The effects of the COVID-19 pandemic forced the healthcare industry to adapt and evolve operations to stay afloat. Reorganized finance plans shifted priorities to include:
- Compliance: Analyzing business policies, processes, and procedures for deficiencies such as breakdown in operational segregation of duties (SoD).
- Efficiency: Automation of processes with advanced technology such as robotic process automation (RPA).
- Performance: Assessing key performance indicator (KPI) capability to action.
Retrospective on 2021
According to a 2020 McKinsey survey of hospital CFOs, 84% of respondents indicated a negative impact on operating margins into 2021. In fact, according to Kaufman Hall, over 1⁄3 of U.S. hospitals continued to face negative gross margins through the end of 2021. With the inflationary pressures of 2022 proving to be non-transitory, we foresee persistent financial challenges.
Healthcare organizations that survived the pandemic surges into 2022 took decisive actions to redesign products, services, and offerings to be digital, safe, and delivered with “low touch.” It is imperative for proactive healthcare leaders to continue to look forward to stability and growth.
Whether your organization came out of 2021 stronger or weaker, health systems should assess capabilities for the future and begin investing in the changes necessary to improve financial operations beyond 2022.
Future Operating Model Focus Areas
Compliance
Many healthcare organizations’ policies, procedures, and processes were ill-prepared for the COVID-19 pandemic. Take these steps to uncover potential deficiencies:
- Review current finance policies and procedures for ease and accessibility.
- Document and review cyclical processes for the integration of new tools.
- Audit deployment financial systems for best practice and address compliance concerns.
- Be mindful of segregation of duties. Regulate business processes for workarounds, loopholes, or self-approvals that could lead to financial losses through fraudulent activity.
Efficiency
The financial future for healthcare organizations is not efficient if they are reliant on spreadsheets and data extracts as process tools to meet the requests of the business. Finance staff should not spend the majority of their time on low value tasks or rely on IT department resources to complete daily tasks.
Given ongoing inflationary pressures, healthcare organizations need to develop a plan to reduce inefficiencies. This plan should identify strategic goals, including evaluating systems, processes, and priorities for the next 12-36 months based on goals and metrics. Priority areas will include those where work is highly manual, or spreadsheet based.
Key questions an operational plan should answer:
- Are the key resources available? Do they have the bandwidth to assist with efficiency planning?
- What processes need to be/can be streamlined?
- How can we digitally empower our managers and staff?
- What technology is required?
Performance
The design and function of business processes determine the cost and outcome of your work. All processes are continuous and small improvements can add up to huge benefits. The most important processes impact customer satisfaction and support the financial strategy through the following steps:
- Assess and enhance human resources processes to baseline current process maturity.
- Identify core processes and measure the maturity of your processes compared to best practice.
- Employ tools such as Lean/Six Sigma to eliminate waste in processes and identify where technology can provide efficiencies.
These efforts can be accomplished easily in three to nine months with the right guidance and expertise.
Final Thoughts
Healthcare organizations of all sizes are still facing financial challenges. If your organization has survived the past two years, congratulations! You figured out how to adapt to the new normal. Now the key is planning on how to institutionalize the changes to transform your organization as you handle the ebb and flow of exiting the pandemic surges in 2022. With no signs the challenges facing healthcare will abate any time soon, time is of the essence for planning now.
In summary, your goal is to develop a three-year plan addressing a future vision for financial management at your healthcare organization. To obtain these goals, begin by evaluating and assessing your compliance and technology portfolio to identify gaps and priorities.
With these goals, you will begin by reviewing and assessing your current policies, procedures, work processes, and technology portfolio to identify the gaps and priorities. The plan should identify changes in organizational finance policies, financial processes to be changed or enhanced, and evaluate the technology in place and options to optimize, add to, or replace.