Attacking the Cost Structure with a Lean Team - Aaron Crane

45 Pages·2014·1.61 MB·English

by  Information Services

Attacking the Cost Structure
with A Lean Team
Aaron Crane, CFO
Salem Health
Oregon Chapter, HFMA
February 19, 2014
Objectives:
• Present the Four Step Problem Solving Model
• Introduce A3 Thinking
• Demonstrate the use of these lean tools at Salem
Health
• Review the waste wheel
• Share an example of
– Collaborative problem solving
– Addressing the financial challenges ahead
– Business case analysis
– Standard work
USING A LEAN APPROACH TO
PROBLEM SOLVING
The Scientific Method
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PDCA Process
 Plan
 Hypothesis (strategy, action plan, proposal)

 Do
 Start with a pilot if possible.
 “Do” contains its own PDCA cycle.

 Check/confirm the results
 Goal achieved?

 Adjust
 If you succeeded, standardize
 If not, adjust your hypothesis
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The Four-Step Improvement Process
Step 4: Confirm Step 1: Investigate
Countermeasures Concern
P
A
D
C
Step 3: Test for Step 2: Look
Cause & Effect for Cause
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Do I have a problem?
SALEM HEALTH FINANCIAL
PERFORMANCE STRATEGY
Telling Stories with A3s
• Purpose: Gain a shared understanding of a critical
issue in order to solve problems and get results.
– Intuitive Flow: Top left to bottom right
– 1 page story board on 11 x 17 paper
– Clear concise story with pictures and few words
• Left side: Do we have a problem? What should be
happening and what is our gap? What is our history?
What do we need to do? How will these actions help?
• Right side: What is our action plan? Are there any
unresolved issues? Any additional resources required?
Source: Dennis, P, Getting the Right Things Done, Lean Enterprise Institute, Oct 2009
Theme: Fiscal Sustainability over the next 5 years
Focus: Financial Performance SD Leader: Aaron Crane
Last Year's Results/This Year's Targets/Mid-term Targets This Year's Action Plan
Operating EBIDA % Goals Tactics Schedule
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
0.14 Revenue Cycle Improvement Project: Target - $65 million over 5 Years
0.12 Clinical Documentation Continue established process, expand
0.1 Cumulative$200 to new clinical pathways.
million Gap Font-End Rev Cycle Engage Access, clinical staff and MD's,
0.08 Our revenues over the past 5 years have grownat a rate of 1.2% care mgmt, community relations
0.06 Expenses have grown at more than 3% before extreme measures Middle Rev Cycle Convert to insurance coverage, improve
have been taken during those years. Extreme measures will estimation and collection work flow
0.04 continue to be required abscent some other change in how we Back-End Rev Cycle Implement Contract Management
0.02 system
0 Technology Implementation Compare estimate to actual, eliminate
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 denials
Operating EBIDA Margin Operating EBIDA Target
Variation in Care: Target $35 million over 5 years
Evaluate governance structure Engage ELC and QOC overiste with legal
Problem Statement:We have a growing gap between revenue and expense leading to an unsustainable
operating EBIDA with a gap of $200 million over the next 5 years threatening the long-term stability of Identify tafrget areas CMO, Finance team, care management
Salem Health. Complete work Physicians and above with KPO
Reflection on Last Year's Activities Growth Infrastructure: Target - $35 million over 5 years.
Activity Rating Key Results/Issues Define Scope Finance, service line leaders, Strategy,
Surgery Scheduling: Target $1.1 Million Red Optimistic, dependent on external forces Develop plan Network Develop., marketing, IT, ELC
Clinical Documentation: Target - $1.2 million Green Exceeded target by $1.1 million Develop and execute opportunities Finance, operations, strategy
Growth: Bariatrics, Orthopedics, Cardiology Red Dependent on external forces
Green Est value analysis team Continuous Improvement: Target $65 million over 5 years.
Supply Chain Services: Target $4.5 million
Significant teamwork led to success Identify non value added work finance, directors, ELC
Variation in Care: Target $4.8 million Green Physicians very engaged. Huge opportunity Tests of Change Same group
70% of departments more than 5% off budget. Complete roll-out plan Same group
Budget Process Red
Heroic measures required 4 of 5 years Implement change, measure, C & A Same group, expanded participation
Use lean tools to elim $3 m waste KPO, Finance, Operations
Analysis/Justification to This Year's Activities
Our reflections above suggest that our moderate success is not enough to overcome the $200 million ga
Hypothesis: Elevating Cost Management Effectiveness
1. If wefocus on revenue cycle improvement, we will achieve $65 million in increased net revenue Four step problem solving
over the next 5 years. (Rev Cycle Team, IS) Identify Opportunities Same group as above with
2. If we reorganize to make Variation in Care a priority, we will achieve $35 million in cost Charter Resources define standard work Information Services
improvement over the next 5 years. (Finance. Physicians, Care Mgmt) Take action - check and adjust
3. If we implement the infrastructurethat supports growth, net revenue will grow by $35 million over
Follow-up/Unresolved Issues
5 years. (Strategy, Service Lines, Finance, IS)
4. if we focus management on continuous improvement and value added business outcomes, we will 1. Southwind impact analyis of case mix shift over the next 10 years. (Increasing percentage of Medical Cases)
2. Tactics to excel under pay for performance, gain sharing or shared savings contracts
achieve the required business results of $65 million in cost improvement over the next 5 years.
3. Identification of resources within the strategic planning function to support growth hypothesis
(Organization wide with tests of change)
5. If we understand industry benchmarks and best practices, we will be able to develop sustainable
continuous improvement targets. (Finance, ELC, Director Reps, IS)