#119 – IMPLEMENTING VALUE ADDED AUDITING IN HEALTHCARE – TED SCHMIDT

 

0014 “We need help with our audit program”. “Our internal auditing is expensive and leadership wants it to show value”. And finally, “Our auditors will audit where they know they’ll find the known problems”.

These are quotes that we hear routinely with DNVGL hospitals. These statements are coming from the individuals who are in charge of the audit program, the internal auditors, and of course, leadership.

Now there is a new, more powerful approach to set up your audit program to better demonstrate how finances are linked to providing patient care. Using your accreditation, you can begin to show these linkages, the real sustainable improvements that your hospital will then demonstrate. Just imagine, accreditation shedding the perception of being an expense to become an asset, which has tangible ROI.

Most DNVGL hospitals changed their accreditation for a reason: to better achieve your Mission and Vision. Now it’s for you to change the way you manage, plan, conduct, and report your audits.

Value-added auditing (VAA) is a proven method for looking at effectiveness of an organization’s operational and financial performance. It has its roots in the US Government Accountability Office (GAO) “Yellow Book”. The Yellow book is an in-depth look at the activities (processes) that affect finances. VAA has evolved to fully integrate a full process perspective while understanding the financial effect on the organization. Greg Hutchins, author of “Value-Added Auditing: The Standard Manual of Risk-Based Process Auditing” describes in his book the process for conducting practical, cost effective, risk based audits in many different functional areas.

In his book, Hutchins defines Value-added auditing (VAA) as a systematic, objective appraisal by independent auditors to determine whether:

1- Financial and operational controls are reliable
2- Organizational risk is identified and managed
3- Compliance to external requirements (NFPA, OSHA, etc.)
4- Conformance to ISO 9001, NIAHO and other applicable standards
5- Efficient use of resources and
6- The organizations objectives are effectively achieved.

While this is an exhaustive definition, it demonstrates the depth and value of the VAA. In a simplified form, VAA is a true organizational performance audit.

Getting to this degree of internal auditing is something all leadership would love to see happen now, yet it does not happen overnight. Most all audit programs that I’ve seen in healthcare are still in the ad-hoc stage. So, logic tells us to begin to move toward this level of performance auditing at a measured rate. Get education, practice, master the techniques, sustain and repeat. Most organizations state that the move to true performance auditing takes time, often times up to 2-4 years. Regardless of the length of time, each cycle of education, practice, mastery and sustainment takes your auditors and their findings to the next level.

There are four steps in the lifecycle of VAA:

  1. Managing the VAA
  2. Planning the VAA
  3. Conducting the VAA
  4. Reporting the VAA results

Each of these steps contains multiple components.  You should organize these components into levels of complexity to allow for a measured approach. Utilizing your time and resources over a planned timeline will better ensure sustainable success. Slow and steady wins the race!

The organizational reward for effective performance audits is both operational and financial, thereby helping create a safer patient environment.  In today’s volatile, uncertain, complex and ambiguous healthcare environment, having a VAA program can help your organization not only survive, but excel. Improving your risk position is also a welcomed side effect…your patients love that!

Bio:

Ted Schmidt is a Pharmacist, a Certified Enterprise Risk Manager (CERM©), and a Senior Advisor with BlueSynergy Associates, LLC. BlueSynergy Associates maximize innovation, experience and customer perspective to reduce risk and make hospitals a safer environment. He currently advises and instructs hospitals in quality, risk, safety and environmental management systems. Ted led the largest ISO 9001 implementation in healthcare at the Veterans Administration. He is a Senior Member of the American Society for Quality and a certified Lead Auditor in quality management systems by Exemplar Global. He can be reached by email at tschmidt@bluesynergyassociates.com.

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