By Cheney, Glenn
Strategic Finance , Vol. 81, No. 3
HOW SOFTWARE STITCHED TOGETHER 1,500 REMOTE SITES
NovaCare had a pretty big problem last year. Then the federal government stepped in to make things better.
That's when things got really bad. Not bad, exactly, but complicated. The Contract Rehabilitation division of NovaCare, a nationwide healthcare provider, offered rehabilitation services at over 1,500 rehabilitation facilities throughout the United States. Approximately one in five geriatric patients in nursing homes was under NovaCare's wing.
The company managed this vast network without benefit of branch offices. Approximately 80 managers worked out of their homes, slinging their offices over their shoulders when they went off to manage services at a rehab facility. They kept daily spreadsheet data and compared it with monthly close information from the central office in Philadelphia.
Periodically they'd hear whether they were meeting budgetary and operations goals. The system worked well enough, but the competition borne of the revolution in healthcare meant the system had to work even better. So when Congress passed the Balanced Budget Act, enacting an immensely more complex Medicare reporting and reimbursement system, NovaCare saw no choice but to overhaul its financial reporting and analysis system.
A flawless system had to be up and running. Soon.
NovaCare had little time to get its new act together. The system had to be effective for the upcoming budget year, and the changeover had to happen in the midst of the most turbulent times the industry had ever seen. In March 1998, management decided to make the change. The new Medicare rules went into effect on July 1, simultaneously with the new fiscal year and NovaCare's new budget season. A flawless system had to be up and running by then.
Under the new Medicare mandate, geriatric rehabilitation and the corresponding reimbursement were limited to minutes spent with the patient based upon the patient's Medicare classification. Therefore, NovaCare budgets and operations depended on how many minutes were spent with each patient, how much revenue was generated per minute, and how well each minute produced the desired care of a human being's health.
Because the new system was essentially a financial reporting system, the responsibility of reengineering came down on Amy Esposito, who at that time was the division vice president of finance.
"The Balanced Budget Act completely changed our business processes, how we delivered our services, and how clients contracted our product,' Esposito says. "The financial model we had used before had to be completely rewritten. We knew we had a budget season coming up and wanted a tool to look at monthly and quarterly trends in the business. We needed a decision support product that would simplify budgeting for our nonfinancial managers and highlight areas needing improvement."
The Contract Rehabilitation division was to be the vanguard (or some would say guinea pig) project for the company. Eventually, according to plan, the systems developed there would become an enterprise-wide solution. It wasn't going to be easy, but success was the only option.
"The industry was changing so rapidly that we had to be reactive in our development of the model? Amy Esposito says. "In a perfect situation, you would have known ahead of time what it should look like. We didn't have that luxury"
Given the massive changes, the division stepped back and looked at all of the process flows within the organization. The goal was to simplify and streamline the daily management of the business, the annual budget process, the monthly close process, and the analysis of the business. The most incisive and pervading element was the budgetary data provided by each field operator.
Until then, the division had been using spreadsheet applications to budget time and funds to each healthcare facility. …