“Care. Compliance. Cash.”
When I started in the medical world over 20 years ago, the first hospital CEO I worked with told me that; ” In hospitals, care should be your first priority, followed very closely by being fanatically compliant, and when those two things are done, keep your eye on the cash flow so we can keep doing what we do.” I have never forgotten his advice.
Over the years, however, I feel one “C” word is missing; Conservative. I think it should go in front of Cash. Over the last year we have been asked to look at dozens of Wound Centers operated by hospitals or other management companies, that have not been performing well. When we ask to look at the initial pro-formas, for the center,(the financial reason the project should have been green-lighted in the first place) we often receive confused looks, and if we do get the document, it often seems to have been written in a fantasy world. Terms like ” we will capture up to 80% of potential patients”, and “…potential for over three million dollars to the bottom line in the first year alone…” make my head hurt! My favorite is always the little asterisk that denotes “.. a percentage of this revenue will be contributed by spin-off revenue..” (Look here if you would like my opinion on spin-off revenue!)
Not only do these numbers often seem to be out of whack, they rarely rely on actual collection numbers the hospital receives. You know, the money the hospital actually has to work with!
Once we determine that the initial projections were optimistic at best, and in some cases, just pure fantasy, the next question is “How did the company track these goals for you?” Usually, we hear crickets again. Many times hospitals are paying a large percentage of revenue, without knowing if they are collecting the revenue that has been reported. We even come across hospitals that have a huge number of denials, and the group they are working with has not addressed the issue!
A proforma is not going to be a perfect document, it is after all a “projection”. Even with that said, the numbers should be based in reality. They should be held as the standard that the management must meet, and there should be some way to track the actual collections. (not just “charges”) We provide a dashboard for the CEO’s and CFO’s we work with that tells them where we stand daily against the budgeted numbers which come from our initial proforma. Those initial numbers should be “Conservative”! If you are not working with us, (and my first question would be “Why not?”) then you should work out a similar system with your management company or operational team to see where you stand against that initial pro forma. If you are entering a joint partnership arrangement, make sure the contribution made by the company you are working with is worth the projected fee. Things like “….company will provide two monoplace chambers at a cost to company of $550,000 per chamber..” should be questioned, unless you have requested a solid gold chamber with diamond studded gauges!
A side note: Remember, Compliance is in the four “C’s” as well, so I would suggest verifying that the process and payment plan meets all regulatory requirements like Stark and CMS requirements prior to entering an agreement.