One of the items of constructive feedback I have received is that some of my articles are too long. The subject of this article resulted in an article over 2,000 words long. I have reminisced with friends in the consulting business that have suggested that we collaborate on a book on this topic based on the experiences we have had. As a result, this article will be posted in multiple editions.
A very highly regarded friend of mine recommended that I address mistakes that might be beneficial to others. Nasreddin said something to the effect that, ‘good judgment comes from the experience we get from exercising bad judgment.’ Given the benefit of this insight, I will address some of the things that I have seen as the cause of extreme angst in one healthcare organization after another. An exhaustive listing is beyond the scope of any article. However, I welcome tips and stories from my readers addressing vivid memories of things that would be beneficial for others to know, especially those that do not have the experience of some of us.
Blind trust of systems
This is one of the most basic managerial errors and it is seen over and over. People ‘assume’ that a system will or will not do something without proving the assumption only to be surprised when their blind faith is proven wrong in a spectacular faux-pas. Rather than assuming that people understand the meaning of the word ‘assume’, I will define it by dissection. All to often, people engage in assumptions leading to flawed decisions that make an ASS/out of U/and ME. I wish I could remember how many times I have witnessed flawed assumptions wreaking havoc around me. Sometimes, these errors result in terminations of the people involved. Mark Twain and Ronald Regan said that, “It is not what you know that will get you, it is what you are absolutely certain of that is just not right.”
Once upon a time when I had reason to doubt the controls in the hospital’s accounts payable system right after a new state of the art, super whiz-bang accounting application had been implemented, I was assured by my Controller that there were safeguards in the system that he said would guarantee that there was no scenario under which an automated check for more than $25,000 could be produced and signed with my facsimile. I had set this limit to insure that I had the chance to personally review large disbursements and sign them manually. About a week later, it came to my attention that instead of keying a construction draw request of less than $25K, the A/P clerk keyed the remaining balance of over $275K to a contractor that the hospital was engaged in an active dispute with. What do you think happened when this transaction went through the system without interruption and out to the contractor? If you ass/u/me that he brought the check back, you would be sorely mistaken. I am sure others can provide similar nightmare stories.
There are thousands of ways to be trapped by our own systems. The more complex the systems, the greater the number of interfaces with other systems and the higher the volume of transactions, the greater the potential for error and the larger the error will have to become before it is discovered by normal control and balancing processes.
Another HUGE area of learning in the school of hard knocks is hiring decisions. Jack Welsh said something to the effect of, “Getting the right people into the right jobs is a lot more important than developing a strategy.” As an interim executive I have observed that one of the more common areas that gets organizations into trouble is hiring decisions that result in people being put into roles where they cannot succeed. Some organizations and hiring decision makers are highly motivated to put the next person in line into a role whether they are qualified or not. I have been criticized for bringing people from outside of town into the organization to fill crucial roles. My response is that if properly qualified local applicants were available, I would hire locally to save travel money if for no other reason. I have counseled Boards and written on the subject of organizational performance being nothing more complicated than the collective caliber of the team on the field. One of my mentors taught me by example the potential and value of getting the right people into the right places in an organization and the difference they can make.
Getting the right people is as important if not more important than avoiding hiring the wrong people by making mistakes in the vetting process.
I have seen so many executives brought down by incorrect valuations of their accounts receivable that I have lost count. So many in fact, that I was inspired to address one of my blog articles to CEOs that all too often become one of the first victims of this error. The article asks the question, ‘have you been caught looking?’ One of the biggest risks on a hospital’s financial statements is the valuation of revenue and accounts receivable and for every understatement, there are multiples of over-statements of receivable and revenue value. In fact, I have not seen an undervaluation recorded although I have been in arguments with outside auditors about under and over valuations of revenue and A/R. It is a lot easier to convince an audit partner to not book an undervaluation than it is an over valuation. The executive that wishes to avoid becoming a victim of this trap needs to take the advice of my article on the topic to heart.
A reclassification of AR is potentially more dangerous and harder to catch than a simple error in calculating realizable value. For example, consider an organization that holds self pay balances after insurance in the same bucket as the insurance. This is considerably more common than many managers appreciate. Suppose a commercial receivable is valued at 70% of the underlying charges and self pay receivables are valued at 5%. When an amount like $5 million is reclassified from insurance to self pay to clean up a backlog after the insurance balances have been satisfied, the adjustment to the value of receivables will be 65% (70% – 5%) or $3.25 million. There are other reasons for balances to accumulate in the wrong buckets on the receivable system leading to reclassification adjustments. The receivables are not wrong, they are just valued incorrectly. This kind of error is enough to knock an enormous dent into or potentially wipe out the operating income of any enterprise. There are rarely adequate cushions or reserves in realizable value calculations to absorb a shock like this.
As can be seen, a text-book could easily be written on the topic of what not to do. There are plenty of texts that are written on what to do, they are just all too regularly ignored. Some leaders seem to not have the ability to connect academic learning and practice. These are but a few examples of things that I have seen go wrong in healthcare organization’s business operations. This discussion is a good example of the value of experience. Experienced executives operating on evidence based practice have a far better potential to avoid these pitfalls and others. Sometimes the value of an executive in an organization is more related to what they know than what they do. Once a patient in an outage accosted a surgeon over his fee. The patient took the position that the fee bore no relationship to the time spent on the procedure. The surgeon replied that 5% of his fee was for the cutting and the other 95% was for knowing where to cut and what not to cut.
My plan is to publish another article on this topic with more examples of what not to do. If you have any stories to contribute, I would love to hear them.
I would like to thank Dr. Christy Lemak, Dean of the Health Administration program at the University of Alabama at Birmingham for inspiring this article. I am looking forward to seeing my grade.
Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general. As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you. I can also help with career transitions or career planning.
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