Lean Finance Transformation for Hospital Shared Services Case Study

Case Studies Finance Operations
Hospital Finance Operations Transformation

Case Study: Lean Hospital Finance Operations Transformation

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.

Project Sponsor:

Chief Financial Officer

Non-technology, self-funding operational improvement implementation:
– No new technology
– End-to-end finance operations
– 6-month implementation

Client Description, Finance Transformation Project Scope, Lean Objectives

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

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 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. All work was complete in 6 months.

Project Objectives:

– Lean finance transformation
– Centralized shared services operations
– Increased financial analysis
– Hospital operations cost reduction

Project Scope:

– Controllers
– Capital budgeting
– Financial planning & analysis
– Accounts payable
– Payroll
– Tax

Finance Transformation Examples – Lean Process Improvement

The Lab identified and implemented more than 200 non-technology 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. The Lab redesigned standard reports 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 lean finance operations process improvements eliminated this avoidable work within three months. This allowed staff to redirect their effort to their most valuable service: financial analysis

Implementation Results:

  • ROI (12 month) 5x
  • Break-even point 5 months
  • Capacity Improvement 25%
  • Annual Savings $13.8M
  • Operating Cost 20%