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G2 Financial Boot Camp - Laboratory Outreach

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G2 Financial Boot Camp - Laboratory Outreach Las Vegas May 2008

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G2 Financial Boot Camp - Laboratory Outreach

  1. 1. Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>“ Laboratory Outreach Financial Boot Camp” Developing the financial plan and metrics for your outreach program <ul><ul><li>Richard Ouellette, MS, FACHE, MT(ASCP)H </li></ul></ul>Las Vegas, Nevada June 18, 2008 Management Decision Systems, Inc. <ul><ul><li>Part I </li></ul></ul><ul><ul><li>Test Volumes, Revenue, Costs, Data & Metrics </li></ul></ul>
  2. 2. The Laboratory – A Diagnostic Service Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>The Laboratory Did you know… Few members of your medical staff understand what is involved with providing a test
  3. 3. Overview <ul><li>Breakeven Model – 50,000 Foot View </li></ul><ul><ul><li>Tests, Revenue, Fixed & Variable Costs </li></ul></ul><ul><li>Lab Outreach – Selling the CFO </li></ul><ul><li>The Big Fixed - Your staff </li></ul><ul><ul><ul><li>50% of direct cost 100% of your success </li></ul></ul></ul><ul><li>Models, Data & Warehouses </li></ul><ul><li>Dashboards & Detail Reporting </li></ul><ul><ul><li>Feedback & Control Mechanics </li></ul></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  4. 4. Re-Thinking The Laboratory <ul><li>Is your laboratory a provider of tests or </li></ul><ul><li>INFORMATION? </li></ul><ul><li>The laboratory is the single largest producer of clinical information in healthcare. </li></ul><ul><li>The Laboratory generates 70 – 80% of the contents of a medical record. </li></ul><ul><li>As a clinical diagnostic tool the laboratory can help identify 95% of the diseases known to mankind. </li></ul><ul><li>Physicians desire a single, easy to access portal for laboratory results for both their office and admitted hospitalized patients... BIG competitive advantage. </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  5. 5. <ul><li>The Laboratory </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>is a detail-oriented business.
  6. 6. <ul><li>If you can’t measure it, </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>If you can’t monitor it, <ul><li>you can’t manage it. </li></ul>you can’t monitor it.
  7. 7. Background and Overview <ul><li>The Typical LIS and MIS </li></ul><ul><li>Transaction based systems </li></ul><ul><li>LIS performs 2 tasks exceptionally well: </li></ul><ul><ul><li>Test ordering </li></ul></ul><ul><ul><li>Test reporting </li></ul></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>For the purpose of this talk, there is little difference between the major LIS vendors
  8. 8. Laboratory Breakeven Analysis Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>$ Tests Labor – Salary Wages & Fringe (25%) Pathologists Generally Not Included Other – Accreditation, Books, Couriers etc. Total Fixed Zero tests Supply – Variable Cost Other - Fixed Cost Labor - Fixed Cost Revenue Breakeven Profit Profit Total Cost Total Tests Sold Total Cost Line Total Cost Total Cost Total Cost Gross Net Revenue
  9. 9. Laboratory Breakeven Analysis Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>$ Tests Revenue Laboratory Breakeven Analysis Test Counts & Projecting Revenue
  10. 10. Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>A successful outreach program requires a close & ongoing working relationship between the laboratory and hospital finance. The Laboratory & Hospital Finance A Marriage of Necessity! The Laboratory Hospital Finance
  11. 11. STANFORD’S LAB OUTREACH UP FOR SALE; WHAT WENT WRONG? Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>Laboratory Economics April 2008
  12. 12. STANFORD’S LAB OUTREACH UP FOR SALE; WHAT WENT WRONG? <ul><li>“ The outreach lab’s continued losses were in sharp contrast with the optimistic financial projections”… </li></ul><ul><li>“ the support of hospital administration. A battle over the direction of the outreach business”… </li></ul><ul><li>“ and the level of investment (or lack thereof ) in information technology for the outreach lab” </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>Laboratory Economics April 2008
  13. 13. Test Counts <ul><li>Very important to know </li></ul><ul><li>Billed Vs. Reportable/Broken </li></ul><ul><li>Billed to reportable ratio is roughly 5 </li></ul><ul><ul><li>3,000 Reqs = 3,000 X 2.5 = 7,500 Billables Vs. 37,500 Reportables BIG DIFFERENCE </li></ul></ul><ul><li>You get paid by billable tests </li></ul><ul><li>Your CFO talks billable tests </li></ul><ul><li>It’s in your best interest to use billables as the denominator </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  14. 14. <ul><li>Better to be roughly right, </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>than precisely wrong P Thomas Hirsch Path Lab 1986
  15. 15. Estimating Net Revenue <ul><li>Don’t use charges – cost/charge 5 – 8 </li></ul><ul><ul><li>A $10 CBC will have a charge $50 - $80 </li></ul></ul><ul><ul><li>No one will pay… not even self-pay </li></ul></ul><ul><li>Ballpark Net Revenue/billed $14 - 20 </li></ul><ul><li>Unless you have a dedicated lab billing system, use your current state specific Medicare outpatient fee schedule (MOFS) to project revenue </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  16. 16. Estimating Net Revenue <ul><li>Obtain LIS test by location & specialty </li></ul><ul><li>Link/Join LIS code, CDM & MOFS </li></ul><ul><li>Multiply specific test volume X each CDM assigned CPT4 code fee </li></ul><ul><li>Summarize by In/Out location & major clients </li></ul><ul><li>Involve CFO to estimate payer mix adjustments as a percentage of MOFS; should come close to $13 - 20 </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  17. 17. Estimating Net Revenue <ul><li>Joining data from LIS, CDM & Medicare </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  18. 18. Revenue & Direct Operating Cost Rule of Thumb <ul><li>If your direct operating costs exceed your projected net revenue take 2 actions: </li></ul><ul><ul><li>Review your math </li></ul></ul><ul><ul><li>If math correct… </li></ul></ul><ul><ul><ul><li>Don’t go into the outreach business </li></ul></ul></ul><ul><ul><ul><li>Take a hard look at your operations </li></ul></ul></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  19. 19. Laboratory Breakeven Analysis Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>$ Tests Laboratory Breakeven Analysis Supply – Variable Cost Supply – Variable Cost
  20. 20. Supply Costs <ul><li>Segregating supply costs is relatively simple for outright purchases of capital </li></ul><ul><li>Compare results with vendor contract </li></ul><ul><li>Reagent rental & capitalized lease arrangement can skew supply costs </li></ul><ul><li>Need to account for costs that may not be in the department </li></ul><ul><li>Capital bequests: fund accounting </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  21. 21. Laboratory Breakeven Analysis Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>$ Tests Laboratory Breakeven Analysis Labor – 50% of Fixed cost Labor - Fixed Cost
  22. 22. The Laboratory Staff <ul><li>Over 50% of direct costs </li></ul><ul><li>Key to maintaining quality, service & profit </li></ul><ul><ul><li>However… </li></ul></ul><ul><li>How do you measure staff productivity? </li></ul><ul><ul><li>Billable Tests/Paid Hour – 3.2 to 6.5 </li></ul></ul><ul><li>How do you measure individual performance? </li></ul><ul><ul><li>Productivity & Service </li></ul></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  23. 23. <ul><ul><li></li></ul></ul>Copyright© 1999-2008 Management Decision Systems, Inc.
  24. 24. Laboratory Opportunity Cost <ul><ul><li>Influenced by your staff </li></ul></ul><ul><ul><ul><li>Providing Excellent Service </li></ul></ul></ul><ul><ul><ul><li>Achieving Customer Retention </li></ul></ul></ul><ul><ul><ul><li>Promoting Good Will </li></ul></ul></ul><ul><ul><ul><li>Achieving Goal Congruency </li></ul></ul></ul><ul><ul><li>How do you quantify these costs? </li></ul></ul>Copyright © 1999-2008 Management Decision Systems, Inc . MAST®
  25. 25. Laboratory Breakeven Analysis Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>$ Tests Laboratory Breakeven Analysis Data, Data Collect & Information
  26. 26. Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>A successful outreach program requires a close & ongoing working relationship between the laboratory, hospital finance & the IT department. The Laboratory The Laboratory, Hospital Finance The Laboratory, Hospital Finance & IT The Laboratory Hospital Finance IT
  27. 27. Enterprise Interface Flow Diagram Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  28. 28. Data Collection <ul><li>• Sources of data – LIS, Finance, etc. </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>• Granularity – Drill Down • Refresh Rate – Daily, Hourly <ul><li>• Data Validation – LIS is truth </li></ul>• Management data often difficult to extract
  29. 29. Data Collection <ul><li>Data Model Design is Key </li></ul><ul><li>Suggested Approaches </li></ul><ul><ul><li>Avoid redundancy - clinical vs. management </li></ul></ul><ul><ul><li>Billed vs. reportable – volume impact </li></ul></ul><ul><ul><li>Anticipate recurrent data refresh </li></ul></ul><ul><ul><li>Level of IT support – vendor/in-house </li></ul></ul><ul><li>Relational Database Schema </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  30. 30. On Line Analytical Processing (OLAP) Excel 2000 – 2007 Copyright© 1999-2008 Management Decision Systems, Inc. MAST® OLAP aka Pivot Table
  31. 31. On Line Analytical Processing (OLAP) <ul><li>Key Definitions </li></ul><ul><ul><li>Facts (Numeric) – Tests, accessions, TAT, $ </li></ul></ul><ul><ul><li>Dimensions – Priority, MD, dept, date, time </li></ul></ul><ul><li>Local Cube – SQL ’00/’05 or Excel ’03 </li></ul><ul><li>Can exceed Excel 65,000 row limitation </li></ul><ul><li>Very Fast – combinations & permutations </li></ul><ul><li>Very Small – 13 MB Vs. 230 MB </li></ul><ul><li>Great tool for what if analysis </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. MAST®
  32. 32. Laboratory Breakeven Analysis Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>$ Tests Laboratory Breakeven Analysis Metric Performance Standards
  33. 33. Performance Metrics <ul><li>Important that you have/quantify them </li></ul><ul><li>Hospital outreach – Inpatient KPIs </li></ul><ul><ul><li>Routine, STAT, Overall % STAT & Early AM </li></ul></ul><ul><ul><li>Leverage your service excellence </li></ul></ul><ul><ul><li>Poor performance will exclude you from own staff </li></ul></ul><ul><li>Essential - Define each process TAT </li></ul><ul><li>Take Responsibility </li></ul><ul><ul><li>Nurse Draws – still your problem if TAT bad </li></ul></ul><ul><li>Black Hole – Test not done until complete </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  34. 34. Metric Process Exploration <ul><ul><li></li></ul></ul>Copyright© 1999-2008 Management Decision Systems, Inc.
  35. 35. What did we do right? Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul><ul><li>Specifics </li></ul><ul><li>Pre-Analytic </li></ul><ul><ul><li>Priority </li></ul></ul><ul><ul><li>Inpatient/Outpatient </li></ul></ul><ul><ul><li>Ordering Location </li></ul></ul><ul><ul><li>Ordering Physician </li></ul></ul><ul><ul><li>Time – DOW & HOD </li></ul></ul><ul><ul><li>Phlebotomist & Receiver </li></ul></ul><ul><li>Analytic </li></ul><ul><ul><li>Priority </li></ul></ul><ul><ul><li>Time – DOW & HOD </li></ul></ul><ul><ul><li>Test Department </li></ul></ul><ul><ul><li>Test Instrument </li></ul></ul><ul><ul><li>Test </li></ul></ul><ul><ul><li>Technologist </li></ul></ul>
  36. 36. What did we do Wrong? Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul><ul><li>Specifics </li></ul><ul><li>Pre-Analytic </li></ul><ul><ul><li>Priority </li></ul></ul><ul><ul><li>Inpatient/Outpatient </li></ul></ul><ul><ul><li>Ordering Location </li></ul></ul><ul><ul><li>Ordering Physician </li></ul></ul><ul><ul><li>Time – DOW & HOD </li></ul></ul><ul><ul><li>Phlebotomist & Receiver </li></ul></ul><ul><li>Analytic </li></ul><ul><ul><li>Priority </li></ul></ul><ul><ul><li>Time – DOW & HOD </li></ul></ul><ul><ul><li>Test Department </li></ul></ul><ul><ul><li>Test Instrument </li></ul></ul><ul><ul><li>Test </li></ul></ul><ul><ul><li>Technologist </li></ul></ul>
  37. 37. Objective – Eliminate waste & rework Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>Present Performance Future Performance
  38. 38. Performance Metrics <ul><li>Articulate them to staff & customers </li></ul><ul><li>Use them to achieve goal congruency </li></ul><ul><li>Monitor & share results & detail daily </li></ul><ul><li>Hold supervisors & staff accountable </li></ul><ul><li>Adopt continuous improvement management approach </li></ul><ul><li>Take ownership of entire continuum </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  39. 39. <ul><li>Pay for performance </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>Feed the chickens <ul><li>Let the turkeys scratch </li></ul>Reward the eagles
  40. 40. Dashboard & Detail Reporting Improving Laboratory Operations Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>Sales Operations
  41. 41. Reporting and Trigger Alert Systems <ul><li>Trigger Reporting Impact - Hawthorne Effect </li></ul><ul><li>Turned on Trigger Reporting January 2006 </li></ul><ul><li>By defining expectations, good management and technology </li></ul><ul><li>From 23 to 11 day TAT – 52% reduction </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. MAST® January 2006 Trigger Reporting starts * Washington, DC 9/27/06 G2 Lab Institute “Case Study Maryland General Hospital”, R. Ouellette, N. Hess
  42. 42. Do-Be-Do Rule <ul><li>if you watch what they do. </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>People will do what you ask,
  43. 43. Marketing Your Outreach Plan <ul><li>Keep it simple </li></ul><ul><li>Bring your Berlitz book </li></ul><ul><li>Seek & cultivate sponsors </li></ul><ul><li>Plan for sponsor succession </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  44. 44. Keep it simple… play to your audience <ul><li>Made to Stick: Why Some Ideas Survive and Others Die By Chip & Dan Heath </li></ul><ul><li>“ Tappers&quot; or “Listeners” - Elizabeth Newton’s 1990 Ph.D. Stanford psychology dissertation </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  45. 45. <ul><li>Tappers received a list of well-known songs & asked to pick a song and tap out the rhythm. </li></ul><ul><li>Listener’s job was to guess the song, based on the rhythm being tapped. </li></ul><ul><li>Results… </li></ul><ul><li>Tappers predicted listeners would guess correctly 50% of the time. </li></ul><ul><li>Listeners in fact only guessed correctly 2.5% of the time… that’s 1 time in 40, not 1 in 2. </li></ul>Keep it simple… play to your audience Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  46. 46. <ul><li>Have you traveled to Paris? </li></ul><ul><li>Recognize that if you want support you need to gain an understanding of possibly a new language </li></ul><ul><ul><li>Finance </li></ul></ul><ul><ul><li>Information Technology </li></ul></ul>Bring your Berlitz book Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  47. 47. <ul><li>Every successful outreach program can point to an originating sponsor or sponsors </li></ul><ul><li>… I’m not talking about you </li></ul><ul><li>As sponsors leave your organization you need to replace them </li></ul><ul><li>… This means you need succession management planning to accomplish this task </li></ul>Sponsors & Succession Planning Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  48. 48. Summary Remarks <ul><li>Effectively managing your business requires that you have clear understanding of your fully loaded costs & net revenue </li></ul><ul><li>Fair, or unfair you have full responsibility for a test from the time of order until it is complete </li></ul><ul><li>Accessing & processing operating information is only the beginning… you need to proactively act on it daily </li></ul><ul><li>Improving costs & service is an ongoing effort </li></ul><ul><li>The laboratory is a detailed oriented business </li></ul>Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>
  49. 49. Thank you! Copyright© 1999-2008 Management Decision Systems, Inc. <ul><ul><li></li></ul></ul>

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