operational and turnaround management - freed associates · operational and turnaround management...
TRANSCRIPT
April 14, 2017
HFMA Northern California Spring Conference
Operational and Turnaround Management
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1. Introductions – David Cox and Samir Panchal
2. Who is Freed Associates & Alameda Health System (AHS)
3. What happened?1. Summary of the core issues/challenges2. Summary of the AHS “current state” at start of these efforts
4. Overview of approach to the turnaround
5. Interventions: what was done & results achieved
6. Looking forward – 2018+
7. Key Takeaways
Agenda
2
David Cox, CPA, MBA, FHFMA
Chief Financial Officer,
Alameda Health System
Samir Panchal, MSEE, MBA
Consultant,
Freed Associates
Presenter Introductions
3
Who We Are: Mission & Vision
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At Freed Associates, healthcare is our passion and our business.
Freed Associates are experts in healthcare and aim to help solve client problems. We collaborate with our clients for success and sustainable results.
Freed engages with leading healthcare companies as a consulting firm to make a positive difference in the healthcare landscape while maximizing employee satisfaction and growth.
Mission
Vision
What Makes Us Unique?
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PartnershipsExperience & Expertise
Communication
Methodology
When you hire Freed, you receive the accumulated knowledge of the whole team.
Freed Associates partner with clients as trusted
advisors to identify and implement solutions to
their most complex problems.
Freed is committed to open and substantive communication with clients to ensure the honest and timely flow of information.
Regardless of the type of engagement, the fundamentals
of how we work remain the same. We assess the situation, work with the client to define
optimal outcomes, create a plan and execute.
Safety Net Provider Alameda Health System
Integrated Regional Network
Vision – Alameda Health System
… 2012Assess and Plan
2013-2017Build, Adapt, Transform
2022…Sustain system & manage pop.
H
E
W
FJ
To be recognized as a world-class patient and family
centered system of care that promotes wellness,
eliminates disparities and optimizes the health of our
diverse communities.
1864 Alameda County Infirmary opened on the Fairmont Campus
1927 Highland Hospital opened in Oakland
1960s Ambulatory health care services launched
1992 John George Psychiatric Pavilion opened
1990s Alameda County Medical Center (ACMC) was formed by merging Fairmont Hospital with
Highland Hospital and John George Psychiatric
1998 Alameda County Hospital Authority was created
2012 Adopted 10 year Financial Plan and 5 year Strategic Plan
2013 ACMC renamed and rebranded to Alameda Health System (AHS)
Expanded Ambulatory – Same Day Services; San Leandro Hospital acquired
2014 Alameda Hospital and San Leandro affiliations completed
The History of Alameda Health System
849 licensed beds, 4,700 employees, 600+ MDs,
5 acute hospitals, 3 SNFs; 4 Wellness centers
Average Daily Census: 500; Discharges: 22,000;
ED Visits: 160,000; OP Clinic Visits: 360,000;
Surgeries: 9,600; Births: 1,500;
Operating budget: $1 billion.
Emergency Medicine, General Surgery, Internal
Medicine, Orthopedics, Oral Maxillofacial Surgery,
Podiatry.
Nurses, allied health professionals, pre-doctoral
psychology interns.
Alameda Health System
Nationally recognized public health system
Training tomorrow’s doctors (160/year)
Training students/providers
• AHS was running at a $3 to $4 million monthly loss per month.
• Alameda County, which provides the credit facility, had severely limited access, causing difficulties paying vendors, and AHS was “out of compliance” with the agreement.
• Total expenses had increased 6.6% per year, and for the period 2012 –2014, increased 8% to 10% per year.
• Expenses per adjusted discharges were increasing much faster than patient revenue, which is not sustainable.
• It was clear that immediate action was required.
Where We Started From
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Hired Term
CEO A 1998 Oct 1999
CEO B Oct 1999 Jun 2000
CEO C Jun 2000 Jun 2001
CEO D June 2001 Nov 2003
CEO E Feb 2004
CEO F Feb 2004 April 2004
CEO G April 2004 May 2004
CEO H Jun 2004 Sep 2005
Wright Lassiter Sep 2005 Dec 2014
Dan Boggan Dec 2014 July 2015
Delvecchio Finley July 2015 Present
Leadership Turnover
The organization
had a difficult
time retaining
executive
leadership
AHS Historical Trends – Income Generation
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Turnaround Goals
1. AHS Executive Team focus on our strategic priorities.
2. Organize and manage work to effectively achieve the strategic priorities.
3. Achieve structural cost reductions:
» $10 million in realized reductions
» Immediate hiring freeze on new and vacant positions
» Communication plan for our organization implemented
» Up to $40 million dollars in expense reductions generated via Better II
4. Revenue Cycle Improvement in place with $15+ million annually
5. Implement Other Revenue Enhancement - $18+ million annually
Turnaround Approach Summary
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Financial Management and the Turnaround Process
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DetermineReality
Communicate
EstablishTrust
EstablishControls
Develop Plan
Governance
Where are we and where do we need to go?
Get management, the board, and key constituencies on the same page.
People may not like the message, but they have to believe it.
Establish proper authority, accountability, and spending limits.
Develop a credible plan, gain approvals, implement, and report
It is virtually impossible for an organization to be successful without good governance.
Oversight Control Committees
FTE
BudgetOversight
CapitalExpenditure
MonthlyVariance
Provides a final review of open positions to ensure that they are still needed and/or identify whether there is an opportunity for efficiencies.
Deals with budget issues during the year; e.g., providing funding for new initiatives and managing our internal reserves.
Allocates the annual capital budget and deal with
unexpected needs, keeping overall expenditures within
budget.
Identifies variances to the budget, but really serves to ensure that Managers have the key competencies necessary to manage their departments.
REVENUE CYCLE IMPROVEMENT
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• Achieve positive net operating income by June 30, 2015 (monthly run rate).
• Establish a sound cost and revenue foundation.
• Optimize the size of leadership team across the system.
• Establish an organizational culture and philosophy of competency and accountability.
• Manage cash, vendor payables, and credit relationships.
• Build and ensure confidence and trust from our community and county leaders.
AHS’ Vision for Revenue Turnaround
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Revenue Cycle Improvement Project Management Model
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Governance
Decision Making
Commitment
Accountability
Teamwork
Flexibility
Establish controls to provide
oversight and direction
Key leaders –make decisions (don’t hold up the process)
Commitment from AHS leadership
Cross-accountability in making this
successful
Joint partnership between AHS,
Freed, and Siemens
We are moving very fast and
sometimes we need to be agile
to change directions
Revenue Cycle Progression
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FY2015 FY2016 FY2017
• RCIP Program Initiated
• Goals: Stabilize cash and improve revenue cycle
• Move program into RCIP Operations
• Goals: Continue improvements through operations
• Assistance in specific areas
• Goals: Projects that have an associated ROI
RCIP Program• Strong program mgmt.• Organizational sponsorship• Focus on high priority areas
AHS Operations• Identify gaps and hire strong
resources• Enforce accountability• Encourage cross-collaboration
Targeted Areas• Continual focus on
improvement• Strong ROI projects• Get assistance when
needed
RCIP Prioritization Process
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Highly Focused & Prioritized Projects and Secondary Projects
Team Capability
Ability to execute
60+ projects
identified
• Quick wins• ROI• Ease of implementation
Issue RCIP Project Outcome
PFS staff not doing follow-up (cradle to grave billing)
Re-organized PFS to $ stratification Reduced 20 temp staff while improving cash
No denials being worked Created denials unit New unit with reporting, processes, and staffing
Expected reimbursement not calculated correctly
Loaded payer contracts in billing system and tested accuracy of expected reimbursement
Calculated Net Patient Revenue accurately and allowed for creation of Payment Variance unit
Authorizations were not routinely captured prior to service
Created authorization unit Decreased denials and more payer compliance
Patient access not consistently doing insurance verification and benefits eligibility
Training for 100+ staff Improved financial clearance
CDM out of compliance Outsourced CDM compliance to vendor Compliant CDM with a maintenance process
DNFB and pre-billing edits over $100M
Dedicated IT, operational and financial team to resolve edits
Reduced DNFB to under $40M
Inconsistent reporting Integrated project with strong data governance
Developed over 600+ reports
RCIP Prioritized Projects
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RCIP Metrics
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Metric Before RCIP After RCIP Change
1. Cash $190.2M (FY14) $314.4M (FY15) 65% Increase
2. AR Days 102 Days 77 Days 24% Decrease
3. AR Dollars ~$525M ~$380M 28% Decrease
4. DNFB $92M $28M 70% Decrease
5. Denial Unit $0 Recovered $4.35M Recovered
6. OR Charge Lag Days 9 Days 2 Days 78% Decrease
7. OR Late Charges 18% 7% 72% Decrease
8. revCORE (Management Reporting) Minimal 600+ reports + data cubes
9. OP Hosp Auths n/a $0.7 On track for $2M annualized
• Strategic vision alignment• MBO per functional area
• Staffing - hired key positions• VP of Revenue Cycle
• Established Revenue Integrity department
• Director of Revenue Integrity
• Manager for Denials and Underpayments
• Accountability• Formalized governance structure
• Visibility and transparency
FY16 Revenue Cycle Operational -Accomplishments
AHS Operational Metric FY14 FY15 FY16 FY17 to date
1. Cash (Net Patient Revenue – daily avg) $875k $1.25M $1.31M $1.39M
2. Cash (Net Patient Revenue – annual) $320M* $467M $608M TBD
3. AR Days 102 Days 77 Days 62 Days TBD
4. DFNB $92M $41M $28M TBD
CIP Results: Expectations Exceeded
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• Net Revenues have increased over 50%, restoring AHS to profitability, and Cash Collections have increased commensurately.
• Net A/R Days have been reduced from over 100 to almost 60, achieving compliance with the Permanent Agreement.
• Systems, processes, and personnel issues have been addressed, improving overall operations.
• This has been a collective effort across the organization.
*SLH FY14 cash number is an estimate
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EXPENSE CONTROL
Cost Reduction Goals (Better II Project)
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Initiative StatusSavings
Projection
Organizational Design $ 3,000,000
Labor/Process
Optimization $ 28,500,000
Clinical Resource
Management $ 7,100,000
Group Purchasing
Organization $ 700,000
Pharmacy Benefits
Management $ 1,200,000
Supply Chain Redesign $ 600,000
Total $ 41,100,000
Actual Cost Reductions
Initiative NameTarget
Savings
Identified
Savings
Completed
Savings
GPO $200,000 $312,794 $175,087
Laboratory Services $250,000 $469,961 -
Organizational Design $1,100,000 $2,416,787 $1,920,239
Pharmacy 340b $675,000 $951,199 -
Pharmacy Operations $565,000 $414,668 -
Pharmacy Benefits Management $1,200,000 $1,095,608 $813,785
Physician Preference Items $210,000 $610,646 $31,020
Process Optimization $3,900,000 $8,869,729 $8,869,729
Purchased Services $700,000 $1,865,739 $234,956
Supply Chain - -
WFX - -
$8,800,000 $17,007,131 $12,044,816
Total to Date
CASH MANAGEMENT
The Importance of Cash Management
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0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
40000000
45000000
50000000
AHS System Accounts Payable
Alameda Health System Alameda Hospital San Leandro Hospital
$70,000,000
$90,000,000
$110,000,000
$130,000,000
$150,000,000
$170,000,000
$190,000,000
$210,000,000
7/4
/14
9/4
/14
11
/4/1
4
1/4
/15
3/4
/15
5/4
/15
7/4
/15
9/4
/15
11
/4/1
5
1/4
/16
3/4
/16
5/4
/16
Fiscal 2016 NNB Forecast
NNB FORECAST YEAR END TARGET
Financial Summary – March 2016
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• Operating Performance –– Operating Income of $17.3 million, just slightly below budget.
– The reported EBIDA Margin is 4.0% compared to prior year (1.3%).
– Total revenues are 2.9% favorable to budget, offset by volume related expense variances.
• Revenue Cycle Performance –– Cash Collections have been positive
– Cash Collected as a percent of Net Patient Service Revenue is 106.3%.
– Net Days in Accounts Receivable have improved from 90.2 to 72.1.
– Accounts Payable (incl. accruals), have been reduced from $36.7 million to $33.9 million; we are current with vendors.
• Alameda County Permanent Agreement – AHS remains in compliance with the Agreement.
• Fiscal 2017 Budget Process – Targeted a 5.0% EBIDA Margin and a Capital Expenditure Budget of $30 million.
SUMMARY OF NEXT STEPS & FUTURE FOR AHS
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Long Term Trends
$0
$20,000
$40,000
$60,000
$80,000
$100,000
AHS Revenues
SupplementalReimbursements
Net Patient ServiceRevenue
$60,000
$65,000
$70,000
$75,000
$80,000
$85,000
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Revenue and Expense
Total Revenues
Total Expenses
3,700
3,750
3,800
3,850
3,900
3,950
4,000
4,050
Paid FTE's
$42,000
$44,000
$46,000
$48,000
$50,000
$52,000
Salaries, Wages, and Benefits
Management Focus - FY 2016 Goals and Objectives
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Pillar Goals
AccessReduce time to 3rd next available to 30 daysReduce ED Door to Bed to 6 hours
Financial Sustainability Achieve a 3% operating margin
QualityReduce incidence of Preventable Harm (HAPU & FALLS) to 0.25Improve compliance with evidence based practice in Ambulatory to 90%
Service Improve patient satisfaction scores (HCAPS) to 77 percentile (CGCAPS)
Community EngagementIncrease AHS market share to 7%Improve NRC ranking (Best Community Health Program ) to 10%
Workforce DevelopmentAchieve employee engagement score of 4.2Achieve physician engagement score of 3.9
• Reduction in supplemental income
• Change in payment models to value-based reimbursement
• Move towards population health management and risk-based stratification
• Expense management
Future Risk Factors
36
Revenue Cycle – Still Not Collecting Everything We Can!
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Key Issues
• Leadership – Permanent fill of key positions.
• Referrals – Services still being referred outside of AHS.
• Care Coordination – Throughput issues across the organization.
• Charge Master – ICD10 has revealed significant deficiencies.
• Charge Capture - Dept Managers have to take accountability.
• Clinical Documentation – a problem everywhere, we have to have a program.
• Provider Credentialing – Still a major problem.
• Professional Billing – Charges are not being captured.
• System Issues – Implement Soarian Financials at other facilities.
Our Future
Limited North/East County presence,
excessive wait times for new appts
Margin derived from supplemental
sources with high relative costs
Independent sites and practices with
information silos
Emphasis on providing ‘what we can’
however we can
Known as provider of last resort,
limited community partnerships
High turnover, operating in silos
Countywide, timely access to primary
and specialty care thru COEs
Best-in-class, quality, and efficiency;
diversified payor mix
Integrated practices with care
coordination and aligned incentives
Consistent quality, patient-centered care
with culture of service
Positively identified brand, known as
quality community partner
Engaged workforce with focus on
identifying and retaining key talent
From 2012 base… 2013-2021 Transition to…
Access
Sustainability
Integration
Experience
Network
Workforce
Pillars Essential Safety Net Provider Integrated Regional Network
“To build achieving organizations, you must replace POWER with RESPONSIBILITY”
– Peter Drucker
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“Houston, we have a problem.”- Cmdr. Jim Lovell, Apollo 13
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