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Differences Between NFPs and For-Profits are Marginal

By Christopher Cheney  
   March 14, 2016

Business-driven operational discipline
In practice, manifestations of the economic pressures inherent to the business model at for-profit hospitals are subtle but significant, says Neville Zar, senior vice president of revenue operations at Boston-based Steward Health Care System, a for-profit that includes 3,000 physicians, nine hospital campuses, 30 affiliated urgent care providers, and six ambulatory surgery centers, plus home care, hospice, and other services. The system earns nearly $2.4 billion in net patient service revenue and serves more than 1 million patients annually in more than 150 communities. The system is owned by New York City–based Cerberus Capital Management.

With positive financial performance among the primary goals of shareholders and the top executive leadership, operational discipline is one of the distinguishing characteristics of for-profit hospitals, Zar says. "At Steward, we believe we've done a good job establishing operational discipline. It means accountability. It means predictability. It means responsibility. It's like hygiene. You wake up, brush your teeth, and this is part of what you do every day."

A revenue-cycle dashboard report is circulated at Steward every Monday at 7 p.m., and includes point-of-service cash collections, patient coverage eligibility for government programs such as Medicaid, and productivity metrics, he says. "There's predictability with that."

Steward's commitment to operational discipline is reflected in the health system's training and staff development programs, Zar says. "They're one of the last things we cut if there are budget reductions. That's how you lose operational discipline."
The revenue cycle team at Steward has an internship program for college students and peer-to-peer coaches who work side by side with the low performers on the staff, he says. "The reason the coaches are effective is the coach is not the boss, and they have to be high performers."

The coaching program also serves as a performance incentive. "People want to be coaches. It takes them out of production, at least temporarily. It gives them recognition. It gives them an opportunity to advance," Zar says.

Operational discipline is an essential building block for developing speed of execution capacities, he says. "At Steward, we have a flat organization. We have eliminated a lot of the bureaucracy you see at nonprofits and academic medical centers. The revenue cycle leaders sit down with the IT team every week. Once we decide something is important, we roll up our sleeves and get it done."

Another method of addressing operational efficiency involves a thorough review of practices.

"One of the initiatives we've had success with—in both new and existing hospitals—is to conduct an operations assessment team survey, says Andrew Slusser, executive vice president and chief development officer at Capella. "It's in essence a deep dive into all operational costs to see where efficiencies may have been missed before. We often discover we're able to eliminate duplicative costs, stop doing work that's no longer adding value, or in some cases actually do more with less," he says.

An emphasis on financial accountability
A high level of accountability also fuels operational discipline at Steward and other for-profits, Zar says.

There is no ignoring the financial numbers at Steward, which installed wide-screen TVs in most business offices three years ago to post financial performance information in real time. "There are updates every 15 minutes. You can't hide in your cube," he says. "There was a 15% to 20% improvement in efficiency after those TVs went up. It's not punitive. It builds teamwork. … Your name is on the board, or your team's name is on the board. It becomes competitive; people are naturally competitive."

The TVs display several metrics, such as receivable follow-up performance and claims denial reversal rates. "Everybody's throughput is up on the board," Zar says.

Accountability for financial performance flows from the top of for-profit health systems and hospitals, says Dick Escue, chief information officer at Valley View Hospital, a 78-licensed-bed nonprofit community hospital in Glenwood Springs, Colorado.

Escue worked for many years at a rehabilitation services organization that for-profit Kindred Healthcare of Louisville, Kentucky, acquired in 2011. "We were a publicly traded company. At a high level, quarterly, our CEO and CFO were going to New York to report to analysts. You never want to go there and disappoint. … There's so much more accountability. You're not going to keep your job as the CEO or CFO of a publicly traded company if you produce results that disappoint."

Finance team members at for-profits must be willing to push themselves to meet performance goals, Zar says. "Steward is a very driven organization. It's not 9-to-5 hours. Everybody in healthcare works hard, but we work really hard to serve the communities in which we are invested. We're driven by each quarter, by each month. People will work the weekend at the end of the month or the end of the quarter to put in the extra hours to make sure we meet our targets. First and foremost is patient satisfaction, patient safety, and clinical outcomes. There's a lot of focus on the financial sustainability, from the senior executives to the worker bees. We're not ashamed of it."

"Cash blitzes" are one way Steward's revenue cycle team goes into to overdrive to boost revenue when financial performance slips, he says. Based on information gathered during team meetings at the hospital level, the revenue cycle staff focuses a cash blitz on efforts that have a high likelihood of generating cash collections, including tackling high-balance accounts and addressing payment delays linked to claims processing such as claims rejections from payers.

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.

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