HFMA's 7 Principles of Best Practice Financial Management

(I'm still in Haiti, but this is another post I wrote before I left... I'll be back June 5)

If you haven't made it over to HFMA's Financing the FutureWebsite, check it out now. They've released their 7th report on how hospitals will finance the future.

This report covers 7 Principles of Best Practices Financial Management and is actually free (just have to fill in a short registration form).

Though some may say the report covers "common sense" financial management strategies, I doubt all hospitals have these in place.

Some ideas that this triggered for me:

More than ever, hospitals need finance expertise

As obvious as it sounds, finance is becoming an increasingly necessary competency for hospital management. The stats reveal the state of affairs:
- in 41% of hospitals, depreciation outpaces capital expenditures;
- Hospital CFOs expect a marked increase in capital spending even while the % of hospitals with limited access to capital has doubled in 4 years.

Seems that all hospitals are in one of two categories: (1) they are improving financially and thus have better, cheaper access to capital; or (2) they are struggling financially and thus are finding it more difficult to obtain the necessary capital to renovate. HFMA calls this the widening gap separating the "have" from the "have not"s.

In case there was still any iota of doubt out there, let me just say it one more time: we can't look at hospitals as purely mission-oriented organizations anymore. We have to find a way to balance mission and margin.

Financial planning should be integrated w/ strategic planning & operations planning

This is pretty common sense, but for organizations that have been doing it differently, it takes a lot of energy and change to get here. It doesn't make sense for strategic planning or capital allocation or resource allocation or budget planning to take place separately. Because of the blatant interdependencies among all these processes, an integrated planning process is necessary. HFMA calls this practicing rigorous calendar management.

Everyone has to play by the same rules

GE is probably the posterchild of this - every single initiative at GE, whether it's a product or service, whether it's a domestic or international opportunity, goes through the same process and is evaluated using the same criteria (and even written using the same formats/templates). This ensures that strategic decisions aren't driven by personal agendas, the slickest presentation, or the current fad. (the hard part is getting everyone to agree on the criteria, weightings, and templates)

Getting good at saying no to good

Not only does the process / templates have to be standardized, but the evaluation of new opportunities has to occur concurrently. New opps have to be weighed against each other (not one by one). This competition of ideas and strategic initiatives forces management to make trade-offs - to say no to "good" ideas in order to focus on the best of the best. This aligns everyone in the same the direction.

For me, this is huge. More and more, I think the hardest part of management is this idea of resource allocation. It's saying "no" to really good ideas in order to maintain a laser sharp focus on the best ideas. It's why some organizations are far superior than others - everyone is marching in the same direction, and everyone is allocating their time to the most important aspects of the business.

Also makes me wonder if this principle is true about life in general, especially here in America. I often feel so distracted by so many good things and middle/upper class luxuries, that I forget about the best, most important aspects of my life: faith, family, friendship, and just being a thankful, forgiving person.