proprietary and confidential to north highland ga hmfa meeting financial performance improvement our...
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Proprietary and Confidential to North Highland
GA HMFA Meeting
Financial Performance Improvement
Our approach to improving margins
September 28, 2012
Stephen KardonPrincipalNorth HighlandAtlanta, GA
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Recent studies suggest that high performing organizations avoid common pitfalls and focus on speed and culture.
High Performing Organizations focus on:
1. Speed and Efficiency
2. Shared Goals
3. Targeted use of benchmarks
4. Evaluate timeline of data availability
5. Building a culture of accountability
6. Clinical performance
Source: Excerpts from Cost Reduction in Health Systems: Lessons from an Analysis of $200M saved by Top-Performing Organizations. Frontiers Magazine American College of Healthcare Executives Winter 2010 Edition
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Culture
Strategy
Infrastructure
Metrics & Scorecard
Process Improvement
Strategy:How rigorous are the plans to facilitate the growth?
Infrastructure:Do the Managers have the infrastructure to succeed?
Culture:What changes are needed for a high performing culture to make sustainable changes?
Process Improvement:How do you prioritize the efforts and where do you focus in a complex environment?
Metrics & ScorecardHow will the Hospital track the initiatives and hold individuals accountable?
The key is to generate sustainable margin improvements so the improvements have a long-term impact.
Key drivers that influence a successful margin improvement exercise
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A successful five year improvement plan requires the organization to have a high performance culture.
We recommend an assessment is completed and the assessment is:
1. Quick to administer assessment.
2. Focuses on senior leadership to the manager level positions.
3. Provides senior leadership an understanding of how much the organization has to change to achieve sustainable margin improvements.
4. Conducted by asking individuals to complete 50 questions. (Typically, the questionnaire is completed in 15 – 20 minutes).
Organizational Culture Inventory® is a registered trademark of Human Synergistics International. OCI circumplex from Robert A. Cooke and J. Clayton Lafferty, Organizational Culture Inventory®, Human Synergistics International. Copyright 1987-2010. All rights reserved. Used by permission. Data collected by M. Walter.
High Performing CultureLow Performing Culture
Organizational Culture Inventory®Acute Care Hospital
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We have developed an approach based on five dimensions to achieving sustainable margin improvements over a five year period.
1. Department Cost Reductions
Year 1 Year 2 Year 3 Year 4 Year 5
2. “Lean” Macro Process Improvement A. Cost B. Throughput (capacity value at CM)
4. Pricing and Contracting A. New opportunities such as new
reimbursement models (global fees, gain- sharing, and severity adjustment)
3. Growth – New PatientsA. Strengthening referrals
B. More downstream care
C. New Services
D. New Locations
Cumulative Improvement
5. Human Resource Policy A. Compensation & Benefits Reductions B. Low Performers Separation
Five Dimensions
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We us ABC to help Department managers learn the language of finance in a way they think – operationally.
…what is spent
Labor $ 525,000Benefits/Payroll taxes 90,000
Supplies 60,000
Depreciation 60,000
Other costs 40,000
$ 775,000
Medical/Surgical Unit Medical/Surgical Unit
Deliver Care
Document Care
Process Patient Orders
Transport Patients
Obtain Test Results
Admit Patients
Process Transfers/ Discharges
Develop Care Plan
Perform General Administration
…into what is done
Deliver Care $ 225,000
Document Care 115,000
Process Patient Orders 110,000
Transport Patients 75,000
Obtain Test Results 70,000
Admit Patients 50,000
Process Transfers/ Discharges 30,000
Develop Care Plan 25,000
Perform General Administration $75,000
$775,000
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A Rigorous Financial Planning and Budgeting process will provide insight into alternative cost reduction opportunities.
1. Identify select Departments to assist in identifying cost reductions based on the following criteria:
a. Information already received
b. Departments whereby managers need assistance
c. Replicate the work to other departments quickly
d. Potential opportunities are bigger
2. Conduct a high level activity based costing analysis at the Department level
3. Develop cost-saving initiatives that, in total, could save 20% of departmental costs for Over head Departments and 10% in Clinical Departments
4. For each initiative, Recommend/Not recommend (with rationale)
5. Department Managers present to peers and decision-making process
6. Implement improvements
7. Track implementation and results quarterly with revisions to budgets
Dimension 1 – Department Cost Reductions – Some Departments did not go very deep in their thinking about opportunities to reduce costs.
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2 3
4
5
6
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8
9
10
11
12
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Pre to Post Operation
Surgical Services Remaining Care
Pre-Surgery
Emergent Medical Services Observation Pt. Mgmt.
ED Throughput
Urgent Care Strategy
Diagnostic Services
Pre-Certifications
Clinic Services
Research
Chronic Care Protocols
Care Gaps
Coordinated Access
Teaching
Funding and Staffing
Research Productivity
Recognition of Grant $$
Post Discharge
Faculty Productivity
Funding for Residents
Macro ProcessesImprovement
There are processes that are customer focused and present opportunities to reduce costs and increase revenues.
Feeder Clinical Programs
New Locations
Throughput
New Locations
Post Discharge Care
Enrollment in PCMH
Year 1 Focused Efforts
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Dimensions 2 & 3 - Macro Process at the Customer Level
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ICD -10 opportunities
Revenue Cycle
Collection Opportunities
C of C Coding Optimization
Supply Chain
Manage Non-Inventory
Leverage Affiliates
OR Standardization
ITSupport Process Chgs.
Care Management
Continuum of Care
Care Coordinators
Outcomes Mgmt across Continuum of Care
Bundled Payments
Ownership vs. Control
New Services
Macro ProcessesImprovement
There are processes that cut across the organization that present opportunities to reduce costs and increase revenues.
PCMH Rates
Protocols
Leverage HITech $$
Control Process
Dimensions 2 & 3 - Macro Process at the Operational Level
Year 1 Focused Efforts
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Specificity Drives ComplexityWhile ICD-10 offers an increased degree of specificity for patient diagnoses and procedures, the implications on complexity and implementation must not be underestimated.
ICD-9 ICD-10 -
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
14,000
68,000
4,000
87,000
Diagnosis Procedural
Nu
mb
er o
f C
od
es
Source: American Medical Association (2012)
18,000
155,000 • ICD-10 will represent 8.5 times as many codes as ICD-9
• Digits will expand from a 3-4 numeric to 7 alphanumeric
• The new codes will provide sufficient detail to describe complex medical procedures
• Better specificity gives better quality healthcare and outcomes
• Each substantially different procedure will have a new code
Key ICD-10 FactsNumber of Codes, ICD-9 versus ICD-10
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Inadequate preparation for an ICD-10 world will not only increase overall cost initially, but may also present downside financial risk.
Providers will need to manage multiple risks after implementation of ICD-10 in order to prevent financial losses.
ILLUSTRATIVE• Denials (no payment)
• Underpayment of claimsRequires re-billing with more information/justify full payment
• Overpayment of claimsRefund payment/increase processing time
• Coder productivityTime from discharge to billing grows
• Biller productivityBills may not go out on time
• Collections productivityIssues with claims lead to increased time to resolution
• Timely filing limits• Could cause providers to lapse
beyond timely filing limits (denials)
• Health plan/managed care issues• Providers must research/resolve payer
issues in addition to their own
Key Risk Areas
High Risk
Medium/ Low Risk
Source: Stratasan; North Highland Analysis
Note: Revenue calculations are based on an assumed reimbursement rate applied to charges.
Ensuring Revenue Neutrality Requires a Focused Approach
Revenues at Risk
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You will face many different barriers when attempting to make the necessary changes
Barriers “Not sure we should be using this business concept…”
“Standardization isn’t possible or desirable in an academic medical setting”
“Patients aren’t cars.”
“Expectations too high too soon.”
“I want to feel comfortable.”vs.“If we are comfortable we aren’t moving fast enough.”
• “We are moving from a “no change culture” to a “constant change” culture
-----------------“Stop the world…I want to get off”----------------
Source: Excerpts from Seattle Children’s Hospital Presentation - Hardwiring Made Easy: Transformation ThroughEngagement, Service, and Performance Improvement – Pat Hagan, President and COO
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How to overcome these barriers in a complex environment
There are many tools to utilize to when making operational changes:
5S– Sort, Simplify, Sweep, Standardize, Sustain
Multi-Day Rapid Design Workshops
Multi-Day Rapid Process Improvement Workshops
1-2 Day Focused Events
Value Stream Assessment & Mapping
Failure Mode Effect Analysis
Root Cause Analysis
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Dimension 4 – Pricing and Contracting Analytics
Key Questions
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Develop attractive products/service What services are unique or differentiated? What is the value of each difference? What themes incorporate these sources of value?
Price based on value What activities drive/support the unique care delivered? How can the charge master be adjusted to reflect unique activities?
Contract to realize value What flexibility can be added to the payer’s payment structure? What fraction of each payer’s total cases and dollars are our “unique”,
valued cases?
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Dimension 5 - Human Resources: Compensation & Benefits Policies & People
A. Staff Compensation & Benefits Policies:
1. Review shift differential policies
2. Review over-time policies
3. Review use of contract staff policies
B. Market Rate Adjustments w/Benefits:
1. Ensure positions’ salaries are similar to market rates
2. Evaluate the rates based on your benefits
3. Evaluate impact of holding salaries and benefits constants
D. Physician Compensation & Benefits Policies:
1. Identify different compensation structures
2. Develop a standard approach
3. Propose new ideas to Senior Leadership
C. People
1. Identify the top 30% “engaged” performers and ensure the workload is meeting their needs.
2. Identify 55% of the “not engaged” and work to move them toward engagement.
3. Identify the 15% “actively disengaged” and develop a program to remove them from the organization.
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Our proposed timeline to meet the needs to successfully implement a margin improvement exercise over five years.
1 2 3 4 5 6 7 8 9 10 11 12 4 - 60 MonthsWeeks
Transformation Management Organization
Quick Hits and Ongoing Initiatives
5 Year Baseline Financial Goal
Holistic & Comprehensive
AssessmentAnalysis Prioritization
Road Map
Cultural Assessment Cultural Transformation Plan & Development
QuickHits
Implemen-tation
KSF/Barriers
Organization Improvement
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