- Healthcare providers and payers must improve their financial big analytics competencies if they wish to succeed in 2018’s rapidly evolving business environment, says a new report by Kaufman Hall, but few organizations have the ability to access and leverage actionable insights.
Chief financial officers (CFOs) across the care continuum both desire and require enhanced access to financial analytics and reporting that offer comprehensive, trustworthy insights into opportunities to trim waste, enhance efficiency, and make strategic decisions.
Ninety-five percent of healthcare CFOs surveyed by Kaufman Hall feel increased pressure to leverage data analytics to manage operations – and 90 percent believe that their organizations could do more in the coming year to develop data-driven strengths.
But only 15 percent say their organizations are “very prepared” to manage evolving payment models, and just 25 percent believe they have the capability to quickly respond to changes in the financial environment.
“Major transformation is underway with healthcare’s business model; the change mandate is loud and clear,” says the report. “In this rapidly changing business environment, the role played by chief financial officers and other senior finance executives is vitally important and has significantly expanded.”
Not only do financial executives have to develop financial plans and the budgets to support them, but they are increasingly being tasked with managing risk in a value-based environment and applying new technologies to financial monitoring and prediction activities.
“Their ability to perform these functions depends on the use of high-quality performance management processes and tools that provide robust data, analytics, planning, monitoring, and reporting capabilities,” the report adds.
However, merely 8 percent of the respondents from 350 hospitals, health systems, medical groups, and payers are “very satisfied” with their existing performance management reporting. Seventy percent said their cost measurement tools are too simplistic, can’t be trusted, or don’t even exist.
Even when reports are available, they are rarely distributed to the stakeholders who need them.
CFOs face the same data quality and accessibility challenges as their colleagues in clinical practice. Fifty-six percent of financial executives lack access to clean, trustworthy, data, while 67 percent are struggling to aggregate big data from multiple sources to create comprehensive insights.
Fifty-nine percent would like to improve their interactions with their data through better dashboards and visualizations, while just over half would appreciate the ability to dig down into the data to better understand what it means.
Two-thirds of the respondents cited resource constraints as a major barrier. Just under half said their financial planning tools are insufficient for their needs, while 29 percent added that their underlying skillsets needed improvement.
More than half face difficulty gathering consistent data on all requests for capital, making it challenging to determine which projects are worth approving and funding.
And projects that do make the cut are rarely monitored afterwards. Forty-three percent of organizations do not review the financial impact of initiatives after they are completed, leaving them without the means to assess their progress and make adjustments in the future.
Better analytics tools could help to support improvements in financial planning, budget development, and peer benchmarking, the respondents said.
At the moment, long budget cycles, difficult long-term planning processes, and insufficient data combine to hobble organizations looking to get an edge over their competitors.
Most annual budget development processes last for months, with just under 70 percent of respondents stating that the task takes more than three months to roll out every year. Nine percent admitted that the annual budget isn’t finalized until 6 months after inception.
Forty-seven percent of executives said that the lengthy process does not leave enough time for them to adequately integrate value-added analytics insights into their strategic decision-making.
Drawn-out yearly budget planning leaves little room for looking beyond the next board meeting. Just 17 percent have long-term plans for financial health over the next six to ten years, the survey found.
Organizations are also limiting their prognostication power by failing to benchmark themselves against their peers. While 84 percent of respondents view peer financial benchmarking as an important activity, only 56 percent are actually engaged in doing so.
Forty-eight percent compare their costs to external peer groups. Eighteen percent do no cost benchmarking whatsoever.
“All organizations should be benchmarking quality and cost performance to understand their competitive position,” urges the report. “Data from public and commercial sources enable comparison of the organization’s performance with that of an appropriate peer group, defined as of similar type with like functions, services, operating revenue, or other factors.”
“Using benchmark-based reports and scorecards, hospital executives and managers are able to observe patterns of performance that impact utilization, cost, quality, outcomes, and patient experience based on factors such as diagnosis, comorbidities, treatment type, department, and physician. Areas of undesirable variation can be explored and targeted for improvement.”
As value-based care continues to develop across the industry, chief financial officers will only face increasing pressure to cut waste, improve efficiency, and steer their organizations through rough financial waters.
“Leadership must ensure that the data, analytics, and software platform is in place to develop, execute, and achieve the organization’s strategic and financial goals,” Kaufman Hall advises.
“With approximately half of CFOs indicating that their organizations have outdated processes and insufficient tools for effective financial planning and analysis, a call to action is imperative. A pivot must be made from a siloed, micro-view of disconnected financial management processes and tools to a macro-view.”
Creating a broader view of organizational processes, problems, and successes requires an integrated, big data approach to analytics and reporting.
The ability to connect disparate data sources and implement more robust monitoring processes will be critical for enabling organizations to make agile, appropriate adjustments to their financial plans for the future.
“Given the demands of the changing business environment, healthcare CFOs nationwide should be critically examining the role they play in their organizations,” the brief concludes. “The CFO’s consulting responsibilities include strategic planning, operational and care redesign, cost transformation, mergers and acquisitions, and business intelligence and data analytics.”
“A singular focus on directing financial operations and the related control/monitoring function is not sufficient going forward.”