Safety Net System Achieves $130M in Fiscal Improvements in 4 Years
100-day productivity cycles help implement hundreds of projects.
Just three years ago, Phoenix-based Maricopa Integrated Health System (MIHS) was in a dire financial situation. The independent public health system, which is governed by a five-member elected board, was bleeding cash and only had four days cash on hand (COH). The board wanted to turn around the health system’s finances to sustain the organization and move forward with needed capital improvements funded by a $935 bond authorization, which voters approved in 2014.
“We knew we didn’t have a lot of time and that we could be out of cash by August 2015,” says Stephen A. Purves, president and CEO, who joined the organization in late 2013. “We needed some quick wins in a hurry. From a fiduciary perspective, it would have been irresponsible of us to move forward with a bricks-and-mortar project without a sound financial plan.”
Today, however, the health system is back in the black and on track to build a new hospital because leaders have been using 100-day performance improvement cycles to rapidly implement hundreds of projects to cut costs and improve operations. To date, MIHS has achieved $130 million in fiscal improvements since 2014. Its current cash balance is $166.7 million, representing approximately 116 days COH.
MIHS’s Margin Improvement Journey, FY14-18
The achievement is especially remarkable given MIHS’s challenging payer mix. More than half of MIHS’s revenue comes from Medicaid, and only 11 percent is from commercial insurance. The organization currently provides more than $140 million of uncompensated care each year, although half is covered by a tax on Maricopa County property owners. Perhaps what is most significant is that MIHS has turned around its performance without the need for significant, across-the-board staffing cuts.
Optimizing the Revenue Cycle
To improve the organization’s finances, leaders at MIHS worked with an outside consultant to implement a performance improvement strategy in which leaders collaborate on changes during 100-day performance improvement cycles. Each cycle has a theme, such as waste reduction, growth, or value creation. “The process gets our organization focused and working in harmony,” Purves says. During these cycles, leaders generate eight margin-improving ideas that can be implemented within 100 days using a team-based approach.
So far, some of the most successful ideas have targeted MIHS’s revenue cycle functions, especially denials management. “We had a huge denial backlog because of the way our IT was built and some staffing issues,” Purves says. In addition to hiring a new collection agency to recover revenue from appealable denials, leaders implemented a root-cause analysis to determine why payers were denying claims in the first place. They set a $5 million margin improvement goal but achieved $42 million by improving denials management alone.
MIHS also implemented its first in-house clinical documentation improvement (CDI) program to manage their case-mix index and optimize payment. The health system hired physician advisers and CDI specialists to collaborate with the health information management (HIM) and coding team. To date, their efforts have added $5.2 million to the bottom line.
In addition, MIHS gained $1 million by implementing point-of-service (POS) collections.
Focusing on ‘Keepage’
Leaders also set a goal to keep more referrals within MIHS through better “keepage” strategies. Traditionally, keepage had been a challenge for the sprawling health system, which has an academic medical center, two behavioral health centers, an outpatient specialty center, and 13 family health centers (FHCs). After developing a system to track all referrals outside of MIHS, leaders recognized an opportunity to improve laboratory and radiology referrals in particular. They used rapid-cycle testing to pilot new policies and procedures, including implementing a new standardized referral process at all of the health system’s FHCs.
As a result of these efforts, MIHS virtually eliminated outgoing lab referrals, which dropped from 17,000 in September 2016 to only 321 in August 2017.
Heeding Lessons Learned
Purves believes other safety net systems can benefit from MIHS’s story and offers the following advice for finance leaders on how they can turn around their financial performance during challenging times.
Give leaders reasons to collaborate. “You need to create a readiness for change in your organization, especially in an academic medical center, where you have a lot of different silos and departments that don’t talk to one another,” Purves says. MIHS’s financial woes provided the burning platform that leaders needed to make changes. “Nothing focuses the mind like running out of cash,” he says. Creating multidisciplinary teams can help improve communication and speed implementation.
Ensure that department leaders—not a task force, project leader, or C-suite executive—own plan implementations. This helps ensure accountability, Purves says. Leaders also should not have to obtain multiple layers of approvals, but rather should be empowered to implement the plans they create.
Get the finance team involved. At MIHS, finance leaders provide two dedicated liaisons to work with project teams on their various plans. Their goal is to help quantify and validate the savings. “You have to commit to provide that finance support; otherwise, you are flying in the dark,” Purves says. To focus their efforts, the liaisons concentrate their six- and 12-month look-backs on projects that have generated at least $50,000 in margin improvements.
Gain buy-in from medical staff. MIHS has a closed medical staff in which independent physicians serve as faculty and provide clinical services under a master professional services agreement. Many physicians were engaged with the 100-day performance improvement teams. “They were some of our most rabid supporters,” he says.
Bring training and coaching in house. With the help of their external consultant, MIHS instituted a leadership training program designed to make leaders more effective and accountable. Eventually, Purves and his team wanted to sustain their efforts on their own, so they implemented a train-the-trainer approach. Because MIHS did not have an existing leadership academy, the health system hired a performance excellence administrator who designed a training program based on Lean Six Sigma principles. The curriculum includes five days of instruction over three months, and trainees work on performance improvement activities across the organization.
Since the training program’s implementation 18 months ago, several of MIHS’s 16 Lean Six Sigma green belts now serve as trainers for the program while another 55 leaders have earned yellow belt certifications. In addition, eight staff members have been certified as Lean Six Sigma black belts and now manage large enterprisewide projects across MIHS.
Consider periodic automatic replenishment (RAP). Reducing inventory is an untapped savings opportunity for many safety net hospitals. MIHS reduced its inventory by implementing a just-in-time supply process. Today, supply units are flagged so they are replenished only when they are truly low, rather than being ordered automatically after a certain time period.
Planning for the Future
Purves expects the organization will achieve an $8 million bottom line this fiscal year, putting it well ahead of its 2020 targets.
This summer, MIHS embarked on its eleventh 100-day performance improvement cycle in which leaders are preparing for a new $1 billion hospital paid for by the bond issue and slated to open in 2021. Other capital projects include a new primary and specialty care center scheduled for completion in 2020. These projects are part of MIHS’s broader strategic plan called “Care Reimagined,” which involves planning, operations, branding, project management, and real estate initiatives.
“The beauty of [the 100-day performance improvement cycles] is that you can use the techniques for any institutional priority, not just revenue cycle or expense reduction,” Purves says. Leaders at MIHS expect to begin a new financial plan toward the end of 2019 and will continue using the performance improvement cycles for the foreseeable future. “They have become a way of life for us,” Purves says.
Laura Ramos Hegwer is a freelance writer and editor based in Lake Bluff, Ill..
Interviewed for this article:
Stephen A. Purves, FACHE, is president and CEO, Maricopa Integrated Health System, Phoenix.
This article is based in part on a presentation at ACHE’s 2018 Congress on Healthcare Leadership in Chicago.