Your Hidden Asset

On the heals of bad news about the discounts offered to Medicare in round one of competitive bidding, some providers are pondering their options for managing the reimbursement cuts. But such questions also extend to those who will be submitting bids this year.

Some of the questions you should be asking are: Should we change product lines? Should we go after different payers? How can we do a better job selling the products we want to sell? Should we outsource some processes or functions?

These are all questions that should be answered. But there is another one that could guide your answers: Amidst this turmoil, how do we create a strategic advantage for our company?

A strategic advantage in business is generally regarded as skills, resources or controls that facilitate inordinate sales growth and/or operating efficiencies. Thereby, the owner of strategic advantage realizes greater profitability and sustainability. Remember, when it comes to competitive bidding, the power goes to those with the highest net profit margins.

Your hidden asset is the source of a strategic advantage: It is the information you own in your databases. The largest and most valuable of those is the billing system database. The databases (information), however, are not the strategic advantage themselves. Everyone has them. The strategic advantage is available to providers who are first at becoming good data miners, and that field is wide open.

Having a company with good data mining capability still requires managers who are strategic thinkers. Our industry has a lot of them. They are just not supported with the data they need. Following is an example of how data mining can pay off.

A provider is applying cost at the HCPCS level to its significant product-payer combinations. The company learns that its oxygen patients have an average length of service of nine months. Having activity costs available, management can quantify the savings potential for extending the length of service of the oxygen patients. It is not difficult to set a new target for length of service, but it is difficult to develop and execute a plan without good data mining capability.

By mining the data associated with oxygen patients, management associated referral sources and payers to the length of service. Once this information is available, management and the sales team can adjust sales calls and tactics to acquire referrals that will be on service longer, consume fewer man hours per revenue dollar, improve the earnings of the sales team and increase the profit of the company.

In our example, management can use at least some of the increased profits to bolster its power to offer CMS a sufficient discount to be in the competitive range — and that is a real strategic advantage.

In order to create a strategic advantage based on data mining, you will need to become proficient in several management information activities. Here are five steps that can help:

1. Use your billing system consistently and fully. Many providers leave much of the data capture options unused.
2. Use third-party tools to extract and manipulate data from the billing system. No system in the market has been designed to produce sufficient information in its report menus. The third-party tools needed are, at a minimum, electronic spreadsheet applications. Optimally, the provider seeking strategic advantage should be working with relational database applications.
3. Appoint or acquire someone whose responsibility will be data mining.
4. Ask questions to gain a deeper understanding of your own operations. One good question to start with is: What is the average length of service by significant product-payer combination? Mine the data, answer the questions.
5. From your answers, make a plan for improvement. This will inevitably require more data mining.

The answers must guide your team to wise actions. When a company acts wisely on good information that is not available to its rivals, it has the opportunity to create strategic advantage.

Wallace Weeks is founder and president of Weeks Group Inc., a Melbourne, Fla.-based strategy consulting firm. He can be reached at 321/752-4514 or by e-mail at [email protected].