"The greatest comebacks start here"

Healthcare Financial Management, June, 2005

When the marketing department at Good Shepherd Rehabilitation Network in Allentown, Pa., came up with the slogan "The Greatest Comebacks Start Here," it wasn't thinking of the hospital's finances. But it easily could have been. Daniel C. Confalone, FHFMA, helped coordinate the system's revenue cycle comeback, from 150 days in accounts receivable to just 55.

As CF0 of Good Shepherd for only three years, Confalone has initiated many of the changes that have successfully seen the hospital through challenging economic times and helped it return to an operational surplus. For those and other accomplishments, Confalone was named 2004 Financial Executive of the Year for the Mid-Atlantic region by the Institute of Management Accountants.

In an interview with hfm, Confalone was modest about that achievement. "A CF0 can never turn around an organization on his or her own," he said. "It requires a commitment from the whole team with a focused effort, especially from the folks in operations." He described some of the problems that faced him when he joined Good Shepherd, and outlined the steps he and his finance team took to steer the department toward its comeback.

There were issues that needed to be addressed.... A number of challenges faced me when I came to Good Shepherd--and when I got into them, the depth of those challenges quickly became apparent. As a result of a major system conversion and significant revenue growth, the financial reporting process left many voids, ranging from an extended closing process to the accuracy of the profit-and-loss statements and balance sheet reserves. Also, finance staff had limited knowledge of the new information system's capabilities.

Those issues resolved themselves within six months after I did some departmental restructuring by hiring Jud Erick as corporate director of financial reporting and creating a new position, corporate director of financial planning, held by Ron Petula. A CFO is only as effective as his or her lieutenants.

But those weren't the most significant issues! I got here right after the system conversion, in which the whole information system was changed over from in-house to an outsourced arrangement. Everything was turned over, and it could have gone better. There was a lot of fallout as a result, primarily in the accounts receivable area.

The system conversion was probably the initial reason for some of the revenue cycle problems, because it wasn't completely clean. Things got hung up in accounts receivable, and once that happens, the cleanup work is all incremental, which makes it difficult to maintain current business office operations.

Our new CIO is now leading us through a strategic IT process to migrate off the shared environment and back into an in-house system. Phase a, which happens immediately as the next step, involves a complete system conversion over the next two to three years to bring up a full spectrum of clinical and financial systems.

Another issue was that basic blocking and tackling just wasn't happening in terms of the financial management of operations. I think that, as a support and service area, finance needs to give managers the information they need to manage. However, the tools that were in place were not completely effective. Decisions were being made without the proper financial baselines, which, in turn, distorted the conclusions.

A big challenge was that our accounts receivable was at 150 days. When you talk about revenue cycle management, you have to understand our organization and the diversity of services we offer in post-acute continuum care. This includes long-term care special rehab facilities that can bill Medicaid every 30 days, and we get paid in 30 days. So that helps tremendously, assuming the electronic billing system is properly working.

We also have a long-term acute care hospital in which the average length of stay is about 28 days, and the bills are typically in the $100,000-plus range. It takes a long time to collect that money, because these patients have a lot of insurance issues when they come to us.

So I have these two situations on the opposite ends of the scale, and in the middle I have the acute rehab business and a physician group practice. We do cycle billing every 30 days with all of our outpatients, but we have inpatients, too. So we have a mixture of bills--easy to collect, hard to collect, and point-of-service collections at our 15 outpatient sites. We decided to outsource a portion of our A/R, which ended up being a quick win in terms of liquidating some older accounts and reducing bad debts.

We also put into place a revenue cycle management program. We started by giving an educational program for relevant staff about the importance of the revenue cycle process. We also flowcharted all the pieces of the cycle and assigned a team leader to the different areas. A big change was to assign the entire revenue cycle department--including the health information management, patient accounting, and patient access departments--to the CFO. And we hired a prospective payment system coordinator for our rehab hospitals.