the strategic benefits of revenue cycle improvement

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What distinguishes high-performing healthcare organizations is an ability to learn from their experiences, and to apply those lessons in positioning themselves strategically.

Capturing financial performance gains and new knowledge acquired

through performance improvement are key capabilities of highperforming organizations. What further distinguishes these organizations is what they do with what they have gained and what they have learned. High-performing organizations know how to leverage their resources and knowledge to better position themselves strategically for long-term success.

Comprehensively redesigning your organization's revenue cycle to achieve and sustain peak performance is one place to begin. Several healthcare organizations that have implemented such an effort have found that they accomplished more than simply near-term financial and operational improvement. They also achieved the financial gains and learning necessary to invest in and help continue to support long-term strategic success.

Leveraging Gains and Learning

Even if they are already achieving strong performance, some organizations seek to further improve their strategic position by embarking on a comprehensive redesign of their revenue cycle. The focus is to simplify and improve the work environment to enhance patient service, improve staff performance and satisfaction, and achieve financial improvements. Typical benefits outcomes include:

* An empowered, more satisfied staff, and a work environment in which:

-All processing of information and management of patients can be defined as proactive, accountable, timely, and effective, greatly reducing losses (such as write-offs, denials, etc.) associated with reactive and exception processing

-Better relations and teamwork exist between all departments and individuals as well as between the provider and payers

-Improved satisfaction leads to greater staff stability and reduced turnover and training cost

* A high-performance, continuous learning culture that maintains performance improvements year after year, for many years into the future

* A recurring annual income (profit-and-loss) improvement equal to 2 percent to 4, percent of net annual patient revenue leading to:

-An overall cash benefit of $50 million to $100 million or more

-More favorable bond ratings and financial terms resulting in a lower cost of money

-A level of financial performance stability that allows the organization to avoid staff reductions and other cost-cutting measures in response to market pressures and to move forward in confidence with strategic investments in training and development, technology, and program and plant expansion

Although the financial gains and learning acquired from process improvement are significant in and of themselves, what distinguishes high-performing organizations is what they do with these results. Organizations that have gotten the greatest value from comprehensively redesigning their revenue cycles understand that the process is really a means to a greater end. They recognize that the true value of putting into place a peak-performing revenue cycle lies in applying what they have gained and learned to achieve strategic success for their organizations. New York-Presbyterian in New York City, and Baylor Health Care System, with headquarters in Dallas, are two organizations that are doing just that.

New York-Presbyterian

New York-Presbyterian had already made substantial improvements in revenue collection when it decided to comprehensively reengineer revenue cycle processes at both its Cornell and Presbyterian hospital campuses during 2001-02. The overall initiative resulted in more than $50 million in annually recurring income statement benefit and $90 million in balance sheet improvement. According to Robert Kelly, MD, senior vice president and COO, Columbia Presbyterian Medical Center, the organization is using these financial gains to help achieve its long-term strategic goals.

"A few years ago, our organization set a goal to be one of the top five hospitals in the country," he said. "It's well and good to say you want to do that, but then how do you actually go about accomplishing it?"

To reach its goal, New York-Presbyterian put into place an eight-year strategic plan that focuses on recruiting physicians, building infrastructure, and purchasing technology. The plan has a $1.8 billion price tag. The organization's board is raising $1 billion, and the other $800 million is coming from hospital operations-including the ability to take the organization's improved bottom line and turn it into accomplishing the capital plan. According to Kelly, by redesigning and improving the performance of its revenue cycle, New York-Presbyterian has been able to increase its revenue, grow its business, drop more to the bottom line, and invest in capital projects.

"Over the past fewyears, we moved up from thirteenth to seventh overall on the U.S. News and World Report hospital honor roll," he said. "We also ranked seventh in cardiac services. We invested in five new cardiac catheterization labs and acquired a large cardiology group that totaled 85 people, which has quintupled our cath lab volume. We are now building two additional cath labs and have plans for five more on the drawing board. The new cardiology group, and the technology we now are putting in place to support their work, should help put us near the top of the list.

"New York is a very competitive marketplace," Kelly said, "and there are many academic medical centers here. As opposed to most cities, where there are one or two, New York City has six. We're the only academic medical center that appears on the U.S. News and World Report hospital honor roll. While that distinction is not the only measure of our success, we have found it easier to recruit physicians to our hospital than we did four or five years ago."

According to Kelly, recruiting personnel also has become easier across the board. "I meet with new nurses and say to them, 'You can go to any hospital in the city. Why did you come here?' Universally, they say, 'We think this is the best hospital.' Our vacancy rates are extremely low. That tells me that people are voting with their feet to come work here."

Clearly, for New York-Presbyterian, comprehensively redesigning its revenue cycle not only helped the organization improve performance in the near term, but also helped provide a springboard to long-term strategic success. The organization has been able to build on the financial gains and knowledge acquired through revenue cycle performance improvement to help attract key clinical personnel to expand strategic programs and further distinguish the organization locally and nationally. New York-Presbyterian also has been able to retain personnel in a competitive market through meeting the needs of a diverse work force by providing a work environment focused on efficiency, continuous learning, and performance improvement.

New York-Presbyterian continues to leverage its revenue cycle gains by investing in patient care and service excellence training organizationwide. And this significant investment of time, energy, and dollars to increase its performance and service levels already is beginning to pay off.

"Our patient satisfaction numbers are going up," Kelly said, "which tells us that we are making progress toward our goal of positioning New York-Presbyterian as the place where people want to come to work and be cared for."

Baylor Health Care System

Recognized throughout the healthcare industry as a high-performing organization, Baylor knew its revenue cycle performance was strong. However, the organization believed it could redesign and further improve the performance of its revenue cycle to help achieve specific long-term strategic objectives.

"To be successful in the marketplace of the future, any hospital is going to have to redesign its processes to ensure it is providing high-quality care," said Lydia Jumonville, CFO at Baylor. "Information about care and service quality is going to become much more transparent to consumers, and they are going to decide where to go and get their care based on this information. I also believe that reimbursement for care is going to be decided based on this information and that reimbursement overall will continue to decline. These are probably among the biggest changes that are going to take place in our industry over the next decade. Healthcare systems that proactively look at ways to streamline their administrative and care delivery processes to become more efficient and patient-friendly are going to be better positioned to handle these changes in the future. Essentially, the cost savings and revenue enhancement opportunities provide Baylor with the ability to focus on reducing the variation in care and operational practices while aligning clinical best practices across the organization.

"We wanted to fine-tune and achieve additional savings from our revenue cycle so that we could use the cash flow and operational improvements to help fund and facilitate our clinical transformation initiative," she said. According to Jumonville, the goal of this seven-year initiative is to create the ideal experience for patients, their families, and the physicians and other caregivers across Baylor. Creating the "ideal patient experience" is accomplished through the strategic definition and tactical planning Baylor has done around creating the best place to give and receive care across the communities Baylor serves. That means that whether patients go to Baylor University Medical Center in Dallas or to the system's smallest rural hospital, they can expect to be taken care of in an environment focused on the provision of safe, timely, effective, efficient, equitable, patient-centered care throughout the system.

"Baylor's administrative processes are more standardized and centralized than most healthcare systems around the country," she said. "But on the medical staff and clinical side, Baylor had not evolved to this system approach. Our organization had continued with facility-based leadership and management practices. We have recognized the need to have medical and clinical leadership and management reflect the system-oriented approach we gained through our revenue cycle success and are moving in that direction to support our strong physician and organizational culture."

"We started our revenue cycle and clinical transformation efforts at about the same time, knowing that our clinical transformation process would extend many years beyond our revenue cycle project," said Fred Savelsbergh, vice president of hospital finance, and an executive sponsor of the clinical transformation access management team, one of 10 areas of focus in Baylor's clinical transformation initiative. "We knew that we would be able to use the tools, technology, process improvements, increased accountability for performance, and cultural transformation that we expected to gain from our revenue cycle improvement effort as a platform to build on for clinical transformation."

Learning and resources gained from Baylor's revenue cycle improvement effort are being applied to several aspects of Baylor's clinical transformation initiative. Examples include increasing speed to care and reducing duplication of patient data collection, both part of Baylor's defined "ideal patient experience."

"Speed to care is all about getting patients to their caregivers as quickly as possible," Savelsbergh said. "That requires us to have in place underlying tools and business processes, such as preregistration and insurance verification, so that wherever patients enter our system-through a hospital, physician office, surgery center or other location-we will be able to ask them for a minimal amount of information that will allow us to verify existing data we already have about them. That way we can get patients to their care provider as quickly as possible so they can get the level of care they deserve as a Baylor patient."

Resources to help Baylor accomplish this timeliness and patient-centeredness goal include development of an expanded master patient database and use of hand-held computers that will enable patients to easily verify information already in Baylor's existing information system. Upon registration for care, patients will no longer have to fill out multiple forms, allowing them to quickly move on to the care setting. Baylor estimates that what used to be a i5-to-20-minute registration process for patients will be reduced to one to two minutes.

"This approach builds on knowledge of technology and work processes that we acquired through our revenue cycle project and then further enhanced to help us meet our clinical transformation patient access goals," Savelsbergh said. "The underlying assumption is that patients should be able to enter our continuum of care at the right point with the right level of resources and then experience their care as efficiently as possible in a safe, patient-friendly environment that delivers quality care."

By leveraging the lessons learned from the revenue cycle transformation activities, Baylor is enacting the cultural transformation necessary to support implementation of standardized clinical and business practices. These best practices will be further supported and measured through the thoughtful design and implementation of standardized tools and technologies across the organization. Each clinical transformation team began by assessing the current processes used throughout the Baylor system in its area of focus, such as patient access or medication management. Taking the current best practices identified, and opportunities for improvement, each team designed the ideal process from the patient's and caregiver's perspectives. Two years into the sevenyear plan, teams are working to implement the ideal standard practices using current tools and technologies while designing to a new technical standard to be implemented in the latter half of the strategic timeframe. Also, Baylor learned that the leadership at all levels of the clinical transformation initiative, from executive and medical staff to individual work teams, must come from within the Baylor organization.

"Overall what we learned through our revenue cycle work that we are now applying in our clinical transformation efforts is that we must take a system-oriented, patient-centered approach to the development of best practice business and clinical processes and support those activities with the implementation of technologies that allow us to measure performance. This approach will allow us to ensure that we meet our expectation of business and clinical integration, driving the sustainability of both solutions to better serve our patient communities," Jumonville said.

Seizing Opportunities

New York-Presbyterian, Baylor, and other leading healthcare organizations understand that being a leader involves more than just setting goals. It requires having a vision of where your organization wants to go and developing specific strategies and plans to get there, while leveraging to best advantage what your organization has gained and learned along the way. Organizations that have comprehensively redesigned their revenue cycle to sustain peak performance are recognizing that the value of the effort goes far beyond near-term financial and operational improvement. Such organizations are adept at identifying the strategic opportunities that an improved cash position can facilitate, building on improved revenue cycle processes to support key organizational strategies, using revenue cycle "wins" to instill a culture of learning in the organization, and ultimately viewing the revenue cycle not as an isolated entity but as interwoven with other strategically significant organizational functions. The true worth of achieving a peakperforming revenue cycle is fully realized only when it is utilized as an engine that drives both the ongoing revenue and process improvement know-how healthcare organizations need to help achieve strategic success.

SIDEBAR

AT A GLANCE

Leveraging revenue cycle financial and process improvements can result in a variety of benefits, including:

* A continuous learning culture that maintains performance improvements over the long term

* Ability to attract and retain key personnel

* Resources to invest in employee education and training

* Expansion of strategic programs

SIDEBAR

COMMON CHARACTERISTICS OF HIGH-PERFORMING

ORGANIZATIONS

High-performing organizations have several things in common that contribute to their success. However, a key characteristic these organizations all share is that they know where they are going. They have a compelling shared vision supported by a strong strategy that turns vision into reality. According to Richard Barton, process improvement and quality management executive, IBM, they also engage in several essential practices that enable and help sustain high performance.

Among them are:

* Investment in learning and skills development

* Investments that make a significant contribution to the bottom line

* Cultivation of change through data-based and business-case decision making

* A plan to become a learning organization through the capture, storage, and

distribution of intelligent insights as they occur, for later, easy access (www.apo-tokyo.org/productivity/010_prod.htm)

How do you know whether your organization is achieving strategic success?

Ask yourself these questions:

* How does our organization define strategic success?

* What key challenges or opportunities must we address to get there?

* What financial and other resources do we need to achieve our strategic goals?

* Are we a "learning organization"? How do we apply what we have learned?

* How can we generate and leverage the resources and knowledge we need to help our organization achieve strategic success?

SIDEBAR

LEARN MORE THIS FALL

HFMA's 2005 Fall Seminar Series features 12 seminars on revenue cycle issues. To register for a seminar, goto www.hfma.org/education/fall/fsshome2.htm.

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About the author

Dale R. Stockamp is president, Stockamp & Associates, Inc., Lake Oswego, Ore. Questions or comments about this article may be sent to him at dstockamp@ stockamp.com.