Strategic Planning

No-Divert Policy, Strategic Growth Help Erlanger Increase Revenue by $300 Million

February 21, 2019 11:31 am

A regional operations center has helped fuel the turnaround by improving communication with incoming patients.


Just five years ago, Erlanger Health System, a safety net provider based in Chattanooga, Tenn., was in the red and struggling to manage its high uncompensated care costs after Tennessee rejected Medicaid expansion. But since hiring new leadership and implementing a strategic plan focused on growth, the academic health system—which has seven campuses serving more than 50 counties in Georgia, North Carolina, Alabama, and Tennessee—has improved its balance sheet at an impressive pace.

Erlanger Health System Significantly Increases Its Revenue




Implementing a “No-Divert” Policy

Despite providing high-quality care, Erlanger had years of lagging financial performance, which meant it was in violation of its bond insurer covenants and was approaching violation of its master trust indenture covenant. At the same time, its market share was slipping in Chattanooga, and rating agencies took note, issuing multiple downgrades.

“We were a sleeping giant that had become complacent about where we wanted to go,” says Janice Keys, DNP, FACHE, RN, senior vice president and chief nursing executive. But Erlanger’s new strategic plan left little room for complacency. “Our plan called for growing our population base—not sitting back and cutting our way to the top, but rather growing our services,” she says.

During the past five years, leaders at Erlanger have expanded their market share by 37 percent, in part by extending their programs and services in their primary and secondary service areas. Key to this strategy was the CEO’s decision to implement a “no-divert” policy—not directing ambulances to take patients to other emergency departments because of capacity—to capture lost revenue and create a regional operations center to manage incoming patients from across the region.

Located in Erlanger’s medical mall, the regional operations center is staffed with critical care nurses who field patient transfer requests as well as air and ground transport dispatchers who manage incoming patients. In addition, a bed-desk team reviews bed availability across the system, and a case manager provides timely information on patient status and even begins to plan patient discharges prior to arrivals. The center also includes a supervisor from environmental services, who fine-tunes the team’s priorities depending on bed availability, as well as patient flow managers who make sure the service lines are prepared to accept incoming patients.

Having these complementary functions centrally located helps leaders dispatch and disperse incoming patients to the right facility based on patient acuity levels and overall patient traffic that day, Keys says. Large displays serve as dashboards, reporting real-time bed capacity and how long it takes to move patients into beds. They also model incoming patients for the following day.

The regional operations center also helps Erlanger avoid admitting stable patients to the emergency department (ED) when they can be sent directly to pre-surgical and medical admissions units. “It works seamlessly because [the teams] are not calling people on the phone—they’re actually in the center with everyone else,” she says. “It’s like an orchestra—everybody has to be on key and in the right rhythm to make it all work, but it does.”

Keys says the regional operations center and no-divert policy have fostered trust with facilities within their service area and even helped Erlanger sign affiliation agreements with several hospitals.

Using Other Growth Tactics

As part of their strategic plan, leaders at Erlanger also have been expanding their specialty services, opening the region’s first heart and lung institute and orthopedic institute. “In our strategic plans, we look at not just what is best for Erlanger to grow, but also what the community needs,” Keys says. In addition, leaders have increased the health system’s surgical capacity by 25 percent.

In May 2018, leaders at Erlanger opened up a behavioral hospital joint venture that serves adults and adolescents. They also recently opened a freestanding ED and multispecialty clinic to expand services in Sequatchie Valley in Tennessee.

Paired with the health system’s growth strategy is a continued focus on quality and safety, and today Erlanger ranks in the top decile for patient safety indicators, Keys says. For example, the health system has seen continued improvement in hospital-acquired infections. Staff also have curbed harmful falls by 40 percent and have improved patient satisfaction scores by 36 percent.

“You can grow and get patients in one time, but they won’t want to come back if they feel like it’s not a good quality hospital,” she says.

Improving Financial Performance

To further improve their balance sheet, leaders at Erlanger have embarked on several Lean-inspired standardization strategies. For example, they recently standardized their inpatient dialysis equipment, which improved nurse productivity and cut the length of stay in half for some patients.

Another strategy is the implementation of a nursing supply management team, which works with supply chain leaders to identify opportunities to reduce costs. Their charge includes reducing bulk ordering of supplies and using dispensing cabinets on the units to help monitor supply utilization. Each patient care director on the units uses a dashboard to track supply cost per case and measures their performance against other leading hospitals.

Combined, these tactics have helped Erlanger become the lowest-cost provider in the region, giving leaders more leverage in their negotiations with payers, Keys says.

Heeding Lessons Learned

Keys offers the following suggestions for finance leaders on how they can turnaround their organizations’ finances by expanding services and containing costs.

Hire leaders who create a culture that supports growth. In late 2017, Erlanger hired a new chief strategy officer, who reviews and prioritizes needs by service line each year. The health system also involves clinical leaders and physicians in strategic planning. “They have to feel like they are part of the planning and process going forward,” she says.

Make productivity a priority. For years, Erlanger’s nursing staff was running at 75 percent productivity. But in 2015, the health system hired a clinical financial analyst to educate nursing directors on productivity and help them make better use of their resources.

Erlanger also implemented a nursing leader pay-for-performance program to reduce agency use and retain the best nurses. Within a two-year period, high-performing nurses have earned $6 million in raises. Today, the health system is running at 98 percent or higher productivity.

Share performance data across the organization—even if it hurts. Making performance data transparent can be painful for service-line leaders, who may be embarrassed to share their numbers with peers in other service lines, Keys concedes. But such transparency is critical to sustain buy-in as leaders set their priorities for the year. “You have to have leaders who can get above the distractions and noise,” she says. “It’s about bringing the organization together on one transparent plane.”

Supporting Clinical Leaders

Keys believes that finance leaders can better support clinical leaders when they have a deeper understanding of what it takes to deliver care. When Keys first arrived at Erlanger, she asked the CFO to join her as she rounded the units. During one of the rounds, she asked the CFO to push the computer cart like a nurse would—a decision that led to the replacement of the carts on many units. Today, Keys still meets with the CFO at least once a month to discuss what resources are needed to maintain the health system’s high-quality performance.

“The financial folks cannot sit in one place in an organization and the clinical folks in the other and expect each other to understand, because the way we talk is different,” she says. “We have to meet everyone where they are at and bring them to a better level of understanding.”

This article is based in part on a presentation at ACHE’s 2018 Congress on Healthcare Leadership in Chicago.


Interviewed for this article:

Janice Keys, DNP, RN, FACHE, is senior vice president and chief nursing executive, Erlanger Health System, Chattanooga, Tenn.


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