Healthcare Finance Leaders Focused on Identifying and Managi
CHICAGO, Jan. 28, 2020 /PRNewswire/ -- The need to identify and manage cost reduction initiatives continues to be a top priority for senior financial executives in healthcare organizations, according to Kaufman Hall's new report 2020 Healthcare Financial Outlook: Performance Management Trends and Priorities. This has been an ongoing theme since the report was first introduced in 2017, and today 87% of respondents say cost reduction is among the most important financial performance activities for their organizations.
Yet 76% say that resource constraints are impacting effective financial planning and analysis in their organizations, more than in 2019 (70%) or 2018 (66%). This disconnect underlines the need for a more widespread cost transformation effort.
Rather than just reducing costs, however, financial executives understand that current service offerings must be delivered efficiently to preserve margins under tightening payment pressures. According to the report, achieving this level of cost transformation will free up resources for investment in new technologies, sites of care, and care delivery models while addressing changing demand and new competition within the healthcare market. Many organizations are unprepared to do so, however, as 54% of those surveyed say they have insufficient data, benchmarking and reporting tools to completely support efforts to lower costs without compromising the quality of care; an additional 15% say they currently have no tools in place.
"The issue isn't a lack of data," said Kristopher Goetz, senior vice president of performance improvement at Kaufman Hall. "There is a massive amount of data flowing in from claims systems, electronic health records, cost accounting systems, patient satisfaction surveys, wearable devices and other sources. The problem is more than two-thirds of healthcare organizations don't have the analytics tools they need to use all that data to gain financial insights and inform their decision-making. This limits sustainability of high-value care delivery and long-term strategic financial viability. Healthcare financial executives recognize the risk but need support from the C-suite to take action and avoid more dire consequences. So far that hasn't happened, but we are hopeful it will change in 2020."
Another top priority identified in the report is the need for agility — healthcare financial executives lack confidence in their abilities to adjust easily to changing business circumstances. Only 24% are "very confident" their teams can rapidly adjust strategies and plans to react to market changes. This number is essentially unchanged from 2019 (23%) and 2018 (25%) despite new competition from tech giants, industry behemoths and innovative healthcare providers seeking to disintermediate legacy organizations from critical shares of their business.
Additionally, just 14% said they believe their current financial planning processes and tools make them "very prepared" to manage the financial impact of evolving payment and delivery models. This figure is also essentially unchanged from 2019 (13%) and 2018 (15%).
At the same time, budgeting cycles continue to grow much longer, with 50% of respondents reporting that the process now lasts six months or more from initial roll-out to board presentation, up from 37% in 2019 and 27% in 2018. This continues to be a concern as longer budget cycles mean that the assumptions made in preparing the budget could be outdated by the time the fiscal year begins. The good news, however, is that 63% of financial executives will seek to improve operational budgeting and forecasting in 2020, up from 53% in 2019.
Understanding the Impact of Clinical Outcomes on Financial Performance
In the third major finding of the survey, 85% of respondents manage financial health as a core dimension of organizational performance. Other highly ranked core areas included quality of care and clinical outcomes (80%), patient experience (76%), and operational efficiency (75%).
"These numbers indicate that most organizations understand the need to manage performance across multiple dimensions," said Kermit S. Randa, chief executive officer of Kaufman Hall Software. "Quality of care and the patient experience, in particular, will be increasingly important differentiators in a more consumer-focused, retail-oriented business model. Using data to identify opportunities for operational efficiency is critical as legacy hospitals and health systems work to reduce costs and compete on price. This data can also help drive revenue optimization and clinical quality improvement, which empowers organizations to achieve healthcare's triple aim."
Still, only 14% of respondents said their organizations are "very prepared" to use clinical measures to impact financial results, which is consistent with Kaufman Hall's 2019 State of Healthcare Performance Improvement report. This must change since the types of transformation financial executives desire cannot be achieved without engaging clinicians in the effort to enhance quality and reduce costs.
Using Data to Drive Action
To help drive meaningful change, 69% of respondents plan to improve reporting and analysis to support decision-making in 2020 — the highest-ranked option. When evaluating financial planning software to help do this, 76% say healthcare expertise and best practices built into software are important criteria, up from 60% in 2019. It was also the highest-ranked choice this year versus ranking fourth in the 2019 report.
Kaufman Hall will host a webinar explaining the details of this report on Feb. 18, 2020.
About Kaufman Hall
Kaufman Hall provides a unique combination of software, management consulting and data solutions to help society's foundational institutions realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods, rigorous analytics and industry-leading solutions into their strategic planning and financial management processes, with a focus on achieving their most challenging goals.
Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; cost transformation; treasury and capital markets management; and mergers, acquisitions, partnerships, and joint ventures.
Kaufman Hall software includes the Axiom Software Suite, providing sophisticated, flexible performance management solutions that empower finance professionals to analyze results, model the future, and optimize organizational decision making. Solutions for long-range planning, budgeting and forecasting, performance reporting, capital planning, and cost accounting deliver decision support, reporting, and analytics within an integrated software platform. Kaufman Hall's Clinical Analytics empower healthcare organizations with clinical benchmarks, data, and analytics to provide a higher quality of care for optimized performance and improved patient outcomes.
Amendola Communications (for Kaufman Hall)
Email: [email protected]
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SOURCE Kaufman Hall