A Better View

How the University of Pennsylvania Health System cut budgeting and planning time by a quarter

by Monica Mehta, February 2009

With healthcare costs skyrocketing, healthcare providers are working harder than ever to develop rigorous budgeting processes that are transparent, flexible, and responsive. Those that reduce the time it takes to react to market changes, align financial and operational planning, and improve business predictability can retain their competitive edge while others decline. Investing in a best-in-class budgeting and forecasting solution can help meet these objectives and strengthen a provider’s ability to withstand the turbulence of today’s healthcare environment.

When the University of Pennsylvania Health System (UPHS) set out to find such a solution, it faced several challenges. How could it fix inefficient budgeting processes that had been in place for years? How could it manage several different businesses, US$3 billion in operating revenues, and more than 15,000 employees? And operationally, how could it determine the financial impact of buying equipment that cost millions of dollars?

Diagnosis: Change

UPHS is made up of three hospitals, two outpatient medical centers, and two suburban patient care centers. Its employees deliver medical, administrative, and support services through UPHS’s clinical, home care, and corporate practices and its large primary care network. Annual budgets are prepared by all seven business units, each with its own employment base, revenue, ancillary expenses, and capital projects.

The health system needed to control costs, optimize staffing, project accurate revenues, and oversee capital expansion. The challenge was how to manage a vast and complex budgeting process while maintaining the flexibility required for each organization to be nimble in a changing marketplace.

UPHS’s budgeting process was being done manually and in silos, making it difficult to do comprehensive financial analysis and planning. UPHS partially solved this issue in 1995 by implementing Hyperion Pillar, an early Microsoft Windows-based Hyperion product, to report expenses, and Microsoft Access to report revenues. In 2002, it also implemented Oracle Essbase and Oracle Hyperion Financial Reporting for management reporting. But the process was not Web-based, and management felt that it could have been more integrated. “With an integrated budgeting system, we felt that it would be much easier for us to get an accurate read of our revenues and expenses,” says John Kilroy, director of operational budget, planning, and capital at UPHS. “As our number of patient admissions, inpatient days in the hospital, and outpatient visits changed, we wanted our budget to update automatically on both the revenue and expense side.”

UPHS also needed a solution that would enable it to manage and analyze its labor dollars in a more detailed and automated fashion. Finally, UPHS was doing all of its capital budgeting and reporting through Microsoft Excel, making it difficult to analyze and prioritize projects across multiple entities. UPHS needed an integrated, automated, and Web-based capital planning solution.

Prescription for Success

In mid-2005, UPHS chose Oracle Hyperion Planning to integrate its financial and operational planning processes. “We saw the opportunity to leverage the investment we had already made in Hyperion Essbase and take that to the next level,” says Kilroy. “We had a good experience with Hyperion Pillar, and we knew that Oracle Hyperion Planning was a good product.” To help implement the solution, UPHS called on its longtime technology services partner ISA Consulting, which specializes in performance management, data integration, and advisory services.

UPHS and ISA implemented Oracle Hyperion Planning between August 2005 and January 2006. ISA worked with the design team, helping UPHS configure the solution to integrate all system processes into a single Oracle Hyperion Planning tool. The result enables 500 users throughout UPHS to perform sophisticated analysis of business operations without switching to different tools. Using a single interface, they could now create accurate forecasts and plans and access interactive analytics and richly formatted financial reports. Oracle Hyperion Planning also helps UPHS track more than 30 different key statistical indicators, such as admissions, patient days, outpatient visits, and procedures such as MRIs and chemotherapy treatments.

Kilroy says the new system has cut by 25 percent the amount of time UPHS spends on budgeting, planning, and reporting processes. “Previously, when we did reports in Excel, the reporting process would take us more than a day,” he says. “Now, it’s just a matter of a couple of hours.”

Revenue and expense is one of the major areas where Oracle Hyperion Planning has helped UPHS improve its budget and planning processes. “In healthcare, it’s important to link revenue and expense with patient volume, because many types of revenue and expense line items will vary based on the number of patients and the extent of healthcare services they receive within the institution,” says Ernie DiSandro, vice president for performance management at ISA.

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