Summary of Work:

In fiscal year 2014, our client faced several operational challenges resulting in a $70 million loss. To quickly identify and resolve the problems, they hired a new chief operating officer and chief information officer, and brought in an interim chief financial officer (CFO) from Warbird Consulting Partners. In addition, Warbird provided key “practitioner” consultants throughout the AMC’s revenue cycle to execute on operational and performance improvement initiatives.

Background:

Our client is a nationally recognized, fully integrated academic medical center and health system. While academic medical centers (AMCs) operate differently than typical community health systems and have a somewhat different mission and goals, they often face similar reimbursement pressures, rising costs and patient demands for more holistic care. An example of how financial vulnerabilities can affect an AMC—and how they can overcome those issues—is our client, a multi-hospital system based in the southeastern region of the United States. This Healthcare System is made up of several hospitals including an AMC with 1,100 employed physicians and a School of Medicine.

Areas of Focus:

Warbird’s engagement began with an assessment of multiple areas including finance and revenue cycle from which a list of action items was reviewed and agreed to with management. Areas of focus included:

The most pressing revenue cycle issue stemmed from our client’s Epic patient accounting system, which was not implemented correctly and did not recognize net revenue accurately. After an accounts receivable (AR) review, the AMC wrote off more than $110 million in net AR dating back to the Epic implementation two years before. To ensure accuracy going forward, the new team reinstalled seven major Epic modules, wrote new policies and procedures and retrained 700 revenue cycle employees. A review was completed of every line on the financial statement including supply expenses, services contracts, depreciation expense and labor costs.

Reimbursement was another significant pain point for our client. Following a thorough analysis, the Warbird interim CFO renegotiated payer contracts to bring reimbursements in line with the complex services being provided. He created a separate managed care function, taking it from a one-person function inside the business office to a team with a vice president (VP) and seven additional staff members to support analytics and negotiations. To encourage community hospitals to send patients to the AMC’s tertiary referral center, executives reviewed patient transfer and scheduling policies to facilitate same-day or next-day appointments with their many specialists.

Finally, the new hospital executive team made expense control a high priority. They reviewed all open positions to confirm their necessity and implemented a VP-level review and approval process for all new hires. Every month, each department director reviewed his or her operating and financial performance with their VP, explained variances and presented plans to get back on budget.

Conclusion:

Within one year, our client went from losing $70 million to making $39 million and placing another $20 million in AR reserves. Warbird’s strong focus on operational efficiencies and adapting to the shifting healthcare landscape resulted in a $129 million turnaround on our client’s $2.3 billion revenue base.

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