Planning and Strategy
The long-awaited opening of a new facility can be an exciting time. Although it is cause for celebration, it is also a time for transition and proper fiscal management. Keeping tabs on the following items will go a long way toward financial success of your new facility: meeting (or exceeding) budgeted volumes, managing by the numbers, revenue cycle management, and cash monitoring and forecasting.
Case volume is the primary driver of a facility's success because without proper volumes, a facility can fail no matter how well all the other areas are managed. Meeting targeted volumes by physicians in the first few months of operations is imperative to ensure the facility gets off to a strong start, as it can be difficult to make up for shortfalls later in the year.
It is important for physicians, not only to utilize the new facility immediately after opening, but to actively engage other colleagues as well to ensure everyone is on board. Physicians should work with their schedulers to ensure that all appropriate cases are given the opportunity to be scheduled at the new facility. It is a common occurrence for schedulers to choose the path of least resistance since making the transition to the new facility requires a change in process for them. Therefore, it is imperative that proper communication occurs with the schedulers from the beginning. Investors in the facility should also consider allowing non-investors to have the preferable surgery start times in order to attract and retain non-investor volumes to the facility.
Managing by the numbers means adjusting expenses to case volumes. Certain expenses are variable in nature and some can vary more than others with differences in volumes over time. For example, if no one is watching expenses such as salaries and they are left unflexed to the surgery case volume, the results will be less than ideal. A proactive approach is required, such as utilizing the Nueterra staffing model templates to match the right amount of staff to the number of cases on a daily basis. Salary and benefits are typically the largest single area of expense for a facility as they average 30 to 40 percent of total expenses. Proper control of this cost, along with inventory management and optimum supply utilization, will keep expenses in line and result in the best financial results possible.
Proper revenue cycle management is critical for your facility to meet cash needs and its return on investment goals, which should have been established during the forming of the project. A physician can help facilitate this by timely dictating, so the claim can be coded and billed as quickly as possible. Nueterra will handle the rest of the process to ensure that receivables are turned into cash at the appropriate rate and claims are being paid correctly.
Nueterra also will monitor the facility's cash on a daily basis to ensure there is an adequate amount to meet cash demands and make necessary transfers between the line of credit and the operating account on an as-needed basis. Cash flow forecasts will be continually updated and monitored to ensure targets are realistic, and to identify any potential cash shortfalls early enough to develop and implement a plan to address the potential shortfall. This process also results in the ability to forecast the amount and timing of future distributions based on actual volumes, revenues, and expenses, which should assist the investors with their own personal cash planning.
These are just a few of the most relative steps involved in managing the financial success of an organization. As your partner, Nueterra's involvement should move your facility through the following steps at the most optimum pace: quick volume ramp-up, collecting cash, paying off line of credit, distributing excess cash and celebrating success!
Jim Morse, vice president, Finance, Nueterra Healthcare