5 Things... #2 KNOW YOUR NUMBERS

It sounds common sense.  You need to know the numbers that define your company.  My experience has shown that many home care agencies don't know the critical numbers that determine their success.  They manage by reacting to the biggest fire instead of planning, monitoring and managing that prevents fires.

THE FOUNDATION:  In the blog, ...#1 STRATEGY, we established that you have to have a purpose and nested goals that all roll up to the top company goal.  The next piece is to know where the company is at now...and now...and now (etc.).  Know where you are at now and you know what needs to be addresses.  Actionable information is the key, not just data.

KNOW YOUR NUMBERS:

1. budget
2. revenue
3. cost
4. cash flow
5. customer success

BUDGET:  Your budget comes from your strategic planning.  How much profit, revenue, cost are you planning?  What is your target profit?  What assumptions are you building into revenue and cost?  Reality will soon vet your assumptions.  Budgets are NOT an annual exercise to do at a company offsite/boondoggle.  It establishes the numbers you use to run the business.  The budget must be alive and part of daily and weekly decision making.  Quarterly or annually budget evaluation is too late.

REVENUE:  For home care, revenue must be understood by payor types (episodic payers, per visit and hourly).  Budget revenue by payor type and monitor it weekly the same way.  It will drive marketing activities, internal operations and clinical utilization.  Any agency that is 70% episodic payor, 30% everything else operates differently then an agency 30% episodic, 70% everything else.  Knowing revenue by payor type tells you if/how you're meeting revenue targets and provides insight into how costs data should look.

COST:  Cost must be understood by both direct (by discipline) and overhead.  There are good "rule of thumb" calculations that let a home care agency know if their direct costs and overhead costs are reasonable.  These rules should have been used in the budgeting process, but they also help management know where in the agency to look and manage to improve costs.

CASH FLOW:  As with the other areas of the business, cash flow has to be monitored.  Not just the reactionary "what can we bill right NOW to get in some cash", but knowing all A/R and completed episodes that are not yet available to bill.  Billers and managers must always have their finger on the pulse of the efficiency of the clinicians and operation because they drive the billing workload.  I have seen more  cash flow problems because of lack of accountability for clinical documentation (turn in & review) and lack of commitment to run down physician orders then due to problems in the billing office

CUSTOMER SUCCESS:  Home care must start viewing the industry as a service with internal and external customers and less like a requirement.  Yes, we have to take care of the clinical need and meet all of the regulatory and financial realities of the industry, but we must also view all of our touch points as customers.  Healing the patient and ticking off the family and physician in the process is a loss in aggregate.  Customers must be understood and monitored.  HHCAPS is one way, but satisfaction surveys , MBWA and other more formal methods should also be used.  I'm not talking about a once a year big questionnaire because that is too obtuse.  This means having a company culture that is defined and monitored both internally and externally.

Knowing the numbers is all about have data and information that is timely, accurate and accessible.  Optimizing systems (home care/financial software & organization/jobs/processes) understanding, setup ups, tools and reports are the keys to success.  Spend time getting the right tools and setting up the systems in an investment in success.  Managers must focus time and energy on analyzing the data, not trying to find it and wondering if it's accurate, or even worse, making decisions without it.

Steve