There’s much discussion in the marketplace about transforming healthcare organizations to become more agile, sustainable and consumer oriented. From adding sites of care and creating new delivery models to pursuing joint ventures and investing in startups, organizations are rethinking how they can impact health. But what does all this innovation mean from a financial perspective, and how can organizations begin to foster this kind of change? By appreciating the current challenges in the market and implementing integrated business technology that breaks down barriers to change, organizations can establish a transformation roadmap and start actively making progress toward a new operational framework.
Deconstructing the current state
Today’s healthcare organizations operate in an environment that is increasingly competitive, highly regulated and rapidly changing. Many entities are focused on continuous improvement to enhance quality, curb costs and deliver value. But siloed clinical, financial and business functions make it challenging to not only execute improvements but to understand what needs to be fixed in the first place. On top of that, disjointed and disparate technology make it difficult to gain a true picture of an organization’s performance or enable real-time, data-driven decision-making.
“Healthcare organizations are wrestling with several dynamics,” says Walter Porter, principal at Deloitte Consulting LLP. “First and foremost, organizations must have a more laser-like focus on costs as they shift their perspectives from volume to value. Every department in a health system is now trying to understand what its costs are, whether those costs are fluctuating, and how to either hold them steady or reduce them. At the same time, health systems overall are growing due to the active mergers and acquisitions market. And these large-scale entities are realizing the need to not just act as a holding company for the various facilities but evolve into a fully integrated system that works collaboratively in pursuit of the same strategic goals. Healthcare is provided outside the four walls of a hospital, thus making it critical to have the lens of serving the surrounding community in the best possible way. This may entail reviewing how patients interact with the health system both clinically and financially, making sure patients are seen in the right setting, at the right time, by the right personnel. While healthcare organizations have concentrated on enterprisewide clinical improvement to address some of these issues, they continue to appreciate the need to optimize back-office performance as well. A health system may provide the best patient care in the area, but if its business processes are subpar, it won’t be able to realize the type of long-term revenue growth it wants or expects.”
Given the range of dynamics at play, it can be difficult for organizations to know where to focus their improvement efforts. “Transformation looks different depending on the healthcare provider, but one thing almost all organizations can agree on is that there are inefficiencies in healthcare processes, which tie up resources and lead to inaccuracies, missed opportunities and negative outcomes,” says Win Fisher, healthcare strategic industry advisor for Workday. “By zeroing in on everyday processes and identifying ways to boost efficiency, quality and reliability, organizations can begin to take meaningful initial steps toward a new model.”
What stands in the way of progress?
Although most healthcare organizations acknowledge the need to evolve, they can run into some roadblocks when trying to make headway. “Healthcare struggles with change because of the industry’s entrenched perspectives of ‘we’ve always done it this way’ and ‘we’re healthcare, we’re special,’” says Porter. “However, healthcare organizations don’t have the luxury of maintaining this mindset. If you’re making televisions, you can afford to be behind the times in the ways you create and service your product because the ramifications of a poorly executed TV are relatively small. However, hospitals and health systems can’t afford to provide inadequate, inefficient care that yields less-than-stellar clinical and financial outcomes.”
Another barrier is that technology vendors have provided healthcare organizations with industry agnostic tools that are not versatile and flexible. “In fact, quite the opposite is true,” says Workday’s Fisher. “Most business technology right now is fairly rigid. For the back office especially, hospitals and health systems have had to bend their processes to a particular tool, and it can result in clunky workflow, which healthcare staff either wade through or find ways to work around. The former is highly inefficient and can slow performance. The latter tends to lead to shadow functionality — workarounds using simpler solutions like email, spreadsheets and word processing programs that don’t allow deep analytics, easy reporting or seamless integration with other data. So, although organizations are technically capturing information through these simpler tools, there is no way to derive meaningful insights, spot improvement opportunities or collaborate across departments based on the data.”
Speeding transformation with the right ERP platform
To enable the degree of rapid decision-making and improvement activation required to remain agile in the market, organizations need to find ways that make it easy to visualize business performance and act. Technology may hold the answer, especially enterprise resource planning (ERP) solutions that span multiple business functions and allow financial leaders to easily see across an organization’s resources. These tools help users understand the current state, pinpoint improvement opportunities and uncover risk points. They also enable robust planning and risk mitigation and can clearly demonstrate the potential implications of future changes.
ERP solutions weren’t always able to effectively drive improvement. “Historically, ERP technology was not well integrated, and there were multiple databases and interfaces to manage,” says Workday’s William Bercik, senior director, healthcare product strategy, planning and analytics. “An organization may have had one system for human resources and payroll and different ones for supply chain and finance. Managing the disparate systems required a lot of IT resources. The user experience for these tools was labor intensive with multiple signins, toggling between different systems and disconnected workflows. And organizations were not confident in the information’s accuracy or that the insights the data revealed truly reflected their performance.”
Fast forward to today, and ERP solutions like Workday offer a truly integrated experience that marries financial, supply chain and human resource data. Within the system, there is one user experience, one sign-in, one workflow and one set of real-time data for all three business functions. The screens look consistent with drop down menus that show standardized fields. Data governance, integrity and reporting are all contained within one platform. “With this type of solution, organizations begin to trust the data from the platform and minimize IT involvement in creating reports or running analyses from system data,” says Bercik. “For example, when users create reports themselves with drag and drop features, the ease of use encourages and empowers all levels of decision-makers to be more strategic. Having one system helps the organization do more than just improve efficiency: It lays the foundation for greater innovation.”
With the detailed and accurate insights a modern ERP solution like Workday can provide, organizations can leverage the technology to reimagine business performance. More specifically, Workday helps organizations realize the transformation they’ve been seeking in several ways.
Optimize business functions
A fully integrated, cloud-based ERP solution lets organizations extend improvements across functions to make progress on a wider scale. “With the right ERP system, facilities don’t have to bend their business processes to the technology,” says Workday’s Fisher. “The technology can help organizations be efficient with their transactions, providing an intuitive experience for things like journal entries, scheduling or inventorying supplies. It also increases the reliability of these transactions — pointing out issues a user might miss as he or she engages in the process and allowing the user to correct potential mistakes before they occur. Perhaps a financial employee is about to close the books and there are remaining accounts that have not been reviewed. The system will point this out, so the individual can address the problem before proceeding.”
Workday’s solution can also speed certain processes that have historically been time-consuming. “We’re seeing some of our clients that use Workday close their books faster, cutting the time in half in some cases,” says Deloitte’s Porter. “And at the same time, they’re getting faster intelligence to their leaders to make more informed decisions.”
In addition to streamlining processes, ERP dashboards communicate strategic advantages to key stakeholders. For example, a dashboard might show a department head that if he or she pays an invoice today, the organization could take advantage of payment term benefits. The dashboard would also show if the department has sufficient funds to pay the invoice, avoiding a financially detrimental situation. The department manager can act on the information, fully confident that the recommendations are accurate and trustworthy.
“We have clients that use the system to optimize scheduling, looking at the acuity of the procedures they have scheduled for a week on a given floor in a given unit and determining whether they have the right talent scheduled,” says Porter. “Not only does this ensure the unit is appropriately staffed to deliver quality care and maintain the patient experience, but it can also avoid agency costs, which are billed at a much higher rate.”
Inform new business opportunities
A robust ERP solution also lets an organization remain nimble and open to opportunity. “Consider the example of a large health system that has 30 to 40 hospitals spread across multiple states,” says Workday’s Fisher. “When every hospital in the health system uses transaction analytics from the same ERP system, the parent organization can quickly assess if volume is outpacing capacity in a certain region. Based on that information, the entity can bake into its long-term capital investment planning strategy the need to potentially invest in a capital project or make a service line adjustment in that area. Because the organization can get a holistic view of revenue, supply chain and staffing information, it can better quantify the situation and determine how best to respond to achieve optimal clinical and financial outcomes.”
Establish a single source of truth
A fully integrated ERP offers a single source of truth for financial, human resource and supply chain data. “When technology pulls data from a single source of truth, it increases data acceptance and reduces the amount of time clinical and financial leaders spend figuring out whether the data supplied by the solution is correct,” says Workday’s Bercik. “This gives financial leaders a clear and defensible understanding of utilization, allowing them to dig into how many hours people are working and what projects are driving profitability as well as areas that need improvement. Not only does Workday offer a single source of truth, but that truth encompasses labor and supplies, which make up about 80% of the healthcare spend. That’s a lot of information on which to make decisions, significantly enhancing the reliability of those decisions and also limiting the amount of extraneous data healthcare organizations need to review.”
Obtain a 360-degree view of finance
ERP technology captures the details of every financial transaction — including the who, what, where, when and why — to better serve and inform all teams, not just finance. For example, managers can see immediately how they are doing against their budget, then understand where they are spending that budget, broken down by category, supplier, staff or product. “This 360-degree perspective allows financial leaders to act more as stewards of costs rather than wardens, partnering with different departments to improve performance,” says Deloitte’s Porter. “Financial leaders can review the data and point out patterns that reveal improvement opportunities, advising their colleagues on key strategies to drive value. Not only can leaders pinpoint possible opportunities, they can understand the process and workflow adjustments needed to support an initiative and get a better sense of how realistic it is and whether it’s worth pursuing. The technology can also simplify discussions around new processes to garner clinical buy-in and support. For example, it can show that by switching to a different surgical supplier, costs will go down, but quality will remain stable. This data can be powerful in garnering physician support and helping them get more excited about change.”
By leveraging the system to better understand inflow and outflow, organizations also can forecast future cash flow more accurately. “Let’s say there is a service line manager in the cardiology department who reviews his or her department’s ERP dashboard regularly,” says Bercik. “He or she could set up the system to receive alerts about open-heart surgeries when the department is about to start losing money from a profitability perspective. This may be due to subpar collections, unexpected outcomes, supply cost increases or other issues. This alert arrives on the cardiology manager’s phone, prompting him or her to determine the appropriate action, whether that’s doing more billing, switching supplies, tweaking staffing for upcoming procedures and so on. He or she is able to rapidly receive the data to make decisions quickly, heading off unnecessary spending spikes, cash flow slowdowns or revenue leakage incidents before they escalate into significant financial issues.”
A well-designed ERP facilitates straightforward reporting. “One of the challenges healthcare organizations often face is they have multiple reports and scorecards that they don’t trust because the data comes from disparate, non-integrated sources, and the information isn’t overly meaningful or it’s hard to understand,” says Workday’s Bercik. “For a technology solution to be useful, it must overcome these hurdles, offering actionable data built on a single source of truth, delivered in a standardized and consistent format that all end users can understand.”
An integrated solution like Workday allows users to see a single dashboard that shows profit and loss alongside supply chain and human resource metrics. “Because all the data is in a single system, you’re able to analyze it like you run the business, breaking down the silos between finance, human resources and supply chain,” says Workday’s Fisher. “The technology starts to mirror how you run your business with people and supplies and finance all intertwined and integrated.”
Align with EHR and revenue cycle systems
When an ERP system has built-in integration capabilities and open interfaces, it can work with clinical, patient billing or other systems for a seamless flow of information throughout the organization. “Hospitals and health systems are in the process of upgrading or replacing their initial electronic healthcare record and revenue cycle investments, looking to consolidate systems so that clinical and billing functions are more integrated and intuitive,” says Bercik. “Seeking these same features in a solution that addresses the rest of an organization’s business functions is the logical next step. And when that system easily partners with the clinical and revenue cycle technology, healthcare organization leaders can better see the financial and resource ramifications of clinical choices, and conversely, the clinical impacts of financial decisions.”
Oftentimes, organizations have bolt-on governance, risk and compliance (GRC) systems to ensure they remain in compliance with applicable regulations. Unfortunately, these tools only marginally fulfill the multitude of requirements organizations must handle. “When GRC is included in an ERP’s core system, an organization can efficiently and accurately comply in all regions where it does business,” says Fisher. “The embedded business process framework manages every transaction. It captures all required information, garners the right approvals and ensures that the accounting impact of every transaction is immediately auditable upon approval. In addition, a single security model can simplify access management, making certain that staff only accesses the data they are permitted to see. With these core capabilities, healthcare providers can accommodate local regulations and requirements across states and regions, increasing process visibility and reducing overall risk.”
Apply emerging technologies
Right now, there is a lot of buzz about using machine learning and artificial intelligence (AI) in healthcare, and organizations are looking for solutions that include this functionality today and plan to further leverage it as part of their road map for the future. Depending on the system, emerging technologies may be used in financial and/or people analytics or intelligent planning and supply management.
Solutions like Workday are incorporating these technologies throughout their systems. “For example, credentialing is an area where robotic process automation (RPA) can be helpful,” says Deloitte’s Porter. “RPA runs algorithms throughout the night, checking for nursing and other clinical staff credentials. It then updates human resource profiles with the credentials and certifications as opposed to staff having to call clinicians for information or search a particular database and make updates.”
Likewise, AI can fine-tune specialized staff recruiting. “When someone is in the system because he or she applied for a job, AI can not only determine if the person is an initial fit for the job, but also if there are other fits throughout the organization in different departments,” says Fisher. “This removes some of the manual aspects of recruitment and better places qualified staff in hard-to-fill positions.”
Emerging technology also can enable more proactive supply ordering to minimize the likelihood of running out of key provisions. “The system can automatically input orders when supplies dip to a certain point or send reminders that an order is necessary, depending on how much control the organization wants to have over ordering,” comments Fisher. “It can also ease order tracking, allowing staff members to simply ask the system where the order is. Natural language processing yields more user-friendly interfaces that make the solution easy to understand and navigate.”
A solution that’s advancing as fast as healthcare itself
Onboarding an ERP system like Workday to enable healthcare transformation requires a significant commitment. And organizations don’t want the technology to be out-of-date within a few years. Since Workday is based in the cloud, it ensures users always have the most current version at their fingertips. “Workday is also committed to continuously refining and evolving the solution,” says Fisher. “We invest well above the industry average of our total spend into research and development. Because everyone is on the same version of Workday, we do not have to maintain old versions of the software, which allows us to only focus on new and next-generation functionalities and not maintaining old versions. We built this system to be dynamic and flexible in the cloud, offering a quick time-to-value that lays the foundation for progress and helps organizations effectively activate change.”
The CFO’s role is evolving
C-suite leaders, such as the CEO and CMO, traditionally have led the way in thinking strategically, and the CFO has typically focused more in the present, monitoring and safeguarding an organization’s financial health. “The role of the CFO is changing,” says William Bercik, senior director, healthcare product strategy, planning and analytics for Workday. “Whereas a CFO used to act more as a ‘CF-No,’ a gatekeeper who maintained a tight hold on spending, this role is now becoming more strategic, reaching out across the enterprise to better appreciate clinical perspectives, human resource constraints, supply use and other aspects of the business. Today’s CFOs also are embracing transparency, making financial information available to other departments so they can operate more efficiently, make decisions quicker and respond to potential issues sooner. In some ways, CFOs are becoming the champions of transformation, acting as storytellers of their organizations’ performance and educating colleagues about the costs of care and the need to deliver value.”
In addition to CFOs moving outside their comfort zones, clinicians are also becoming more aware of the financial implications of decisions and seeing the value in keeping the business side of the health system running smoothly. Going forward, the finance team will need to strengthen the bridge between finance and clinical care, sharing meaningful and insightful information that can drive better decision-making.
Workday provides a unique, single cloud-based system for finance, human resource and supply chain management to help complex organizations improve operations across the continuum of care. Using the solution, entities can effectively manage:
- Finance. By bringing accounting, reporting and analytics into one financial management system, users get a complete picture of an organization’s financial performance in terms of spending, revenue, finance and payroll. The system shows real-time cash balances and transactions to help organizations manage resources effectively and make good decisions about funding, paying and collecting money.
- Human resources. Leaders can monitor and address all aspects of the employee lifecycle from recruiting and credentialing to compensation and development. Organizations can also use the system to engage employees in learning, fostering career growth. The solution gives healthcare leaders analytics and insight to manage, reward and develop staff, resulting in higher retention.
- Supply chain. The technology provides seamless processes for purchasing, stocking, tracking and replenishing supplies while financial leaders gain insight into cost, usage, item preference and more. This lets organizations more efficiently manage supply chain and gives them a better understanding of the supply chain’s impact on clinical outcomes. Workday unifies planning, procurement and inventory, giving organizations a single source of data to reduce costs, gain efficiencies and improve clinical outcomes.
Because the financial tool seamlessly integrates with supply chain and human resource functions, organization leaders can tie costs to resource use and optimize the performance of all three areas.