Strategic Finance for Service Lines: Finding Opportunities for Growth

Healthcare providers are always seeking innovations and evaluating strategic alternatives to meet growing demand while healthcare legislation is adding challenges to an already complex industry. As the population continues to age and development increases the demand for high quality healthcare, providers must put themselves in the optimal financial position to deliver the best care to the communities that depend on them.

To do this, many are turning to a service line model so that they can identify profitable areas of their organization that will generate future growth and capture market share.  In order to identify the strategic value of each service line, organizations need to have a long-range planning tool that will enable them to quickly forecast each of their service lines over the next 3-5 years and evaluate growth areas so that investments can be made in the service lines that will generate the greatest long-term economic value for the organization.

Utilizing Oracle’s Hyperion Strategic Finance, Edgewater Ranzal has helped many organizations chart a realistic financial plan to achieve their long-range goals and vision.  Some of the ways that we have helped organizations are as follows:

  • Forecast detailed P&Ls  for each service line using revenue and cost drivers such as number of patients, revenue per procedure, FTE’s, and payer mix to accurately forecast profit levels of each service line.
  • Easily consolidate the forecasted service line P&Ls to view the expected financial results at a care center level or for the Healthcare organization as a whole.
  • Layer into the consolidation structure potential new service lines that are being evaluated to understand the incremental financial impact of adding this new service line.
  • Run scenarios on the key business drivers of each service line to understand how sensitive profitability, EPS, and other key metrics are to changes in variables like number of patients, payer mix, FTE’s and salary levels.
  • Compare multiple scenarios side by side to evaluate the risks and benefits of specific strategies.
  • Evaluate the economic value of large capital projects needed to grow specific service lines beyond their current capacity.  Compare the NPV and IRR of various projects to determine which ones should be funded.
  • Layer into the consolidation structure specific capital projects and view their incremental impact on revenue growth and profitability at the service line level as well as the healthcare organization as a whole.
  • Use the built in funding routine of HSF to allocate cash surpluses to new investments and to analyze at what point in time the organization is going to need to secure more debt financing to fund its operations and its capital investments in specific service lines.

Regardless of where you are in your understanding, analysis, or implementation of service lines, a viable long-term strategy must include a critical evaluation of how will you identify the market drivers for growth, measure sustainable financial success, and adjust to changing economic, regulatory, and financial conditions.

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