Financial Indicators: Early Warnings for Riskbased Supervision P. Van Dyk | Dutch Health Care...

Financial Indicators: Early Warningsfor Riskbased Supervision

P. Van Dyk | Dutch Health Care InspectorateCoördinating / Specialist Advisor of Research & Innovation+31615 03 5789 | [email protected]

EPSO | Porto May 2014

Riskprofile Supervision News SourcesConcern

HOSPITAL X * Click for more information

Reports & Complaints

Indicators Quality and Safety

Theme1

Theme1

Theme2

Theme2

Theme3

Theme3

Theme4

Theme4

Theme5

Theme5

Theme6

Theme6

Theme7

Theme7

SupervisionCorporate information

External Signals

High risk

Medium risk

Low risk

No (reliable) information available

No data defined

Program:

Concern:

Institution:

Location:Sector:

Year:

City:

Select providers:

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History 2009 2010 2011 2012 2013

Governance

Finance

Fraud

HRM

Staff

Facilities

Production

Image

Cliëntsatisfaction

Similar profiles 2009 2010 2011 2012 2013

Provider 1 X

Provider 2 X X

Provider 3 X

Provider 4 X

Similar profile* 2009 2010 2011 2012 2013

Provider 1 X

Provider 2 X

Provider 3 X X

Provider 4 X X

Findings 2009 2010 2011 2012 2013

Quality

Risks

Government

Riskmanagement

Compliancemanagement

Increased supervision:

Start End Summary

31-10-2012 20-03-2013

Reports 2009 2010 2011 2012 2013

Number of incidents 22 12 14 23

Number of complaints 8

Last inspection: 20-3-2013

Aspect KPI 2013 Signal

Finance Liquidity (current ratio) 63,8 X

Solvability 12,5

Debt coverage ratio 88,8 X

Profitratio -0,1 X

HRM Absentism 5,9

Inflow staff 10,2

Outflow staff 15,5

Governance Using governancecode Ja

Staff Nursing staff (percentage) 73%

Hired staff (percentage 10%

History 2009 2010 2011 2012 2013

Medication incidents

Theme KPI 2013 Signal

Theme 1 HSMR X

Unexpected long stay

Readmission rate 13% X

Theme 2 Indicator 2.1

Indicator 2.2

Theme 3 Indicator 3.1

Theme 4 Indicator 4.1 Nee X

Theme 5 Indicator 5.1 76

Theme 6 Indicator 6.1 83

Theme 7 Indicator 7.1 0,4

Top 3 Incidents * Complaints

1. Medication errors Therapy

2. Infection prevention Treatment

3. Communication Information

Top 3 Social Media * Customer experiences

1. Therapy Therapy

2. Treatment Aftercare

3. Costs Information

Signals / complaints 2008 2009 2010 2011 2012

Negative signals Social Media 20 34 46

Consumer Quality Index 35 32 40

Top 3 Focus supervision*

1. Therapy

2. Treatment

3. Constraints

Notes Bla bla

Top 3 Actions *

1.

2.

3.

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ObjectviewHome Sectorview IGZview Riskscan Managementreports Alerts My dashboardsFrontoffice

IRIS 2.0. Version 25/11/2013

ComplaintsReports

Social media

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Similar providers

Different providers

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Overview concerninformation used forRiskbased Supervision on Dutch Healthcare

GOVERNANCE

(LACK OF )(CERTIFIED) QUALITY SYSTEEMCOMPLIANCE MANAGEMENTRISKMANAGEMENTLOT OF INTERIM-MANAGERSFUSION AND REORGANISATIONS

FINANCE

CURRENT RATIO CAPITAL BUFFERSOLVABILITYDEBT COVERAGE RATIORESULTS RATIO

FRAUD

EXCEPTIONAL CHANGES IN SALESEXCEPTIONAL CHANGES IN PRODUCTIONSUPERVISORY BOARD OF 1 PERSONMANY PRIVATE LIMITED COMPANIESUNEXPECTED CHANGE OF OWNERSHIPNOT-CARE-RELATED ACTIVITIES

HUMAN RESOURCESABSENTEISMSTAFF TURNOVER

STAFFOVERHEADINTERIM-/FLEXWORKERS

FACILITIES OUTDATED BUILDINGS

PRODUCTION PRODUCTIVITY

ICT INVESTMENTS ON ICT

COMMUNICATION CLIENTSATISFACTION

P. Van Dyk | Dutch Health Care Inspectorate

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Example: Dashboard of a hospital


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Example: Dashboard of a mental health provider (1)


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Example: Dashboard of a mental health provider (2)


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Analysing trends in IRiS


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Analysing trends in IRiS


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Riskbased Supervision:

The search for early warnings

CHAIN REACTION

year T0 year T+1 year T+2 year T+3

Organizationaland managerialproblems

financial results capital buffer DSCR at risk long term debts productionX mismatch of supply - demands

budgets absenteeism staff turnover job vacancies flexwork / interimX board changes consultancy short term debts


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Case 1: the risk of merging hospitalsBuffer Capital ratio as indicator for financial andmanagerial problems and – finally - high risks on patientsafety

The story of Hospital X:

• Fusion of two hospitals in 1990. Outcome of a power struggle• Increased supervision 2002 - 2005• 2005: risks on lung surgery, acute care and orthopedic surgery• 2008: high risk of infection on operating rooms shutdown• 2009: new owner; capital injection from government• 2012: increased sales; more profit


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Case 2: The fall of an institution.Decline in results, buffer capital, DSCR, turnover,Increase of absenteeism.

x €1000%

Debt Service Coverage RateAmount of cash flow available to meet annual interest and principal payments on debt.

Increased supervision since 2010

•There was a bankruptcy in 2011 with potential lost of care for all clients.

Causes:• Fusion of financial weak partners in 2005-2008;• No insights in finance;• CFO did not communicate … and died suddenly

Effects: bankruptcy 2011• financial setbacks (-18 mln)• due to: increase costs, decline of benefits


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Meaning of financial indicators

Investigation on 40 yearly financial reports of providers:

with recent capital injection from governmentwith increased supervision in the last yearswith penalties for fraud in the last years

Findings:

75% did have financial problems before25% did have organizational problems

Financial problems caused by:

no business information on finance, due to administrative, communicative of ICT failures no business information on client-needs disinvestments low conversion rate (short versus long term interests) failed fusion of componies too many major operations (like a fusion + big investments on new buildings)


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Using finance indicators for riskbased supervision

• Financial indicators are not yet widely used as meaningful indicators for riskbased supervision ...

• There’s a lack of sufficient knowledge on finance indicators implementation is in progress ….

• Dutch Health Inspectorate: does not focus on finance itself (no legal task!)

• Dutch Education Inspectorate: does focus on finance itself (increased financial supervision; legal task!)

• The last inspectorate also finds relation between finance and quality:

Boards under increased financial supervision often have problems with the quality of education in their schools or training. They have a relatively high number of (long-term) weak or very-weak schools. Almost half of the boards under increased financial supervision in basic education have deficiencies in the quality of their education. In secondary education even nine out of twelve (75%). Education is especially at risk in a situation of both financial and quality problems.


Financial Indicators: Early Warnings for Riskbased Supervision P. Van Dyk | Dutch Health Care...

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