HFMA Session: Achieving Transformation and Dramatic

Results Through Benchmarking

Melissa Johnson, CFO, Baptist Medical Center South

Samantha Platzke, CFO, Care Logistics

A Baptist Medical Center South Case Study

Are hospital CFOs measuring the right things?

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We often focus first on lagging indicators:

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But what levers really control them?

• Operating margin • Net margin • Days cash on hand • Days in A/R • Expenses

The new world for hospital financial

leaders requires new thinking

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H&HN: “It’s a significant time for financial executives. It’s not just looking at your history and assuming that’s what will be your future.”

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Sept 9,

2104

Question: What do you consider the top 5 critical responsibilities of today’s hospital CFO?

The Challenges Today Are Clear

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• Record Low Revenue Growth

• Credit Upgrades Decline

• Credit Downgrades Increase

• Expenses Outpace Revenues

October 16, 2104

Becker’s: “Hospitals are having difficulty identifying ways to decrease expenses, having already picked much of the low-hanging fruit.”

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Hospitals must manage costs through better and

more efficient operations, not further cuts.

Leading indicators of care efficiency predict performance:

• ALOS • CMI

• O/E ratios • ED flow • Denials

• Utilization

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Where to Focus? What to Measure?

What if the right system—people, processes and technology—would let you set and measure in

real time leading operational metrics?

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Foundation for Benchmarking

What if you could define your current state and the

right benchmarks, and ensure a path to the desired future state?

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Setting Appropriate Goals

What if you could take action today that will drive, measure and predict the success in metrics that matter

most to your hospital?

How Baptist Medical Center South made

benchmarking a foundation for successful

transformation

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You Can, and Here’s How

“Patients First, Compassionate Care, Pursuing Perfection”

Transformation Success: • LOS: 4.2 to 3.8 • CMI: 1.63 to 1.83 • LWOT: 8.14 to 1.25% • Added annual capacity of

1,600 beds • Readmission rate: 10.5%

Baptist Medical Center South Snapshot

• Founded in 1963 • 514 licensed beds (454 acute, 60 psych) • Flagship tertiary care hospital for system • Level 2 trauma service • Regional referral center for cardiac and

stroke care • Teaching facility with two primary care

residency programs

• Establish standard of excellence and compare performance with that standard

• Set quantitative measures

• Benchmarking theory: Compare performance, identify gaps and change management processes to address them

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Defining Benchmarking

Healthcare institution must apply this discipline to reduce expenses and simultaneously improve product

and service quality

Pursuing Perfection: Benefits of Benchmarking

• Understand strengths and weaknesses • Realize what levels of performance and

improvement are possible • Compete better by stimulating continuous

improvement—get and stay exceptional • Better satisfy customer needs: Quality, cost, product

and service • Promote better quality, productivity and efficiency,

which drive innovation and competitiveness • Cost effective way to pool and apply innovative

ideas

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BMCS Benchmarking: Kickoff

Objectives for deployment and kickoff at BMCS:

1. What is the current condition (Where are we)?

2. What is the desired condition (Where do we want to go)?

3. Prioritize needs—focus on the breakthrough objectives.

4. Create the plan to achieve objectives (Executive A3).

5. Deploy the plan, with a deployment leader to oversee each key strategy.

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• Defined areas to benchmark • Quantified current state metric for each area • Budgeted specific improvements for FY 2015 • Identified Baptist Health System liaison for each area • Identified internal, industry and other sources of benchmarking data • Determined level of information needed to enable continuous

improvement with peer comparisons: – High Level: Hospital wide metric – Medium Level: Division wide metric – Detailed Level: Department metric – Specific Level: Job-level metric

• Set plans for benchmarking process by area – Resources required – Timeframe – Milestones

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How BMCS Set Effective Benchmarks

• Compares performance, identifies gaps and changes processes to improve

• Uses people, process and technology to improve data quality while making it easier to obtain

• Applies “production” principles and tools to take fast, effective actions that improve performance

• Created and uses meaningful benchmarking scorecards to comprehensively track performance and gains

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How BMCS Uses Data to Continuously Improve

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Cascading Scorecard Strategic Pillar Weight Criteria

Meets = At or under budget score =5%

Does not Meet = Above budget score =0%

Exceeds = 100% or above score =5%

Meets = 98 – 99% score=4%

Does not Meet = less than 98% score =0%

To Meet Goal: score = 5%

Clinical – meets productivity w/OT 3% or less

Non-clinical – meets productivity w/OT 1.5% or less

=> Budgeted Volume score = 5%

=>97% and < 100% Budgeted Volume score = 4%

< 97% of budgeted volume score = 0%

Patient Satisfaction

Hospital Exceeds => 90

th percentile score = 10%

(Overall Hospital) Meets = 75th – 89

th percentile score = 7.5%

Does not Meet < 75th percentile score = 0%

Patient Satisfaction

Department Exceeds => Dept. 90

th percentile score = 10%

Meets = Dept. 75th – 89

th percentile score = 7.5%

Does not Meet < 75th percentile score = 0%

Exceeds = Engagement => 40% score = 12%

Meets = Engagement =>32% AND Increased 1% or > score = 8%

Meets = Engagement =>32% NOT Increased by 1% score = 6%

Meets = Engagement => 22% AND Increased by 3% score = 3%

Does Not Meet = Engagement < 22% score = 0%

Rating of “A” or “B” score = 8%

Rating of “C” or “D” score = 0%

Meets = turnover <= 13% & RN<=20% score = 7%

Meets = Turnover <= 13% & RN>20% score = 4%

Does not Meet = turnover > 13% score = 0%

Engagement – 30%

Quality & Safety – 20%

Patient Experience – 20%

12%

10%

10%

10%

Team Member

Survey

Engagement

8%Leader Talent

Assessment

3%Leadership

Standard Work

10%

7%

Turnover

All Dept <= 13% &

RN <=20%

SMART Audits

Stewardship & Growth –

20%

Care Coordination10%Care Coordination - 10%

*If no dept.score,

Hospital = 20%

Productivity

Dept. specific

indicator

Growth5%

Overtime 5%

5%Total expense per

critical stat

5%

Completes scorecard for leadership Standard work: % of weeks

completed X 3%

Measurement

Applies to specific departments noted in template instructions. If dept. is not

designated for growth target then the weight for Total Expense per critical stat

is increased to 10%.

Security & Engineering – meets productivity w/OT 2% or less

Applies to departments that have Care Coordination related metric as noted

in template instructions. If department does not have this metric, each of the

Quality & Safety Criteria will have a weight of 15%.

Meets / Does not Meet as determined by dept. goal

Meets / Does not Meet as determined by dept. goal

Performs SMART Audits: 32 weeks/year meets; <32 does not meet

Talent Management Eye Chart (top down)

Leader Name PMEC TMEC

Indicator PMT Indicator PMT Indicator DOR Indicator HCAHPS Indicator see below Indicator HR report Indicator M7 35.64% 54.1% / B+

Target 100% Target 3% Target 293.31 Target 75% Target ********* Target < 13% Target 120 min

Actual 89.76% Actual 10.40% Actual 266.93 Actual 67.00% Actual ********* Actual YTD 52.38 Actual 2.5

Indicator PMT Indicator PMT Indicator DOR Indicator HCAHPS Indicator see below Indicator HR reprt Indicator M2

Target 100% Target 3% Target 593.39 Target 75% Target ********* Target < 13% Target 60 min

Actual 99.76% Actual 4.90% Actual 559.56 Actual 79% Actual ********* Actual YTD 32.47 Actual 1.46

Indicator PMT Indicator PMT Indicator DOR Indicator HCAHPS Indicator see below Indicator HR report Indicator M2 / M7

Target 100% Target 3% Target 276.86 Target 75% Target ********* Target < 13% Target 1.0 / 2.0

Actual 76.27% Actual 13.79% Actual 486.19 Actual 79% Actual ********* Actual YTD 38.04 Actual 1.57 / 2.48

J. Heston / Ortho

J. Heston / MICU

J. Heston / 5 SW

LEADERSHIP

Productivity

Weight ______

Overtime

Weight______

Exp. Per Critical Stat

Weight______

HCAHPS

Weight______

Quality/Safety

Indicators

Weight ______

BAPTIST MEDICAL CENTER SOUTH

MONTHLY LEADERSHIP SCORECARD

FY 2014 - May 2014

Care Coordination

Weight______

CARE COORDINATION

Employee Turnover %

Weight______

EFFICIENCY & GROWTH PATIENT EXPERIENCE QUALITY & SAFETY ENGAGEMENT

Entity Level Strategy Pillars & KPI’s (established annually) Individual Leader

Performance Criteria

(established annually)

Department/Leader Scorecard

(updated monthly)

Department Pillar Board

(updated monthly)

Pillar KPI’s & Process Measures (Updated Monthly)

Where Benchmarking Already Existed

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Stra

tegi

c Th

em

e

Quality & Patient Safety

Engagement

Patient Experience

Core Measures

Value Based Purchasing

Employee Engagement Survey Benchmarking

Associate Retention

Patient Experience Survey & HCAPS Benchmarking

Financial Statement View for

Operations Improvement

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Levers Sublevers

Denials

Clinical Documentation

Patient Statusing

Utilization:

Diagnostics

Pharmacy

Level of Care

LOS

Psych, ED, OBS, Acute

Care

Coordination/

Revenue Cycle

Care

Coordination/

Clinical

Levers Sublevers

Revenue

Cycle/Charge

Capture

Late Charges

DNFB

AR Days

Productivity Index

Overtime Hrs as % of Total

Hrs

Labor Exp. As % of Total

Oper. Exp.

OR Supply Cost per Case

Cath Lab Supply Cost per

Case

Productivity

Supply Chain

Car

e C

oo

rdin

atio

n

Ste

war

dsh

ip &

Gro

wth

Financial Statement View for

Operations Improvement

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Identified

Benchmark GAP

Recommended

FY 2015 Target

Budgeted FY

2015

Denials $ 1,827,860 $ 913,930 $ -

Clinical Documentation $ 1,500,000 $ 1,500,000 $ 1,500,000

Patient Statusing $ 1,667,858 $ 833,929 $ -

LOS $ 7,343,913 $ 3,857,295 $ -

Facility Metrics: $ 900,000 $ 900,000 $ 900,000

OR Supply Cost/Case $ 2,500,000 $ 2,500,000 $ 2,500,000

TOTAL $ 15,739,632 $ 10,505,155 $ 4,900,000

Care Coordination/

Revenue Cycle

Care Coordination/

Clinical

Productivity

Supply Chain

Benchmarking Prioritizes Projects and Resources

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Prioritize using sequencing and planned use of limited resources to focus and align resources and obtain greater benefits quicker.

BMCS Tied Priorities to Financial Targets

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Rev Cycle

Utilization

Productivity

Denials

Patient Status

ED LOS

Supply Chain

Psych LOS

Acute LOS

Clin Doc

Prioritize & Plan

JuneJuly

TBD

TBD

$0.9M

$0.9

$1.8M

$1.2M

$2.5M

Dec Jan Feb Mar Apr MayAug Sept Oct Nov

$0.4M

$2.2M

$1.5M

• It’s a bold new world for CFOs

• Your role directs future success more than ever

• You have the power to help lead your hospital to the next level of performance

• Transformation is not elusive

• Improve performance through operations, not cost cutting

• The right people, processes and technology provide the benchmarks that measure and predict financial performance.

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Taking Action Now