“Instead of just taking care of debits and credits, they now need to know how IT systems work in a very intimate way. Their job has become understanding the entire enterprise and how transactions are accumulated and processed.”
New payment models and technology in healthcare are bringing big changes to the hospital controller job as “following the money” has become more complicated than ever.
“A controller’s function is to take actions controlling expenses for a hospital,” said Mark Norrell, a lecturer in health management and policy at the School of Public and Environmental Affairs at the Indiana University Bloomington campus. “For the last decade, organizations have cut costs inside the walls of the institution and have cut all there is. Additional savings will come through efficiencies of scale brought about by mergers and acquisitions.”
Controllers are responsible for the financial books and records of an organization and for the internal controls needed to follow money around the hospital. They are the first line for financial reporting internally and externally. But industry changes mean they will be instrumental in setting up, and then integrating, new controls.
“In my view the primary driver of changes in the controller’s position is Enterprise Resource Planning systems,” said Tom Feuerstein, Vice President Financial Reporting and Operations at the NYU Langone Medical Center. “These large-scale implementations combine financial and other information systems to automate work flow across a wide section of hospital finance functions.”
ERPs automate financial transactions across multiple systems. Consider the purchase of medical devices, for example. When the requisition is filled out, the computer coordinates getting appropriate sign-offs. After approval, the purchasing system is accessed to see who the vendor is. The purchase order is generated electronically using this information and is sent to the vendor.
When the order is filled, the receiving department inputs that the medical device has arrived and updates the financial system. This, in turn, results in the payables system sending payment, all without having a single human involved.
“The controller needs to understand what is happening with this data, how the systems work and interface, and where the internal control points are,” noted Feuerstein. “Instead of just taking care of debits and credits, they now need to know how IT systems work in a very intimate way. Their job has become understanding the entire enterprise and how transactions are accumulated and processed.”
As with most of healthcare, changes in insurance payment are also impacting on the controller’s office. For example, the rise in high-deductible health plans means more money is collected from the patient, which affects the controller in two ways.
First, systems have to be set up and controls put in place to account for the money coming in from individual patients. The second is the impact on cash flow.
Insurance companies often pay within eight days. Now the bill is sent to the insurance company who sees the deductible hasn’t been met and sends it back. The hospital generates a new bill and sends it to the patient.
“The patient usually puts their medical bills on the bottom of the pile and pays it after the mortgage and cable bill”, said Norrell. “This slows cash flow down dramatically.”