Question

It is the second Monday night in October and it is now 3 a.m. You cannot sleep.

You are the CFO of Marysville General Hospital, a 300-bed community hospital in the Midwest. Your hospital board meets at noon on the second Tuesday of each month. You have a truly awful report to give the board, and you are dreading it more than anything else you've done in your 15-year career as a hospital senior manager.

The target for days in accounts receivable (which the board and CEO set some years ago) is 55 days. When AR days are at 55, cash flow to the hospital is strong and you can meet all monthly obligations while putting some money away into investments for the hospital’s future.

It has been several years now since the hospital has seen its AR at 55 days. There have been many factors, but AR has been in the 70–80 day range for some time now. Last month it crept up over 90 days, and this month you have the painful task of reporting to the board and CEO that the hospital is carrying 100 days in accounts receivable.

You must come up with a plan to bring AR days back in line, and you will not be able to accomplish that alone. It will take cooperation from the medical staff, the clinical departments, health information management, the business office, and many others. But it must happen and it must happen soon, or your community could actually lose its hospital.

Your Role/Assignment

Come up with a plan to bring AR days back in line. It will take cooperation from the medical staff, the clinical departments, health information management, the business office, and many others, so include how you will involve these departments in devising a solution.

As you prepare your process improvement plan, keep the following in mind.

What further data collection will you conduct before beginning to write your plan?

What will be the elements of your plan?

For each element, who will be the key players and what will be their roles?

What resources outside of senior management will you engage?

How will you present your plan at the board meeting?

And how will you know that your plan has been effective?

Answer 1

What further data collection will you conduct before beginning to write your plan?

At first, we must know how to measure the AR. We should first calculate the number of days for AR process. Like in the given case it is 55 days’ time. Then will collect the required data as to the customers and clients from whom the payment is pending and generally how much time they take for the payment. How frequently each of the department is doing credit transactions. What are the policies frames by the department for late payment or non-payment? KYC details of all customers and their respective case. Past records of the payment of that customers.

What will be the elements of your plan and for each element, who will be the key players and what will be their roles?

1. Maintaining the details of the customers and their track record of how much they owe to us and when is the due date. Their KYC details to contact them and their frequency of visits. – This will be taken care by the receptionist and health management staff to give the information to record the same. Their key role will be coordinating and alleging whosoever is doing transactions on credit basis and sending the same to business department for their perusal;
2. Invoice them on the same day of the transaction as if we take days to prepare an invoice, the more will be the delay in payment from them and a delay in making tons of invoices backlog – This will be done by accounts team, tracker maintained by the receptionist and business team will shared with the accounts to prepare the invoice and send to the customer;
3. Always check beforehand the ability of the customers to pay back and accordingly choose the method of accepting the Payment – This will be done by the legal department who will check the credit capability of customers by having the software in hand ready.
4. Set up the mechanism by which you can schedule the customers from whom the payment is pending for long and start giving reminders of the payment 10 days before the due date already.

What resources outside of senior management will you engage?

We need to engaged accounts department, legal team and business team along with the ward staff and receptionist. They together maintain the record of the customer visiting and pass on this information to other team for their respective perusal. If these people work together and coordinate themselves, problem of time gap will be resolved soon.

How will you present your plan at the board meeting?

We will make the presentation on how this plan were working presently and what was the flaws in it. What do we need to do now for fixing this and how will we go about it? We will include all the departments and will explain all contents of the elements framed they’re via projector clearly visible to all.

Projection of problems is negative unless it is accompanied by the solutions for fixing it.

And how will you know that your plan has been effective?

Continuous follow up with the accounts department and make them report you. Implementation is the main stage. Here you need to control and take feedback of the plan put forward. And ask for any concern and problems they are facing and check the AR ratio now.