Proxima's recipe for revenue- and cost management
Proxima uses the Prodacapo costing results as a valuable guideline for identifying cost reduction opportunities and proactively optimizing profitability.
About Proxima
Proxima is a privately owned group of healthcare providers in Sweden, performing primary health care, diagnostics, specialist care and rehabilitation. Proxima has 3 specialist clinics, 11 primary care centers, 2 industrial health service centers and 3 radiotherapy departments. The Proxima group also includes 6 rehab clinics.
Challenge
In late 2009 Proxima began a project to improve its corporate performance management and to prepare itself for new market challenges including declining margins, increasing healthcare alternatives for patients, etc.
Proxima wanted to improve its performance management in order to facilitate better decision making, strengthen its control of costs and increase the level of commitment to making improvements within the organization.
A need for better cost management
"Previously we had problems with backlogs within our operational reporting and financial follow-up. The source data was stored in several different systems and required a lot of manual processing. The gathering of data for budget- and operational follow-ups was very time consuming. As a consequence it took as us long time to react to various events", says Jessica Welander, CFO at Proxima.
"The main reason for implementing activity-based management was to follow up and gain control of our production costs and revenues, both in total and per individual agreement. For example we wanted to determine the time, cost and revenue involved with performing a certain number of operations."
"We also needed better information about the quality and profitability of the services we provide, what we are good at and what we need to improve, and how our revenues and costs are divided between different areas of the business", says Jessica.
New insights
Even before Proxima had completed the implementation of Prodacapo the project group was able to identify some opportunities to improve the profitability. The cost calculations clearly and quickly indicated that some agreements had considerable lower margins than expected, and vice versa. The same important findings could be made when analyzing the profitability of healthcare services and DRGs.
The reactions to the new and interesting cost and profitability results have been varied. Some of the results came as a total surprise, while others conformed what Proxima had previously suspected but not been able to verify.
Results
"Prodacapo ABM indicates which services and treatments are profitable and which are not, which naturally assists our decision making in many matters. The costing result also indicates which agreements, services, activities and treatments are vital to keep, change or phase out.
The Prodacapo results can be used in negotiations as a mean of demonstrating that the cost of performing a service is not covered by the price we are being offered", says Jessica.
Some of the suggested improvements have already resulted in changes. When Proxima increased the daily number of joint replacement procedures from 3 to 4, an improved result was clearly evident.
"Our future plans are to maintain the costing model, simulate different scenarios and optimize our processes. We are also planning to implement Balanced Scorecard", concludes Jessica.
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