Message from Leadership: Keeping Caregivers Informed with Financial Decision Making
Published September 29, 2014
By Sheri Feeney, Chief Financial Officer
Here’s a short, moderately interesting, fact about me... I don’t really like to cook. I like to eat most types of food and I actually like to clean up the kitchen (probably goes along with being a bit analytical) but I don’t really enjoy, or excel at, cooking. One entre I do make well is spaghetti sauce. My mom grew up next door to a very close friend who comes from a fabulous Italian family. This friend’s “Nonny” (a.k.a. Grandma) taught my mom how to make authentic spaghetti sauce, and in turn, my mom taught me. That sauce is my go-to, consistent, fill up the freezer with easy meals, menu item. Regardless of how fabulous my sauce is, I still have to buy the pasta (and cheese) as my expertise ends in that one pot! I can make lasagna, stuffed shells, ravioli, and regular spaghetti with my sauce, but I need fresh packed or dried pasta, and at minimum some great parmesan cheese, to create a meal. I rely on the skill of others, at the grocery store, to create the remaining key ingredients to combine with my sauce, and as a result, my family and guests can eat a fabulous meal. This illustration from my limited cooking experience can also be a picture of the cooperation that exists within our ministry.
It takes a variety of skills and expertise to deliver the best patient care. Similar to my kitchen, which thankfully benefits from my husband’s culinary skills, the best results come from a combination of the right expertise. When it comes to making financial decisions, our finance team needs to serve up the “sauce” of key financial information, models of future financial trends, and other analytics to assist our leaders and caregivers in making the best decisions. We also need to ensure that information is relevant, understandable and helpful for drawing a conclusion. Together, we can create health care excellence, in line with our goal to deliver the best outcomes, while satisfying our patients and families, at the most affordable cost, for the improved health of our communities. This very important goal is referred to as the Triple Aim. As the health care industry changes, so must we. While it is the goal of the finance team to keep our leaders well supplied with the financial information they need, we recognize this data is only one factor impacting decision making, and each difficult decision requires a broad discussion of the various viewpoints.
What financial information are we studying and providing? Honestly, we are looking at each piece of our financial data available. We analyze the amount we are paid (reimbursed), and the process we follow in order to receive every dollar reimbursement allowed for the services we provide. This “revenue cycle” analysis is very important as we plan for future changes in health care. Every dollar of revenue we obtain allows us to extend our care to all who can benefit from it, especially the poor and vulnerable. We also study our expenses very carefully. Some expenses change as our operations change. Variable expenses increase or decrease in relation to our volume of services. Fixed expenses don’t vary with volumes, and a very tall example of a fixed cost is our beautiful D-wing. We look closely at how we utilize valuable resources like our staff time, and how “productive” our teams of workers are. Productivity is the measurement of how much work (the output) is accomplished during our labor hours (the input). Other variable factors that drive our expenses are the choices we make on the frequency and quantity of procedures or interventions, contracts we utilize to provide professional support, including clinical consulting, and the specific supplies we use in providing care. The total cost of health care is made up of many components, and each piece of the equation needs to be understood in order to make the best decisions as caregivers.
Maybe an obvious comment, but collecting more revenue in total than we spend on expenses is critically important for sustaining our ministries. This need for some remaining savings (also referred to as margin) is the same balancing we all do with our personal finances. Margin is required for us to immediately invest in capital like our campuses, furniture and equipment, maintain sufficient reserves for future needs, and also the ability to give back to our community. Each month we hold a Choose Providence meeting where updates are shared during each 120 day cycle. We spend a portion of the time digging into different areas we want to improve while staying focused on the overall goal of the Triple Aim. Topics we’ve tackled include Overall Waste Reduction, Growth, Affordability Parts I and II, and Supply Costs. Additionally, each quarter senior leadership spends two solid days with every department and clinic leader in our region, discussing each service we provide. With all of our regions leaders, we are looking closely at our services, determining where we have opportunity to improve in our service delivery, from quality and safety aspects, patient and family satisfaction and in reducing overall cost of care. We are also using these cycles and two day leader summits to plan for changes occurring in our industry in both the short-term and long-term.
Financial information must be accurate, and at minimum directional, for decision making to benefit. The format of financial information needs to evolve over time, not only as our finance team learns more about the needs of the decision maker, but also as our services change, and our industry changes. Depending on the need, we provide groups and leaders analytical tables, or graphs, or charts, or proformas. We create, and oftentimes, recreate the information until the leader has what they need to form a conclusion. In the same way many caregivers wouldn’t know how to analyze detailed financial information, or record an accounting transaction, our finance team doesn’t pretend to be experts in clinical operations. As we work together, this partnership between our financial team and clinical and operational experts in all of our departments and clinics provides a key ingredient we need for business decisions. Communication is critically important. Financial information has to be interpreted, and often times clarified. Some caregivers learn from visual representations, and others prefer to study the financial data. It is our job, and usually our enjoyment, to figure out what financial information is needed to help everyone understand the decision at hand.
So, how do we keep caregivers informed with financial decision making? We stay involved in our ministries, we learn and adapt, measure and analyze alongside our operational partners. We engage in conversation, and we test and analyze our financial theories. We build relationships that are flexible enough to bend with the changes in our industry, and strong enough to get through the oftentimes challenging pressures. There isn’t another region in our health system better able to innovate and create than our ministries in Northwest Washington. You bring the pasta, I’ll bring the sauce, and together we can make a better meal. And, yes, my spaghetti is cheesy too!