How to apply lean principles to healthcare IT and recover millions of wasted dollars
Healthcare CFOs and CIOs live in an era of unprecedented pressure to recover costs and improve quality in a fast changing regulatory environment. Massive reimbursement policy shifts, Electronic Healthcare Records (EHRs) requirements and industry consolidations have turned revenue streams into a complex overwhelming mandate.
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Healthcare systems are scrambling to navigate rules changes in reimbursements to Value Based Care from Medicare and expansion of Medicaid programs and implement the demands of the Affordable Care Act. These are just the latest in a series of mandates such as the Federal requirements for Electronic Healthcare Records (EHRs), and the Health Insurance Portability and Accountability Act (HIPAA), which add layers of mandatory activities to already complex daily responsibilities.
– News release, HHS, Jan. 2015
What this report covers:
- Healthcare delivery organizations (HCOs) CFOs and CIOs face tremendous cost management pressure as reimbursements decline and cost structures grow
- Growing IT demands outstrip the current IT labor pool
- Industry consolidation and changing competitive landscape magnifies the necessity of running a lean organization
This paper examines how a streamlined program in theoften-overlooked area of optimizing telecommunications billings may return significant dollars back to your enterprise, allowing for resource reallocation to areas of strategic importance.
The conflict of growth and constraint: lagging investment and IT labor shortage
IT continues to be one of the top budget items in healthcare, accounting for an average 4% of total revenues. However, at 4%, this lags other industries, like banking at 6.3%, even though there is an increased burden of adopting disruptive shifts in data storage – for example, Electronic Health Records (EHRs), massive security requirements and interoperability of often conflicting systems from industry consolidations.
Source: McKinsey & Company: “Applying Lean to Healthcare”, Dec. 2014)
The growth of these challenges has consistently outpaced the growth in numbers of qualified IT workers, resulting in a bidding war of sorts between industries for talent. Healthcare, though needing a much larger pool, lags other industries in pay scales. This combined crunch means an additional constraint of “doing more with less”.
The inability to fill positions – or waste time on non-critical initiatives – will put the enterprise at risk. Identifying core areas to streamline is critical.
The Telecom Services Management Challenge
With all of these responsibilities, managing the organization’s carrier networks and associated charges might seem like something that can be safely left as an afterthought, but doing so would be a big mistake. Telecommunication networks typically account for 30-40% of overall IT costs – and growing in importance as remote medicine, distance learning and consolidation gain importance. Hidden fees and underlying billing complexity make this a ripe field for applying lean management techniques.
The amount of total IT spending dedicated to communications, according to Gartner.
– 2014 world wide spending estimate; June 2015
Today telecom spans landline phones, mobile phones, Internet and data services, wired and wireless networks and various related technologies. Different companies can bill each of these services separately, and the bills often include a bewildering list of taxes, fees and other charges beyond the simple monthly charge for services. Health care systems pay hefty bills for telecommunications services, and they often do it with very little insight into where the money is spent.
Individual costs vary widely from a few thousand dollars a month for a small physician practice to hundreds of thousands or millions for a large, multi-state hospital network. Big or small, they all face a bewildering array of telecommunications service agreements and invoices.
Who Should Perform the Oversight?
Healthcare organizations confront complex and dynamic challenges. The hundreds and even thousands of invoices coming in each month for voice and data communications must be allocated accurately and paid in a timely manner. Yet if they are paid without close examination and research, organizations may be spending money unnecessarily on services that are unused, inaccurate, or ill suited to their intended purpose.
It is tempting to handle billing reviews in-house as many organizations rely on remote locations, an office manager, or the information technology department to review and approve, and then onto accounting for payment. Yet – are those really the best options?
Accounts payable is often overwhelmed by the thousands of total invoices and allocations while often having a high turnover rate of personnel. The organization’s administrative personnel are working full-time managing several tasks throughout each day including revenue-generating activities such as patient insurance. In addition to their normal workload, they must negotiate and review telecommunications services.
While IT is managing the hardware and software that connects to communications networks, the breadth of expertise in telecommunications, carriers, and pricing, is often minimal and most technical personnel really don’t like administrative paperwork functions. Before a healthcare delivery organization decides to keep telecommunications expense management in house, consider these questions:
- Do we have the necessary experienced staff to adequately analyze and research every telecom charge on every invoice, accurately allocate those charges, and pay the bills on time? If not, can we afford to hire the needed personnel?
- Do we have an up-to-date inventory of all our telecommunications services – circuits, features, wireless devices, usage, service agreements, and know exactly how they are all used? If not, do we have the manpower to create such an inventory and keep it updated?
- Do we have a process and centralized system to track and monitor the complete telecom management lifecycle? If not, can we create one?
Real Impact: Identifying the Cost of Telecommunications
To illustrate, let’s consider a hypothetical health care organization with 100 locations around the country:
- The telecommunications infrastructure includes data centers, backup systems for stored data, multiple networks, hundreds of circuits, thousands of telephone numbers and thousands of mobile phones and hand held devices (such as iPads or Android tablets).
- It spans dozens of different markets; so many different providers are involved, each with multiple billing systems.
- Any single location of this health care organization generates five or more invoices a month for voice, data, wireless and other services. Multiply that by the system’s 100 locations, and you could have 700 to 800 bills a month just for telecommunications.
If the answer to even one of these questions is “no,” building a solution in house may not be wise. What frequently happens is the IT department manages by exception: if a bill does not cross a pre-set threshold of change, it rubber-stamps approvals and forwards to the AP department. The AP department then pays the bills without any further close examination. This can easily lead to hundreds of thousands of dollars in hidden over-payments.
Reconfiguring the cost structure: outsourcing TEM
There is an alternative to diverting overextended internal resources and building your own platforms. Outsourced Telecom Expense Management (TEM) services deliver a dedicated, more efficient, cost-effective solution with Subject Matter Experts (SMEs) knowledgeable in telecommunications networks and billing practices. More and more companies are hiring TEM professionals, whose only business is managing every aspect of telecommunications operations.
A TEM firm can determine what services are in use, negotiate the most favorable service agreements on your behalf (they’re managing millions a month), streamline your services for maximum efficiency and can recommend additional changes to save both money and time. A TEM firm will provide a cloud-based solution to monitor charges on a proactive basis while accurately centralizing and simplifying your payment processes. This gives CFOs, CIOs and their staffs complete, realtime visibility to the true costs of their telecommunications networks – and the ability to redefine part of their IT cost structure to free up resources to use in other parts of their enterprises.
The axiom “you can’t manage what you can’t measure” – is fundamental to recovering cost in an organization’s telecommunications services and contracts. Telecom expense management is a continual process, not just a one-time operation. In addition, consolidations via mergers and acquisitions as the industry matures will contribute to future TEM management needs.
Outsourced TEM: Defining the Value
While outsourcing your TEM functions takes the direct burden off of your shoulders, it is imperative to thoughtfully evaluate key considerations, specifically:
- Telecom Expense Management can typically help an organization reduce telecom expenses 12 to 20 percent (up to 40 percent in some cases) and increase control over voice, data and wireless costs, in addition to including the AP functions. Typical payback ranges from 3 to 6 months.
- The ROI, measured in dollar terms depends on the current state of your telecommunications infrastructure. If the current telecom system is poorly managed, a TEM provider may be able to bring substantial savings in a short time. If you already have a reasonably good handle on the situation, the savings may be more modest. But in either case, you will be shifting the burden from your organization to hired experts.
- To make an informed decision between in-house work and TEM, an organization must fully evaluate the costs and return on investment of each and compare them side-by-side.
- Some TEM providers offer guarantees to save your organization time and money. Of course investigate what is included in those guarantees.
- Many TEM providers charge a setup fee to establish the initial database and inventory, while some don’t charge for this service as they are looking to establish a longer-term relationship.
With a good TEM provider, you will be able to:
- Create an inventory: This is the crucial first step. Before you can manage your services, you must know what and where they are. A TEM provider has the Subject Matter Experts (SMEs) to track down every circuit, switch, and mobile device and examine the contracts, billing history and other data that goes with each.
- Gain up-to-date real-time inventory: This is the secret to ongoing management. TEM providers use sophisticated software to keep the inventory fresh, adding new services as they come in and removing old ones as they’re taken out of service.
- Reconcile Payments: The inventory makes it possible to match your charges to your agreements. Have your providers raised rates behind your back? Are you being billed for mysterious third-party fees or taxes that you can’t identify? Are you still paying for services you haven’t had in months? TEM will tell you.
- Simplify payments: Most healthcare systems are billed for hundreds or thousands services every month. A good TEM provider will know what each are used for and can allocate them appropriately and upload or integrate the coding into your financial system.
Feeling the Stings
According to Gartner, anywhere from 12 percent to 20 percent of telecom charges are incorrect, and almost all of the errors – 85 percent – are in the service provider’s favor. Unused services and keeping up with optimizing usage and technologies reaches as high as another 10 to 15 percent. How much does that equate to for your organization?
Implementation of Outsourced TEM
The engagement process (see figure 1 below) is a straightforward sequence proven over thousands of successful engagements. An organization should expect to take about 100 days to implement MoT®.
Figure 1.
Success Story: AdvantageCare Physicians
In February 2013 four large physician groups merged to form AdvantageCare Physicians, one of the largest medical groups in New York City. Phil Myones, CIO and Steve Xenos, CTO were hired to merge these four disparate organizations into one. They had to take stock of all of the existing operating platforms, phone lines, phone numbers, call centers, email servers, EMR systems, etc. used to run the four separate organizations and determine how to integrate and/or replace them.
- Consolidation of the four call centers with more than 200 agents
- Complete rebuild and upgrade of all IT Enterprise-wide systems
- Reduction of ongoing telecom expenses
Myones quickly learned that Tellennium, a telecom expense management and enterprise consulting firm, had already been serving two of the four physician groups so he brought Tellennium on to help with the task at hand. His immediate undertaking included upgrading, consolidating and integrating enterprise-wide phone systems of the four call centers.
“Early on, we saw the value that Tellennium offered.” said Myones. Tellennium President, Greg McIntyre, and his team stepped in and immediately helped AdvantageCare Physicians prepare an RFP for the new enterprise-wide communications system to support all locations and the new call center operations on one platform. Tellennium helped vet the vendors and build the foundation of what is the system in place today.
“They made this very complex install go smoothly which adds to our bottom line and to our reputation,” said Myones. “I don’t think we could have accomplished what we did without Tellennium. We always weigh out our decisions with them. I think they know our phone systems better than we do.”
Consolidation of operations
The first large task was the consolidation of the four call centers into one. “It was total insanity; every piece, every variable was moving simultaneously;” said Xenos. Two hundred people were moving locations and being trained on a new telephone system that was being installed even as training occurred. Everything from coordinating employee skill sets to routing phone numbers to choosing and installing new SIP technology and state-of-the-art equipment was happening at once.
“Tellennium became like an extension of our department. They acted more like an inside employee. They were right by our side advocating for us and providing all the business intelligence we needed to get this done;” said Xenos.
Operational Savings
Myones was also charged with reducing telecom expenses. Initially, Tellennium identified and eliminated circuits and PRIs that were unnecessary or had never even been used. “Tellennium has saved us millions of dollars in duplicated circuits that would have taken us a long time to get to,”
Myones said.
They’ve cut our costs and eliminated circuits that we would never see or get around to cutting. Tellennium has saved us millions of dollars.
- Myones
While still consolidating the call center, AdvantageCare Physicians moved into using Tellennium’s software management system, MoT®. The platform gives real time visibility of circuits inventory and activity across the organization. AdvantageCare Physicians has access to the MoT® dashboard so they too can see, at any given time, what inventory is in play, what the usage is and what the costs are. “Without that software I think I would still be looking at paper bills and pulling my hair out,” said Xenos.
Tellennium processes all communications-related invoices and provides recommendation to ACP. “They do a lot of legwork to keep things from falling through the cracks. And they give us advice on best practice and steer us down the right path,” Xenos said.
The Results
With Tellennium’s expertise, leadership and support, AdvantageCare Physicians was able to consolidate and completely re-engineer their call centers within just three months. They built a new platform on which all of their infrastructure will operate and they have saved millions of dollars by eliminating unnecessary telecom expenses and better management of necessary expenses.
Outsourced TEM: Shrinking Administrative Burdens While Exponentially Growing Cost Savings
Managing telecommunications is complicated and costly, but the cost of not doing it well can be even greater.
“Telephone Expense Management is an often untapped treasure trove of double digit cost savings – and it’s easy to outsource and gain fast results,” says William O. Lehmann, a business process improvement consultant with experience in healthcare and financial industries, based in Louisville, Ky. “It should be one of the first quick hit projects for any CFO or CIO. It will likely reap huge results, especially for companies with large IT budgets as a percentage of their G&A.”
Still, it’s not part of the core competencies of health care organizations. It is THE core competency for a Telecom Expense Management firm. With a TEM provider, you will always know what your telecom services are, what they are being used for and how much you’re paying for them. With TEM, you can make better-informed decisions and reduce significant cost. Cost savings in one area frees up resources for investment in other – more critical – areas. Your administrative burden will become much lighter, and you can devote more time and resources to your first mission: Delivering health care.
About Tellennium
Tellennium began as a telecom consulting firm in 1999, utilizing objective expertise to help procure enterprise wide telecommunications systems and services. In 2002, we introduced Tellennium’s Integrated Management System or MoT®, our telecom expense management platform designed to proactively assist our clients with the continuous management of their telecom processes and expenses. With our expertise, proven processes, MoT®, and an unwavering focus on our clients’ best interests, Tellennium has grown dramatically since inception at a double digit rate year after year.
We have been nationally and internationally recognized by Inc. Magazine and the Gartner Group as a telecom industry leader. Our core philosophy is to apply the highest standards of honesty, objectivity, expertise, and sophisticated software tools to complex telecom issues, thereby providing our clients with a unique set of solutions, efficiencies, and proven results.