Insights

It’s 2013—and a great time to set an organizational new year’s resolution. In light of possible Medicare and Medicaid cuts, as well as the regulatory and economic headwinds facing healthcare providers, consider resolving to improve or preserve the fiscal health of the organization.  Keep in mind, like any new year’s resolution, without a well-defined goal and a well-organized plan to achieve the goal, the resolution will quickly lose momentum and dissolve into an afterthought.    

Improving or preserving the fiscal health of an organization may seem to be a very daunting and broad task.  Indeed, many factors and areas of business directly affect the fiscal health of an organization.  Employee turnover, decreasing sales/business, increasing expenses, and frequent payment delinquencies or non-payment for services—to name a few—all directly impact the bottom line.  Each area of the business that has a direct impact on the bottom line should be closely evaluated so problems can be anticipated and prevented.  For example, delinquencies may not be a problem today; however, a close look at the company’s delinquencies may reveal a negative trend, which may ultimately develop into a problem if the negative trend is not corrected.  Accordingly, each organization must take the time to locate negative trends or budding problems and identify the root cause of the negative trends.  A corrective action or measure cannot be implemented if the root cause is not identified.

Most negative trends that exist in an organization are not obvious and therefore may be ignored, only to develop into a much bigger problem that eventually requires added expense in an attempt to alleviate the impact of the problem.  To identify negative trends before they become problems affecting the bottom line, data must be gathered and analyzed.  For example, to determine if an organization has or is developing a negative trend regarding its receivables, gather data regarding the frequency and number of receivables that hit a 30-day, 60-day and 90-day delinquent status.  The number of accounts reaching these milestones, as compared to previous years, may demonstrate a negative trend—one that could possibly develop into a serious problem and comprise an organization’s ability to effectively function.               

As an example, let’s assume that data  regarding receivables does demonstrate the development of a negative trend.  Now what?  Attempting to correct the trend at this point is not likely to end in success.  Without further investigation, do we really know the underlying issue or problem that is creating the negative trend?  Only after determining why an event or a negative trend is occurring can workable corrective measures be identified to prevent a continuation of the negative trend observed.  Understanding why a trend or an event occurred is the key to developing effective recommendations. 

Root-cause analysis is a strategy used to identify the cause of negative events or trends.  The analysis requires asking the question “why” repeatedly until the root cause is identified.  Start with the same data collected used in identifying the negative trend.  Review the list of accounts that hit the 90 day delinquent status.  The data may reveal a common or reoccurring characteristic.  For example, the majority of the accounts may be unpaid patient liability when Medicaid is the primary payor source.  With this information, the root-cause analysis can be utilized. 

The following is an example of how the root-cause analysis may work in the above scenario:

1. Why were the identified accounts delinquent?  The patient did not timely pay his/her patient liability. 
2. Why did the patients not timely pay his/her patient liability?  Collection notes indicate that most patients thought Medicaid was responsible for paying 100% of the charges.
3. Why did the identified accounts or patients believe Medicaid was responsible for 100% of the charges?  A review of the process and procedure for handling Medicaid patients demonstrates that the concept of patient liability is not explained to the patient or the patient’s family.
4. Why is the Medicaid process and the concept of patient liability not explained to the patient and/or the patient’s family?  The admission process does not include a thorough explanation of the same and does not involve personnel knowledgeable on the topic of Medicaid and patient liability.

In this example, it appears that the root cause of the negative trend (increase in 90 day delinquencies) may be (1) the organization’s failure to involve personnel knowledgeable on the topic of Medicaid and patient/liability and (2) the organization’s failure to incorporate the requirement that the topic is thoroughly discussed with the patient.  Accordingly, the corrective measure would be to include personnel knowledgeable of Medicaid and patient liability in the admissions process and require a thorough discussion explaining the Medicaid process with the patient and/or family.   

Developing and incorporating a corrective measure does not end the task of correcting the negative trend.  Collecting and analyzing data must continue; failure to continue the collection and analysis of data will prevent the organization from discovering if the corrective measure is working.  If the problem or trend continues, new corrective measures or additional corrective measures may need to be implemented. 

Resolve in 2013 to be proactive and not reactive when it comes to the organization’s fiscal health.  Locating and understanding negative trends, identifying the root cause of the negative trends, implementing a corrective measure, and analyzing whether the corrective measure is having the desired impact is a method that proactively eliminates the possibility of a problem rather than allowing problem to surface.  Being reactive allows for the problem to surface and then requires a quick fix that is not likely to address the root cause, thus spending time and resources without achieving real results.