Within one year, the AMC went from a projected $70 million loss to an estimated $39 million profit and with another $20 million in AR reserves.

While academic medical centers (AMCs) operate differently than typical community health systems, they often face similar reimbursement pressures, rising costs and patient demands for more holistic care. An example of how financial vulnerabilities can affect an AMC and how they can overcome those issues is a multi-hospital system based in the Southeast. The organization is made up of several hospitals including an AMC with 1,100 employed physicians and a school of medicine.

In fiscal year 2014, the AMC faced several operational challenges resulting in a forecasted $70 million loss. To quickly identify and resolve the problems, they hired a new chief operating officer and chief information officer, and brought in an interim chief financial officer (CFO) from Warbird Consulting Partners.

The most pressing revenue cycle issue stemmed from the AMC’s Epic patient accounting system, which was not implemented correctly and did not recognize net revenue accurately. After an accounts receivable (AR) review, they wrote off more than $110 million in net AR dating back to the Epic implementation two years before. To ensure accuracy going forward, the new team reinstalled seven major Epic modules, wrote new policies and procedures and retrained 700 revenue cycle employees.

Reimbursement was another significant pain point for this AMC. Following a thorough analysis, the Warbird interim CFO renegotiated payer contracts to bring reimbursements in line with the complex services provided. He created a separate managed care function, taking it from a one-person function inside the business office to a team with a vice president (VP) and seven additional staff members to support analytics and negotiations. To encourage community hospitals to send patients to their tertiary referral center, executives reviewed patient transfer and scheduling policies to facilitate same-day or next-day appointments with their many specialists.

Finally, the AMC’s new executive team made expense control a high priority. They reviewed all open positions to confirm their necessity and implemented a VP-level review and approval process for all new hires. Every month, each department director reviewed his or her operating and financial performance with their VP, explained variances and presented plans to get back on budget.

Within one year, the AMC went from a projected $70 million loss to an estimated $39 million profit and with another $20 million in AR reserves. A strong focus on operational efficiencies and adapting to the shifting healthcare landscape resulted in this $129 million turnaround on the AMC’s $2.3 billion revenue base.

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Michael Draa, CEO

Doug Fenstermaker, Senior CFO