Michael N. Abrams
Simone Cummings
Dana Hage

Hospital finance leaders can play an important role in the development of clinical care paths designed to guide clinicians in the delivery of high-quality, cost-effective care, but they should always defer to physicians to lead the effort.

At a Glance  

  • Care paths map the critical actions and decision points across a patient's course of medical treatment; their purpose is to guide physicians in the delivery of high-quality care while reducing care costs by avoiding services that do not contribute meaningfully to positive outcomes.
  • Each care path development initiative should be led by a respected physician champion, whose specialty is in the area of the care episode being mapped, with the support of a clinician project manager.
  • Once the care path has been developed and implemented, the finance leader's role begins in earnest with the tracking of financial and clinical data against care paths.

For more than two decades, healthcare delivery organizations have devoted extensive resources to cost management in response to shrinking payment. They have used vendor consolidation and contract renegotiation to lower supply costs, and shared services to lower overhead. Combined with the wholesale consolidation of hospitals into larger systems with corresponding purchasing power, these actions have done much to make healthcare delivery less costly. Nonetheless, most healthcare delivery organizations have overlooked what is arguably the largest category of costs with the potential for reduction: costs controlled by clinical decision-making.

In many hospital cultures, matters pertaining to physicians or their clinical decisions have long been seen as being the purview of other physicians, period. Despite the many changes that have occurred in the healthcare environment over the past 20 years, this assumption continues to be commonplace. Physicians are treated as masters of their own practices unless they do something egregious, and even then, it is up to other physicians to intervene. Although reviews of variability across clinicians to understand differences in cost or outcomes have been widely performed across the industry, hospital administrators much more rarely perform such reviews within their organizations. Such forays by management into clinical decision-making are often seen as taboo-even though physicians' clinical decisions drive the majority of costs in most healthcare delivery organizations.

Informally, hospital executives estimate that 30 to 40 percent of clinical costs related to physician decision-making are unnecessary.a They worry, however, that if they broach the subject, they will be accused of "practicing without a license," and will damage relationships or even lose business. The reality is that all healthcare delivery organizations face a bleak economic outlook and all need to consider addressing the "unnecessary" costs associated with clinical decision-making. The development of predictive care paths can help bridge this gap between clinicians and administrators by providing the basis for conversation about the impact of clinical decisions on both costs and quality.

Care paths are tools that define the critical actions and decision points across a patient's course of medical treatment. A care path may be as narrow as the surgical implantation of a total joint, or as broad as the treatment of coronary artery disease. When optimally developed, care paths provide the much-needed link between clinical activities (including variability) and associated costs for delivering on clinical care.

Developing Care Paths: The Process

Developing a care path is akin to developing or redesigning an engineering process, where a series of steps describes a defined flow of activities. On a macro level, care path development entails a 10-step process, as shown in the exhibit below.



Step 1: Identify the clinical area of focus. A care provider may decide to focus on total joint replacement, for example, because of the volume of procedures and pricing sensitivity of payers.

Step 2: Designate a care path champion and project manager. Ideally, the care path development process should be led by a champion who represents the specialty of the care episode and has credibility among the team. Assigning a project manager to support the process by working with the team champion can help keep the effort on track and moving forward.

Step 3: Define the start and end points of the episode of care. The champion and project manager should first outline the episode of care to be mapped by defining the start and end points for the episode of care. (This is an important preliminary step before the more comprehensive effort of fully defining the activities that constitute the episode, which occurs at Step 7 of this process.) For a total joint replacement, for example, the map could start with the diagnosis of degenerative joint disease, with drug therapy, or with admission to the hospital for surgery. And the episode of care's end point could occur at hospital discharge or at 30, 60, or 90 days after discharge (in which case, it would likely include physical therapy).

Step 4: Define the core team. Once the episode of care has been defined, only then does it become possible to select the members of the care path team, because the full range of activities determines who will be involved at any point along the path. Assuming, again, that the orthopedic care path for total joint replacement is the focus, the core clinical team for the first phase of care path development should include the orthopedic surgeons who account for the bulk of such surgeries. Criteria for selecting team members might also include the surgeon's stature in the eyes of peers, tenure, experience, track record of outcomes, consistency in adhering to standards of practice, and practice cost effectiveness (as well as that can be evaluated).

At this point, based on the findings and input of the team, there should be some flexibility to make adjustments to the steps that already have been developed. For example, the core team may decide to adjust the episode's end point or to add members to the team later in the process. Providers of auxiliary services just beyond the end points of the episode of care also could be involved in an ad-hoc fashion, participating only when their expertise is required.

Step 5: Review standards of care. The next step for the newly formed care path development team is to identify existing standards of care. Such standards typically will include those published by professional societies such as the American College of Cardiology or Society of Thoracic Surgeons. However, guidelines from other sources also should be considered, such as those developed by the Cochrane Collaborative or the Agency for Healthcare Research and Quality (AHRQ), which conduct and publish systematic reviews of primary research to identify more efficacious treatment regimens. Articles from peer-reviewed literature also may be helpful in providing guidelines for the treatment of specific conditions. Standards of clinical practice associated with the episode of care of interest will serve as the foundation for care path development.

Step 6: Engage key physician specialists in the process. The care path development team should identify physicians on staff who will be asked to review the team's findings, including the maps drafted by the team in the step that follows.

Step 7: Draft maps. At this point, the team sets about identifying diagram key interventions and decision points for the episode of care. Developing a high-level "macro-map" allows clinicians to see a visual representation of the episode. The macro-map is first developed from the clinical guidelines and then reviewed by physicians on staff identified in the previous step. As an example, a macro-map for total hip replacement might include:

  • The patient evaluation
  • The decision for surgery versus medical management
  • The preoperative work up
  • The administration of anesthesia
  • Performance of the surgical procedure
  • Delivery of post-op care and discharge

For each of these six steps, more detailed "micro-maps" will need to be developed, which likewise should be evaluated by key physicians who might recommend improvements. With this process, physicians preferably will be engaged in one-on-one in conversations about how the approaches they use compare with the approach detailed in the draft map. During these conversations, the physicians can assist in identifying critical activities, resources, and medical tools (e.g., implants, pharmaceuticals, staff) to provide a basis for developing activity checklists.

Step 8. Review care paths with relevant staff and roll out finalized care paths. Once the macro- and micro-maps of the care path have been developed, it is important to obtain additional input from both core team clinicians and other key staff (e.g., nursing staff and physical therapists) to ensure that nothing has been missed. At this point, it may be necessary to modify the care paths based on physician input and actual practices. Observed or reported variances in practice approach should be reconciled by the team champion, with changes made as appropriate. In some areas, actual practice may exhibit a higher quality of care than is reflected in standards. These areas will form the differentiators for the episode of care. In other areas, actual practice may fall below standards, presenting opportunities to improve the quality of care.

Much of the variation in practice will be identified in the associated resource and activity lists discussed above. Initially, all preference items should be included in the activity checklists. Variations should be discussed with the involved physicians and, where appropriate, best practices (ideally supported with data) should be identified. Where individual physician preferences have little or no impact on cost or outcomes, variation should be allowed, whereas unnecessary activities or resources that have an impact on costs should be identified and removed.

To illustrate, during an actual initiative to develop a care path, the physician champion guiding the initiative discovered that two of three diagnostic tests routinely used in evaluating cancer patients were in fact redundant. He pointed to recent research indicating that tests B and C offered insufficient additional information beyond test A to warrant their cost. The team later found that most of the physicians conducting these tests were unaware of the latest research. Ultimately, the champion convinced his colleagues that tests B and C were unnecessary, and they were removed from the care path. This is a great example of how the development (and regular monitoring) of care paths can help to keep clinicians current regarding best practices for a specific treatment regimen within an episode of care.

As this example shows, the care path team members must agree on how best to modify the care path to reflect changes in actual practice. Although complete agreement about what should and should not be included would be ideal, a certain amount of disagreement is inevitable. These inclusion /exclusion decisions have implications not only for patient care and quality, but also for financial management. Care maps should be reviewed regularly in light of current research on effectiveness and clinical outcomes.

Even when care paths are well-designed, failure to communicate why they are being implemented can lead to resistance. Physicians will be more likely to accept care paths if they understand that they are intended simply to offer a guide for clinical decision-making based on current practice and relevant evidence, without imposing "cookie-cutter medicine," and for tracking cost and quality outcomes. Physicians always have the option of departing from the care path. However, the electronic health record (EHR) should be structured in a way that requires physicians to explain why they have deviated from core care path elements.

The actual roll-out of the final care path should be immediately preceded with one final review of the care path by all the physicians and relevant allied health professionals who will be using it, to obtain consensus for its use in clinical care. The support of the clinical care path champion is integral to gaining this consensus. If the care path calls for changes from current practice, it is essential that clinicians be provided with a valid, peer-reviewed, published rationale for those changes.

Step 9: Track financial and clinical data against care paths. It is with this step that the finance professional begins to play a central role in the process (see the sidebar on page 89). After the care path has been developed, the finance professional should work with other functions, including IT and quality staff and clinicians, to integrate the care path into the computerized provider order entry (CPOE) system in a way that ensures the data captured will be sufficient to enable the necessary and appropriate financial and clinical reporting. The data capture system should facilitate the easy identification of outlier cases and physicians whose clinical decision-making may warrant further analysis.

Financial and clinical reporting is necessary to support clinical and administrative management at the unit and service line level. To support clinical cost-effectiveness, reports should indicate whether charges and costs of treatment, by physicians in aggregate and individually, are in line with expectations. The finance professional, therefore, should analyze historical and current patient data to estimate the average charge per case as well as the average cost per case.

Some variation may be warranted. Deviations in decision-making may reflect improvements in the care process that haven't been integrated into the care path, or they may simply reflect practices, like tests B and C referenced above, that are slow to change. What is important is that someone is monitoring these data and ensuring that the data are put in the hands of the individual responsible for assessing whether the variation is reasonable.

In some instances, analyzing clinical variation may lead to a better understanding of complications or comorbidities that should be examined further. To support outcomes improvement, financial and clinical reports should characterize adherence to the full care path and to each major component of the care path by physicians individually and in aggregate.

The finance professional has an additional role to play in ensuring that clinician decision-makers receive financial reports that are credible, useful, and clearly understood. Although it should be self evident that the data presented in financial reports must be accurate, this point also bears emphasizing. If physicians believe that reports are based on faulty or incomplete data, they simply will not take these reports seriously.

The financial professional should educate the department chair and other clinicians about the types of reports that might be helpful, detailing how various elements might be used and why they are important, and explaining the implications of variations in clinical practice for both quality and costs. Finally, the data should be presented in a user-friendly manner that clinicians can easily understand. Clear graphic representations of the data, such as line graphs showing trends over time or scatterplots showing data for individuals overlaid with a line showing the mean, are examples. Physicians are trained as scientists and generally have no difficulty with such approaches. The finance leader should be prepared to respond to requests for more specificity with tables, and if necessary, actual data to back up the graphics.

Step 10: Review and refine care paths based on data. As new technologies and medications are developed, the care path for any episode of care will likely need to be revised. The finance professional has responsibility to analyze the economic impacts of these changes in using the care path to support cost and revenue management. As part of this effort, the finance professional can simulate the financial impact of a change in treatment protocols on both organizational expenses and anticipated reimbursement. The introduction of an expensive new drug or the purchase of capital equipment, for example, could significantly alter the charge and cost per case. The finance professional should work with quality staff to develop a balanced picture of the impact of such changes.

The finance professional may also play a role in assessing the impact of quality initiatives after a patient's discharge. As the Centers for Medicare & Medicaid Services begins to act on its directive to withhold a portion of payment for the patients who are readmitted within 30 days, it will become increasingly important to monitor the costs of treatment delivered in the 30 days following discharge. In doing so, the finance professional, working with quality assurance, can help identify variances in treatment that increase the likelihood of readmission.

The Simple Keys to Success

Developing predictive care paths can help healthcare providers reduce costs while improving the quality of health care. Whether an organization can do so effectively, however, will depend on the ability of administrative leaders to communicate openly with physicians, to engage physicians in care path development, and most important, to ensure that the finance professional plays an integral role in the process of developing, implementing, and evaluating care paths.

Michael N. Abrams is managing partner, Numerof & Associates, Inc., St. Louis (mabrams@nai-consulting.com).

Simone Cummings, PhD, is a research analyst, Numerof & Associates, Inc., St. Louis (scummings@nai-consulting.com).

Dana Hage is a business analyst, Numerof & Associates, Inc., St. Louis (dhage@nai-consulting.com).


a. Numerof, R.E., and Abrams, M.N., Healthcare at a Turning Point: A Roadmap for Change, Boca Raton, Fla.: CRC Press, 2012.


The Role of the Finance Professional in Care Path Development  

Historically, finance professionals have not involved themselves in the details of clinical activities-just the financial consequences. However, as delivery organizations begin developing care paths and actively managing cost, quality, and adherence, the finance professional has a more active role to play.

In the earlier steps in developing care paths, the finance professional should play a role by analyzing historical financial data for the episode of care being modeled to detect previously unidentified clinical activities that should be incorporated into the care path. The closer the care path is to actual practice, the more likely it is to be supported and adopted by the clinicians who will be impacted. A close adherence to actual practice is particularly important if the care path will be used to support bundled pricing, which requires that administrators understand both the costs and charges associated with the episode of care.

It is in the final two steps of developing care paths that the finance leader assumes a leading role in this process. As noted in the discussion of the process steps in this article, the finance leader is charged with tracking financial and clinical performance under the care paths and assessing the economic impact on the organization. The finance leader also can then disseminate the findings of these efforts among appropriate stakeholders to prompt potential revision or additional development of care paths. 


Publication Date: Monday, December 03, 2012

Login Required

If you are an existing member, please log in below. Username and password are required.



Forgot User Name?
Forgot Password?

If you are not an HFMA member and would like to access portions of our content for 30 days, please fill out the following.

First Name:

Last Name:


   Become an HFMA member instead