Put an effective structure in place
An effective net revenue department structure helps the finance team establish ownership of the month-end close process. Some strategies for achieving this include:
- Have the right players in place. Having the right team members in the right place – based on their strengths and abilities – helps improve accuracy and reliability of the information communicated, which ultimately leads to more organizational confidence in the month-end close process. If areas on the team are lacking in terms of expertise, consider enlisting the help of specialists in this area to fill knowledge or skill gaps.
- Clearly define policies and procedures. Having unambiguous procedures helps ensure adherence to predefined timelines, responsibilities, and assumptions, which is essential for being able to arrive at accurate and timely month-end estimates. Well-defined policies also are repeatable, meaning the team’s success will carry forward month to month.
- Use appropriate documentation. Clear and organized documentation should exist for all key points in the month-end close process, including midmonth projections, pre-close, and close. Appropriate documentation also should be used for modeling decisions and reserve assumptions. If the team needs to change something in the month-end close process, the documentation should clearly outline validation procedures and what approvals are required. This establishes clear escalation paths, helping team members know where to go when issues arise during the month-end close process.
- Develop consistent reporting schedules. Reporting information consistently throughout the month-end process allows analysts and leadership to identify trends and actionable insights at the same time and work from a single source of truth. To help manage expectations, the team should aim to use the same timelines.
- Create “swim lanes.” Presenting information in a diagram such as a swim lane (a type of flowchart that provides a visual explanation of who does what in a process) can serve as a valuable tool for team members to reference quickly and easily throughout the month.
Analyze the data: Revealing insights
Once the team has an effective month-end close structure in place, it can shift its focus to analyzing data that delivers actionable insights to key stakeholders across the organization. To accomplish this, team members should be familiar with the data they have, how to access it, and how to use it.
It’s critical that team members understand the data elements contained in any analytics solutions it uses. Team members also need to have a clear understanding of how operational events within the organization affect net revenue. Some suggestions for how finance team members can achieve these objectives include the following:
- Become familiar with data elements found on account-level reports.
- Know how data moves from the organization’s patient accounting system into its net revenue software solution.
- Understand how information affects reserve models and reporting, which can help guide the team’s data analysis.
- Understand the data well enough so that it can be used to drive operational improvement.
- Fully adopt the net revenue reporting solution as the single source of truth for net revenue reporting to eliminate complexity associated with topside or out-of-model adjustments.
Create an efficient month-end close executive summary
Producing standardized reporting packages around net revenue is a worthy goal for numerous reasons. Standardized reporting allows everyone – from the analyst level all the way up to the C-suite – to interpret and articulate key financial information more effectively. A standardized and consistently delivered reporting package also establishes trust in the month-end close process and confidence in net revenue results.
Some strategies for creating a standardized month-end close executive summary include:
- Define comparison metrics. Clearly defining which metrics the organization is comparing itself to helps promote a more cohesive understanding among stakeholders reviewing the month-end close summary. In addition to defining how the finance team wants to see the data, consider what leadership might want to see. (For example, are leaders interested in comparison to budget or comparison to prior-month trends?) Team members should aim to make the reporting flexible enough for them to pivot easily between different comparison points if necessary but focused enough for a universal understanding of performance.
- Consider materiality. Most health systems have their own unique variables that typically are included in their month-end close reports. Organizations should, however, consider the significance of each variable included and whether each one affects the organization’s overall month-end close “story.” The information included in the executive summary should help tell the story of how net revenue results align to the organization’s strategic goals and key performance indicators.
- Make sure cross-functional teams are on the same page. When finance and revenue cycle leaders bring two different figures and two different sets of results to a meeting, it generates more questions than answers during the month-end close process. Teams that work together during the month-end close process, such as the finance and revenue cycle departments, should be using the same data sources and share a common understanding of the metrics used. Consider whether cross-functional teams are using consistent messaging and whether they are calculating various metrics, such as cash collections and net accounts receivable days, in the same way.
- Continually monitor net revenue. Make sure the team is continually pausing to consider what it is presenting in its reporting packages. Team members should consider if the information has a purpose (does it help tell the net revenue story?) and if they understand the underlying drivers of changes in the metric itself. The team should periodically consider whether it should be tracking and trending any new organizational initiatives (for example, the addition of a new service line) and whether those initiatives should be included in the reporting package.
- Understand root cause analysis and have remediation plans in place. It’s crucial for the team to be able to review any impacts on net revenue results and explain to leadership whether the issue is a one-time occurrence or recurring. Leadership will ask questions about changes, so it’s a good idea for the team to be proactive and be prepared to give answers.
Delivering actionable net revenue insights
There’s a lot going on during month-end close – including a lot of challenges. Having an effective structure in place, using existing data effectively to glean meaningful insights, and producing standardized month-end close reporting packages can all go a long way to delivering actionable net revenue insights. This, in turn, can help healthcare finance teams bring even more value to their organizations.
