Quint Studer

Three healthcare organizations show how they forged a common understanding between clinical and financial leaders for measurable performance improvement.

At a Glance  

To ensure that financial and clinical leaders have the same perspective on the direction their organization is taking, hospitals should:  

  • Build a platform of common understanding  
  • Connect to the "why"  
  • Be transparent  
  • Give clinical leaders the tools they need  
  • Create true collaboration  

Years ago, I read an article that compared being a healthcare leader with driving a nitroglycerin truck. Today, we are driving more than a truck. We are leading a convoy, with heavier loads, steeper roads, and more blind spots. The surface is loaded with bumps, too. Some are the direct result of the operating environment, but others are self-imposed.

Yet financial stability has never been more important for keeping our organizations on the high road. In the current operating environment, high levels of unemployment threaten healthcare spending and coverage, which will mean an increase in bad debt and charity care for hospitals, with a softer demand for health care.

In any convoy, the alignment, actions, and accountability of each driver are crucial. Clearly defined outcomes and constant communication are necessary. Everyone must understand directions in the same way so they know when to speed up, slow down, and when to stop and start again.

Financial managers readily embrace the concepts of alignment and accountability because they have concrete, specific goals. They measure data frequently. They also keep a close watch on variance for quick action when adjustments are needed. However, this is not always the case with other leaders in the organization, because professional training among clinicians and financial managers differs greatly. For example, nurses and physicians have not been trained to spot and respond to financial variances. Clinicians' training focuses on quality of patient care, so they understand the urgency of responding to patient needs, but may not understand the urgency or importance of thinking like a financial manager.

Build a Platform of Common Understanding

Clinical leaders and financial leaders need to "speak the same language" to meet the organization's mission while remaining financially viable, especially in the current economy. Yet clinical leaders often lack the skills to demonstrate positive financial impact.

A common example: A nurse leader requests an additional FTE to round on patients in the emergency department reception area to improve the patient experience. The leader fails to perform the financial analysis, however, that would demonstrate a strong ROI. Yet the strategy has been used effectively. A Texas hospital, for instance, used this approach to reduce its incidence of patients leaving without being seen by 4 percent over one year, for a net revenue increase of $480,000 (capturing 600 additional patients at an average revenue of $300 per patient).

In the same way, most CFOs understand that reducing patient falls saves money. Yet they sometimes fail to create the urgency and connect back to purpose in a way nurses value-by demonstrating how evidence-based clinical practices, such as hourly rounding on patients, will provide a higher standard of care to keep patients safe.

To create alignment, healthcare organizations should establish goals for service and operational excellence that cascade to leaders at all levels of the organization. Leaders should then be held accountable for meeting these goals in a specific way.

An example: Baptist Health South Florida is a five-hospital, faith-based, mission-driven organization with a large outpatient business, $2 billion in annual revenues, 13,000 employees, and a double-A rating from both Moody's and Standard & Poors. The system has also been ranked in Fortune magazine's 100 best employer list for the past 10 years, with its flagship hospital, Baptist Hospital of Miami, ranked in the 97th percentile nationally for inpatient satisfaction.

How do they do it? They start with goals and create incentives for aligned behavior through the use of an automated, standardized leadership evaluation system that weights and prioritizes objective goals for every leader. These goals also align horizontally and vertically across the organization.

In addition, Baptist Health sets clinical goals for financial managers and financial goals for clinical leaders to ensure that everyone has a stake in meeting the organization's overall goals. All leaders have patient satisfaction and expense management as a goal. A financial manager, for example, will receive a "5" on a 1 to 5 rating scale, if the organization is ranked in the 95th percentile for patient satisfaction nationwide, but a "1" if Baptist Health comes in below the 85th percentile. This ranking would count for at least 10 percent of the manager's evaluation or more depending on job title. (For registration managers, patient satisfaction is weighted at 25 percent of the evaluation because of their high patient contact.) Insurance, tax, privacy, and supply chain leaders also have specific physician satisfaction goals.

When Baptist Health recently embarked on an ambitious program to better coordinate the accuracy and timeliness of charge capture, it incorporated a charge capture and reconciliation goal into the leader evaluation tool for all revenue-producing departments. The evaluations of the director of rehabilitation services, intensive care unit (ICU) patient care manager, and director of surgical services were weighted at 5 percent for achieving this project goal.

"Using an objective, weighted leader evaluation tool is revolutionary for us because it requires people to understand the strategic goals and mission of the organization and what we're trying to accomplish," explains Baptist Health South Florida's CFO Ralph E. Lawson, FHFMA, CPA. "It enables them to see how their daily activities fit into the big picture and what they need to do to be compliant." This year, the system took it to the next level by tying merit increases for all leaders to performance on the goals.

Connect to the Why

The best communicators focus more on what is heard than on what they are saying. They take the time to explain the "why" in a way that engages the purpose and passion for making a difference that their audience feels.

It's also important to connect the dots on what is happening in the external operating environment so everyone in the organization feels the same urgency to take action to respond quickly in an aligned way. When clinical leaders truly understand how financial performance affects the organization's mission, they become more willing to engage on budget issues, acquire necessary financial management skills, and demonstrate good financial stewardship. Conversely, when employees are working in a vacuum, they can't see the financial big picture, which makes leadership decisions seem unfair or unexplainable.

"Early on in our journey to excellence, we held a number of internal Leadership Development Institutes (LDIs) that were very focused on financial education for leaders," explains Scott Hamilton, CFO for Parkwest Medical Center, a 462-bed hospital in Knoxville, Tenn., affiliated with Covenant Health. "Not just the Xs and Os of accounting, but also work sessions on what it means within a healthcare environment. For example, when I explained what it costs us when present-on-admission indicators aren't documented, leaders were engaged. When explaining financial statements, I also drew parallels with personal finance that people found helpful."

In 2009, Parkwest had its best year ever with a 5 percent growth in admissions and a 43 percent increase in profits while reducing average length of stay by 2 percent and raising patient satisfaction to the 93rd percentile nationwide. Although Parkwest certainly recognizes that some of its success is due to its high commercial payer base and enviable demographics, it also credits its financial performance to a strong focus on reducing overtime percentage and premium pay percentage for labor in 2009.

Be Transparent

Transparency also helps people connect to the why: why they should regularly review financial statements, why they should address budget variances, and why they should understand and demonstrate the financial impact of budget requests. Transparency creates consistent messaging across the organization in a controlled and consistent way from managers to employees.

Kaiser Permanente's Northwest region includes 475,000 members who receive medical care through a 1,000-member contracted physician group in 31 medical offices in the Pacific Northwest for $2.7 billion in revenue. The region also tracks and shares key metrics for service and operational excellence. As a result of this alignment, the region's flagship hospital has raised patient satisfaction from the 34th to the 70th percentile in just 18 months, and Kaiser Permanente won a JD Power & Associates award for the health plan with the highest patient satisfaction in the Northwest. Because Kaiser operates as a mostly capitated prepayment system with its own insurance arm, it is well-positioned to compete in any future that focuses on risk-based payment systems.

The foundation of Kaiser's strategy is to deliver affordable, high-quality health care-a concept that starts with a high-level strategic plan and links to an operating plan and budget. Key performance metrics are set and tracked monthly and then reported quarterly. Results cascade to all levels of the organization via employee forums held by leaders and communication boards on all units to show real-time performance. Leaders round on staff to collect feedback and ensure two-way communication.

"Prevention of chronic disease is a real focus for us," explains Karen Schartman, CFO for Kaiser Permanente's Northwest region. "Under the quality objective, for example, we set a breast cancer screening goal of 78.4 percent, which we surpassed. To meet our financial target, we set a goal for an operating margin of 2.3 percent in 2009, which we also met."

"If we catch more stage 2 versus stage 3 cancer, we improve both clinical quality and cost," adds Andrew McCulloch, CEO and president of Kaiser Permanente's Northwest region. "They are closely linked. Meeting the mission is what motivates our team here." It would seem that employees agree. On Kaiser's 2009 employee survey, 79 percent of its 7,500 employees agreed they were confident in the long-term success of the organization, a 17 percent increase over the prior year.

Give Clinical Leaders the Tools They Need

The fact is, what's right for patients is right for the bottom line. In a mature organization, both clinical and financial leaders understand the cost-benefit ratio of their proposals. "If I'm considering moving to a higher labor standard on a particular unit or department, I need to understand what that could mean to clinical outcomes," notes Parkwest's CFO Scott Hamilton. "Although we may save a little through efficiencies on the salary side, costs could end up higher if that raises infection rates."

One of the ways that Parkwest has created this kind of cross-fertilization in big picture thinking is by changing its nurse leadership model. To stabilize high nurse manager turnover (50 percent), leaders created a tiered management model with a manager, nursing educator, and unit administrative coordinator (UAC).

The concept: Help nurse leaders be actively engaged in running their "business" by reducing span of control and providing skilled financial support. Rather than adding FTEs, Parkwest changed the job title of nurse leaders to nurse educators and sent them back to school for bachelor's and master's degrees. Then they hired four UACs-who are highly skilled financial managers-to report to both the chief nursing officer (CNO) and the CFO. These leaders support nurse managers with the business side of their jobs.

"The UACs are like accountants in nursing departments," explains Parkwest's CNO Janice McKinley. "They not only understand what the finance department needs, but they live in the nursing department. Because they appreciate the clinical impact of business decisions, they can be that interpreter for clinicians who are less experienced."

Last year, Parkwest charged its nurse managers with finding ways to reduce the cost of linens for a "greener" approach to resource management. With leadership by the UACs, they reduced linen costs by $250,000. "They also questioned a dialysis contract that saved us $72,000," adds McKinley. "That's something a nurse manager would have had a harder time evaluating and make happen."

Create True Collaboration

At Baptist Hospital of Miami, the 680-bed flagship hospital for Baptist Health, there exists a unique culture of collaboration and alignment among leaders to attain organizational goals. Becky Montesino, RN, BSN, MS, CENP, Baptist Hospital's vice president and CNO, credits the culture to leadership that cascades from Baptist Health's system CFO Ralph Lawson. "He is a visible, insightful, and active leader who communicates guidelines frequently at our LDIs on how to look at finance and growth." ("Financial managers must lead," suggests Lawson. "You can't sit in your office and effect organizational change.")

As a result, every nursing unit knows its financial priorities. "Everyone has something they're working to improve. Because all staff are informed that we need to reduce overtime from 4 to 3 percent, nurses won't be surprised if we give a shift to someone who won't be overtime. In the emergency department, all employees know that reducing left-without-seen patients has a high ROI. It's good business as well as the right thing to do for patients."

Over time, as collaboration between finance and nursing grew, so did trust. When Baptist Miami's ICU monitors needed to be replaced at a cost of more than $1 million in a year when minimal capital expenditures were budgeted, Montesino submitted a one-page proposal outlining the frequent repair costs and a risk assessment if the monitors were to fail.

Conversely, when her critical care staff wanted to change a large closet into office space, Montesino decided not to forward the request to finance. Because the CFO said the organization needed to increase cash days on hand, she knew that project wasn't a priority. She reminded staff about financial priorities outlined at the LDI and promised to put it on their wish list for the future.

Seek First to Understand

If you want your clinical leaders to speak finance, seek first to understand. Be compassionate about things that are important to them and patient as you seek mutually satisfying solutions to difficult issues. In the end, it all comes down to acting in accordance with our values, even when it is uncomfortable to try out unfamiliar new leadership behaviors. Because after all, it is not what one knows, but how one executes.

Quint Studer is CEO, Studer Group, Gulf Breeze, Fla., and a member of HFMA's Florida Chapter (quint@studergroup.com).

Sidebar: Leverage Points in Aligning Behavior

Values. If leaders and employees understand the "why" and the impact an action will have, they are more likely to do it.

Skill. Clinical leaders who do not have the financial skills to comply with expected behaviors will be frustrated. Provide training and resources to help them succeed.

Reward and recognition. Rewarded behavior gets repeated. Recognize high performers in public forums and through specific, personalized, and handwritten thank-you notes.

Consequences. If leaders have been provided with clear expectations and the skills to succeed but fail to perform, hold them accountable. You will rerecruit your high performers by no longer tolerating low performers.

Sidebar: Take a Multidisciplinary Approach to Managing a Service Line

In calculating service line profitability, health systems are often shocked to find that their orthopedic surgery business is running at a loss as the price of expensive implants outpaces payment. At Baptist Health South Florida, an interdisciplinary team (composed of finance, purchasing, strategic planning, quality management, operational leaders, and physicians) designed a new procurement strategy that ultimately sustained implant expense reductions of $1 million annually.

By moving from an open source implant procurement model to a dual source model, Baptist Health negotiated better pricing and services with just two orthopedic knee and hip implant companies instead of eight.

First, business teams sought feedback from joint replacement surgeons and medical staff leaders to ensure that clinical quality remained high. Ultimately, a physician led an orthopedic service line committee to review and monitor quality and evaluate physician requests for exceptions to the new strategy.

The formal exception process sustained focus on evidence-based medicine and evidence-based business models.

A monthly scorecard-distributed to orthopedic surgeons, surgery directors, operational vice presidents, and purchasing and finance leaders-is completely transparent. It shows costs per case, implant cost, and the number of granted exceptions. A year after implementation, all stakeholders at Baptist Health have declared the initiative to be wildly successful.

Publication Date: Tuesday, June 01, 2010

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