← Becker’s Healthcare Podcast
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- [00:00]
Chanel Bunger
Hello and welcome to the Becker's Healthcare Podcast. My name is Chanel Bunger. Today I'm thrilled to speak with John Scholl, president of Scholl Business Insights llc, who joins us today to discuss Churn CCP and how to modernize a capital management program within a health system. John, thank you so much for joining me. Could you start us out by introducing yourself and sharing a bit about your background and organization?
- [00:23]
John Scholl
Certainly. Thanks, Chanel, for having me on today. I appreciate it. I have spent 10 years in hospital operations. I was overseeing surgery and radiology for coralwell Health, which is the largest healthcare system in the state of Michigan. Early in my career there, I was also overseeing the supply chain function. Prior to that, I spent about 30 years in as an executive outside of healthcare in the manufacturing side and I was leading supply chain and finance functions globally. Most recently I retired and have started my own consulting business and I also serve on a number of nonprofit boards.
- [01:04]
Chanel Bunger
Perfect. Thank you so much for the introduction. Now, as somebody that has your ear to the ground on both the business side and the healthcare side of things, could you talk about what trends you're currently watching in the healthcare space today?
- [01:17]
John Scholl
Yeah. What's been fascinating is that I have time now to research things that I just did not have time or even in some cases the energy to really research before. And two topics that I've been diving into quite a bit since my retirement from the day to day operations has been how hospitals apply clinical AI in the radiology space, which is a hot topic, as you know. You've spent time on that before. It's one of the ripest environments for the application of AI in healthcare today and it's certainly getting a lot of attention. The other one that I've been looking into is something that I have just been involved in all of my career and it's around the capital management process in hospitals. How do you get things approved? How do you manage the fleet that you have and planning and budgeting and forecasting? It's an archaic system and it's very frustrating for most of us who use it. And I think that's probably true for virtually every health system that they'd say it. It's something I just want to help make it better. Sometimes when you're going through a capital management ask in a hospital, it feels like you're going through the American Ninja Warrior obstacle course and there's things swinging at you, trying to knock you off into the water and prevent you from making it up that final ramp. And it's Just a of a lot of surprises that feels like oftentimes it's a matter of who wears who down to get to the final answer of being able to get what you need for your hospital system. So because it was something I was spent so much time in my career with and now that I've got the time, I really have spent some time trying to figure out how to make it better and not just accept the way that it is and that it has to be that way going forward.
- [03:00]
Chanel Bunger
Got it. Got it. And can you dig it a little bit deeper into why capital management systems are failing to meet the needs of health systems today?
- [03:08]
John Scholl
Certainly. So I've done a fair amount of research since retiring. I reach out to other hospital executives. I've met with a number of people in the IT service industry that serve this part of the need of hospitals. And I think it comes down to a number of things. One is we just hospitals have not been keeping up on this kind of technology. They have competing needs like boosting their EMRs like Epic or Cerner. They've been working and upgrading the backend systems like Workday or Infor peoplesoft and then they've got so many concerns about cybersecurity that I think just get a lot of the IT attention. And in many cases capital management systems are just asked to get along one more year. And I think that in most cases a lot of capital management systems depended on whatever accounting had that they needed for calculating depreciation into the financial statements. So the result is there's just lots of missing, incomplete and siloed data. There are other things that I discovered like there's disjointed functions with asset management, like just having the inventory of what you have in your fleet. Maybe in one siloed system your maintenance records may be in a completely different system that doesn't talk and then your purchasing systems are separate and then finally it's disjointed across the time continuum. So when you think about forecasting and budgeting, where you're working out in these long time frames, a year out, maybe five years out, and then you get into the budgeting within the quarter or that current fiscal year and then you're talking about purchasing and actually making day to day decisions and then you're working on asset life management across the time continuum and those all tend to be disjointed where they're cut up into chunks and there isn't the accountability flow back and forth for informing those so that you really have realistic forecasts. And then you're executing based on, you know, what you said you were going to do. And there's accountability associated with that. It's so disjointed that it's very hard for health systems to keep, keep track of what it is that they're doing. So those are the main things that came out as, as the trends. It's not to blame anyone. It, it is what it is. The people that work in capital management are working very hard with what they have. They just have insufficient systems and technology to be able to manage the base that they have.
- [05:34]
Chanel Bunger
Absolutely. And you mentioned that you've been working on finding solutions. What are some key strategies an organization can use to strengthen its capital management system?
- [05:43]
John Scholl
Well, Chanel, the good news is that there is hope. And rather than saying, wow, it's a really hard problem and there aren't any answers, there are, but we really can't wait too much longer. There was a US census study in 2022 that estimated that hospitals in the US spend around $50 billion in capital equipment and another 50 billion DOL in facilities, all which are assets that hospital has to maintain. And that's likely to double over the next 10 years due to changing demographics and just the general changes that healthcare is facing. So there are a lot of assets that are going to need strong systems to manage them going into the future. So in a nutshell, capture the necessary data that you have, make it digital and connect it. You can do that with integrated capital management systems, or you can connect disparate systems and do it on your own, where you connect all the information and make sure that it is readily available and accessible. There are systems out there. There are CMMS systems like eMaint. There's some other systems that get more into the holistic asset management, like Accruant, Brightly, nuvolo, which is ServiceNow product, IBM's Maximo, and there's some newcomers like CapePpert and Handle that also provide comprehensive solutions. And so there is hope. And there are people that are converging. There's investment going on in this area to help make things better. There are six main pillars that through the research that I did, I identified that are really important to upgrade. And one of them is just the basic foundation of really strong data. Data that will tell you where your inventory is, model, serial number, age, how it's utilized, things like connecting it to revenue so that you understand and you can do risk analysis on critical pieces of equipment. The second one would be the strong process of onboarding. A project asks many hospitals. It's very inconsistent. So making it digital and consistent so that there's dashboards where the stakeholders can understand exactly what the status of the request is, ensuring that there's consistent inputs for return on investment calculations and total cost of ownership so that you can mine those. When you're coming up to the latter steps of prioritizing, the next step is the third one is capital budgeting and forecasting. And as I mentioned earlier, it's got to be built off realistic needs and then there's got to be accountability. So for instance, oftentimes it's not uncommon that a hospital system might have a capital budget of say, 15 million doll. And yet when they do a thorough analysis of all of the assets that they have that are way past their useful life, that are impacting patient care, that are costing far more than what they should in terms of maintenance and downtime, you might have requests for 30, 50, maybe $100 million that are like flaming red items that need to be replaced. And so to continue to just forecast and budget and say 15 million is all we have is really not realistic. When you're in a circumstance like that, you may need to make some choices for a year or two to be able to catch up or shift some money, maybe some from some facilities to be able to replace some assets or vice versa. And so just being able to have that data is important, but you've got to build it off realistic needs instead of just throwing a number out there in a forecast or a budget that, that the operators will just look at and know that it is not enough. And I know there's a huge challeng with hospital systems trying to be very judicial with the capital that they do have to spend. But they are going to have to make some adjustments going forward, especially when they get the data that can tell them exactly how bad their situation is. The fourth pillar is the process on prioritizing needs. So this is where if you do a great job of getting all the information together, decision makers, people in a CFO role, COO business unit heads are going to have to be able to make decisions. And when they have requests adding up to 50 or 80 million dollars and they only have 15 million to spend, they've got to be able to make the decision off data and they've got to be able to have that, which is why those prior steps are so incredibly important. The consistency of how the asks get boarded and then also just having a really strong foundation of data. The fifth step that I identified was to, you know, in many cases you think you can do a lot of this stuff on your own. But hospitals need help and they need help through strategic partnerships. And we have typically not done a lot of that in the industry. It's been frowned upon. There's arm's length regulations that make it very, very difficult to have a true partnership with a supplier. But there are ways to do that. And that could be an IT supplier that can bring to you a solution that allows you to manage this much better. It could be moving suppliers onto platforms. So instead of every RFP goes to the low price, you might be focused more on a supplier that can be a partner of yours. You can move more of your asset classes over into that particular supplier and they can help manage that. And in particular, what I believe that it makes a difference between a strategic partner and just a supplier relationship is by tapping into risk based agreements, things where both organizations go at risk for the things that don't go well in the relationship and the things that do go well, both risk sharing and gain sharing. And in order to do that successfully, you can't have every supplier be in that category. You really have to target those who, where there's, you know, true synergy between the two organizations, a good cultural fit and then the energy and the resources to get behind that. And a key part of that is having C suite governance to be able to oversee the expectations and that the benefit of the relationship is gained. And then lastly connecting the asset procurement and the maintenance systems and all the aspects, aspects that go with that. How do you procure, how do you do RFPs in an efficient way, the maintenance systems and rethinking how you do maintenance for assets where for instance, some assets don't need a four hour response time in case the piece of equipment goes down and yet others do need that, like think of a platinum, gold, silver, bronze, service level. A lot of times if you were able to look at your maintenance agreements, you might find that you're overpaying for protection that you don't really need because you may have another asset like another CT or an MRI that you could, if you had to move the volume over. But you may have another critical asset that you absolutely can't afford to be down with. And you need to have a service agreement that assures that that's up and that your partners have parts close by and service people that can handle that.
- [13:04]
Chanel Bunger
Well, John, I want to thank you for sharing all of these actionable insights. And for listeners that want to get started on this, where should they begin?
- [13:13]
John Scholl
Well, I think the most important Thing that you've got to do is an assessment of your current system. Where are you in your capital management system? And you can't just compare yourself to where other health systems are because for the most part, most of us are not where we need to be. So you need to think of what can be, not simply benchmarking yourself against everyone else, which might just encourage the continuation of mediocrity. And we've got to make some big strides. So I like using something called a maturity model that looks at a capital management program that will take maybe six or eight of these key factors like I mentioned and say, here's what it feels like if you're in your infancy in your program. Here's what it feels like when you're pretty developed and this is what best in class looks like. And there may not be a whole lot of systems that are at best in class, but it's a great way to on a continuum to be able to stretch and look at where you are and grade yourself. And then once the people that are kind of running the capital management system can do the self assessment, it ends up being a great tool to be able to go to senior leadership like the CFO or the CEO in the system and say, here's where we are, here's where we could be. And I think most importantly, we've got to start thinking about what are the consequences of continuing to have inefficient and ineffective capital management systems. I don't think we've thought like that in the past, but I think that there are consequences to doing that. And I think as we continue to manage more assets and it becomes more critical that we don't make mistakes and that we are doing things like redeploying underutilized assets rather than buying a new one. We make those mistakes all the time because we don't have data today, but being able to avoid those consequences. Advance capital management system It's a great discussion with the senior leadership team to say this is what's possible. And then you get alignment on the resources and the timing by which you're going to get there. And in most cases, I believe that the senior executives are not even aware of the fact that there are these digital connected systems out there that can allow for much better asset management system asset management. And so at that point, it's just a matter of getting resources committed, getting, you know, the alignment that you need and start making some progress.
- [15:31]
Chanel Bunger
Absolutely. And John, if listeners want to learn more, connect with you, where's the best place for them to go, Chanel.
- [15:37]
John Scholl
The best place to connect with me would be through my website, which is shoalbusinessinsights.com perfect.
- [15:44]
Chanel Bunger
Well, John, I want to thank you once again for your time today and for sharing your insights on the Becker's Healthcare podcast. Thank you so much.
- [15:50]
John Scholl
Thank you for having me here today. And thanks for all that you're doing to improve health and to save lives yourself. Thank you.