[David Joyce MD, MBA]

Another from Sabir,

“Wow, that was a lot of good information. As you’ve said before, none of it was even brought up during any part of training, and for that matter during signing contracts or the first few years of my job. You really have to go out and seek this information; very detrimental if we don’t know since this is what pays our bills, especially those never ending medical school loans.”

[David Joyce MD, MBA]

You bring up 2 things. The first is about negotiating. We will get to that in the last course of the program. But for now, when there is an asymmetry of information, bad results occur. Over the short term it may benefit one party, in this case the employer, but when information evens out in the long term and you realize you got the short end of the stick, a level of animosity and distrust develops. That is bad for business, bad for organizational morale, and bad for the patients. Unfortunately most hospital employers take advantage an asymmetry of reimbursement information. They create these reimbursement formulas that are complex. The contract you had an opportunity to review is from a local medical center. It was framed by a major healthcare consulting firm from Philadelphia. I am afraid, they will not help physicians obtain the knowledge needed to interpret its financial consequences.

The second issue is about measuring work. The RVU is a rough measure. I included in the presentation the quote about high and low RVU procedures not being a fair measure. Basing production strictly on RVUs can be problematic. I think using RVUs at the department level to create a reimbursement pool is good, but then a second formula needs to be developed at the provider level to take into account the actual work. You think CT scan is lower RVU/time, how about reading mammograms. That may be the lowest, but it still must be done to provide comprehensive radiology services to patients. Your department will succeed or fail as a group. If there is lack of engagement and low morale in portions of the department is will be difficult to succeed as a whole.

[David Joyce MD, MBA]

“Our hospital always says it is losing money. An impossibility in Maryland. The idea behind creating value and being paid foe value is to increase quality and decrease cost. This theoretically should attract more patients.”

Maryland is a special case.  In patient care is already paid under the preset budgeting system.  Here is the thing that many do not realize.  All care is not treated equally.  Highly profitable care is still a big bonus for all Maryland hospitals.  AAMC has always wanted cardio-thoracic because it supports their intervention cardiology which is highly profitable.  Most hospitals would like to increase their profitable service lines and decrease their non-profitable ones.  The revenue budget will be the same but their net income is better.  They always appeal for an increase in revenue budget, which has nothing to do with the net income.   Is cardio-thoracic viewed as a profit center?  That is the first question.

The rest of your question involves the evaluation of a new service line.  Rarely have I seen a business plan from a physician that properly supports your request for capital funding.  In general, requests usually take the form either a sidewalk conversation or a relatively quick pitch with leadership.  The capital request form at Hopkins is a one pager full of the “why we need” and nothing about “how much value”.  Business planning with 5 year projected budgets and Net Present Value assessments is key.  Is your new hire going to be profitable, and is so for who and how much?  Where is the value, and in what form?  You need a formal business plan.  The plan then needs to be presented to those who control money.  Try to sidestep those who want to sidetrack it for non-professional reasons.

The business plan begins with strategic planning ( PATIENT-CENTRIC MISSION) and ends with NPV.  This course will give you all the raw skills you need.  We do have a course that helps you use the skills to create a formal plan.  https://es4p.com/jandbuniversity/courses/finance-of-healthcare-business-planning-2-75-cme/

I would be happy to work with you outside the course.

 

 

 

 

• This reply was modified 5 years, 12 months ago by David Joyce MD, MBA.

[David Joyce MD, MBA]

Those, Aug and Sept,  are actually very good months to look at.  Let’s look at adjustments.  Those are the discounts from the charged amount that are calculated based on fee schedules for different payers.  The August charges is lower than Sept, but the adjustment amount is higher.  Usually payer mix is relatively consistent, why the much higher adjustment ratio for August?  Does this represent August charges or is this adjustment where the blending begins.

You observation is insightful as well.

The whole point is that in an accrual accounting system there is no blending across months.  Each column matches up based on the number of RVUs earned that month.  So sensible, yet rarely done.  Thing here is that is is not about the actual billing.  It is about the accounting that tell you how effective you billing and revenue cycle perform.

I suspect that there are no irregularities in the revenue cycle in this practice.  Thing is, you would never know it based on the reports you get.

Thanks Stephen

[David Joyce MD, MBA]

Thanks for the great insight into your organization.  You know I am always talking about transparency.  One of the problems with transparency is the level of knowledge of the people accessing the information.  When you have a staff that has little understanding  of financial statements, transparency could be problematic and create misunderstanding.  This is the case with most medical staffs.  I have sat side by side with faculty from Johns Hopkins and Georgetown and reviewed a P/L statement of which they had little understanding.  When the staff has some basic healthcare financial skill, an increased level of transparency could be a major bonus to the organization.

As far as decision making.  Generally an advisory board is composed of people outside the organization who oversee the CEO decisions.  Usually those are strategic decisions and not day to day financial decisions.  Another thing most of the time the board function is to stay out of the way of the CEO and just make sure things don’t go off the track.  By the time they do take control it is usually bad.  If a team of providers with financial skills, like you have now, is involved in the decision process all the better.  Be careful about CEO who convince you about the level of transparency but then exclude the true foundations of those decisions.

[David Joyce MD, MBA]

I was in a negotiation with the local hospital and they told me they did not track departmental level income statements.  I asked them how they follow the financial performance of any department and their reply was that they only collect those numbers organization wide.  Of course, I did not believe it, but that was the extent they were willing to go to avoid transparency.  Why?  If you are in a department that is losing money it would be an important motivating factor for those working there.  If their is a highly profitable department, they may have some best practices they can share.  We all know that some departments provide services that may never turn a profit.  But let’s not forget that there is a lot of brain power among those providers, and improving profitability or even becoming less non-profitable could be a goal, .  Who knows what innovative solutions could arise?  Hiding the information results in the exact scenario you describe, getting blindsided and who does that help.  Simple answer, noone.

[David Joyce MD, MBA]

Barbara

I wonder how you would characterize the efficiency of their collections?  What metric or data point would you focus on to track it.  In the next course you will learn about run charts and normal vs special variation.  The object would be to have a value that measures collection efficiency, track that each month in a run chart, and then determine over time is a trend was developing of if a particular month represented special variation.  In the next progress report I have an impressive story about tracking revenue that I heard about just a couple of days ago.

[David Joyce MD, MBA]

“Another issue in many institutions I have worked with is that there are many barriers to getting the proper financial statements in a granular form.”

I find this interesting because you are actually earning the revenue that appears on the income statement.  There are a millions reasons I would want you to take ownership of that revenue production.  I do think it is another example of organizational ambiguous behavior.  Admin keeps it secret, despite the fact that it could improve productivity.  Reality is a much stronger motivator than perception.  They also may not want to share information that you could not understand and would be quick to create false assumptions.

Bottom line, a critical mass of providers have the financial skills to interpret the financial statements and make informed financial decisions.  The day that happens is the day transparency becomes the norm.  It is easy to make it hard to get info for 1 or 2 physicians.  Not so easy for the whole department.  Impossible for the whole hospital.

[David Joyce MD, MBA]

Thanks for the comment Banda.

First thing you do is recognize the arbitrary nature of charges.  In reality it does not matter what the charge is as long as you do not use that as a standard for self pay.  You know you will never get paid the “charged” rate, but it could show up on a self pay because they have no built in discounts.   Don’t forget to adjust your self pay to what you think is fair to collect, let’s say the Carefirst rate.  You must still charge the same but set a goal on the self pay as your collectible for the A/R and use your collections to get to that goal.

All attention should be on what we call “collectibles” or “allowables”.  That is your charged rate minus the discount for each payer.  Your fee schedules are loaded into the billing system, one of the benefits of computers and of course they are great at teaching financial statements if you have the right instructors!  If your A/R is based on collectibles it should be a firm target, and all efforts should be made to collect every cent.  Your collections/collectibles should be close to 100%.

Now all of a sudden you are not writing off so much “bad debt” because your accounting system is grounded in reality and you don’t go to sleep every night worried about uncollected revenue driving you crazy.

And that is what accounting is all about.  Presenting the truth and the whole truth in a statement that is simple and correct and not requiring an army of accountants to interpret.

[David Joyce MD, MBA]

The big horror story was the purchase of a multimillion dollars therapeutic machine at the same medical center.  The purchase was the idea of a senior physician who had a great deal of pull with decision makers.  The machine was cutting edge, but had a very specific use.  Two years after the purchase that physician left to work for the competition.  The next two years the machine was rarely used.  Four years after purchase they pulled the machine out to make space for another machine that was used for a workhorse for the department.  Tell me that there was a business plan for that project.  If there was then whoever wrote up the projections is out selling ocean front property in Arizona.

[David Joyce MD, MBA]

Rob, well done.  When those who do the work and produce the revenue begin to engage in the financial results, financial statements, of that same work it puts pressure on the administrators, none of who produce revenue for the hospital, to become more transparent.  I would like to take the credit  for awakening the attention it took for you to critically review the financial statements and have the confidence to ask an intelligent question on what you found.  Imagine if a dozen of your colleagues were as engaged with the same level of knowledge as you possess.  The next meeting might be quite different.  Financial decision making should be a shared responsibility.  The informed voice of front line physicians need to be included.  When that happens, lookout, all of our lives will get better.

You get a gold stethoscope.

[David Joyce MD, MBA]

Great comment Rob.  The way financial information in handled in your organization is very typical of the way most hospitals do things.  Just think about it in a business sense.  You are employed by the hospital.  You produce revenue for the hospital both through fees collected for your work and downstream revenue based on care given.  You are an expense as well.  You have no idea if you are profitable to your employer.  You are suggesting the employer has no idea if you are profitable to them.  Resources are allocated to you so that you can care for your patients.  These are a few of the business statements about what is going on when you go to work every day and they are pivitable to your ability to work successfully and sustainably.  Transparency issue?  My kids remind me of my lecturing habits when they were growing up.  I apologize up front but I can’t resist.  Successful organizations understand the value of every employee,  work hard to improve that value, and make sure the employee themselves are aware of it.  When the employee understands their value, they use that understanding as a focus of improvement, and increase their engagement in their work.  It is kind of like the golden rule of business.  OK, end of lecture!

[David Joyce MD, MBA]

Great point Clement ” If so, there are many cpt with 0 rvu.  So for me, it does not help much or give any additional info.”  Collecting data on work metrics that are meaningful is key.  Why waste your time collecting meaningless data points.  This financial statement is a mess, but it represents a company revenues of close to $2.5 million.  Figure that!

[David Joyce MD, MBA]

Great comment Katelin from someone in the front line.  I wanted to respond to hospital employment shielding a provider from any of the business end of their practice, especially finance.  Financial decisions are being made daily that affect that providers ability to care for the next patient that comes through the door.  Allocation of resources starts with the budget and is supported by volume of patients seen, the profitability of each of those patient visits, and the amount of resources it takes to provide that care.  “Do more with less” begins and ends with a provider checking out of those decisions and outsourcing that activity to someone who has never seen a patient in their lives and has no real idea as to what is required.  The only reason to check out is because you don’t have the knowledge.  As a physician when I do not have the knowledge about a condition or procedure that I need to provide, what do I do?  I go out and get it and improve on my existing knowledge.  No different here, you are learning the language of finance and how to communicate.  That will get you a place in the decision making.  Imagine if every provider even had that level of understanding.

[David Joyce MD, MBA]

Katelin, that is the first thing that jumped out at me as well.  Accounting is supposed to help you make actionable decision based on financial information.  How can you have confidence in the accounting that tells you the smallest payment showed up in one of the highest harge months.  There may be more than one reason for this but sorting through the possibilities is not what a good accounting system is supposed to deliver.

You took the extra effort to enlist people to help you understand what the numbers represent.  What do you think the role is of the front line provider in having access to financial information and then participating in the decision making?  Would it be useful for them to take a course like “Practical Tools”?

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