am.bi.gu.i.ty (n.)

  1. Doubtfulness or uncertainty as regards to interpretation
  2. Something of doubtful meaning

An essential characteristic of world-class consultants is the ability to tolerate ambiguity. This is a critical attribute for achieving success on any client engagement. This ability to constructively tolerate an ambiguous, chaotic or rapidly changing environment and become a source of positive influence can make or break a project’s success. Understanding and translating environmental client conditions and needs into the right advisory dialogue without being irritated or annoyed allows you to think creatively when helping clients solve problems, making recommendations and providing consultative guidance.

Situation with Ambiguity

In 2011, Jeanne Bateman (Warbird PC) was on a client engagement project with a billing problem. The Billing Department was several months behind due to staff turnover and essentially no one was able to tell what the client had or hadn’t paid for. There was no structure in place that easily enabled Jeanne to follow the cash. She had to think creatively on how to piece the puzzle together by cross-referencing and only counting things once in the process. To reach the end-goal, Jeanne had to work with four different groups of people within the company. She gathered lots of data and made it into a structured product that their field personnel found extremely helpful. Beyond this end-product, another report was created from IT for A/R to use for collections and Jeanne also outlined a financial audit work plan that other Warbird PCs were able to use on this same client engagement project. Ambiguity played a huge factor in Jeanne’s work but she was able to find creative ways to get around it, and ultimately she impressed the client.

Overall outlook for Healthcare changed from stable to negative; 2014 will be at a “tipping point”

  • Negative Pressures are accelerating:
  • Ability to contract for revenue increases and the ability to make major cost deductions is becoming harder
  • We are dealing with physician cost and capital cost pressures.
  • State Medicaid is growing as a percentage of the payer mix: unknown whether the ACA subsidies will really help the hospitals
  • If the Balance Sheet is weak now, it may be too late to improve it to a sufficient degree.
  • However, on the positive side, many hospitals are showing good strength in cash position built over the last few years.
  • Equal number of upgrades as downgrades in 2013. Likely to shift to more downgrades than upgrades in 2014. Nearly 400 rating affirmations in 2013.
  • Will CFOs be able to discern real P&L benefits from the massive IT investments being made? Theoretically yes in the longer term, but really unknown.

What are your thoughts on CFOs discerning real P&L benefits from IT investments?

“Change cannot be installed and engineered, and so it always takes longer and is more difficult than we ever imagined.” – Peter Block

When implementing a new program or process on a client engagement it’s easy to just follow the blueprint and install it manually. Instead of just installing the work at a client space, there needs to be an enhancement to the strategies and that’s where engagement comes in during implementation.  Becoming more engaged, on both sides, leads to better results in the long-run.

Two Aspects of Implementation for Consultants

  1. The technical work using the expertise you have spent developing over years of real-life experience
  2. How to build support for the business or technical change you are planning
  3. Real changes require real commitment, and part of your role is to help fire that spark.

Key Takeaways

  • Too many consulting projects result in cosmetic change: the thinking and rhetoric about the change are perfect, but the experience of people does not match the promise.
  • No single person runs a business, no one person makes or delivers a product, and no one general ever fought a war.

Today, virtually all health care CFOs appreciate the need for their organization to demonstrate value.  It’s no longer as simple as chanting the mantra “volume is everything”, like many of us have for so many years.  Not only are we in a delivery cost crisis, we are in an insurance crisis. Now is the time for hospitals and physicians to integrate economically and clinically and focus on the efficacy of care. Now is the time to align economic incentives among the providers. Now is the time to figure out the economics of the transformation we are in.   We aren’t quite ready to kiss employer sponsored health care goodbye.  But most of us know we can’t ignore insurance exchanges, co-ops and consumer transparency.  The good news is we have some time to pilot innovation – but it is not unlimited.  The bad news is we must get started now as the transformation from volume to value and related cost-management takes time and effort.

Following is a quick quiz to see how your organization is progressing toward the value-based payment and care world ahead:

  • Have you defined the size and scope of your primary care network and laid out the plan to develop it?
  • Can you and your physicians demonstrate with practical, real life examples how your organization is helping to bend the cost curve and why this is good economically for them and the hospital?
  • How does Wall Street view your strategy to accept “payment risk” – is it a credit strength or negative outlook in your credit report?
  • Do we engage our members/patients with outreach and medical management programs that help mitigate population based payment risk?

Warbird Consulting Partners has partnered with Valence Health of Chicago, a leader in value-based care analytics and payment model innovation, to help address these strategic financial and operational challenges.  Lower fees for service payments and deteriorating volume is accelerating around the country. We think now is the time for carefully experimenting with new payment arrangements, risk arrangements, “bundling” and forecasting the potential impacts on your P&L. Take a look at population health and risk through a financial lens and plan your forward thinking strategies accordingly.

David Kirshner, Healthcare Director and Sr. CFO Consultant, Warbird Consulting Partners