HFMA Region 5Dixie Institute February 27, 2014

Ron Swanson says…..

Manage the business backwardsStart with value to the customer and work back through the processes and people to deliver that value

Provider First• Waiting Happens• Errors Are Expected• Compulsory Employment• OTJ Training• Diffuse Accountability• Add Resources• Reduce Cost• Retrospective Quality

Review• Management Oversight• We Have No Time

Patient First• Waiting is Bad• Defect-free Work• Empowered Employment• Training By Design• Rigorous Accountability• No New Resources• Reduce Waste• Real-time Quality

Assurance• Management “In The Place”• We Have Time

• Lean Strategic Planning and Deployment• Standard Work• Visual Management• People Development• The Work of Leadership• Accountability Processes• Lean Leadership Behaviors• PDCA and A3 Methods

“Lean Accounting is the general term used for the changes required to a company’s control, measurement, and management processes to support lean manufacturing and lean thinking”

Brian MaskellPresident, BMA, Inc.

• Predictive Hubris• Avoid the belief that you can accurately and consistently predict the future

• Adaptability• Prepare the organization to be adaptable and agile to respond to changing conditions

“If the underlying circumstances that created data have changed, then extrapolating that data gives you stupid answers”

Jeff Bauer, PhDHealth Leaders Media, January 3, 2014

Budget

• Eliminated Annual Budget Process• Implemented Quarterly Forecasting

• Designed overall process• Operationalized software• Initiated Quarterly Senior Leader meeting

Topic: Quarterly Forecasting

Owner Sponsor: Mike Allen

Date Revision 12/27/2011

1. What’s the problem? Current annual budget process is out of synch with current strategic and operational planning processes, takes too long to prepare and becomes out-dated quickly as business conditions change faster than the budget is updated.

4. Gap Analysis Current budget process is built for an annual cycle, including the preparation, meetings and software to support the budgeting and reporting functions.

7. Completion Plan Purchase software early January 2012, fully install and test in January Quarterly Planning and Forecasting meeting structure developed with projected meeting dates around March 1, June 1 and September 1

2. Current State Lead Time (elapsed time) 17 months Labor Hours 940 Labor Costs $48,000 Frequency Annually

5. Solutions Eliminate most steps for annual budget

including preparing budget packets, meeting with directors before and after numbers are submitted

Develop quarterly planning meeting with senior leadership and include a forecasting component

Acquire software to support the process with the appropriate level of speed and accuracy and reporting ($25,000)

8. Confirmed State

3. Future State Lead Time (elapsed time) 4 months (76% improve) Labor Hours 540 (43% improve) Labor Costs $36,000 (25% improve) Frequency Quarterly There is a significant overall reduction in labor hours, although more hours are needed at senior leadership level for this planning-focused process

6. Rapid Experiment Run the 2 quarterly planning meetings

concurrently with 2012 annual budget, to provide some flexibility to learn and improve before going “bare” without the annual budget.

9. Insights

• Agility - Annual Budget process is out of synch• Pace of change in the industry

• Lean management system• Lead Time too long – 17 months

• Noise – budget becomes noise that gets in the way of real-time continuous performance improvement

•Waste – time and resources

• Review Progress on Last Quarters Plans and Initiatives (30 minutes)

• Review Financial Results and Forecast for Next 6 Quarters (60 minutes)

• Review Quality and Patient Experience Results and Forecast for Next 6 Quarters (45 minutes)

• Trends, Opportunities, Gaps and Ideas (45 minutes)

• Actions and Consensus on Plan (60 minutes)

• Start with Long-Term Financial Forecast to determine targets

• Use Quarterly Forecasting to evaluate progress on Long-Term targets

• Close the Loop on gaps between Quarterly Forecast and LT Targets

• This is primarily a top-down exercise, resist creating a quarterly budget process

• Quarterly Forecasting meeting created enhanced dialogue across Service Lines/Teams

• Preparation for the quarterly meeting has triggered a more meaningful interaction between finance and operations

• Operating leaders are asking more and better questions

• You have to learn to walk again

• Quarterly Forecasting:• Is about performance improvement• Is about probabilities and alternatives• Is not about precision or paper clips

• The point of forecasting is not creating numbers to “hit”. It’s about designing operations to deliver better performance.

Michael Allen, CPA, FHFMA

CFO

Gundersen Health System

mmallen@gundersenhealth.org

608-775-1951