Phoenix Children's Hospital: Improved Financial Performance

With Accenture's help, Phoenix Children's Hospital was able to improve its financial performance without compromising its mission—so progressing on the road toward high performance.

Phoenix Children's Hospital is the only comprehensive children's hospital in Arizona. It has evolved over the course of more than 20 years to become the major provider of pediatric care in Arizona, with the largest pediatric and neonatal intensive care units in the Southwest United States.

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Several years ago, Phoenix Children's Hospital leased space and services from an adult hospital.

In its efforts to achieve high performance, the hospital transitioned to a full-service, stand-alone facility. The challenges surrounding this transition included delays in opening, construction overruns, flood-damage, inflexible staffing levels and a change in establishing reserves for bad debts—all of which contributed to a downward financial spiral that threatened the hospital's survival. Just six months after opening its new facility, the hospital faced accumulating operating losses of nearly US$50 million. Phoenix Children's Hospital asked Accenture to assist with management functions on an interim basis, and to plan and implement the hospital's return to profitability.

Accenture recognized the need to achieve immediate improvements in financial performance and to implement organizational and functional changes that would position the hospital for long-term success.

Accenture worked with the hospital's board of directors to stabilize the hospital's leadership with contracted interim positions supported by an Accenture team. Accenture also supplied proprietary methodologies, leadership, pertinent experience and accelerated work environments to help redesign clinical and business processes, restructure management, and align employee incentives with both service and financial objectives. Implementation teams, including Accenture facilitators, subject matter experts, and key hospital staff focused on strengthening a number of key areas, including: revenue cycle management; physician services; patient care; surgical services; support services; human resources; information services (ultimately the hospital outsourced the management of its information resources to Accenture); and program development.

With Accenture's help, Phoenix Children's Hospital realized substantial, measurable financial improvements in a remarkably short period.

Specifically:

• Within four weeks, the organizational and process restructuring efforts generated annual cost savings of US$6.3 million.
• The initial wave of revenue cycle improvements carried with them a conservative annual impact of US$4 million.
• The hospital ended its first fiscal year with financial improvements of US$17.6 million.
• The hospital's financial performance improved from an operating loss of US$49 million to a profit of US$3 million.
• The hospital's cash reserves have increased from a low of nine days cash-on-hand (barely enough to cover one pay period) to more than 60 days.

In addition, operating revenue, patient days and surgical volumes are continuing to increase, consistently exceeding budget projections and demonstrating physician referrals and confidence in the hospital. In short, Accenture's collaborative approach and health care experience helped Phoenix Children's Hospital improve its financial picture without diminishing its mission. Equally important, Accenture helped the hospital pave the way for high performance.

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