Case Study Better Metrics for Financial Management Paul is a newly promoted Chief Financial Officer (CFO) of the Columbus City Health System, a large, established urban health system. He has been with the organization for nearly two dozen years, and has seen the healthcare environment shift greatly over that time. Given all the changes that have taken place since the passage of the Affordable Care Act, Paul is concerned about his ability to present a clear picture of the CCHS financial situation to the board and to CCHS administrators. Not only is the reimbursement picture complicated due to the nature of third party payments, but the introduction of financial incentives and penalties based on organizational performance has hampered his ability to develop a reliable budget or forecast hospital finances. Given his promotion, Paul wonders whether he should use this transition as an opportunity to devise a better basis for the values estimated in the budget, along with accompanying metrics to monitor financial performance. New metrics might be able to account for penalties and more closely align with “worst-case scenario” income for the hospital, thus better preparing the institution if things do not go well. At the same time, Paul wonders how to best account for the unknown dollar amount that will be reimbursed for care given the shifting mix of payers and variability in negotiated rates. Another concern involves the cost of tracking and reporting quality data. Since starting in his new position, Paul has tried to calculate the cost of the resources (e.g. additional labor) required to achieve the quality measures set by the Centers for Medicare & Medicaid Services (CMS), and he has found the amount of work to be daunting. He has found that CCHS currently reports more than 1,000 unique measures to 35 different organizations, reflecting the reporting burden common to many healthcare organizations. Paul understands the importance of population health and measuring quality, but he also knows that resources are limited. He is acutely aware of the financial constraints facing CCHS. Paul thinks the time has come to improve the budget metrics so that CCHS will be better able to understand and report its financial picture. He does not consider any of these policy changes to be fleeting, and he believes they should be incorporated into the budgeting process. However, he is not sure how to do so. To get started with the process, Paul schedules a meeting with his analysts and asks them to come prepared to discuss how to improve their current budgeting process. $500,000 has been set aside for CCHS to invest in population health, which Paul believes will help the organization to reach some of the CMS quality measures. He has asked senior executives in each department to make recommendations on how best to spend the funds, bearing in mind how potential expenditures will affect the organization’s bottom line.

1. What are some of the issues Paul has identified with the current budget metrics? Are there other issues that should be considered?

2. What about the budget metrics can be improved? What cannot be controlled?

3. How can these new budget metrics be implemented, and who should be involved in rolling out the new metrics?

4. How could the list of metrics be shortened? Why would fewer metrics be a good idea?

5. How should the organization ensure that the metrics are regularly changed appropriately?

6. Provide a summary of your thoughts on how to best spend the funds set aside to improve the health of the population served by CCHS. Approach the issue from the perspective of a senior executive of the hospital.