Healthcare Finance Operations: Standardization Roadmap Accelerates Transformation & Reduces $13.8m in Cost

client Situation

Lean Finance Transformation for Hospital Shared Services

The CFO was flabbergasted. Months before, under a mandate from the CEO to cut finance operations costs, she told her internal improvement team that the finance function needed to be centralized. They started with accounts payable (AP)—supposedly the easiest function to bring to the corporate shared services office.

But their plan backfired.

When they centralized, they failed to standardize the work, improve finance processes, and cut cost. Consequently, one-off reconciliation at the regional hospitals forced each to retain dedicated accounts payable staff. AP staffing actually increased by 10 percent.

Client Description

Finance Transformation Project Scope, Lean Objectives

The non-profit company operates hospitals across the United States. Its finance organization includes more than 1,300 employees in the corporate office and hospitals in a dozen states.

The CFO needed an effective standardization strategy to meet her cost reduction targets and simultaneously increase the organization’s capacity to deliver valuable financial analysis. She reviewed The Lab’s Knowledge Work Standardization approach to industrializing white collar work. She recognized immediately that two-thirds of her finance organization’s work was mundane and repetitive—ripe for standardization.

The lean hospital finance transformation began with a 7-week, Phase I process improvement analysis. It delivered a self-funding, guaranteed work plan that enabled an immediate launch of the Phase II implementation. 

Within 6 months, The Lab delivered lean standard work methods and effective centralization. Operating costs declined by 20 percent. The organization recouped 25 percent of productive capacity. Customer service levels nearly doubled. No core technology was required.

Finance Transformation Examples

Standardization-based Process Improvement

The Lab identified and implemented more than 200 standardization-based finance transformation process improvements.

Examples:

Reduced One-Off Reports—The finance organization created hundreds of recurring monthly reports. But they had never standardized the content with the hospitals. The result: scores of one-off, emergency requests every month. Duplicate reporting with conflicting data was rife. The Lab redesigned standard reports and then automated them with Microsoft Power BI to reduce one-off requests by 70 percent.

Standardized Data Definitions—No standard definitions existed for data used in financial reports. Reconciling reports typically required 4-5 meetings. The Lab standardized data definitions within two months. These new standards eliminated 80 percent of financial reconciliation rework to deliver lean finance and accounting operations.

Improve Analytical Services – Staff devoted nearly one-third of their time to reconciliation and error correction. The Lab’s finance operations standardization improvements eliminated this avoidable work within three months and enabled automation with RPA. This allowed staff to redirect their effort to their most valuable service: financial analysis