The DUPONT Decomposition Equation for ROI

D.D.E. FOR HOSPITALS AND HEALTHCARE ORGANIZATIONS

DEM blue

By Dr. David E. Marcinko MBA CMP

[Editor-in-Chief] http://www.CertifiedMedicalPlanner.org

According to the Dupont Decomposition Equation – which involves the conglomeration of net operating income, revenues, expenses and average operating assets – ROI and economic profit is increased in three prioritized ways:

  1. Cost and expense reductions.
  2. Revenue increases [Rev]
  3. Reduced average operating assets [AOO]

Note: ROI = NOI / Rev X Rev / AOO

Cost and expense reductions

Although many hospitals have reduced expenses, postponed projects and put clinical or information technology projects on hold because of the MU conundrum, this may be unwise and quality may suffer. And, mental health care programs are almost always the first cost center to be reduced in tough times.

Upgrades today, especially with concurrent marketing and advertising promotions, may well be considered a strategic competitive advantage, and at bargain basement prices for those with cash or credit. This cost reduction is easy because it gives the biggest buck-bang in the ROI equation, and is the first line of ROI augmentation by savvy administrators and CEOs. It is also intuitive and wholly “wrung-out” in the marketplace, to date.

Revenue increases

On the other hand, revenues can usually be only incrementally increased by improving services like emergency care, urgent care, wellness, out-patient and/or surgical departments. This is the more difficult part of the equation and yields a positive, but lesser return in the ROI equation.

CITE: https://www.r2library.com/Resource/Title/0826102549

DuPont Formula: Learn More At Accounting Play

Three Modern Collections Rules for Hospitals

The following medical practice procedures will markedly increase upfront office collections:  

  • Train staff to handle exceptions. What is your policy if the patient payment is significant? Will you allow 25% payments—one today and three over the next three months? Communicate your policy to all staff. What will you do if a patient shows up without an insurance card? There will be other exceptions. Train employees to call the appropriate practice-management contact when an exception does not fit in the categories you provide and make sure those managers are responsive.
  • Understand that not everyone will shine in collections. The value of this new front-desk function should be reflected in job descriptions and wages. Track staff performance and hold employees accountable for collection goals. The most successful practices collect in the 90% range.
  • Provide professional signage that states your basic policy. “Payments are due at time of service.” Avoid typewritten, lengthy explanations taped to walls or desks that look like clutter.

Reduced average operating assets

Finally, any delay in updating facilities – while easy and may reduce operating assets – there is little ROI advantage and profit potential. Of course, facility asset upgrades mean borrowing funds through tax-exempt bonds – the main source of debt for most hospitals – and is currently difficult or impossible in this climate. Loans from banks, private investors, angels, venture capitalists or other financial institutions are similarly difficult to obtain. Thus, this part of the equation may often be neglected; as is the case now.

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Pass ALL PODIATRY BOARD Certification Examinations!

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As we complete our first quarter-century of service to the podiatric community, it is only fitting to update our colleagues of the extreme changes taking place in the individual board exam testing space.

Some of these changes are perfunctory with little practical impact; while others are so profound as to cause extreme consternation in the practitioner community writ-large.

For example:

Nomenclature:

  1. FROM: American Board of Podiatric Surgery -TO- American Board of Foot and Ankle Surgery.
  2. FROM: American Board of Primary Podiatric Medicine and Orthopedics -TO- American Board of Foot and Ankle Medicine and Orthopedics.
  3. FROM: ORAL questions -TO- “oral” computerized Clinical Pathology Conference-like queries
  4. FROM: American Board of Podiatric Medical Specialities -TO- American Board of Medical Specialities, in Podiatry.
  5. FROM: Non-Competitive MOC Exams -TO-Competitive MOC Re-Cert Tests.
  6. FROM: Solely DPM crafted exams to professional psychometric designs by PhDs, computer scientists, and E.Eds.

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Testing Dynamics:

  1. The Surgery Certification and Qualification tests now rely less on rote memorization and more on applied cognitive content, and may be very different from any other test you have ever taken, to date [ie., multiple choice or fill-in-the-blank].
  2. The Primary Medicine and Orthopedics Certification and Qualification tests now rely less on rote memorization and more on applied cognitive content, and may be very different from any test you have ever taken, to date [ie., multiple choice or fill-in-the-blank].
  3. Traditional human ORAL questions have been usurped by [non-human] computerized Clinical Pathology Conference [CPC] queries; AKA: Computer Based Testing [CBT] or Clinical Scenario Questions [CSQs].
  4. American Board of Medical Specialities now includes over a dozen general categories; including podiatry.
  5. The Re-Certification tests for Maintenance of Certification [MOC] now rely much less on rote memory, as in the past; and more on deeply experiential content. It is also becoming more competitive, to-date.
  6. So-called “wrong” questions by-design are called psychological “stressor questions” and are used to evoke emotional volatility and waste precious time. So, BEWARE!. Moreover; the so-called “points-to-pass” AND “points-to-fail” philosophy may be re-emerging.

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PODCAST: Healthcare Customer Service is Terrible!

WHY?

BY ERIC BRICKER MD

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