The Increasing Importance of the FP&A Function in Healthcare
The FP&A function in healthcare is growing increasingly crucial as senior management of larger healthcare companies consistently looks for greater operational and financial transparency to help them manage the business and control costs.
Large healthcare companies can have hundreds of business locations and thousands of departments across these offices, housing thousands more employees. Large occupancy and physician compensation costs must be carefully budgeted and tracked for strategic planning; however, the FP&A data collection process for these line items can be particularly onerous, often using outdated systems and Excel manipulations.
The implementation of business intelligence tools with existing Enterprise Resource Planning (ERP) systems makes data collection more efficient and timelier, leading to improved reporting and decision-making.
Implementing Business Intelligence Tools
FinServ’s client, a large and rapidly growing healthcare organization, recently implemented a SAAS Facilities Management software for more efficient space utilization and planning to enable the client to track moves/adds and changes to departmental space at every location. Prior to the implementation, the departmental space usage was tracked in an Excel file, so the data quickly became stale as departments changed locations or moved from one floor in a building to another. Since occupancy costs are budgeted and allocated to each department based on square footage, the stale square footage numbers became meaningless with respect to budgeting and allocating actual occupancy costs to the respective departments.
The project was a significant undertaking. Floor plans for hundreds of locations had to be obtained and converted from PDF to CAD format, and the space on each floor required confirmation from the respective clinical managers in each department. The successful implementation allowed the company to update moves/adds/changes to the real estate portfolio on a timely basis, providing efficient data collection and reporting on departmental occupancy costs in the FP&A process. This allowed management to make more timely decisions on the use of space. The software also enables the organization to manage its vacant space and incorporate that information for the planning and budgeting for new providers. Combining this information with operational statistics such as patient volumes allows management to forecast profitability by location and make decisions to expand or close locations based on that profitability. The company can now decide on the quality of staff at specific locations using clinical data on patient volumes and satisfaction to make staffing and compensation decisions.
Overhauling the Compensation Process
Our client’s physician compensation process was similarly complicated and outdated. The methodology of compensating physicians is also constantly changing. At one point, physicians were compensated on the P&L they generated, which forced physicians to spend time managing their costs, such as the number of clinical staff they required to support them. Physician compensation, or “Phy Comp” was also tracked and calculated in Excel, which was unsustainable for a rapidly growing company.
The implementation of Business Intelligence tools with the company ERP systems gave the company the transparency to work relative value units (“wRVU”), which are standard units of measurement used to establish values for health care procedures or codable direct patient care experiences. The transparency of this data enabled the company to move to a production-based compensation plan for physicians, which allows physicians to spend less time managing their costs and more time dedicated to patient care.
The company is also moving towards value-based-pay incentives as more data around the patient care experience has become available in the ERP systems. The company has also undertaken a project implementing a compensation system to automate salary and bonus calculations, documenting processes and controls for IPO readiness. All these project improvements will streamline the FP&A processes with respect to Phy Comp.
Forward-thinking healthcare companies are also adopting the Financial Services model of offshoring support functions of their ERP systems to low-cost locations like India. These cost-effective managed services offer excellent support to resolve issues through the client support ticketing process quickly.
Technological improvements to ERP systems result in improved transparency of clinical data from billing systems. This allows for a more granular process in using detailed data for financial analytics and forecasting and can significantly impact financial results when utilized effectively by management.
FinServ Consulting, LLC has technical expertise with respect to systems, data collection, and US GAAP accounting to add value to healthcare companies, including the FP&A and ERP domains. Our team is well-positioned to help ensure the success of your next project. If you would like a full picture of FinServ’s methodologies or capabilities in running a project for your healthcare organization, please contact FinServ Consulting at firstname.lastname@example.org or call 646-603-3799.
About FinServ Consulting
FinServ Consulting is an independent experienced provider of business consulting, systems development, and integration services to alternative asset managers, global banks and their service providers. Founded in 2005, FinServ delivers customized world-class business and IT consulting services for the front, middle and back office, providing managers with optimal and first-class operating environments to support all investment styles and future asset growth. The FinServ team brings a wealth of experience from working with the largest and most complex asset management firms and global banks in the world.