Hospital Operations Lessons Learned in the Delta

1
Hospital Operations Lessons Learned in the
Delta

• 2004 National Conference of State Flex Programs
• June 16, 2004
• Block Slabach, CEO, Field Memorial Community
  Hospital
• Eric Shell, Principal, Stroudwater Associates

2
Agenda

• Delta Initiative Overview
• Rural Hospital Performance Improvement (RHPI)
  Project
• Approach and Methodology
• Sparta Community Hospital
• Case Study
• Summary and Discussion

3
Presentation Objectives

• Enumerate successful components of the rural
  hospital performance improvement project being
  conducted in the Mississippi Delta Region
• Through a case study presentation, describe how
  performance improvement specifically helped a
  rural hospital

4
Delta Initiative Overview

• Office of Rural Health Policy, HRSA, DHHS
  announcement to fund an initiative for rural
  areas of the Delta Region
• 3 years beginning September 2001
• Initiative to support hospital performance
  improvement
• 1 million contract to help small rural hospitals
  improve their operations and financial
  performance
• Delta Region
• Alabama, Arkansas, Illinois, Kentucky, Louisiana,
  Mississippi, Missouri Tennessee

5
Overview - Organizations
Jerry Coopey, Project Officer

DHHS/HRSA
Hartzell Cobbs, Contract Manager Christy Crosser,
Staff Lead Linda Powell, Staff
Terry Hill, Project Director Communications Staff
(new)
6
Overview - Project Goals

• Target rural hospitals in the Delta Region
• 122 eligible
• Three goals
• Hospital consultation
• Expert assistance to address targeted or
  comprehensive needs
• Develop link to tools
• Providing decision support resources that can be
  used internally
• Help build capacity through partnerships
• State Offices of Rural Health, Hospital
  Associations, Delta Regional Authority, other
  projects, peer support

7
Approach - Consultations

• Process
• Hospital expresses interest to RHPI or state
  partner
• Hospital completes two page application
• RHPI holds phone interview with CEO, staff, Board
  rep.
• State Partners provide recommendation
• Selection decision
• Target rural hospitals in the Delta Region
• 70 applications
• 53 participating (as of May 2004)
• Does not count hospitals using on-line tools

8
Approach - Consultations

• Comprehensive Performance Improvement
• Assesses
• Market/Service Area
• Clinical Services
• Reimbursement
• Expense Management
• Physician Practice Management
• Organizational Architecture
• Implementation assistance provided
• GE Workout process
• All measure employee satisfaction

• Targeted Consultation for Specific Need
• Examples
• Strategic planning,
• ED facility design,
• IT assessment,
• Customer service program,
• Facility consolidation.

9
Example Recommendations

• Clinical Services
• Swing Beds
• Increasing ancillary services (Lab, PT, X-Ray,
  etc.)
• Physician recruitment
• Financial/Reimbursement
• Hospital Designation (CAH or PPS)
• Cost Report
• Business Office
• Contracting Strategy/Charge Master
• Accuracy of Financial Information (interim
  payment rates)
• Financial/Expense
• Benchmarking
• Interim payment rates monitoring vs. actual
• Cost Report findings
• Business office opportunities
• Bad debt accounting and incentives
• Senior management team accountability and
  incentives

10
Example Recommendations

• Physician Practice Management
• Designation (Provider-Based, Rural Health Clinic,
  etc.)
• Productivity Benchmarking and Provider
  Compensation
• Charge Master
• EM Relativity
• Expenses and Staffing Ratios
• Organizational Architecture
• Level of Decision Making
• Compensation
• Performance Reporting

11
Approach - Balanced Scorecards

• FY 2002 - 2003
• Pilot project
• 2 Hospitals
• FY 2003 2004
• 5 additional hospitals in process of balanced
  scorecard implementation

12
Field Memorial Community Hospital

• Case Study

13
Field Memorial Community Hospital (FMCH)

• Approach and Methodology
• Conduct an intensive 2 day site visit
• Interview Administrator, CFO, Department
  Managers, Board members and Medical Staff
  representatives
• Gather and review pertinent market, clinical
  service line, operational and financial
  performance data
• Hospital inpatient and outpatient volume, revenue
  and expenses
• Clinic volume, productivity, revenue and expenses
• Hospital medical staff roster
• Fiscal Year 2002 cost report
• Historic financial statements
• Current year interim financial statements
• Develop report and recommendations
• Action Plan Development Workshop
• Implementation Plan Follow-Up Schedule

14
FMCH Market Overview
Majority of service area is within a 20 minute
drive of the facility (blue line)
Small portion of northern Louisiana is serviced
by FCMH
15
FMCH Market Overview

• Demographics

16
FMCH Market Overview

• Service Area
• Service Area estimated at 9,500
• Geographically situated full service hospitals
  coupled with the array of specialty physicians in
  those areas challenges FMCHs market growth
  potential
• Opportunities are present in swing bed and
  outpatient service utilization

17
FMCH Financial Overview

• Profitability analysis indicates improving
  financial position
• CAH Status effective 10/1/02 and higher State UPL
  income
• Liquidity decreased as a direct result of delays
  in RHC billing for physician services
• Cash, net of short term credit, has decreased
  from 215 to 60 on account of cash flow losses at
  RHC
• Priority to resolve RHC billing issues

18
FMCH Clinical Analysis

• Inpatient Services
• 30 decrease in acute patient days projected for
  FY03 (vs 2001)
• Increased outpatient management by physicians and
  more stringent admission criteria
• 43 increase in SB days projected for FY03 (vs
  2002)

19
FMCH Clinical Analysis

• Recommendations
• Set a goal to increase swing bed patient days by
  at least 2 (from 3 to 5)
• Total increment revenue for adding 2 swing beds
  equals 116.5K/year
• Devise a marketing plan to promote swing bed
  services
• Promote the swing bed program to the community,
  the patient/family transferred to a tertiary
  hospital
• Work with the physicians to promote the
  expectation of referral back to FMCH for
  post-acute care when transferred to a tertiary
  hospital
• Include face-to-face meetings with physicians and
  discharge planners of surrounding hospitals and
  acute rehab units to explain FMCHs swing bed
  program

20
FMCH Clinical Analysis

• Outpatient Services - Radiology
• Complete make vs. buy analysis on key diagnostic
  services including Mobile Ultrasound and Echo
  Cardiology
• Require that all charges are entered for services
  performed during a shift before staff can depart

21
FMCH Clinical Analysis

• Outpatient Services - Laboratory
• Discontinue Field Clinics use of reference lab
  for services that FMCH can provide
• Update chemistry analyzer (analyze lease vs
  purchase)

22
FMCH Clinical Analysis

• Outpatient Services Rehab Services
• Work with DON to assess needs and develop a
  strong inpatient Swing Bed program
• Offer community educational services regarding
  the benefits of therapy for situations other
  than Ortho and Neuro to encourage referrals from
  local physicians
• Hire COTA to assist the OT and PTA to assist PT

23
FMCH Clinical Analysis

• Physicians Services
• Population based measures indicated no physician
  recruitment opportunities

24
FMCH Financial Analysis

• Medicare Designation
• CAH designation election was based on the FY 2001
  cost report
• Analysis above reviews CAH benefit based on FY
  2002 cost report to ensure CAH election continues
  to be financially viable

25
FMCH Financial Analysis

• Business Office Functionality
• Establish a Financial Services Team that meets
  on a weekly basis to resolve billing office
  issues
• Begin a performance measurement system for the
  business office that at a minimum tracts
• Bad Debt Expense as a of Gross Revenue
• Contractual Allowance as a of Gross Revenue
• Days Net Revenue in Net Accounts Receivable
  (Gross A/R less Contractual Allowance reserve)
• Days Gross Unbilled Revenue in Gross Accounts
  Receivable
• Consider Productivity based compensation for
  business office
• Consider adopting a sliding fee schedule by using
  cost to benefit analysis

26
FMCH Financial Analysis

• Expense Analysis
• Based on benchmarks with peer hospitals, recent
  financial performance, and overall observations
  during the site visit, expense management is
  appropriately balanced with revenue generation
• Substantial opportunities to further reduce
  expenses are unlikely, although continued focus
  on expense management must be maintained

27
FMCH Practice Management

• Overview
• Four clinics all designated as a provider-based
  rural health clinic (RHC)
• Recommendations
• Clinic staff should maintain log for time
  allocation of physicians traveling between
  locations
• Consolidate practice locations for cost report
  purposes

28
FMCH Practice Management

• Example Recommendations (continued)
• Structure
• Consolidate the back end business office
  functions onsite at the hospital and pursue best
  practices in billing and collections
• Clinic responsibilities
• Collect co-payments at time of visit, every time
• Include common diagnosis codes on superbill for
  physician assignment
• Enter charges immediately and accurately at
  clinic site
• Cross reference of bills with scheduling system
  to ensure billing for all services
• Centralized functions
• Centralization of payment posting and remittance
  advice reviews
• Reporting on short pays and/or denials going back
  to clinic sites
• Analyze accounts receivable from date of billing
  by payer
• Use management reports to measure performance

29
FMCH Practice Management

• Example Recommendations (continued)
• Productivity
• Benchmark physician and NP productivity
  individually according to peer standards, as
  shown in the example below
• Complete time studies on patient waiting time and
  work with physicians to modify scheduling
  practices with goal of reducing waits

30
FMCH Org. Architecture

• Decision making and Responsibility
• Create accountabilities for performance at the
  departmental levels through use of budget to
  actual reports and regularly schedule meetings
  with CFO
• Compensation
• Consider enhancing variable pay methodologies for
  managers and staff that reward exceptional
  behavior
• Performance Reporting
• Increase use of department managers input in
  setting annual volume budgets for their
  departments
• Important to have department managers manage both
  volume and expense
• Create charts of key departmental performance
  indicators
• Indicators may include monthly charges,
  expenses, volume statistics, staffing to volume
  ratios, combined with clinical indicators etc.
• Monthly Board reporting package to add outpatient
  service element to increase accountability for
  growing these services

31
FMCH Workout/Action Planning

• Key Target Areas
• Swing Beds
• Interdisciplinary team-based programs that offer
  appropriate rehab services
• Goal to increase census
• Clinic Compensation
• Create allocation of cost by physician that is
  understandable to MDs
• Incentive Compensation/Department Manager
  Accountability
• Align incentives between performance and pay
• Ancillary Department Service Improvements
• Common scheduling system/policy that frees techs,
  increases availability, and addresses physician
  concerns
• Action plans developed for each target area
• Driver
• Date
• Measure of action plan completeness

32
Summary and Discussion