Five Keys For A Successful Hospital CFO – Part 2

With more than 20 years’ experience in both health care and technology industries, Derek Morkel, HealthTechS3 CEO, shares valuable insight to strategic planning in order to improve financial performance with a special focus on Revenue Cycle Management.

In the previous blog post, we discussed the Five Keys to being a successful CFO. Now we drill a bit deeper into one of the most important areas of responsibility for a hospital CFO – Revenue Cycle Management (RCM). Revenue cycle (aka cash) success should be on every department managers’ priority list in any healthcare organization – not just the CFO.

Getting paid timely and correctly for the services provided is critical. Accounts receivable (AR) is typically one of the largest line items on the balance sheet so ensuring you get cash in the door and that days in AR is correctly stated will create a more positive financial position. Sadly, the necessary focus on this process is often missing in healthcare so we will use the Five Keys to address it.

“If you can’t measure it, you can’t improve it.” Peter Drucker

As we explore how the Five Keys relate to RCM success – process, data, measurement and discipline should not be far from your thoughts.

My Five Keys to RCM Success:

  • Focus areas – figure out what is important and why. CASH is the priority.
    • Cash is important in every business so make sure you dedicate enough time in your daily schedule to ensure your team is driving towards a cash goal.
    • Measure the KPIs that lead to financial goals. It is not good enough to simply measure AR days – that is not a leading indicator, it is a result calculation. Registration and billing accuracy are leading indicators: Do you measure those? Do you know what those indicators were for yesterday? Month to date? Year to date?
    • Daily and weekly items such as discharge not final billed and denials, respectively, should be leading indicators and monthly summary indicators like cash as a percentage of net revenue should be measured. Further, monthly summary indicators and progress against goals should be shared with department managers and senior leadership.
    • There are at least 5-10 basic KPIs that should be focused on every day. If these are moving in the right direction then cash will flow.
  • Team – invest in the right people at every level.
    • The first and second Keys are almost interchangeable. Without the right team members (especially middle managers), it will be hard to get the other areas correct.
    • This is a critical point that many hospitals forget – investing in the RCM team. In many hospitals, registrars are among the lowest paid staff yet they control the start of the RCM process and customer service. If we know registration accuracy directly correlates to improved billing and collections then these staff should be higher skilled, trained well and paid accordingly.
    • As discussed in the previous point, we can be too focused on the pennies and lose sight of the larger dollars. A good Business Office Director – depending on the size of the organization — can have an impact into the millions. Yet most hospitals neglect to invest in this management position and settle for less experienced or younger candidates in over to save five or ten thousand dollars per year.
    • At HealthTechS3 we frequently discuss the 4R’s. The Right People + Right Process + Right Technology = Right Results. The one pillar that is the most important is People – the other 2 will not be effective without the right team.
  • Process & Technology – use technology to ensure there are no holes.
    • The sheer volume of registrations and then transactions that occur with each registration and charge code means it is not possible to ensure 100% accuracy without the right tools, software, and systems.
    • Chargemaster management is a good example of this. I still see hospitals using consultants to review their CDMs vs. technology. It is not possible for any consultant to be as efficient as a good CDM technology platform.
    • As long as there are manual parts to a process, there will be errors and thus it is also critical that there are data mining tools that can automatically identify potential errors to be fixed before they occur.
    • There are now data tools that run from EDI data sources like 835s (Remittance) and 837s (Billing) that provide data audit capabilities at a reasonable price. This allows even smaller hospitals and non-acute providers that might not have dedicated IT staff to extract data, identify issues, correct them and also retrain staff as needed.
  • Data – build an RCM data warehouse.
    • This is one of the most important items in building a data-dependent RCM operation. You need a platform that enables automated data extracts that can manipulate and/or be loaded into other tools to make the data meaningful, such as Business Intelligence (BI) and some of the RCM tools we discussed in the previous sections.
    • What we do not need is to spend hours extracting data, loading into Excel and then rebuilding queries daily. Time spent on building even a basic BI data warehouse and the 5-10 fundamental KPIs by department, especially, RCM will save your team countless hours.
    • Spend time improving processes, if necessary, not getting access to your own data.
    • Pick the right KPIs (leading indicators), identify the data necessary to measure the KPIs, and ensure you are improving them.
  • Details – don’t be a big picture CFO; be a detailed-oriented one.
    • Trust, but verify — a great quote attributed to Ronald Reagan. As discussed previously, the details of how we register, charge, and then bill for claims determines the timeliness and accuracy of payment. Miss one charge for an AICD implant and it could cost you tens of thousands of dollars.
    • It pays for the CFO to periodically get into account level details. Go through your top 50 accounts in AR (by balance or charges) that are older than 60 days and see why they have not paid. I always found this to be a good practice at least once a month and it ensures accountability and communication by your team.
    • Accountability starts with having the right team, but is always reinforced when the CFO is in the details and understands where improvements need to be made.

In a nutshell, every good RCM operation that I have been involved in followed these pillars.

Have a daily focus. Measure what counts – leading indicators. Get the right people on the team. Use technology to ensure there are no holes. Build a data warehouse to automate measurement. Never forget the details; it ensures you know what is going on and builds accountability.

The best CFOs I have worked with in my career have all paid attention to these building blocks with respect to operations and especially RCM. I know that the year that I spent as a Business Office Director was instrumental in making me a better CFO. I understood the details of why claims paid and why some didn’t.