Effective Communications Yield Stronger Operating Performance

It's hard times for many hospitals. Negative margins, declines in non-operating income, investment losses, decreases in days cash on hand and declining patient volume are wreaking havoc with the bottom line. The good news is, most of us can do better. We can reduce capital spending, change debt structure, contain labor and non-labor costs, seek strategies to improve patient volume and improve processes to enhance productivity and efficiency. But WHO will do this? It won't be the CFO. It will be the strategic and operations leaders. And HOW will they know what to do? Here's where communications is critical.

I'm talking about providing the right information to the right people at the right time. Financial statements should be timely, concise and meaningful. They should be understandable, focusing on the results, metrics and variances from plan that facilitate identifying areas of opportunity. Information should be provided to the Board, senior management and operating managers, that allows them to make the correct decisions to address the organization's situation.

Its incumbent on the CFO to develop reporting that provides the greatest insight. We know the language and business of accounting and finance, but do we know the language and business of the operating departments? I understand, as CFOs we're consumed with finance-related matters. But an important first step in communications is understanding the subject matter about which we're communicating. How can we be reporting, developing, interpreting, coordinating, and administrating the hospital's policies on finance, if we do not know what is happening outside of the finance department? So, walk around! Meet with operating managers, at their desks, and discuss their operating results. Spend some time in their departments and learn what they do, and the language they use.

Once you understand their issues, create reports that communicate the relevant facts, packaging information and concepts in a way that is meaningful to the targeted reader. Think about the appropriate frequency with which to report different kinds of information. It could be daily, weekly, bi-weekly, monthly or less frequently, depending on the subject matter. Use plain language, and the terminology they understand. Use charts, overviews, trends, whatever it takes to get your information across in a meaningful way.

Here's one important reporting vehicle, to start you off. Develop a Balanced Scorecard, incorporating the Key Performance Indicators that focus on the strategies, objectives and initiatives deemed by the Board and senior management to be critical to your organization. The Balanced Scorecard should be produced monthly. The KPIs should be relevant to each accountable hierarchical level: System, Organization, Division, Subdivision and Department. Set goals based on peer-related benchmarking information. The actual KPIs could relate to productivity, volumes, liquidity, quality, etc. I won't delineate them here, for purposes of brevity.

Create a budget process that incorporates benchmarks and metrics,where each level in the hierarchy contributes to the development of targeted balanced Scorecard indicators.
Report the information consistently and timely. Create a culture of accountability, where all strive to achieve the targets, and are recognized for their achievements.

Other reports might include service line profitability analysis, supply chain analysis, labor management reports, and quality indicator trends.

Congratulations! You're on your way to creating a communications environment where  information (not data) is provided to the end-users that will allow them to make better decisions and manage effectively.