Tracking changes can provide warning
By Stephen W. Earnhart, MS
President and CEO
Earnhart & Associates, Dallas
Surgery centers are busy. There’s no question about that. But they are also big business, and someone (please) needs to keep track of the business end of the center. We are talking about basics here, such as "same store growth" (the increase or decrease in the same line of business as the previous period). It is a great way of seeing what is going on inside the business. Somewhere, in all the paperwork and regulatory issues, some of us — no, not you — have forgotten that we need to be constantly vigilant in our endeavors. It takes constant monitoring to stay on the right track.
Here are some good, real-life, examples. John Doe, MD, one of your most productive orthopedic surgeons, announces one day that he is joining a for-profit surgery center that just opened up down the street. "What! How rude," you think. But there had to be warning signs. Was anyone looking? Did anyone in the center know what to look for? When was the last time you and Doe sat down and had a chat? Or when was the last conversation you had with his office manager? Maybe his wife didn’t know, but his office manager did. You can bet on it. Did he have complaints in the past? Was something going on that you didn’t know about in his postings?
When surgeons are about to jump ship, most of the time, they start hoarding cases to go with them, or they start doing them in another facility to see how they are treated before they decide to invest. In this case, the administrator looked back at the activity for Doe and saw a huge drop in volume over the past three quarters. No one noticed until it was too late. The end to this story is that Doe left, and within one month, the other orthopods followed him, and they took 1,500 cases with them.
Here’s another example. You receive a call from your vice president. She just received the projected profit and loss statement (P&L) from the accounting group, and she wants to know why net collected revenue is off by 40%. As the administrator, you know you had a great period compared with last quarter. Didn’t you? It sure seemed as if it was! Did you review the P&L before your boss did?
What had occurred several months earlier was that the billing department had installed new software, and the forms all were processed wrong: They left out the post-op diagnosis. As a result, every claim was rejected for several months before anyone noticed. Had someone been tracking on a routine basis the cash flow, they would have noticed it and had an opportunity to correct it before it grew into such a large problem. As a result, the administrator suffered a severe loss of confidence from her board, and she almost lost her job.
I recently went to a staff meeting during one of our "operational audits" and asked the staff what was the target number of cases for the next month and whether they had reached their goal this month. It was like shining a light at a deer: They just froze as if they didn’t understand the question. They had no idea what their goal was or how it impacted them.
Think about it. You come to work every day and do what you are trained to do, but no one ever tells you what your mission is or what the desired end result should be. You need to track certain items, such as cases per month, net revenue per case, supply cost per case, personnel cost per case, and number of cases by physician per month. Plot them out, and share them with the staff. Often, they can find things that a busy administrator misses.
(Editor’s note: Contact Earnhart at 5905 Tree Shadow Place, Suite 1200, Dallas, TX 75252. E-mail: email@example.com. Web: www.earnhart.com. Earnhart and Associates is an ambulatory surgery consulting firm specializing in all aspects of surgery center development and management.)