Healthcare Decision Support Helps CFOs Achieve Their Top Goal: Timely, Accurate, Agile Decision Making

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Skip Kriz has served as the Chief Financial Officer (CFO) of Pennington Health, a large Midwest health system, for over a decade. Despite his extensive experience, his role seems to get bigger and more challenging with each passing year. On any given day, he has to juggle a growing list of financial and strategic responsibilities—managing the financial stability of the organization in the face of declining reimbursement and rising expenses, effective procurement and deployment of precious capital, resourceful revenue cycle management, constant merger and acquisition activity, adequate operating margin and days cash on hand (DCOH), and negotiating reasonable risk-based contracts involving bundled payments, shared savings, and capitation. The list of challenges is long and continues to grow.

Despite the many challenges of his job, Skip is actually enjoying his work more than any other time in his career. How is this possible? The answer is straightforward—timely access to reliable data for decision making. Quality decision making requires good data, speed, flexibility, adaptability, and collaboration. To support this need, the health system recently implemented an executive decision support system—healthcare decision support that enables leaders to easily monitor key metrics, quickly identify emerging issues, and collaborate with others to resolve problems.

Just recently, at the request of Pennington Health’s CEO, Skip led a team of finance and operational leaders to address a decline in DCOH. Drilling into the data, the team was able to quickly determine that the drop in DCOH was related to an increase in operating expenses, AR days, and payroll expenses at some of the larger hospitals. Using the data and collaboration capabilities of the decision support system, the trend was quickly reversed.

Four Ways Healthcare Decision Support Helps CFOs Lead Effectively and Drive Improvements

From data-driven practice expansion to improving population health management, CFOs rely on healthcare decision support to enhance their systems in four key ways:

#1: Data-driven growth and practice expansion

Over time, the health system’s growth has and will continue to require the construction of new office buildings to support a growing patient base in expanded geographical locations to better meet the needs of existing patients without clinics close to where they live. The governing board has approved expansion and asked Skip to work with his team to decide how to optimally spend $60M budgeted for new clinics and ambulatory centers to determine clinic location(s) that will best serve patients. To tackle this question, they needed to understand where to locate the clinics and what types of providers they needed to meet the patients’ needs.

The executive decision support system allowed Skip to quickly visualize the number of patients in each zip code area, along with measurement for that population, such as case counts, readmission rates, charges, revenue, and length of stay. These metrics could be stratified by demographics, and clinical and financial information (figure 1). Clinical data could be viewed by county and zip codes (the latter is important because a given county could have dozens of zip codes).

Figure 1: Healthcare Decision Support System View of Clinical Data

Using the executive decision support system, Skip’s team was able to determine how many patients live near the proposed location for a new facility, and understand what type of visits those patients were generating (and in what specialty) and the potential volume of visits based on that information. The team also explored risk and demographic information of patients living in the area.

In addition, when hiring new physicians to staff the new clinics, the team was able to evaluate the patient volume for a given specialty coming from one county versus another to inform where the newly hired specialists should practice, or whether they should split their work week at different offices. Based on this data, Skip was able to inform the CEO and governing board with confidence about how to best spend the precious capital that had been allocated to the expansion.

#2: Improved ability to negotiate favorable risk-based contracts with payers

Skip’s finance team is also using the executive decision support system to ensure the conversations with payers are more data-driven and accurate. With good data, they can demonstrate the health complexity and risk associated with a given cohort of patients (e.g. diabetics) insured by each payer. At the end of the day, both the payer and the health system are after the same objective of delivering higher quality care at lower costs. In order to deliver on that joint objective, the health system now has leverage to better justify a higher per-patient-per-month care management fee to enable investment in the care infrastructure (e.g., hiring more care managers to help coordinate better care for these patients under the system’s care management program).

#3: Effectively and fairly address important physician compensation issues

The finance team wants to ensure that the compensation framework is properly aligned with the actual patient care that a physician performs on a day-to-day basis by properly accounting for the volume and risk of subspecialty work. The team turns to analytics for guidance. As an example, a breast surgeon who also does general surgery can be more accurately benchmarked based on the volume of breast surgery they do, compared to the volume of general surgery and the risk profile of the patients they serve.

#4: Improve population health management

Skip and his finance team also routinely use the executive decision support system as a key component to the health system’s initiative to maximize population health. They work collaboratively with the system CMO to identify and reduce inappropriate variation. Removing unnecessary variation from specific clinical processes is critical to ensure patient care aligns with best practices and minimizes costs. Using the financial costing support application, costly, high-variation clinical areas can be easily identified. The application enables users to quickly visualize variation rates and costs stratified by physician (adjusted by risk) to decide what the biggest opportunities are, so that variation reduction initiatives can be prioritized and effectively managed in collaboration with those in charge of clinical improvement.

As these examples illustrate, today’s healthcare CFOs are being asked to play a critical role in setting and tracking strategic priorities within their organizations. This inevitably leads to enormous pressure to be able to effectively analyze organizational data to control costs and assure that financial and operational performance targets are met.

CFOs Need Healthcare Decision Support to Achieve Their Top Goal: Timely, Agile, Accurate Decision Making

According to a 2017 survey by the consulting firm Kaufman Hall, more than 70 percent of over 380 finance executives polled say supporting decision making is their top goal for 2017, a divergence from the more traditional finance and accounting roles. Over 90 percent say they need to do more with the financial and operations data at hand to help top management make critical decisions. This emphasis is because CFOs in general feel ill-equipped to manage their present challenges. Only 14 percent felt prepared to manage the financial impact of healthcare reform with their current financial planning processes and tools. Only 19 percent are very confident in their team’s ability to quickly and easily make adjustments if business circumstances change suddenly.

Finance teams that are empowered by healthcare decision support to make accurate, agile, and timely decisions using modern analytical techniques, such as accurate cost measurement, risk-adjusted scenario modeling, and rolling forecasts of future trends will have a distinct competitive advantage. They will be able to significantly shorten planning cycles and optimize strategic decision making. Healthcare organizations will be able to adjust quickly to unexpected market changes and capitalize on new market opportunities.

Additional Reading

Would you like to learn more about this topic? Here are some articles we suggest:

  1. Why CMOs Need Healthcare Executive Dashboards to Lead High-Performing Systems
  2. Why the Executive Dashboard Is a Healthcare CEO’s Best Advisor
  3. Leading Wisely in Healthcare: Why the Next Generation Executive Decision Support System is an Industrywide Imperative
  4. Leading Wisely: Better Executive Decision Support
  5. Automating the Executive Healthcare Dashboard: Spend Less Time Collecting and Validating KPI Data
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