Clinicians and Finance

1. Clinicians and Finance Grant Howard Waikato Hospital The Health Roundtable Meeting HRT1012 August 2010

2. Disclaimer and Conflict of Interest • The Waikato District Health Board takes no responsibility for the views or actions of Dr Grant Howard • Dr Howard has resigned from hospital management and intends to return to intensive care medicine at Waikato this year

3. Credentials • Director Finance Andrew McCurdie to Grant Howard: “Why don’t people listen to you?” (a question or directive to reflect ?) • Dr Grant Howard GM Waikato Hospital (exp $320 million, revenue $400 plus) MBBCh FRACP FJFICM MBA • So what

4. No really - why should anyone listen • In 18 months we have achieved the following: • ESPI non-compliance with funding suspended – corrected • Throughput: Increased surgical volumes (all comers) by 25% • Halved the increase in expenditure relative to prior years (from more than 10% to 5%) • Full year forecast contribution for group increased by $10 million (12% > planned)

5. For example: Surgical Discharges per Month Start of current management Can we do till 30 June ?

6. What are we trying to do here?They give Nobel prizes for questions not answers. • If you want the clinicians to like you invite them for a barbecue

7. What are we trying to do here today?They give Nobel prizes for questions not answers. • Why should there be any special relationship between finance and clinical staff? • What is finance ? • What are the important issues? • How would I do what is required? • Closing and questions

8. What is Finance? • What is a gastroenterologist? • A group of people with: • Aspirations • A scientific based training • A career • A business function (payroll) • An external reporting and audit compliance group (not least to the owner) • A group which supplies management information (for which there may be less or no demand)

9. What are the Important issues? • The purpose of healthcare - is what ? • Preconditions to running a healthcare business – • Understand how an organization is run • Credibility – Get the basics right • Understanding the fundamental dynamics of the healthcare business • The effect of finance on clinicians • The effect of clinicians on finance • Matching competence with aspiration • How do the bits fit together - how do we get to be good?

10. Precondition #1: Understand how an organization is run • Not for profit service industry • Maximum use of health dollar • Competent management of all forms required • Knowledge of the industry in some detail • Social – political skill: an understanding of where the levers are, and who can make what happen • Astute applied operational management • Competency and aspirations

11. Precondition #2 - Get The Basics Right FTE Can you measure and report an “actual” daily and reliably

12. Get The Basics Right: The Performance SpaceCan you measure and report an “actual” daily and reliably

13. Precondition #3 • Understanding the fundamental dynamics of the healthcare business • The effect of finance on clinicians • The effect of clinicians on finance

14. Health System Dynamics I: ClinicoKinetics • What the system does to the clinician

15. Carnegie Mellon Competency Maturity Model • Do not plan what you cant possibly deliver • Competency and aspirations should match

16. A case study – Waikato Hospital February 2009 Hospital has fallen behind contract. Hospital Manager leaves. New managers instruction is to do more and catch up Meanwhile it is budget time for 2009 / 2010

17. The finance picture looks different The budget for 2009 /10 is based on a YTD annualised actual and shows no planned increase in expenditure

18. What could we conclude – two options Hospital Exec Dr Phil Weston: “ I will feel much more comfortable next year when we are told we are running at a loss every month. I am much more use to that.” The budget does not match the business intent - oops The intent of the organisation is to pull off the greatest productivity increase known to man - oops

19. Health System Dynamics II: ClinicoDynamics – The two roles of the clinician • What the clinician is doing to the system (resource)

20. Health System Dynamics II: ClinicoDynamics Department and unit managers control cost per unit Clinicians control the volume of products used

21. The doctors are managing the system Dr B Dr A

22. How do the bits fit together - how do we get to be good? • Management is about leadership, planning, organising, controlling. • Finance is about funding and…… • None of this matters if the medical staff are directing the utilisation of resource…..and are not considered managers • Do not create a parallel universe • So what to do………..

23. What to do? • Make up your mind about what you are trying to do! • It can’t be woolly • It must fit your competence no matter how sobering that is! (volume cost trade-off) • Build an accountable organisation. . . • Construct an operating plan that actually will deliver what it is you are trying to do • The primary clinical focus is Performance as only they can deliver performance and revenue • Execute the plan, measure the actuals, manage the variances

24. Building An accountable organisation • A series of questions to consider is bloody hard work

25. Group 1 Questions: Is there a Cabinet? • Is there a group of people who meet to advise the top executives on what should happen? • Does accountability remain with the executives? • Who is on it? Those with authority or those responsible for the primary function of the organisation or both? • Does it work? • Is there a clear work plan • Does everyone know what the plan is • Is this plan being communicated to others • Them, they, us – is this a problem yes or no?

26. Group 2 Questions: Do you know who you have and where they are?:i.e. Organisation Profile • Do you have a depiction of your organisation down to individual teams? • Are the teams rolled up in a way such that the person at the top is accountable for the lot (at each level)? • Is each team able to be accountable – clinicians included?

27. What? • “The organisational profiles are difficult to follow, why does the document have all these sub sub numbering systems?? What do they relate to? it seems much bigger and harder to read than it could be, especially in the middle section.” • “The FTE status is incorrect as we also have contracted staff on board and why is it necessary to supply the FTE status?” • “It is our recommendation that this document should be put on hold until the Peoplesoft software component that will be able to do the function of organisational structure is in place.”

28. The Resource Centre Philosophy underlying the concept of an accountable organisation For a resource centre manager/ supervisor to work effectively they must clearly know What they are accountable for and to whom The task they have to perform What their output should be (activity, quality, standards, etc) What their output is (activity, quality, deviation from standards etc) They must know who is accountable to them and what for What their resources are What their Operational Plan is Group 3 Questions: How many boxes can your organisation tick in this list ?

29. Group 4 Questions: Reporting • Does your finance group tree and other corporate records match the organisation profile? • Can you report actuals (Performance, Labour, Revenue , Expenditure,etc. ) accurately and promptly? • Are prior months adjustments minimal • Is the report relevant to the resource centre? • Is there a mechanism for responding to reporting errors, so they don’t recur?

30. Group 5 Questions: Operating framework –“moving on from bucket accounting ?” • How good is your bucket accounting? • Do you use a casemix funding method or similar framework? • Do you have clinical operating plan (bed days, capacity)? • Is your costing accurate? • Do you know where you lose money and where you make it? • Are all cross subsidies visible • Are you trying to get better at the things you have to do but which are losing you money?

31. So – how many did you get right out of 29 ? 20+ and you may be ready to start working effectively in an organisation with clinicians?

32. Healthcare Management 101 Debunk some myths • We are not short of clinical leaders – don’t believe anyone who tells you so • Clinicians are managers by the nature of their practice – they allocate resource • The standard nature of management structure and function in healthcare is poor – it has created a parallel world where clinicians have to be engaged • If you have separate terms (and tribes) for clinicians and managers you have got it wrong – start again from the beginning

33. Healthcare Management 101 Obstacles • There is a tremendous shortage of people who know how to operationally manage in healthcare. • But no shortage of people who will try and tell you how to do it. • How many people do you know who can prove they fixed a healthcare system by pointing to outputs? • There is no universally accepted set of terms, tools, frameworks – you have seen some of mine today! • How can we have any professional management when we can’t agree on the terms – Elliott Jaques • What an opportunity for New Zealand to be a world leader

34. Healthcare Management 101 Finance and Clinicians Recognise that we are not short of clinical leaders If you have separate terms (and tribes) for clinicians and managers you have got it wrong – start again from the beginning Build an Accountable Organisation Establish true Cabinet Government Develop a clear annual Operational Plan Deliver a high quality Financial Service to all Manage the variances

35. One message only Until the doctor decides, the patient dies Herbert A. Simon • If your management function is not maximising every opportunity for the doctor to make an informed decision as soon as possible - think again about how you are trying to do whatever you decided it was you wanted to do

36. Good luck