are your analytic tools really adding value?

ARE YOUR ANALYTIC TOOLS REALLY ADDING VALUE?

HFMA Financial Accounting & Reporting Committee

Thursday, August 14th8:30 am - 10:30 am

ANALYTIC TOOLS are one of the most efficient ways that can be used for ensuring good profit from the hospital’s investments. These tools are highly helpful in evaluating the market, and investing in a way so as to maximize the profit from the investments made. They should be useful for deciphering both internal and external information related to a specific business organization.

Hospitals spend a lot each year on buying and maintaining analytic tools such as cost accounting, decision support, and contract management systems.

BUT IS IT BEING SPENT WISELY?

IS CHANGING

Health Care as we knew it

AND WITH IT . . . .Our NEEDS for analytical tools

SHOULD BE changing too

Is there a TOOL or METHOD that is

Better ROI? Just as Accurate? Fits our needs going

forward?

ASSESSING YOUR TOOLS

1. INVENTORY OF TOOLSCATEGORY TOOL SOURCE SYSTEM

Financial Ratio Analysis Software

1. Tool 1

2. Tool 2

System 1System 2System 3

Financial & Management reporting

1. Tool 1

2. Tool 2

• System 1• System 2• System 3• System 4

Planning, budgeting, and forecasting

1. Tool 1

2. Tool 2

• System 1• System 2• System 3

Strategy management & scorecards

1. Tool 1

2. Tool 2

• System 1• System 2• System 3• System 4

Cost and profitability management

1. Tool 1

2. Tool 2

• System 1• System 2• System 3

Working capital & cash flow management

1. Tool 1

2. Tool 2

• System 1• System 2• System 3

2. FINANCIAL ASSESSMENT: Cost & Profitability Management

TOOL AGE (years)

INITIAL COST

ANNUAL COST RESOURCES AGE

(years)Special COSTS

Cost Accounting

7 $148,500 $103,800 EHR 2 $2,500

Data warehouse

6 $4,000

Billing 8 $3,800

Misc 1 3 $1,500

Misc 2 5 $1,500

WHAT IS IT REALLY COSTING?

DIRECT COSTS

• Software & license fees• Implementation cost• Ongoing Training costs• Maintenance fees• Manuals• Dedicated IT FTEs

OTHER COSTS

• Error rate for improper usage

• System interface errors due to changes/ updates

• Age of tools• Changes to how we do /

look at business

Cost Accounting ExpensesFirst Year Annual

Software license $ 35,000

Implementation 95,000

Training 15,000

General Maintenance $ 15,000

System Interface 13,300

Manuals 3,500 500

Dedicated IT 25,000

Dedicated User 50,000

TOTAL $ 148,500 $ 103,800

3. ASSESSING YOUR TOOLS

S – Strength W – Weaknesses O – Opportunities T – Threats

Define BEST PRACTICE

Identify the fundamentals that provides the necessary tools and concepts required for providers to successfully compete in today’s marketplace.

Cost Accounting SWOT

BEST PRACTICE:A system that will be critical in supporting tactical business decisions and enhancing profitability; in addition to supporting the organization’s concepts, techniques, and practices.

Cost Accounting SWOTStrengths Weakness Opportunity Threats

1. Inventory valuation2. Product pricing3. Cost analysis4. Resource

consumption cost concepts

5. Cost planning

Cost Accounting SWOTStrengths Weakness Opportunity Threats

6. COST MGT TOOLSa. Direct costing

b. Cost-volume-profit analysis

c. Target costing

d. Cost object analysis

e. Constraint analysisf. Process analysis

g. Zero base budgeting

Cost Accounting SWOTStrengths Weakness Opportunity Threats

7. Cost Mgt by Function

a. Overall reduction strategy

b. Compensation cost reduction

c. Benefits cost reduction

d. Marketing effectiveness

e. Production & maintenance reduction

f. Procurement cost

g. Administration cost

h. Facilities cost

i. Finance cost

4. SUMMARY OF INTERNAL TOOLSCATEGORY TOOL ASSESSMENT

Financial Ratio Analysis Software

1. Tool 1

2. Tool 2

1. Revisit in 2016

2. Research new vendors / alternatives

Financial & Management reporting

1. Tool 1

2. Tool 2

1. Revisit in 2015

2. Research new vendors / alternatives

Planning, budgeting, and forecasting

1. Tool 1

2. Tool 2

1. Revisit in 2016

2. Research new vendors / alternatives

Strategy management & scorecards

1. Tool 1

2. Tool 2

1. Research new vendors / alternatives

2. Research new vendors / alternatives

Cost and profitability management

1. Cost Accounting

2. Tool 2

1. Research new vendors / alternatives

2. Research new vendors / alternatives

Working capital & cash flow management

1. Tool 1

2. Tool 2

1. Revisit in 2016

2. Research new vendors / alternatives

MAKING CHANGE

5. Cost and profitability management: Cost Accounting

CHOICE

Tool B

Tool A

Alternative 1

5. Cost and profitability management: Cost Accounting

BrainstormAssign

monetary value to costs

Assign monetary value

to benefits

CompareChoose

BRAINSTORMINGBrainstorming provides opportunity to create new ideas through group thinking.

The problem is the internal group is often “stuck in a rut”.

TECHNIQUES

Conventional group problem solving can often be undermined by unhelpful group behavior . And while it's important to start with a structured, analytical process when solving problems, this can lead a group to develop limited and unimaginative ideas.

TECHNIQUESBy contrast, brainstorming provides a free and open environment that encourages everyone to participate. Quirky ideas are welcomed and developed. All participants are encouraged to contribute fully, helping them develop a rich array of creative solutions and buy-in.• brings team members' diverse experience into

play• increases the richness of ideas explored • often find better solutions to the problems that

faced

TECHNIQUES

• Individual Brainstorming• Group Brainstorming

• Reverse• Round-robin

•SCAMPER•Futures Wheel

BRAINSTORMING Steps1. Explain the problem or imitative. 2. Give each person index cards to record their ideas individually3. Have each team member, in silence, think of one idea and

write it down on an index card. The goal is to allow individual people to think creatively without any influence form others.

4. Once everyone has written down an idea, you can pass their idea to person next to them or share ideas.

5. Each person should use their neighbor's idea as inspiration to create another idea.

6. Continue this circular idea for as long as is necessary to gather a good amount of ideas. When the time is up, gather up all the ideas. You can now collate them, eliminate any duplicates and discuss them further as required.

SCAMPER

Acronym for• Substitute• Combine• Adapt• Modify• Put to another use• Eliminate• Reverse

SCAMPER Steps

You use the tool by asking questions about existing products, processes, services, or people using each of the seven prompts in previous slide. These questions help you come up with creative ideas for developing new products, and for improving current ones.

SCAMPER Steps1. Take an existing product or service. This could be one

that you want to improve, one that you're currently having problems with, or one that you think could be a good starting point for future development.

2. Ask questions about the product you identified, using the SCAMPER mnemonic to guide you. Brainstorm as many questions and answers as you can. (Examples follow)

3. Look at the answers that you came up with. Do any stand out as viable solutions? Could you use any of them to create a new product, or develop an existing one? If any of your ideas seem viable, then you can explore them further.

SCAMPER StepsSubstitute• What materials or resources can you substitute or swap to improve the product?• What other product or process could you use?• What rules could you substitute?• Can you use this product somewhere else, or as a substitute for something else?• What will happen if you change your feelings or attitude toward this product?Combine• What would happen if you combined this product with another, to create something new?• What if you combined purposes or objectives?• What could you combine to maximize the uses of this product?• How could you combine talent and resources to create a new approach to this product?Adapt• How could you adapt or readjust this product to serve another purpose or use?• What else is the product like?• Who or what could you emulate to adapt this product?• What else is like your product?• What other context could you put your product into?• What other products or ideas could you use for inspiration?

SCAMPER StepsModify• How could you change the shape, look, or feel of your product?• What could you add to modify this product?• What could you emphasize or highlight to create more value?• What element of this product could you strengthen to create something new?Put to Another Use• Can you use this product somewhere else, perhaps in another industry?• Who else could use this product? • How would this product behave differently in another setting?• Could you recycle the waste from this product to make something new?Eliminate• How could you streamline or simplify this product?• What features, parts, or rules could you eliminate?• What could you understate or tone down?• How could you make it smaller, faster, lighter, or more fun?• What would happen if you took away part of this product? What would you have in its place?Reverse• What would happen if you reversed this process or sequenced things differently?• What if you try to do the exact opposite of what you're trying to do now?• What components could you substitute to change the order of this product?• What roles could you reverse or swap? • How could you reorganize this product?

THE FUTURES WHEEL

Visual tool that gives a structured way of brainstorming the direct and indirect consequences of a decision, event, or trend

The Futures Wheel

How to Use ToolIdentify Change

• Write down event, trend, problem, or

possible solution

Identify Direct 1st Order

Consequences

• Inner circles surrounding

change

Identify Indirect 2nd Order

Consequences

• Outer circles surrounding

1st Order Consequenc

es

Analyze Implications

• Does this make

sense?

Identify Actions

• Manage negative;

take advantage of positive

6. OUTCOMES

• Chosen new tool• Weighed pro’s and con’s• Reviewed alternative• Evaluated risks and opportunities• Created best value for the buck

ADVANTAGESSkill

Development

Self Worth

Lower Turnover

Increase knowledge

Productivity

Efficiencies

Deborah Sieradzki, PhD (586) 292-6446Debby.Sieradzki@lubawaymasten.com

510 Highland Avenue #311 ◊ Milford, Michigan 48381(248) 347-1416 (main)

www.lubawaymasten.com