Clinical Corner : Business

INtrapreneurship

Carol Kleinman — Mon, 18 Aug 2008 15:47:00 GMT

The word entrepreneur creates the connotation of a business-minded individual who pioneers change, who wants to work for herself or himself, and who organizes, manages, and assumes the risks of a business enterprise.

An intrapreneur is a person within a large corporation who takes direct responsibility for turning an idea into a profitable product through risk-taking and innovation. Intrapreneurism encompasses a variety of concepts: identifying and fostering employees who have what a considered to be intrapreneurial traits, developing an intrapreneurial process for part or all of a business, and developing innovation through rewarding intrapreneurial behavior.

For the intrapreneurial employee, advice abounds. They are advised to be courageous, moderate risk takers, frugal, flexible, and creative about their pathway. Their task is to put together a team of enthusiastic volunteers, build a network of sponsors, and ask for advice before asking for resources.

Gifford Pinchot's out-of print book "Intrapreneuring, Why You Don't Have to Leave the Corporation to Become an Entrepreneur" provides 10 commandments for intrapreneurs:

1. Do any job needed to make your project work regardless of your job description.

2. Share credit wisely.

3. Remember, it is easier to ask for forgiveness than permission.

4. Come to work each day willing to be fired.

5. Ask for advice before asking for resources.

6. Follow your intuition about people; build a team of the best.

7. Build a quiet coalition for your idea; early publicity triggers the corporate immune system.

8. Never bet on a race unless you are running in it.

9. Be true to your goals, but realistic about ways to achieve them.

10. Honor your sponsors.

Online forums that encourage new thinking have evolved, with Fast Company and The Intrapreneuring Cafe being among the favorites. Fast Company has the goal of chronicling the changes under way in how companies create and compete, highlighting the new practices shaping how work gets done, showcasing teams who are inventing the future and reinventing business, and equipping the people exploring this uncharted territory with the tools, techniques, models, and mind-sets they need. The Intrapreneuring Cafe, run by intrapreneur.com, discusses a variety of specific intrapreneurship issues such as what the best businesses are for intrapreneurship and government agency intrapreneuring. They also run want ads for intrapreneurs.

Another direction intrapreneurship is growing is in developing scenarios to anticipate future trends and responses. Scenarios are stories about possible futures which enable organizations to learn, adapt and develop better strategies. Scenario planning begins by identifying the focal issue or decision. There are an infinite number of stories that could be told about the future; the purpose is to tell those that matter, that lead to better decisions. While scenarios to-date have primarily been used for large scale planning efforts for such projects as education in the United States, it is very applicable to the business environment today.

Part 10: More Budget Secrets

Carol Kleinman — Thu, 31 Jul 2008 17:31:00 GMT

Budgets are done initially as computer-modeled projections based on previous performance. What that means is that the computer looks at what was spent and models a budget for the next cycle based on that amount. Thus, if you spend less, you will get less. It's pretty weird, but it reflects the belief that you do not need as much as was allocated.

In the real world, while all budget line items are examined, the greatest focus is placed on staff costs, followed by supply costs. I work very hard to keep those two in line. But for other line items, I have a policy of not only spending every penny, but of going over five to ten percent every year. That is often not enough of a variance in these areas to attract much attention and it allows me to be allocated just a little more next year. This strategy allowed me, over several years, to develop a few subaccounts with money I could use in various ways to the benefit of my staff and the unit. I call this "creative accounting..."

Believe me, I learned this strategy the hard way by being very attentive to budget limits and staying just under budget across the board...only to be allocated less the following year! In general, as managers you should spend up to...and even slightly over...the limit for line items (other than salaries and patient supplies, of course). I even suggested to my managers when I was the CNE (though I deny I ever said it!) that they do so as it helps all the nursing units. Sometimes, there will even be money left over in various subaccounts.

Whether or not you will be able to use the money left over toward something else is a question you will need to find out from your organization. Some allow the transfer of funds from one subaccount to another and this should certainly be explored as it will allow you to spend the money where it is most needed. Even if this is not possible, I would spend all I could on, for example, journal subscriptions, because it will tell your staff you are interested in their growth as professionals. Using the funds for books and creating a unit-based library of reference books is often another way to use subscription funds. There are truly many ways to develop creativity in managing the budget!

In most of my facilities I was able to move money from one account to another through an interaccount transfer and that helped me pool funds for different purposes. I also worked directly with finance to create new subaccounts and transferred money into them from other subaccounts. For example, there was no account for journals and books and I was able to create one so staff could have resource books and current journals available on the units.

Another example was the staff request for new lockers, to which I believed they were entitled to keep their things safe. However, in total the lockers would have cost much more than $1000, putting them in the category of a capital request, which I knew would never be approved. The cost was also more than I could authorize at the time as a nurse manager, as my signing authority was limited to $1000 and my director would have had to approve the purchase, which she would not have done. So I ordered them but used the subaccount of minor equipment (which was for beepers and cell phones and the like), ordering six at a time and doing that every couple of months until everyone had a new locker.

Managers (and even administrators) have spending limits on what they can purchase on their signature alone. Going above that figure requires the signature of a higher-level manager. As I have no interest in bringing some of my activities to their attention, I am always below that number. So, if my limit is $1000, I may have three or four orders for $900. I share this with the vendors and ask for bills or invoices for those numbers and they always comply...they also know the game!

Part 9: The Courage to Lead

Carol Kleinman — Mon, 28 Jul 2008 16:11:00 GMT

As I developed the recent blog entries, I was led to reflect on what is required of our leaders in the current health care environment. It seems to me that so many of those who allege to lead us suffer from a failure or fear to act. I think courage is one of the key elements required of true leaders, though I am not sure how much you will read about it in the literature. I know it is scary, but we must gird our loins and face the demons for the sake of the patients and our staff.

Are all of you ready to do that?

You might be interested in what I was able to come up with in the literature on the subject of courage in leadership. I think courage and a willingness to take risks instead of playing it safe is a key characteristic of great leaders.

-Clancy, T. (2003). Courage and today's nurse leader. Nursing Administration Quarterly, 27, 128-132.

-Hader, R. (2007). Leadership anxiety? Choose courage over complacency. Nursing Management, May, 6.

-Fifer, J. (2006). Courage in leadership: like a long distance runner? Healthcare Financial Management, November, 32.

-Fifer, J. (2006). Courage to lead in the revenue cycle. Healthcare Financial Management, September, 200.

Thinking about courage in leadership led me to reflect upon how management/administration is viewed by the rank and file. So often, administration is regarded with suspiciousness and doubt as staff believe they are not being told everything and think there is a hidden agenda that explains management's actions. However, once we are on the other side of the fence, it is so much different. Of course I would prefer transparency, just as I prefer complete honesty in personal relationships. But we all know that we must balance such honesty with tact and compassion. If we said everything we thought and felt to our spouses, significant others, parents, children, and friends...we would likely be voted off the island! The same is true for openness and honesty in management. How do we balance openness with the need to know? What if I need to be deceptive, but for a good reason?

Part 8: Developing New Services

Carol Kleinman — Tue, 08 Jul 2008 17:43:00 GMT

One of the important ways we evaluate ideas for new products or services is through a market and SWOT analysis, something you did last term in your portfolio assignment. Someone suggests something they think would be a great new product or service and then we go out and evaluate it.

In my last executive position the med-surg nurse manager suggested a unit comprised of all private rooms, with custom menus and chef-prepared food, better furniture, cable TV and movies, etc. She wanted to call it the Garden Suites. No one thought it would ever fly as our hospital had a huge percentage of charity cases, Medicaid, etc. However, an analysis was done and we built the unit which remained almost 100% full all the time! People will pay out of pocket (if they have the resources) for more nursing care, a nicer environment, better food, etc. I was amazed!

Does anyone have a story about a similarly surprising venture?

Part 7: Thoughts on Budgeting

Carol Kleinman — Thu, 19 Jun 2008 15:40:00 GMT

The operations budget, while based in part on expenses, is also based on revenue projections. Clearly we would not knowingly budget to spend more than we expect to earn from a product or service and so we budget accordingly. In general, we do not expect to have a great deal of money left over from revenues received after deducting all the operating costs, i.e., the costs of providing services. What we do have left...and it is usually a very small percentage...we do not leave in operations accounts, we move into an account that contains all the positive balances from various operations.

Essentially, capital budget funds come from these assets, ones that are left in the organization after all expenses are deducted. This includes not only operating expenses, but such expenses as depreciation, interest paid, taxes, etc. What is left is usually a pool of money call unrestricted net assets as we can do what we wish with them, up to a point. What is generally done is that the funds are used to replace outdated major equipment, expand existing services, and develop new product lines.

So, we expect operations to pay for themselves through the revenue we generate and we use the resources left to continue to grow our operations. We do this for various reasons. Sometimes we simply do this to remain competitive. In one place I worked, the L&D area was dismal, old and un-renovated, and no one care because most of the mothers were Medicaid recipients. Then another nearby hospital opened a state-of-the-art LDRP center and all the Medicaid moms went there. Despite the fact that the revenue was low on a per-patient basis, losing ALL of it was a blow. My hospital had to create an L&D area that was just as up-to-date in order to regain market share. Similarly, if we want to keep our primary referral sources, usually physicians and payers, we need to have the kind of environment and equipment they expect.

I wish we could allocate those funds back into operations and add to staffing ratios and so on, but you will find other compelling realities exist in the executive offices that require senior administration to make some difficult financial decisions.

Do you feel ready to do this?

Part 5: Creative Accounting

Carol Kleinman — Tue, 13 May 2008 16:23:00 GMT

I thought I would confess one of the strategies I employ in dealing with difficult-to-acquire capital items, something I call "creative accounting." As all of my experience has been in behavioral health operations, it was always been clear to me that providing the best equipment for the mentally ill has never been a priority in most hospitals.

In my last administrative position, the unit was old, the furniture was broken down (when the unit first opened the furniture had been acquired from the warehouse of discarded furniture with the belief that there was no point in providing decent furniture to patients who would not appreciate it or who would destroy it), and the floors in terrible disrepair. There were no supplies, no recreational equipment, and the whole environment was pretty sad. The nurses were still using thermometers with probes while every other unit had the ear thermometers. My nurses were still taking manual blood pressures while all the other units had electronic ones that operated automatically. All the other patient care units had a Pyxis machine for medication administration but we still had a rickety cart with wobbly wheels and drawers that wouldn't open or would fall out. The list could go on and on.

I requested capital funds year after year and was turned down. But because I spent just over the limit in every line item-other than salaries-each year I got a little more allocated for that line item in the budget. One of the line items was for repairs to materials and equipment, but this could not be used for replacement as that would be a capital expense with depreciation over several years while repairs were simply expensed out each year. So one year I "repaired" the floor. The whole floor. Three feet at a time. Continuously...until it was all new. If I had been questioned I simply would have said the floor was in such disrepair that I just kept repairing the parts that were dangerous and might trigger patient falls.

Another example I will share was cited in a book published by Sigma Theta Tau called "Ordinary People, Extraordinary Lives." It is a book about inspirational nurses whose personal stories were written by someone whose life the nurse impacted. I am honored to be one of the nurses included in this book and I will post to document sharing the story that was written about me by one of my graduates. That story, too, describes an example of creative accounting and how I used it for the benefit of the patients for whom I was responsible.

One of the most valuable things nurse managers and administrators can learn is how to find "workarounds" to solve problems that are caused by the often-rigid structures and policies within our organizations.

Both stories illustrate one of my mottos: "I would rather ask forgiveness than permission." I did what I needed to do for the patients and did so creatively. Does anyone have a similar story?

When I reflect further on "creative accounting" and tried to think of more examples, I first thought I would share my personal accounting activities in which I rely on the famous "float" so I use more of my money than the bank does, but then I realized the IRS might read the post and notice and I would have to finish my postings from a Federal prison...

Seriously, part of the strategy has to do with willingness to engage in risk-taking behavior. As you become more experienced, you begin to develop a sense, quite frankly, of what you can get away with in the system and which activities are too far below the radar to get anyone's attention.

Part 4: Reimbursement of Costs…ALL Costs!

Carol Kleinman — Tue, 29 Apr 2008 17:21:00 GMT

When nurses begin to learn about the difference between cost for an item and the total cost for everything involved in supplying the item they are often upset to learn that there indeed may be a charge of $12 for a simple aspirin. Most see it as health care facilities having "marked up prices" when there are, in fact, the only way we can cover other costs associated with providing care for which we cannot be reimbursed.

What we do when we develop charges is try to determine all the costs associated with the service or item, and there are many. We then develop a charge consistent with the total amount. Thus, these are not inflated charges, but rather a reasonably accurate determination of all associated costs.

We are often reimbursed an amount less than what we charge and there are Generally Accepted Accounting Principles (GAAP) that determine how we handle the difference. Typically this is done through including a contractual allowance that is a deduction from the gross revenue we "book" or enter into the ledger. If we enter only the amount we receive, we will not capture the actual charges and not accurately reflect the discount we gave to the payer.

The only way we collect money in our facilities is to charge insurers for the actual care we provide to the patients who are their members. This includes tests, treatments, etc. But far more is included in the costs of running the facility than just those elements that are part of the direct care of patients.

For example, how do you think we are paid for the laundry we use in patient care and other activities? How do we get paid for the security guard who ensures staff and visitor safety? What about the people in payroll who process our paychecks? And the medical records people who maintain patient records even after they are discharged? Do you think we bill the insurer for these services? Do you think they would pay? Do we just absorb all these costs?

When considering accruals for all costs, we must also add to the cost of supplies a portion of the salary for the person who orders them, the individual who unloads them from the truck and places them in storage, and the person who delivers them to the unit. Then there is the cost of maintaining the inventory so the hospital never runs out of them and the cost of the people who review the bills for them, process the account payable, input the payment information into the general ledger, and someone to actually cut the check and put it into an envelope and mail it! Oh yes, and the postage...

While we add up the costs of doing business, we also have significant economies of scale that allow these costs to be spread over many items and payers so that, if we run our operations efficiently, the average of what we are paid covers our actual costs...and a little more. For example, if we are paid $25 for a bag of IV fluid, that may actually include $5 for the cost of the nurse who hangs it. But she is also hanging several other IV bags for several other patients whose payers are also paying $5 for it. In the end, we make enough from the volume of payers to cover the cost of both the IV fluid as well as the nurse. If you add to that the payers who pay, say $55, there is additional revenue to cover the cost of the nurse.

Ultimately, payers must reimburse us for the cost of all supplies and operational costs. This can be done as when we charge for each item as it is used, when we bundle charges and include it in the cost of a procedure, or it may be included in a per diem charge for a day's care (or another unit of service). Inevitably, everything we use for patient care must somehow be reimbursed to us or we are giving it away and, even for an item as inexpensive as a needle lock syringe, it would undermine our success as a business.

We are often using supplies that, individually, cost very little. But multiply cost by volume and a $1 item becomes $1000 a month, conservatively. We are constantly looking for ways to maximize our reimbursement while cutting costs. It is clear we do not even get reimbursed for all the actual costs of the care we provide, let alone achieve the surplus of funds that might be called a profit. What happens is that those patients with better insurance, for whom we get better reimbursement, carry the burden of the patients for whom we are paid less than the cost of their care.

Part 2: Prospective Payment Systems: An Historical View

Carol Kleinman — Mon, 14 Apr 2008 16:58:00 GMT

What happens with Prospective Payment Systems (PPS) is that we are paid a flat rate for each Diagnostic Related Group (DRG), rates that were determined after extensive research into the cost of treatment for specific diagnoses. What the PPS system did was identify a huge number of diagnostic categories based on research that determined the average cost required for hospitals to treat patients with various diagnoses. The individual diagnoses were grouped into related categories for which reimbursement was standardized. A length of stay was identified for each diagnosis and daily activities identified during the stay that were required to provide care for individuals with that diagnosis. Average cost of providing the treatment was identified per day and a total amount specified, one that is now what hospitals are paid. For example, a total hip replacement is worth $XXX per day and allocated a length of stay of X.x days. All costs related to the care of that patient are included. The same is true for the diagnosis of pneumonia, but the cost was determined to be less so the DRG payment is less.

As a consequence, we know in advance exactly how much we will be paid for each patient when he or she is admitted, based on his or her diagnosis. Comorbid conditions that carry additional diagnoses provide increased payments as do complications that occur while the patient is in the hospital. If we are able to discharge the patient in fewer than the number of days for which we are paid, we get to keep the extra money. However, if the patient exceeds the predetermined length of stay, we must absorb the cost...and the loss. That is why you notice such scrutiny on length of stay and so many initiatives aimed at reducing averages even by a tenth of a day!

Therefore, if the patient's care costs less than the amount we are paid, we keep the difference and the money is used to fund the cost of improvements, repairs, patients who have no insurance, etc. If the costs exceed the payment, we absorb the difference. As the greatest correlation exists between length of stay and cost of care, our efforts have focused on reducing length of stay as well as on the most appropriate use of resources. Furthermore, patients often do better at home, as some research has demonstrated. Beyond that, when a patient who develops complications we are going to be paid more as we are able to request money for secondary diagnoses and other ancillary conditions.

Currently, the other key issue is quality. The days of cutting costs at the price of quality are long gone as payers and other stakeholders are far too aware of the importance of quality. We are constantly required to demonstrate higher levels of quality while conserving valuable resources. It is honestly my opinion that the managed care initiatives of the last 20 years have required us to improve quality vastly over what existed under the old fee-for-service model. Case management allows us to provide patients with the right care, at the right time, in the right setting and mandates that we do so with our eyes constantly on the patient and patient-related outcomes.

Part 1: Sharing Financial Information with Staff

Carol Kleinman — Mon, 14 Apr 2008 16:53:00 GMT

One of my pet issues relates to the level of knowledge of nurse managers and administrators about financial operations. I even believe strongly in the importance of beginning to educate staff nurses in the fiscal realities of health care operations! I think nurse managers must be clinically competent as they must supervise direct care staff, but it is equally important that they possess strong managerial skills, particularly related to financial and human resource management. I published an article in JONA a few years ago titled something like "How Prepared are our Nurse Managers?" that addresses this reality.

Similarly, I think senior administrators need an understanding of the current processes that occur at the point of care...which is one reason nurses often do far better at executive levels than non-nurse administrators. However, at that level of administration business knowledge and skill often assumes greater importance than maintaining clinical skills.

So, what is the relative importance of clinical versus business skill and knowledge as one moves up the management and administrative ladder? Are nurse managers prepared for the business-related aspects of the role? Are senior nurse executives even fully prepared?

It has become crucial for staff members at all levels and in all positions understand the realities of financial decision-making and the issues related to expenses that confront us all. One of the things I did as a new nurse manager a long time ago was include financial results in monthly staff meetings for all staff. I took the monthly operating budget reports and simplified them, extracting key information, and used overheads (in the old days before PowerPoint) to show staff where we were related to projected budget numbers. I explained the concept of variances to them, showed them how I was required to justify variances, and demonstrated the way in which current results had implications for future management decisions I had to make.

I know it was eye-opening for them as no one had ever actually explained the "why" of financially-based decisions, no one had ever provided an understandable rationale for making some of the difficult choices managers often have to make. The information ranged from basic, such as the incredible amount of coffee and orange juice we used and were charged for (the stuff that seemed to grow little feet and walk out of the hospital), to complex, such as the aggregate of individual incremental overtime which could amount to an actual full-time salary at the end of a month!

This effort had many positive results as staff became educated about the cost of things they were using as well as the relationship between patient volume and expenses. They felt their intelligence was being respected as it was clear I believed they could understand complex financial operations and appreciated the increased level of open communication. They also felt they were more active participants in controlling costs and in ensuring the unit's financial success.

However, what do we do with staff who are often resistant and glassy-eyed when financial information is presented in meetings? I found dealing with this situation was actually pretty simple. I took my various financial reports---monthly operating statements, biweekly staffing reports, admission and length of stay data---and extracted selected information which I put on flip chart paper. Then I used them for mini-lectures first to educate staff about what these were and then to identify the figures I wanted to discuss. For example, I found the nourishment budget was completely out of control and I assumed the orange juice, coffee, and sugar were growing little feet and walking out of the hospital by themselves as there could be no other explanation for the incredible volume the units were using. When I presented this to the staff, all of them, on all shifts, the changes were dramatic.

I had a situation once, in the same hospital, when I had to reduce staff by two FTEs. In the days before my arrival the last two nurses to be hired would simply have been laid off. Instead, I met with all the staff on each unit, all three shifts, and laid out the financial reality, along with the need to reduce total hours by the equivalent of two FTEs. In each meeting I also asked the person with the least seniority to raise his or her hand. This made it real to them as we would not lose an FTE...we would lose Sarah or John or Yvonne. Eventually the staff themselves all decided to reduce their paid hours by two hours per pay period and the cost savings I needed were realized without anyone losing their job.

A Primer on Finance

Carol Kleinman — Thu, 20 Mar 2008 17:22:00 GMT

Nursing leadership skills have changed dramatically in a health care environment so different from years past. Nursing management skills are required at all levels…even at the bedside…as nurses have become coordinators of care. Financial issues have come to the forefront for health care organizations and nurses must be ever-conscious of fiscal realities. Additional skills are needed to justify staffing, ensure adequacy of supplies, and maintain quality in a time of fiscal restraint. Unfortunately, most nurses—even many nurse managers and directors—have had little formal preparation for the financial aspects of the managerial role.

The budgeting process in a health care organization is not unlike a personal budget. Budgets help us to manage ongoing expenses, allow us to plan for what we can purchase, and provide a mechanism for saving. Much in the same way our personal budgets allow us to implement a personal or family strategy, a departmental or organizational budget is consistent with the organization’s mission and allows it to achieve short and long term goals that are part of a strategic plan. By evaluating what we spend on a monthly basis, we and our families are able to evaluate our expenses and control excess spending. In exactly the same way, nurses who develop awareness of and insight into unit and department expenses can facilitate cost-consciousness throughout the organization.

I am constantly amazed at how little nurses know about how we get paid for what we do and how we run our organizations! In my opinion, it reveals a deficiency in our basic education.

The next several blogs will present a series on the financial aspects of care management. I hope they will provide an introduction to financial concepts and a basic understanding of how financial realities impact all of us.

Finance and Nursing - The Business of Caring

http://www.hfma.org/hfm/2006archives/month01/CoverStory0106.htm

Long-term care, anyone?

http://findarticles.com/p/articles/mi_m3257/is_n9_v43/ai_7894365

High Quality, Low Costs

Carol Kleinman — Wed, 28 Nov 2007 15:20:00 GMT

Long-term care organizations must continue to achieve high quality patient care and positive patient outcomes without increasing costs. One consequence of this reality is the development of care delivery models using "nursing substitutes" or unlicensed assistive personnel (UAP).

While these health care workers fill the void created by the shortage of nurses and decrease costs of providing patient care, many dilemmas are associated with their use. As nurses maintain responsibility and liability for the actions of unlicensed personnel, it is imperative they effectively delegate and supervise to ensure UAPs are providing safe and effective patient care. Nurses act in a supervisory capacity over UAPs to whom they must delegate but are rarely taught to do so in formal educational programs, requiring managers to find ways to develop staff nurses' delegation and supervision skills.

Nurses can look for guidance to the National Council of State Boards of Nursing's "Five Rights of Delegation"

Right Task - one that is delegable for a specific patient.
Right Circumstances - appropriate patient setting, available resources, and other relevant factors considered.
Right Person - right person is delegating the right task to the right person to be performed on the right person.
Right Direction/Communication - clear, concise description of the task, including its objective, limits and expectations.
Right Supervision - appropriate monitoring, evaluation, intervention, as needed, and feedback.

Steps in the delegation process may also be used to develop delegation expertise.

assessment of patient needs and UAP's knowledge and skill level
identification of tasks that may be safely assigned
prioritization of tasks and timeframe for completion
communication with UAP and encouragement to ask questions that may arise
evaluation to review progress toward goals
revision of plan as patient needs change

The use of the RN/UAP model is an undeniable reality. Nurses must develop the skills necessary to adapt to evolving professional roles and must be skilled not only as clinicians, but as leaders of the healthcare team.

References:

Sheehan, JP. UAP delegation: a step-by-step process. Nurs Manage. 2001 Apr; 32(4):22.

Kleinman, C. and Saccomano, S. Registered nurses and unlicensed assistive personnel: an uneasy alliance. J. Contin. Educ. Nurs: 37 (4):162-70