Wednesday, February 28, 2007

Q. What is management through focused measurements, and how will it help me improve how I run my company?
A. Focused measurements provide the information that managers need to ensure that the organization is on the right track. HME providers should develop focused reporting in two important areas. They are cash management and EBITDA. Cash measurements indicate the status of the company's balance sheet accounts. EBITDA reflects the revenue and expense accounts used to calculate profit and loss. Each measurement should be compared to a goal. By identifying unfavorable variances, managers can focus their attention on problem areas. It is important that the measurements are easy to compile. A delay in reporting variances can result in slow reaction and growing problems. To make the process effective for busy managers, the measurements should start with simple data, such as daily cash collections or weekly patient revenue. Picture an information pyramid, the simple focus measurements sit at the top of the pyramid. Each layer of the pyramid below the focus reports contains more detailed supporting data that is used to explain the cause of the variance. The manager or analyst will drill deeper into the detail until the cause of the unfavorable variance is discovered. In the case of cash collections, examples of detailed information include, but are not limited to, payments by payer, invoices submitted each day/week, cash collected by aging category and denials. To make the process efficient, the analyst will use the highest level of information required to identify the problem and create a solution. There are times when the problem isn't identified until you reach the most detailed level of information, which is usually individual patient data. hme
HME Consultant Joe Haley is a partner with Healthcare Strategies. Reach him at or 401-447-7123.