Edward J. Giniat
Brad Benton
Eric Biegansky
Robert Grossman

Business transformation requires not only focusing on tools, technology, and techniques, but also involving the entire workforce.

At a Glance

Change management for healthcare organizations should be rooted in the following practices:

  • Articulating a business case and vision for change
  • Assessing organizational risk and readiness
  • Mobilizing and aligning leaders
  • Building awareness of and commitment to the change effort
  • Aligning the organization
  • Tracking performance improvement and benefit realization

Healthcare finance professionals are working today in a demanding and complex environment, characterized by significant uncertainty—about the nature and the timing of government healthcare reform legislation and regulations; the risks inherent in trying to predict the price, volume, and mix of future revenues; and the evolution of relationships across the healthcare continuum. Meanwhile, multiple potential “game changers” are arising from more robust and granular clinical data, new and increasingly sophisticated IT, and an accelerating transformation of relationships between providers and payers in local markets.

Healthcare transformation is expected to bring dramatic changes to the value chain. Instead of volume-based fee-for-service payments, payers and providers will be compensated based on resulting savings and the overall health of their defined community of responsibility. Because one healthcare participant’s revenue is another’s cost, the implications are clear: Any mandate for cost reduction will affect revenues elsewhere in the value chain. Participants as a whole will need to consider how to do more with less.

Facing this uncertain environment, healthcare finance leaders may rightfully be focusing on the tools, technology, and techniques to measure and manage performance and to aid in planning new business scenarios. However, as they look to impose order within this complex, chaotic, and changing business, they also should be focusing on people and their response to these changes. The broad and significant business transformation can benefit significantly from a parallel and integrated strategic effort to engage, educate, and involve the entire workforce.

In fact, KPMG experience indicates that the overwhelming reason that change management programs fail is “resistance to change.” Yet by effectively addressing people and change management as a priority, an organization can promote sustainable benefits while mitigating the risks to the successful adoption of the new business model. The research also showed that although a staggering 70 percent of all business initiatives fail to meet their objectives, of those that do, 90 percent attribute their success to transitioning their people in the right way.

In a survey of risks affecting healthcare organizations, “leadership readiness at all levels: projected gap in leadership skills” was identified as a potential emerging risk (Assessment of Key Risks for Hospitals and Healthcare Systems–Spring 2010, KPMG LLP, 2010). Finance leaders should not only incorporate this risk into their business planning, but also proactively address the implications for their departments.

Exhibit 1


Capabilities of Finance Professionals Managing Transformation

When healthcare organizations build strategic, operational, and financial strength, there is an emerging market premium for “smart nimbleness” in evaluating strategic options and in developing the associated road maps. Incorporating “war gaming” as a core skill set will help management consider various scenarios and assumptions more effectively. It can help them in identifying which assumptions are important, assessing the associated risks, stress-testing models, and identifying the potential returns. These skills and analyses are increasingly crucial to managing the transition to the new business models that are likely to emerge from healthcare transformation.

Characteristics for Success at Managing Change

Today’s market realities, in fact, offer healthcare organizations little choice but to embrace change. Organizations are constantly challenged to address whether they have the clinical integration and alignment, the management structure, the leadership skills, and the overall workforce productivity to capitalize on rapidly shifting business conditions and opportunities. In this context, three key areas of focus are emerging as critical for success at managing change:

  • Fostering a climate of innovation
  • Embracing continuous improvement
  • Developing a stronger customer focus

Organizations at all levels need people who can lead and contribute in these areas. Healthcare organizations may also need guidance and support in making the transition to new ways of doing business. A crucial overlay to these challenges is that they are likely to occur simultaneously with the complex transition to new business models and, therefore, need to be managed in parallel across a transforming healthcare landscape.

Finance Should Lead in Managing Change

Without underestimating the complexity of the transformation in the business and the related stresses to its professionals, finance professionals should help to lead their organizations in managing change.

As managers, finance professionals should understand how to structure and educate their organizations to facilitate nimbleness, introduce receptivity to change, and generally encourage an engaged and focused workforce.

Knowing how to structure an organization for optimal performance—ascertaining and obtaining desired skills and required competencies, engaging employees and leaders in driving toward a strategic vision, and creating a culture and processes that embrace change—significantly enhances the probability of success.

Industry experience shows that one of the most significant factors contributing to a successful business initiative is how an organization’s leaders manage people issues and change throughout the transformation process and across the organization. There are ways to address the challenges of transforming an organization’s culture and its business model at the same time.

A Change Initiative for People and the Organization

Many organizations undergoing profound business transformation embark on an initiative in which process, organization, technology, and other teams work in tandem with an empowered “organization and people” work stream. This initiative has timelines and deliverables just like the other tracks, and a seat at the table for major decisions and discussions. Its success also depends on clear sponsorship of leadership throughout the change process.

The critical point is that the leaders of the organization’s overall change management program should help define the future state by factoring in consideration for both the organizational business model changes and the people agenda in “managing the transition.”

Leading Practices in Managing Change

When an organization embarks on major change initiatives, whether internally or externally driven, change management should be methodical and rooted in several leading practices, exemplified by the following steps.

Articulate a business case and vision for change to help make the change effort an organizational priority. The effort should be clearly connected to the organization’s overall strategic direction and a vivid picture of the desired future state. The rationale for change should be clearly articulated and connected to broader strategies and goals. For example, the only sure way to gain the understanding and agreement of all vested groups (physicians, nurses, managers, and payers) during the ICD-10 and 5010 conversion processes is to explain to them clearly how the transition will affect them and their clinical documentation practices and payment. To the extent that the affected parties view this transition as a regulatory mandate and understand the requirements that will affect the entire revenue cycle, the strategy is more likely to gain their acceptance and support.

Assess organizational risk and readiness so the nuances of the change effort can be properly recognized and subsequently addressed. This assessment also should take into account the “personality” of the organization, line of business, or function affected by the change. Identifying potential “road blocks” before they manifest aids in the change process and helps ensure a smooth transition. For example, many healthcare organizations, both payers and providers, have undergone significant technology implementations recently, albeit with varying degrees of success. This somewhat checkered history of transformational change is a primary cause for the skepticism and potential resistance that impede adoption of the new technologies so essential for successful adaptation to the emerging healthcare transformation agenda.

Mobilize and align leaders to make full, appropriate use of their influence and authority and ensure that each has a personalized action plan that demonstrates support of the change effort. It is critical to have appropriate leadership support of the project at its onset—not just tacit approval, but genuine belief and dedication. As “meaningful use” becomes the general way of doing business, the top-tier leaders of all healthcare organizations need to demonstrate their understanding and alignment with its requirements and realities.

Build awareness of and commitment to the change effort via a proactive and tactical approach to communications. The exhibit below shows the “communication ring” encompassing the entirety of a change management program that can help healthcare organizations best deal with the massive amounts of change across the healthcare landscape. This approach requires the development of a robust, methodical, and deliberate communication plan and a series of actions and training activities to implement the plan. In preparing for the transition to ICD-10, several providers have taken a phased approach to ICD-10 training that addresses early needs, such as enterprisewide awareness, as opposed to later stage needs, such as coding and clinical documentation.

Exhibit 2


Align the organization so that all affected stakeholders can adopt the appropriate mindsets and behaviors and best execute the desired processes for a successful change effort. The program should be designed so that all key stakeholders understand its goals and objectives and are working toward a common set of desired outcomes. Although the changes facing healthcare organizations require careful attention to the organizational implications, organizational alignment does not necessarily require structural change. For healthcare organizations, governance models to provide clarity of roles, responsibilities, and accountability for decision making can be effective and powerful in driving change.

Track performance improvement and benefits realization on a timely basis. Quick wins and attaining planned benefits provide energy to the transformation and help sustain the momentum through the numerous obstacles that can arise during the project. To manage change more effectively, a quantitative job impact analysis should be conducted using specific performance metrics and taking into account job role changes. The focus of this analysis should be on performance improvement at a measurable level, as tied back to the organizational business case. Paying attention to the “people adoption” side of the equation can help organizations streamline their manual, redundant business processes.

Increasingly, value is created by the success of internal processes in delivering organizational effectiveness:

  • Developing institutional culture
  • Deploying talent across functions and geographies
  • Enhancing the ability to manage change
  • Establishing the systems and structures that encourage the desired behavior in employees

Managing these aspects of the “people agenda” is fundamental to any business transformation. So it would seem reasonable that these critical success factors are likely to have an exaggerated importance for healthcare organizations when considering the significant complexities they face now and into the future. With next-generation healthcare business models characterized by greater levels of clinical integration, closer adherence to science-based clinical protocols, economic alignment across the entire care continuum, and more complicated organizational structures, the call for exceptional change leadership resounds loudly.

The greatest value from transformation can be realized by aligning every aspect of the organization to achieve its goals, including the commitment, motivation, and talent management of employees at all levels of the enterprise. Managing change and building the routines and culture that embed strategic goals into every aspect of the organization provide the foundation for success.

Designing a clear and concrete strategic plan for human capital management (including human resources [HR] processes) is a starting point for transformation but not sufficient by itself. In a large, clinically integrated healthcare organization, the HR function needs to evolve rapidly to meet the sophisticated needs of tomorrow’s accountable-care-capable healthcare enterprise. The HR function should focus on the people agenda to help each member of the workforce (including management, physicians, nurses, and other clinicians and the lower-level staff) contribute to the competitive advantage that the organization needs to succeed.

HR also should view the “workforce” as broadly as possible to include all the participants―whether contracted or employed―at all levels who are engaged in helping the organization achieve its goals. This view will become increasingly important as the virtual walls of the organization extend to encompass new and differentiated partnerships and other collaborative efforts. Business leaders should continue to support the evolution of the HR department to help move the organization forward and, in particular, to orient human capital management as an intellectual and strategic asset of the healthcare organization.

Healthcare business leaders should also reassess the talents and requirements they perceive as vital to ensure a robust and adaptive workforce. Differentiated models should be considered across the spectrum of employees (e.g., clinicians, management, and key functions) as well as for contracted staff. For example, with the pending arrival of ICD-10, it is neither unrealistic nor unreasonable to presume that a vast new cadre of coders may be able to work virtually. A hospital in Georgia might employ a group of virtual coders in Kansas, Canada, or India if that fits in its talent plan and allows it to maintain timely and accurate coding information. Consequently, as the ICD-10 “reality clock” keeps ticking toward October 2014, healthcare professionals should be looking at alternative workforce models that will enable a quick and error-free adoption to the new environment.

Driving and sustaining change for finance professionals, in turn, requires new ways of thinking, new competencies, and new metrics. These include skills such as embedded and ongoing change management, organizational development, talent management, and optimizing departmental and other vertical “stack” relationships throughout the enterprise. Although it is difficult given their day-to-day responsibilities, finance professionals should be working with their HR peers to:

  • Rethink the organizational structure, particularly legacy functions such as managed care contracting
  • Assess current talent in terms of the new competencies necessary for the organization in the near future (e.g., decision support, other data analysis, and economic attribution skills)
  • Devise new metrics and advance enabling technologies to capture the information required to bring sophisticated planning to next-generation challenges

By anticipating the coming changes, providing leadership in the C-suite and around the governance table, and proactively embracing institutional transformation, finance leaders can further demonstrate the value of finance to the organization as a whole.

Edward J. Giniat, CPA, is the national leader, KPMG Healthcare, Chicago, a past member of HFMA’s National Board of Directors, and a member of HFMA’s First Illinois Chapter (eginiat@kpmg.com).

Brad Benton, FHFMA, CPA, is the national account leader, KPMG Healthcare, Atlanta, and a member of HFMA’s Georgia Chapter (bbenton@kpmg.com).

Eric Biegansky is a partner and national lead partner, Change Management Practice, KPMG, Chicago (epbiegansky@kpmg.com).

Robert Grossman is a director, KPMG, Atlanta (rgrossman@kpmg.com).

This article represents the views of the authors only and does not necessarily represent the views or professional advice of KPMG LLP.

Publication Date: Monday, October 01, 2012

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