Your Financials are your Most Important Measurement
The brutal reality for any business organization is the worn-out expression, “No Money, No Mission.” I avoid using the phrase, but it is true. One does not completely understand this until the day one watches a Hospice close its doors and become assimilated by the Borg Hospice or health system. Now with this said, we recognize the need for aligning with ACOs, MCOs and health systems. This is good business IF done well. If done poorly, the Hospice will dwindle to mediocre at best. The dreams of compassionate care at one of the greatest transitional periods in life are lost as the Hospice becomes another cog in the wheel with little-to-no voice in its future as it is relegated to “department of a health system” status. This is why when Hospices seek recommendations about such mergers from MVI that we advise a Hospice contractually spell out that it is to be operated, to the extent possible, autonomously, with a Model and not a budget…and that the financial system will be setup according to Best Practices (The stuff MVI writes about).
But the point of this short piece, is that the REASON a Hospice is forced or feels the need to merge is normally a financial shortcoming, plain and simple. This financial problem is the result of poor management. Again, plain and simple. To reiterate, the reimbursement in Hospice is great! At least that is what a Hospice operating in the 90th percentile would be saying with 20%+ percent margins. The difference in this attitude and result is simply that the 90th percentile truly understands MANAGEMENT and what it means to manage well. Long-term phenomenal economic results will ONLY come through running a quality program. WORLD-CLASS QUALITY is the focus with WORLD-CLASS PROFITS as a natural by-product of being extraordinary. Please don’t say you are a world-class Hospice if you do not have world-class profits, for they go hand-in-hand. And your numbers give you away… Your financial results spell life or death as an organization. Therefore, your financials are your most important measurement.
This is why, when setting up a new Hospice platform, the first system we implement is the financial system. Note however that the financial system is not the most important system! Your People Development System should be #1!
There are two numbers/measurements I want to emphasize:
14% and 6-9 Months
- [14% – the amount of Net Hospice Homecare Operational Income]
- [6-9 Months – the amount of cash or near-cash your Hospice will need to withstand the intentional financial constipation of regulatory scrutiny…the remedy for thinning out the number of Hospices in our country.]
Benchmarking gives you powerful perspective…so that you can always judge your Hospice’s performance in relation to the rest of the Hospice world. It also elevates amateur Hospice leaders to the ranks of professionals in the business dimension quickly, as they can easily point out areas of excellence as well as areas that need work.
Therefore, we highly recommend providing a copy of the Executive Dashboard, Hospice%Rev and the Indirect Analysis reports to your leadership team on a monthly basis using an unfiltered selection criteria. Measure yourself against ALL Hospices in the database first. THEN use the filters such as ADC, region of the country, tax status, patient-management system and other filter criteria for secondary information and to answer specific questions. You want your leaders to be able to speak from a confident “national” perspective and understand your proprietary Model. If significant deviations exist in specific areas from the 50th percentile, leaders and ideally all staff should understand why and how your Hospice achieves these results. At this point, you truly know your Hospice is working within the Model approach. We have found that Hospices that provide their leaders with “filtered” data (like only NFP or Hospices of a certain size) “dumb down” their teams. You want your team to have a true national perspective so they can be professionals and not amateurs.
~ Andrew Reed, CPA