QuestionWeek 2: Operating Revenue – You Decide

Week 2: Operating Revenue – You Decide

It is the second Monday night in October and it is now 3 a.m. You cannot sleep.

You are the CFO of Marysville General Hospital, a 300-bed community hospital in the Midwest. Your hospital board meets at noon on the second Tuesday of each month. You have a truly awful report to give the board, and you are dreading it more than anything else you’ve done in your 15-year career as a hospital senior manager.

The target for days in accounts receivable (which the board and CEO set some years ago) is 55 days. When AR days are at 55, cash flow to the hospital is strong and you can meet all monthly obligations while putting some money away into investments for the hospital’s future.

It has been several years now since the hospital has seen its AR at 55 days. There have been many factors, but AR has been in the 70–80 day range for some time now. Last month it crept up over 90 days, and this month you have the painful task of reporting to the board and CEO that the hospital is carrying 100 days in accounts receivable.

You must come up with a plan to bring AR days back in line, and you will not be able to accomplish that alone. It will take cooperation from the medical staff, the clinical departments, health information management, the business office, and many others. But it must happen and it must happen soon, or your community could actually lose its hospital.

Come up with a plan to bring AR days back in line. It will take cooperation from the medical staff, the clinical departments, health information management, the business office, and many others, so include how you will involve these departments in devising a solution.

As you prepare your process improvement plan, keep the following in mind.

• What further data collection will you conduct before beginning to write your plan?
• What will be the elements of your plan?
• For each element, who will be the key players and what will be their roles?
• What resources outside of senior management will you engage?
• How will you present your plan at the board meeting?
• And how will you know that your plan has been effective?

At the board meeting, you give your financial report. You actually have a small profit to show for the month on the income statement, but as you are going over that report in the board packet, you notice that all six board members have already turned past the income statement to the accounts receivable report. One board member actually has his mouth open, jaw dropped, and another is looking at you over his glasses. This is not good.

Your board members are community representatives; they care about the hospital, and they know how important the hospital is to the town of 35,000 people. They are all very worried. They know what has happened to other communities when their hospitals have failed financially. Everyone in this room has a tremendous stake in the survival and success of the hospital.

After you give the accounts receivable report, there is a prolonged silence. You wish somebody would just yell at you and get it over with, but that does not happen.

You know exactly what he means, and you answer:

With the cash on hand, you can meet the hospital payroll completely only once without pulling money from the hospital investments. Those investments are reserved to replace and improve the technology of the hospital, to expand facilities when needed, and to replace the hospital itself someday if that becomes necessary or appropriate. Dipping into those investments to meet payroll is a really bad sign for any hospital.

Mack turns to your CEO Katrina Eaton:

The board completes the rest of the its business; nothing eventful—reappointing doctors, monthly reviewing statistics, accepting donations from the foundation, planning a holiday open house, and welcoming a new cardiologist to the staff. Lots of positive things going on at the hospital, but nobody in the room can really focus on any of that. They are all still looking at the big “100.47 Days” at the bottom of the AR report. The meeting adjourns.

Gathered in the CEO’s office are the CNO Nancy Stritmatter, CIO Brian Billings, Business Office Manager Linda Freed, HIM Director Becky Santos, Medical Staff Coordinator Martina Jackson and Chief of Staff Dr. John Evans, and yourself. Dr. Evans does not routinely attend management meetings, but he was at the board meeting and followed the group into Katrina’s office. He comments:

Waiting in the lobby outside Katrina’s office is Bill Walker, president of First United Bank. He sees Dr. Evans leave and calls out.

The group overhears CEO Katrina chatting with Bill at the office door.

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