Healthcare organizations struggle to address challenges that affect operating margins and long-term viability, from staffing shortages to healthcare reform. Leadership teams face crucial decisions that affect organizational success across patient experience, care quality, and workforce engagement. They must also navigate internal and external challenges that affect revenue generation and collection. Moreover, they hold specific roles that cross over through complex, interrelated processes that are prone to breakdowns in communication and efficiency.
Financial acumen is a critical competency for healthcare leaders to ensure success. A comprehensive financial acumen competency model may benefit healthcare leaders and leadership development practitioners alike in addressing these challenges in a systematic way.
Several healthcare associations have developed healthcare leadership competency models that include financial acumen skills and behaviors. These models focus on planning and analysis, budgeting, and the reimbursement process. The following financial acumen model includes these areas, but with a greater focus on attaining positive financial results. In addition, although this model applies to healthcare leaders, many of the leadership development elements apply across industries.
Revenue CycleHealthcare leaders must have a strong knowledge of the revenue cycle within their organization and across the industry. The healthcare revenue cycle is the process of capturing, managing, and collecting on services to patients. The process spans the organization, from nursing and other clinical areas to administrative and clerical functions, and from lower-level technical work to the process of capturing services via claims utilization and coding into patients’ medical records. Leaders must understand and apply revenue cycle terms and associated practices, such as AR Days, or the average number of days a patient’s bill stays in collection before receiving payment. These figures affect the organization’s credit ratings and long-term financial stability.
Healthcare organizations often struggle to collect on medical bills from patients due to complex reimbursement processes. Moreover, reimbursement has lagged behind actual hospital costs for Medicaid and Medicare patients. Leaders must therefore direct healthcare teams toward more efficient processes. Many would think this is a finance-centric responsibility, but these silos must be broken down.
Leaders must engage the team throughout the revenue cycle process. Moreover, they must align team members with critical targets in patient safety and experience. Process awareness is key; leaders across the organization must:
- Understand the complex components of reimbursement processes.
- Partner with one another as owners of particular components of the cycle.
- Consistently seek improvements that improve overall efficiency.
Programs that integrate job shadowing and cross-functional teams with a focus on action learning can help to develop leaders with a strong organizational awareness of these processes and build collaborative relationships across the organization. Leaders should also be equipped with process awareness techniques that analyze each process step, its supplier and customer, and its subprocesses. Through this development, leaders can begin to diagnose processes that are repetitive, cause bottlenecks, and are error prone.
Labor ManagementMany patient-centered zones experience staffing shortages that affect their ability to provide quality care. Staffing shortages create cost increases in three ways: orientation of new team members, increased per capital labor costs through the use of overtime and contracted labor, and the right mix of staff for the volume of work. Leaders must work to reduce employee turnover and optimize staffing based on census.
Hospitals face shortages in bedside registered nurses, with a third of newly licensed RNs leaving their first nursing job within two years. According to the 2016 National Healthcare Retention & RN Staffing Report, the resulting turnover costs are between $37,700 and $58,400 per separation, but can total more than $6 million for large acute-care hospitals. To address these staffing challenges, leaders must engage their staff to reduce turnover and its associated costs. For example, they can hold monthly one-on-one sessions with staff, in which they ask about key engagement and retention issues, such as barriers to performance. Follow-up on these issues is key; team members must recognize that their opinions count and that their concerns are being addressed.
Finding the right team members to fill vacancies is typically seen as a talent acquisition performance metric. However, leaders play a role in this area. For instance, they ensure that interviews are scheduled timely, and must be able to identify the right candidate based on competency and fit. Leaders should also engage current staff in peer interviewing. Structured, behavior-based peer interviews allow for robust assessment of candidate fit. Assessing for competence and fit within the interview process will lead to high-performing employees who stay with the organization longer.
Further, healthcare leaders must optimize staffing within patient-centered areas to ensure the right employees are addressing the right tasks, with sufficient care for patients. Hospital census varies daily, and its fluctuations affect the number of team members needed on staff. Therefore, leaders must optimize their scheduling to manage demotivators like staff flexing, in which team members are sent home due to too few patients. Many healthcare organizations use staffing matrices to determine staff based on patient numbers or other metrics. Leaders must receive training on how to understand and employ these matrices; pairing them with leaders who are experienced in their use can be helpful.
There may be areas in the organization that lack team members, and others that are flexing due to low patient volume. Leaders should cross-train their team members to build bench strength. By building capabilities across teams, they can better collaborate to ensure teams use the right skill levels to get the job done.
Business ManagementLeaders must make decisions based on complex financial indicators across medical-record, accounting, and financial-technology systems. Before training leaders on how to use these systems, begin with the concepts behind them. Many healthcare leaders don’t have a business administration or finance background, and will need to learn basic financial terms and how they relate to their department.
To help leaders interpret financial information, engage them through application and experience. Enlist finance subject matter experts to help develop training and learning objectives. Work with leaders to set goals around their desired financial outcomes, and create action plans to meet these goals. Use case studies, and have leaders bring their financial statements to training sessions. Providing leaders with case studies and other opportunities to follow processes, interact with them, and make decisions in safe settings can strengthen decision-making skills and familiarity with financial indicators.
Microlearning can be especially helpful in creating task-based learning. These on-demand modules can give leaders what they need at the right time. Microlearning modules also help new leaders avoid errors that could have negative consequences on finances, particularly if they have not yet received formal onboarding. Many organizations offer new leaders workshops and other training quarterly or even annually. Based on when leaders enter the organization or their new roles, they may go several months without key skills. However, new leader onboarding is critical. Leaders must be brought up to speed on how to use systems to avoid process breakdowns.
Process EfficiencyProcess efficiency affects the costs associated with providing patient care. People are becoming more consumer-driven in healthcare decisions, based largely on quality and cost. Leaders must therefore understand and set goals around key financial metrics, such as length of patient stay, that affect their financial results.
Creating process awareness and identifying waste can provide patients with a more cost-efficient and time-friendly experience. Equip leaders with skills to define the problem, collect and analyze relevant data, and attain executive-level support to remove barriers and approve suggested improvements and solutions. This process helps to remove waste from patient care processes, leading to higher value for the patient.
Another important point to remember is the level of the leader. We must know what a new leader needs in terms of responsibility expectations and give them just-in-time resources. As you go up the ladder, there are more complex opportunities for higher-level leaders, like contracting and managing partnerships with other facilities. Organizations must prepare leaders not only for their current position, but for the next.