Array Advisors Insights

The Proof is in the Profits - Analyzing Healthcare ROI

Posted by Hilary White on March 16, 2018

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I joined the Array team because I wanted to change the way healthcare leaders think about their strategic business decisions. My passion for this awakened when I hit a pivotal moment in my career. I had been working for a large academic medical institution for some time when I began searching for a challenge that would use more of my skills. A mentor in another department wrote me one day with an assignment.

He had recently attended an industry conference where he expressed his vision to do away with a service line that he viewed as capital-intensive but not profitable. He acknowledged that the venture produced downstream revenue, but insisted it wasn’t worth the investment. His peers at the conference disagreed with him, and he found himself wondering if he was missing something. He was determined to find out.

He paired me with another financial analyst and some members of the market research team, and asked us to perform an analysis of that service line, drilling down into each procedure to determine the profit margin at an incredibly granular level. We analyzed billing codes by volume, examining their revenue after applying the institution’s standard payor mix. We looked at the costs associated with fixed and variable labor and supply. Ultimately, we produced a comprehensive model detailing which procedures were profit-generating instead of just revenue-producing and which ones weren’t. My mentor saw the bottom-line figures proving the service line was profitable and was satisfied with our analysis. We coupled that information with the market research team’s demand analysis, and collectively the information drove us to change the way we staffed and operated the institution’s new location.

Even though our analysis showed we could make money, I couldn’t help but wonder whether there was more information available at our fingertips we weren’t using. My mind roamed with possible “what ifs?”

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ArrayAdvisors_FinancialThoughtBubble1.pngArrayAdvisors_FinancialThoughtBubble3.pngSurely there were other ways to structure this information that would help us to not only answer the profitability question, but also to ask better questions in the first place. This kind of ROI-based decision modeling is integral to an organization’s strategic business decisions.

The ability to first recognize the need for this kind of thinking and then implement it is one of the things I love most about Array. In my short time here thus far, I’ve been on teams affecting strategic changes at two health systems important in their communities. In Washington, DC, I am part of a team determining the optimal healthcare-related use(s) of part of the former Walter Reed Medical Center campus being redeveloped by Children’s National Medical Center. In upstate New York, we have prepared a strategic master plan for a major healthcare institution with deep ties to the communities they serve as they strive to transform their institution for tomorrow’s healthcare demands. Our commitment to strategy-driven, business-justified solutions sets us apart.

 

 

 

Topics: Strategy, financial analysis