Investments pay off with financial information systems; CFOs are more involved than ever in missions to integrate clinical data with financial data, and then mine it to maximize financial outcomes

Health Management Technology, August, 2004 by Richard R. Rogoski

Sooner or later, all expenditures and billings recorded on the clinical side of a healthcare organization wind up in the financial department. Too often, though, clinical applications and financial applications operate independently of one another, and early attempts to integrate these disparate systems seldom guaranteed a timely collection and transfer of necessary information.

While some vendors have chosen to develop fully integrated clinical and financial software, others continue to pursue a best-of-breed philosophy. However, chief financial officers have become acutely aware that in today's environment of managed care and federally mandated programs, these systems must be linked, or at least provide easy access to and exchange of data.

Data In, Data Out

Being able to drill down into large databases to find pertinent information related to managed care contracts led Dan Deets, CFO of Hunterdone Healthcare Inc. in Flemington, N.J., to consider a single-vendor solution. Deets says the institution had been using some internally developed software and some best-of-breed systems, but the goal was to increase the integration of applications, and that could best be done through a single-source provider.

In 1998, this 176-bed, privately owned community hospital with annual revenues of approximately $150 million chose Restin, Va.based QuadraMed Corp.'s Affinity Health Information System, which combines clinical and financial information into a single patient-centered database. "We selected QuadraMed based on an evaluation of their software and the people we dealt with," says Deets. "The conversion weir very smoothly. But it was a challenge because we converted so much at the same time."

For Ron Bunnell, CFO of Phoenix-based Banner Health, the goal was to "simultaneously improve quality of care and financial performance." Reducing adverse drug events, for example, reduces the average length of stay and the cost of insurance. "Improving throughput improves financial efficiency," he says.

Created through the merger of a health system in Phoenix and one in Fargo, N.D., Banner Health serves eight western states through 19 hospitals, six long-term care centers and an array of other services* As a result, this not-for-profit healthcare system, which hit $2.3 billion in revenues in 2003, began formulating a strategy in 2001 and 2002 focused on "process redesign" and the integration of different systems--especially the clinical and financial systems, Bunnell says. "It's only through this integration that we can drill down to the specific issues we need to address to make changes in our systems."

Crazy Quilt of Applications

At one level, data is data--and the whole of it must at least come together, if not fit together, in the CFO's office, so that the profitability and fiscal health of the enterprise can be maintained. Nevertheless, Bunnell says that management decisions emanate from the micro level. "We're looking at a data warehouse so we can combine data in different ways. We can look at specific doctors, specific diseases, costs by managed care payer, or outcomes by payer. We might want to know revenues and profitability for a payer, or improve outcomes in surgery. These would require different combinations of data sets."

Instead of going with a single-vendor solution, Banner Health chose to convert all its best-of-breed clinical systems to Cerner Millennium and to replace its various financial applications with Financials provided from St. Paul, Minn.-based Lawson Software. "That's the only way to have a model of delivery of care so that patients can get the same quality of care and the same business efficiency no matter what facility they walk into," Bunnell explains.

This decision, however, was preceded with considerable trial and error. Before deciding on these two major vendors, Banner Health had installed more than five separate clinical systems and more than four financial systems. "If you looked at our software then, and if it were color-coded, we would look like a quilt," Bunnell says. "But very soon, it will be nearly monochromatic."

Hoping to have all facilities fully converted by 2006, Banner Health is taking a giant step toward that goal in announcing the opening of a new hospital in West Phoenix called Banner Estriella Medical Center. Scheduled to open in November, this will be an all-digital hospital staffed only by employees who agree to work with EMRs, CPOEs and other paperless systems, Bunnell says. As with the other hospitals in the network, Banner Estriella will integrate Cerner's clinical system with Lawson's financial suite.

Countering the Secret Weapon

Not surprisingly, both Bunnell and Deets have found that by integrating clinical and financial systems, they now have access to the information they need to cap costs and improve efficiencies in the delivery of healthcare.

But Vince Schmitz, CFO of MultiCare Health System in Tacoma, Wash., discovered he could staunch the flow of revenue lost from denied claims with an ASP-based suite of financial applications provided by Decatur, Ga.-based Third Millennium Healthcare Systems Inc. In 2000, this nonprofit community based healthcare system, which operates three hospitals and has facilities in 50 locations throughout the Puget Sound area, posted an annual loss in revenues of $20 million and reported gross accounts receivable days in excess of 100. This definitely constituted a situation Schmitz wanted to remedy.