Corporate management systems
An individual Corporate management system will create more transparency of your hospital, and strategic goals and visions can be turned into reality.
This will not work just by utilizing financial figures and applying standard performance measurement. Confrontational means will not lead to success, too. Therefore Antegrad has developed a governance tool, means: management system and successfully implemented at clients‘ organisations.
The introduction of an unified DRG sytem (flat rate cases) has led to transparency of cost and true (price) competition between hospitals. The pressure to change and improve triggered by the DRG system will further increase constantly and not constitute a temporary challenge only which could be sat out and ignored. As in any competition, there are winners and losers. Within this environment, some hospitals have succeeded to position themselves very well in terms of medical and economic performance and the ability to generate sustainable profits. In any case the general rule applies that success will only be achieved by those who proactively and positively take the challenges and effects caused by the change to a revenue pricing model. Remaining in traditional notions and structures has been and is not economically viable, and in mid to long term perspective even jeopardizing future existence.
In the DRG system, as in any other pricing system, there are economically attractive cases/customers heavily targeted in the competition efforts and there are such being not lucrative. Over time, specialised providers chasing and serving the attractive cases emerge, and consequently they concentrate on these segments. Vice versa all providers not bound to a public service mandate, will refrain from serving cases inevitably generating losses. By implementation of the DRG system, hospitals in fact have become (profit oriented) companies and hence are subject to economic constraints, in all of their services and functions. All hospitals are called for offering marketable and competitive services only. This applies not only to their core medical scope of serving patients but also particularly to the secondary and tertiary service areas (laboratories, pharmacies, cleaning, administration etc.).
Compared to „common“ companies, hospitals are still facing a very specific internal differentiation between „core business“ and administration. Naturally, different stakeholders are pursuing different interests and goals. However, as a very hospital-specific phenomenon, each staff group — such as (attending) physicians, nursing and finance functions — is pushing for their particular interests and benefits much tougher than usual in, for example, industrial companies. This frequently leads to a substantial disconnect between the goals of such employee groups and those of the hospital as a whole, and sometimes such forces are in full contradiction to the goals of the hospital (management). Any responsible hospital management has to find ways to break such conflicts of interest.
Implementation of a Control system
Management and development of medical departments:
Crucial: simple cost center structure and clear/consistent allocation of cost
All business figures presented to leadership have to be valid (!!) and tracable down to voucher level.
Of course, those may differ from one medical department to the other. For example, pediatric department will generate a lower CM 2 than cardiology department.
Regular ‚Development Rounds‘
Particularly with the medical leadership staff, hospital management should not primarily discuss financial numbers – subject should rather be medical processes, competition, structure of referring phycisians, case potentials, hence
KPIs for medical departments
Number of cases
Number of cases
DRG revenues per case
Demand of beds (assumed 90% utilization, 365 days)
Share of OPS DRG
Share of Bons. DRG
Medical Service of the Health Funds (MDK) ratio
Inek comparison for medical staff
…these data are to be provided by the Medical Controlling department. Management will add selected external data such as:
General external data
Market shares per diagnosis (actual) and potential for +5 and +10 consecutive years; Split by sex and age
Case numbers by main diagnosis and medical departments of surrounding hospitals
Effects caused by demography, ambukat potential, minimum quantities, epidemiological development, medical advancement…
Catchment areas by focus service level (down to ICD); consideration of competition and filters as per above
Along with the medical figures, financial numbers are to be analysed and required measures to be derived from. Based on the scrutiny of the financial data, subsequent actions required have to be defined. Detailed measures to be taken are solely resulting from medical ratios:
Questions of that kind are to be discussed and improvement measures to be elaborated. By conducting such conversation, confrontatations can be avoided, e. g.:
‚Deadlock communication‘ does not support achieving hospital goals. Rather, by maintaining described performance enhancement dialogues with all medical key staff on a regular basis and supported by positive development of key ratios and communication of the same within the entire peer group, hospital management creates a positive internal competition for the best departmental wealthiness – hence, management and medical leadership do jointly develop medical portfolio and organisation of the hospital.
In almost any hospital medical key staff possesses a very high level of self-esteem:
Each cost center directory for a hospital comprises of 120 cost centrers. A responsible individual has to be assigned to each cost center (head of medical department, leading nursing staff, head of technical services, head of HR etc.). Having such organisation in place ensures clarity, e. g.: The area of responsibilty of head of medical department Dr. Miller generates cost to the tune of x €. This amount x can be segregated into staff cost and cost of material/external services and documented down to voucher level. In the same straight and transparent manner revenues can be assigned – for this purpose, similarly simple clear rules are to be set, e.g. revenue will be allocated to discharging or receiving medical department.
The resulting contribution margin is comprehensible to Dr. Miller, head of medical department. These official figures supersede the subjective perception of Dr. Miller. On one side, it can be documented if a medical department is making profits, and it can be displayed in which output and process related KPIs there are still potentials not utilized. Hence, tackling of recognized potentials can commence (rather than unspecific calls for ‚savings‘).
By identification of first measures to solve issues
the economic performance (i.e. contribution margin 1 and 2) of the department will improve simultaneously, and this progress can and should be honored accordingly. Of course, not all medical leadership staff is positively and consequently joining this way (in fact , there are exceptions i. e. opposing individuals), however the very majority of medical leadership staff appreciates the new transparency and the visibility of measures and their impact.
Antegrad gets it done
Antegrad has implemented such systematics in several hospitals with great success. Starting with restructuring of accounting and controlling department, cost center structures and accounting guidelines, Antegrad has led the development dialogues — at least in the difficult initial period — and established the system in order to handover the same to the hospital management. Each member of the medical leadershsip — i. e. each head of medical department — is either very pretious or very expensive to the hospital. The interaction and guidance of this – this administrative term may be excused – corporate resouce is a true management task and can not be delegated. Within the entire development of medical areas, heads of medical departments and hospital management constitute a team and can only entirely succeed as such.
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Your contact partner: Gerhard Becker