Granted, the average financial analyst might have to Google "sepsis" to participate in discussions about reducing sepsis mortality rates. By the same token, the typical clinical leader may glaze over at the mention of productivity measures. However, if you can get these two talking about how to improve these two different data points, it could be the start of a beautiful friendship. A mutual respect for data-and how data guide decision making-is one of the common grounds between finance and clinicians.
Driving out unnecessary costs and improving quality requires two critical skill sets. The first is an in-depth understanding of how patient care is delivered-and how to improve it. Clinicians, of course, are the go-to source for this type of information.
A second skill set-sophisticated data analysis and reporting-resides in abundance in the finance departments of hospitals and health systems.
"Clinicians are experts in what they do. They understand the clinical implications," says Kari Cornicelli, CPA, FHFMA, CFO and vice president at Sharp Grossmont Hospital in San Diego. "In finance, our expertise is in running and analyzing data and in understanding the financial side. But we may not understand the implications on operations. We may have our own set of assumptions and, unless we work with the clinical side to validate our assumptions, then we can't come up with the right solutions."
Rita Turley, MS, RN, a former nurse executive who is now a consultant, agrees: "People who understand clinical and financial practice must sit down at the same table and really start to have discussions," she says. "They need to ask, 'What does it cost to provide care the way it is currently being done? How can it be improved-not only from a quality perspective, but also from a cost perspective?'"
The Benefits of Pairing
Some organizations are formally pairing finance and clinical leaders to manage unit/department budgets, conduct detailed service line analysis, identify beneficial improvement strategies, and analyze the cost-benefit of new technology. "When that happens, the results can be really incredible," says Turley.
Slashing premium labor costs. Take, for example, the $1.9 million saved in nurse traveler costs at 107-bed Pioneers Memorial Hospital in Brawley, Calif. "Finance pointed out the level of cost related to registry," says CFO Daniel R. Heckathorne. "Then our nursing leadership took it upon themselves to get together with human resources and develop an aggressive nurse recruiting program."
In just over a year, the hospital had hired enough staff nurses to replace all but two of its 20 travelers. Accomplishing this required additional investments in recruitment, nursing salaries, and internal training. "We don't see these as added costs. We see them as investments," says Heckathorne, noting that the initiative has also improved continuity of care and staff morale. Even with these added costs, the hospital realized an ROI of about $550,000.
A collaborative budgeting process was the backbone. "We sit down together when we do budgeting and set targets for how much we could improve over a period of time," says Heckathorne. Throughout the year, financial analysts meet with nursing leaders to review productivity and budget reports and work together to address any variances.
Validating benefits of new technology. In another example: Sharp Grossmont has avoided spending thousands of unnecessary dollars by bringing finance and clinical leaders together on a New Technology Committee. The cross-discipline team evaluates the cost-benefit of promising new supplies and equipment, separating facts from sales pitches. Recently, the committee has looked at cardiac stents, hypothermia equipment, and interventional radiology catheters.
"There is usually a claim of better outcomes," says Anthony D'Amico, vice president of clinical services at Sharp Grossmont. "But if you dig a little deeper and ask to see the research or the data, it is often not there. Our committee provides a good kind of vetting process to actually validate that there is an outcome benefit."
In some cases, the additional cost is justified. For instance, the committee recently approved the use of an expensive interventional radiology catheter
for treating acute strokes. "We felt the benefit was so great that we waived the incremental cost," says D'Amico, who manages laboratory, radiology, and other ancillary services.
"It really takes a dynamic team working collaboratively to dive in and analyze and understand all the implications," says Cornicelli. The committee even includes coders who validate, for instance, whether a financially beneficial coding change related to a new technology can truly be supported by physician documentation-and whether that coding change would generate enough additional reimbursement to cover the more expensive technology.
Two Mindsets; Better Results
By reviewing and digging into data together, clinical and finance leaders can shed some clarity on a variety of problems and opportunities.
Finding errors and solutions. Unity Health System in Rochester, NY, is already seeing reductions in supply expenses just six months after putting together finance-clinical teams to review operating budgets for major departments/cost centers. One financial analyst meets monthly with a small group of clinical managers. The managers are expected to come to the meetings with specific questions or problems they want to discuss with the analysts related to the various budget reports they receive.
"The financial analysts have gotten very creative in helping managers figure out how to dig into the data and how to challenge some of our charges," says Jane McCormack, MSN, RN, senior director for nursing and patient care. For instance, the financial analysts have pulled material managers into the meetings to explain why certain supply charges were appearing on unit budgets. "The analysts are in a much better position to pin down where some of these expenses are coming from, and we actually found some errors that were easy to hide in some of our bigger departments."
McCormack and her managers rely heavily on finance's data analysis skills. "For example, we were struggling with a labor benchmark in our walk-in care center. The area was not meeting its step-variable rate because of volume increases. So we had to look at different methodologies. I wasn't necessarily proposing that we add incremental FTEs to the budget as much as I was saying, 'The benchmarking methodology is not working.' Our financial analyst came up with a perfect solution that has helped us benchmark the walk-in center's budget-to-actual activity. I would not have had the time to do all the math and run the year-to-date numbers to identify this new approach."
As Turley points out, finance is trained in variance analysis, which means they can help clinical leaders "manage the peak and valleys of work." "Work peaks
at certain times and valleys at other times," says Turley, adding that many hospitals are struggling to improve patient flow and remove delays/breakdowns in care delivery processes. "The peaks and valleys could be related to staffing, the processing of labs and medications, or other issues. With the tools they have, finance can help identify ways to level those peaks and valleys. The data analysis really takes the emotion out of the equation."
Validating assumptions. Clinicians, in turn, can help finance understand and validate data. "You've got to have the clinician that's going to ask the 'what if' questions, or say 'this doesn't look right,'" says Cornicelli. "Clinicians can be astute in asking for additional data that will help us further clarify the findings."
For instance, Angela Coladonato, RN, MSN, NEA, BC, is currently challenging her finance department's perspective on nursing salaries. As CNO of Pennsylvania-based Chester County Hospital, Coladonato must compete against other suburban Philadelphia hospitals to recruit and retain staff nurses. "Finance needs to understand that we need to remain competitive with our salaries," she says. "They may look at salary data from different U.S. regions and think our salaries are competitive. But we really have to look at what's happening within 15 to 20 miles around us. If you look around this area, salaries continue to go up."
Financial analysts need two key skills, says Cornicelli: the ability to ask the right operational questions and a comprehensive understanding of any revenue implications on the inpatient and outpatient side.
These two skills proved crucial when the New Technology Committee at Sharp Grossmont evaluated the cost-benefit of offering a new procedure. The vendor insisted that the procedure could be coded as an inpatient procedure, which promised a healthy reimbursement scenario. However, when finance did a little more digging, they learned that the procedure had to be coded as an outpatient procedure, which completely changed the reimbursement and the ROI.
"Financial analysts can build a spreadsheet, but to really understand what is happening behind those numbers, you need to validate the reality," says D'Amico. "Sometimes the pro forma is built on assumptions that just don't stand up to the test of reality. So it's important for financial analysts ask the right questions and to probe, test, and pick out weak spots in the assumptions."
Identifying priorities. "I think finance also adds value by helping our clinicians find out where to spend their time," says Mike McNeely, director of finance at Memorial Regional Medical Center in Mechanicsville, Va. "How do we focus the energy and the limited time and resources we have so we get the biggest reward out of our efforts?"
As detailed in a related case study, Memorial Regional is teaming up clinicians, physicians, and finance leaders to lead clinical improvement efforts. McNeely relies on sophisticated data reporting capabilities to slice and dice variable cost data into specific buckets, such as nursing costs, lab costs, etc. "You have to go down to the charge level detail to determine what is driving the costs of those services: Is it the operating time, is it the pharmaceutical regimen, is it the location, or the length of stay?
Once leaders find the cost drivers, they can focus and channel their energy toward making the greatest impact in the least amount of time, he says.
Expanding perspectives. Finance folks tend to be really black and white, says Turley. In contrast, clinicians tend to generalize to worst case scenarios-for example, defending budgets based on the possibility of high census numbers. But together, finance and clinicians can expand each other's perspectives.
By walking them through the data, finance can help clinicians with their worst-case scenario thinking. "If you are always thinking of the worst-case scenario, and you are staffing your unit like that, then you are being somewhat wasteful," says Turley.
On the flipside, Heckathorne encourages his financial analysts to learn the business of clinical care delivery-from a reasonable point of view. "We don't need to prep for surgery, but we need to learn the processes of care, the standards of care, and how care is delivered."
For instance, when Pioneer's emergency department (ED) was 40 percent over budget in October due to flu-related complaints, Heckathorne encouraged his finance staff to consider how this ED uptick would impact the budgets of other hospital areas. "If the ED is 40 percent over, then the lab is going to be over and patent registration is going to be going nuts," says Heckathorne. I told my staff, 'Think about it-a certain number of those ED patients will be admitted, which will put pressure on nursing, pharmacy, lab, respiratory therapy, and many other departments.' We've got to know what indicators drive our business. Then we can understand why, for example, there is so much overtime and be supportive of our clinicians."
These types of reality checks are common occurrences during the monthly meetings between clinical leaders and financial analysts at Unity Health System. "It is an opportunity for the managers to give detailed explanations of why they are not meeting their benchmarks or targets," says McCormack.
"For example, we're famous on the clinical side for saying labor can be driven by acuity," she says. "But 'acuity' is just a word to a financial analyst, who sees that we are still $60,000 over in RN labor. These meetings give us an opportunity to describe exactly who drove the acuity up. It might have been driven up by one patient who needed one-on-one nursing care, which threw the unit's labor expenses over immediately."
Understanding what drives the data can help leaders identify long-term, lasting improvement solutions-versus short-term fixes. "We need to look for sustainable change versus immediate results," says Turley. "There are definitely some ways to get immediate results by fixing those things that are blatantly broken. But we also need to think about the sustainability of our work and how to improve care over the course of time."
Publication Date: Friday, January 01, 2010