs, a more in-depth review could possibly lead to programmatic changes to realize efficiencies and ultimately decreased costs. Building a resilient financial management system for the local public health system demonstrates a commitment to responsibly manage fiscal resources. The private sector is motivated to implement sound financial systems because their livelihood depends upon it. However, the public sector has been slow to develop a sound financial management system which accurately captures program cost information, trains managers to proficiently manage their program's costs and demonstrate an understanding that program sustainability is strategically planned for. This slowness may be attributed to the cost to invest in updated systems that easily track expenditures including time and purchases, the perception of difficulty and time commitment to learn a new process. Developing a resilient financial management system is critical and should become a core piece in LHD's strategic planning.
The implementation of the Department's program cost review process has involved many program staff and County fiscal managers. The initial steps of the process were charted out with Health Department Administration and the fiscal manager from County Human Services. The information that needed to be captured was identified, an excel spreadsheet with formulas was created, and the steps that needed to be involved in the review were identified and vetted. Through this process, communication and staff involvement has been a paramount piece of its' success. Without staff involvement in capturing the time associated with the parts of program delivery, many pieces would have been overlooked and not captured in the program costs. Further, involving the Department fiscal manager in the meetings with program staff and identification of indirect costs was also a critical piece because of the resulting consistency that was established with this oversight. The same indirect costs are identified for each Department program, needed coding was developed and implemented so that moving forward costs are easily identified when invoices are being paid, time sheets are being completed and purchases are being made. Our fiscal system has been built around the improvement of our program costing. Program managers are given updated program cost & revenue information monthly, so that sound fiscal decisions can be made. The program costing is further used in the budget preparation process which has enabled the Department to develop more concise and representative budget proposals. SLCoHD plans to continue with the current program cost review process and build upon the information this system provides so that sound fiscal decisions are made moving forward. Program managers are met with quarterly to share this information, training is provided by Department fiscal manager and monthly updated reports have virtually eliminated the need to make unsubstantiated fiscal requests. This cost information, along with revenue tracking, has created a fiscal system for our Department which allows us to strategically plan for the future.
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