Greg Klugherz joined CentraCare Health in 2008 as vice president and CFO of CentraCare Health and St. Cloud Hospital. Klugherz, a certified public accountant, is responsible for the finance and treasury functions, as well as the revenue cycle and admitting functions at St. Cloud. CentraCare Health encompasses a 489-bed community hospital in St. Cloud, located 65 miles northwest of Minneapolis-St. Paul, as well as five critical-access hospitals. The health system employs 250 doctors and mid-level professionals.
CentraCare has been a beta site partner with Strata Decision Technology, a Chicago-based company focused on analytics, especially in the financial arena. HCI Editor-in-Chief Mark Hagland spoke with Klugherz on Oct. 21, as he was participating as a presenter in the Executive Leadership Symposium, a daylong conference sponsored by Strata Decision Technology and held at the Swissotel in downtown Chicago. Below are excerpts from the interview with Klugherz.
Tell us about your organization’s financial planning analytics work, including your partnership with Strata Decision Technology.
We’ve had various sources available to us over the past few years, as we’ve initiated and then advanced our work in analytics around financial performance. We had a cost accounting system available to us with a vendor that had sunsetted and left the industry. We looked at an array of available software vendors when we learned that our previous vendor was sunsetting its product. In fact, we had already been a Strata customer for years with their capital planning suite, but then we decided to add them comprehensively for budgeting and financial planning. We went live in January of this year with their full suite of products.
What have been the key challenges you’ve been trying to face in your ongoing initiative in this area?
We got started with a more organized, energetic pursuit of cost reduction in the way that larger organizations have. They’re looking at ACA [Accountable Care Act] impacts, as well as general cost issues that are being acted on by employers through their insurance company agents. And we came to realize that it’s going to be difficult to continue revenue growth multiples year after year going forward, and that would hit us in terms of seeing not much economic growth within a few years from now, and not many new people moving to our area, as well as being manifested in reimbursement increases slowing or even becoming decreases; as well as through our own pursuit of value. We expected all those things to conspire to reduce revenue growth dramatically in the coming months and years. In fact, we expected that it was unlikely that those growth multiples would match the unmanaged inflation we would experience on the expense side, so we came to the conclusion that we needed to intervene.
What kinds of things have you done?
We established a set of goals, and created infrastructure to support that set of goals. We did a launch of our initiative. And part of that was that we brought this message out to the entire organization regarding our the scenario we were projecting around costs and reimbursement going forward, and our challenge had been that our margins had been pretty good until now. So we laid out the case, and declared that this was our truth, our future, and therefore we had to act, and we put this in front of the staff, and told them we needed to seek financial improvement—both on the cost savings side and on the revenue enhancement side. And we’ve received over 1,200 ideas from our health system staff, which have led to our selecting 142 ideas we’ve implemented, and which we’ve put a monetary value of $11.5 million on. Essentially, what we did was to create an electronic suggestion box, and solicit ideas. Many have come from our managers themselves, and all the others have come from line staff and clinicians, from every single department, including housekeeping, for example. And all the ideas we selected for implementation, we gave a timeline of no longer than a year to execute.
Here’s how the process went: any individual who had an idea could put it forward, and the individual would pick an assigned, responsible leader, who would evaluate whether that idea was feasible or not.
How is analytics facilitating all this work?