Scott MacStravic, PhD
There are a number of reasons for hospitals to create and maintain working relationships with retail clinics, though at least one major reason to do so very carefully. Hospitals can gain patient referrals from such clinics, as well as revenue for physician oversight, for example. But with widespread primary physician opposition to or at least concerns about clinics staffed only by nurse practitioners and physician assistants, there will have to be care in obtaining their acquiescence or at least apathy toward the idea.
Hospitals already operate in the same “convenience sphere” as do retail clinics, though more often in the “urgent care clinic” category, where physicians are the major providers.
But recently, some hospitals and systems have signed formal relationships with non-physician-staffed clinics as well. Memorial Hermann Health System in Houston, for example, initially provided physician oversight for RediClinics in its market, but recently signed a full partnership with them, including quality and co-marketing initiatives. [“RediClinic Announces Fifty-Fifty Partnership with Memorial Hermann” RediClinic.com Apr 11, 2007.]
As it moves toward a planned 500 or more locations, RediClinic is also partnering with Bon Secours Health System, which will offer physician oversight for clinic sites in the Richmond, VA area. [“Rediclinics Debut in Richmond Inside Wal-Mart Supercenters with Bon Secours Partnership” RediClinic.com Mar 29, 2007] It joins both Revolution Health and Wal-Mart as “partners” in some way with the RediClinic system. (I would like to think that I had some influence on this development, since I advised Bon Secours to join in the “placeless healthcare” movement in 2005 during a consulting engagement therewith.)
Meanwhile, retail clinics, particularly RediClinics, are moving more in the wellness direction. This adds an enormously larger market to their potential than does routine sickness care. Wellness has already been described as coming $1 trillion market, to reach that level somewhere between 2010 and 2020. After all, practically everyone in the US has some chronic condition, health risk or concern that could benefit from wellness support, and retail clinics are becoming ubiquitous.
Of course, retail clinics that succeed in reducing patients’ incidence and prevalence of disease may be viewed as the enemy, rather than potential partners, by hospitals that are wholly dependent on sickness care revenue. But an increasing number of hospitals are offering wellness programs of their own, for their employees at least, and often for local employers, as well, given how profitable this type of service can be. Northwestern Memorial Wellness Institute in Chicago is one fo the more recent examples.
The MDVIP high-end retainer medical practices have already demonstrated how much effective proactive patient health management can be in reducing sickness care use. MDVIP Patients in eight states for which comparative hospitalization rates are reported had rates from 36.0% to 92.7% lower than the top rated insurance plan in each state. Medicare patients had rates from 2.7% to 93.5% lower in four states for which comparative rates were reported. (www.mdvip.com)
How much affect retail clinics will have compared to MDVIP practices, which see far fewer patients than traditional practices (a maximum of 600) and cost much more than retail clinics charge is unknown, but their effects will surely be in the same direction. As such, they may find new sources of revenue of their own, by offering services to employers directly, rather than to consumers only. Pharmacists have already proven their ability to reduce sickness care use in diabetes disease management programs such as those in Asheville, SC, so with so many retail clinics in pharmacies or superstores that have pharmacies, the potential for this proactive health service is also increasing.
In any case, hospitals should at least be aware of what retail clinics in their markets are doing, and consider carefully what kinds of relationships with them might be mutually beneficial. As the number of such clinics increases from the current few hundreds to many thousands, they will be impossible to ignore.
Leatrice Ford, RN, BSN, CCSConsultCare Partners, LLC
The hidden trump card in the proposed rules for 2008 that will impact the cardiovascular service line (MDC5) and others is the omission of one of two diagnoses for congestive heart failure as a co-morbid (CC) or major co-morbid (MCC) condition.
ICD9 428.0 Congestive heart failure unspecified and 428.9 Heart failure, unspecified were eliminated from the list of co-morbid conditions by CMS because they were considered to be “chronic” conditions and not reflective of an acute disease process. Interestingly enough when CMS determined what diagnoses made the cardiovascular patients “sicker” in the revision of DRGs for 2006, these diagnosis codes were part of the major cardiovascular conditions (MCV). Now in 2008, CMS eliminated them from even the lower co-morbid classification, let alone the major CC list (MCC) without demonstrating that the diagnoses did not impact the cost of care.
Robert FrombergEditor-in-Chief, HFMA
When association editors and publishers talk with one another, a topic that frequently comes up is "interference" from senior management and the board in the association's magazine. What that means is that the association publishers feel their publications have additional value if they are independent voices about the particular industry rather than perceived as a house organ through which an association promotes some agenda or promotes its goods and services--more like a newsletter than a magazine. Fair enough.
Whenever this topic comes up, however, I reflect on the contributions that HFMA board leaders and senior management have made to the better covering healthcare finance through HFMA publications. Here is a smattering of examples:
Not interference, influence. In short, the best ideas for our magazine have come from board and management leaders.
A major topic of presentations and discussions at the recent World Healthcare Congress in Washington, DC Apr 22-24, was the move to “value-based” purchasing and benefit design among employers and insurers. The focus of this movement is on explicitly measuring and continuously improving the value of what third-party payors are getting when they buy, or at least pay for, healthcare. There were three different “sizes” for this trend: small, medium and large.
The small size relates to payors’ policies and practices with respect to prescription drugs. This includes careful analysis of the value of different brand-name and generic drugs with respect to their impact on healthcare costs, employee health and performance, with deliberate efforts to promote selection of and adherence to those drugs with the most value, to both payors and patients. And it often involves explicit promotion of selection and adherence through reducing or eliminating the deductibles and co-payment barriers to patients’ purchase and use of these best options.
The medium size expands the scope to full scope of health insurance in general, rather than just prescription drugs. It includes the full range of healthcare options and providers that might be chosen by patients and their physicians, reflecting the “Buy-Right” concept popularized by Walter McClure, PhD in the 1970s. Payors can use the same kinds of preferential coverage methods used for prescription drugs to “steer” employees and plan members to the treatments and providers identified as delivering the greatest value.
The large size deals with governments, insurers and particularly employers as the purchasers of heath benefits for employees, consumers, and government “beneficiaries”. It encompasses the overall investment in the health of insured populations, and how well it “performs” in delivering value to the investors. This includes how health benefits affect the performance of employees and the value this delivers to employers, as well as how insurance coverage affects this value. And it includes how payors, consumers and providers can work together to optimize the value gained by all three.
Value-Based HCO OperationIn the fullest application of VBHP, HCOs will have new challenges and opportunities. These encompass the full range of ways that individual HCOs can optimize the value they offer and deliver to payors and patients alike, in order to optimize their likelihood of succeeding, surviving and prospering as VBHP catches on more widely and moves to its greatest application. And this includes HCOs’ adoption of value-based purchasing and value chain management in order to optimize such likelihood.
In its simplest and most traditional applications, value-based purchasing (VBP) means that purchasers carefully analyze the full value of options available in the market, expanding their analysis to all options available, rather than ones with which they are already familiar. But the trend in VBP has included purchasers who engage in “reverse marketing”, engaging in “partner relationship management” with sellers in order to improve the value of what sellers offer.
Wal-Mart, for example, is renowned for its aggressive approaches to its suppliers, working with them to reduce the costs and improve the quality of what they sell, and signing long-term, high-volume purchasing contracts with them as incentive and reward for the “best” suppliers, as well as to ensure continuous delivery of the best products. This practice, when fully engaging purchasers and sellers, becomes “value-chain management” (VCM).
VCM by HCOs is rare, simply because most HCOs are tiny compared to the size of their major suppliers. But the potential remains for either very large HCOs, such as integrated hospital systems with dozens of members, or for individual HCOs with local suppliers. And HCOs may go one step further than most purchasers engaged in VCM – by offering services and support for suppliers’ efforts to improve the value of their products and services through employee health management (EHM).
HCOs may go even further, if they become masters of pay-for-performance (P4P) management of their own employees. This would enable HCOs to offer services to suppliers as part of VCM that include both EHM and P4P as proven approaches to improving suppliers’ overall performance, and the value of their products and services to the HCOs. HCOs, as employers, should adopt VBHP for their own health benefits in order to become or remain the best value option for the employers and consumers they serve. And as providers, they should strive to become the best purchasers and partners in VCM, for the same reasons.
One of the unavoidable issues related to employee health and benefits management is the value that employees, as individuals and as workforces, contribute to their employers. Since health/benefits management is moving toward being an investment with ROI, and that ROI depends on the value contributions that employees make, the connection has to be examined and understood.
Two stories I recently read underline at least the potential value of employees, though only one suggested a way of measuring it. The first recounted the experience of ICI Films, a manufacturer of polyester film for industry. It has just completed a major improvement in its operations and financial performance, when it learned that a Japanese competitor could produce the same film for only $1.00 per pound, well below what ICI charged. In the polyester film market, such a price could easily mean the demise of firms unable to match or beat it.
The CEO gathered the firm’s employees in a “boot camp” effort to discover if there were ways to overcome this threat. Work groups presented ideas for cutting costs while maintaining or improving quality to the CEO for review, approval and implementation. The combined effort of all involved found a way to produce film at a cost of $0.94 per pound, and ICI had its most profitable year ever, instead of being kicked out of the market. [“The Mystery of Performance – The Secrets of Contribution” Tor Dahl & Associates Newsletter Apr 24, 2007 (www.tordahl.com)]
The second story was about a “bag boy” at a supermarket. He had been a participant in a workshop devoted to motivating employees to “leave their fingerprint” on their work, in order to make their customers’ shopping experiences worth bragging about and repeating. As a mere 19-year old bag stuffer, and challenged by Down’s Syndrome at that, “Johnny” took the idea to heart, though he wondered what he could do to make experiences memorable.
On his own, though with the help of his father when it came to implementation, Johnny came up with the idea of gathering or making up “Thoughts for the Day,” upbeat bon mots that he could put in the bags of customers for them to discover and enjoy once they got home and emptied them.
He began adding these small slips of paper to each customer’s order as they checked out, and proudly wrote to the speaker at the workshop who had inspired him. A month later, the manager of the store shared with that same speaker the fact that lines at Johnny’s check-out station were now three times as long as those at other stations. Shoppers were reporting that they were coming in more often just to get more of Johnny’s thoughts for the day.
The spirit that Johnny demonstrated began to catch on. Workers in the flower shop at the supermarket began keeping broken flowers and unclaimed orders, then finding an older woman or young girl and pinning flowers to their dresses to make their experiences memorable. Clearly the speaker who created the original spark, plus the manager who arranged for the workshop, deserve some credit, but if this is the difference a 19-year-old bag boy can produce, it suggests at least that individual employees can make a big difference and contribute significant added value.
Given the enormous and growing challenges that healthcare organizations are faced with, there is surely a good reason to measure or at least estimate the value of employees in general, and of individuals who can contribute as much as Johnny did. It seems likely that the HCOs that can galvanize their workforces as partners in addressing the slings and arrows of outrageous fortune, and optimizing the contributions they can make to the organization’s performance, will do much better.
James AlexanderTechnical Director, HFMA
It’s shaping up to be a long hot summer, particularly for hospital providers. That really shouldn’t come as a surprise--because year after year, the release by the Centers for Medicare and Medicaid Services of the proposed inpatient prospective payment system rule has tended to heat things up for providers. But with this year’s installment (if the proposals are adopted), you may find yourself mopping your brow a bit more than usual. Not only is there a big, hot issue in the works--the giant step to severity-adjusted diagnosis-related groups--but also, there is a plethora of “devilish” details to look forward to.
You may find yourself needing to work up a Medicare-only to-do list as you assess the impacts of the MS-DRG plan (the MS-CMS DRGs are the preferred version, MS for “Medicare severity”) and the other proposals. Of course, the proposal to change the DRG system is not new; the trial balloon having been floated last year. And hospitals have had weeks to review the interim report of the RAND Corporation, analyzing several likely models of severity-adjusted DRGs. (See Evaluation of Severity-Adjusted DRG Systems: Interim Report.) By familiarizing yourself with what to expect from this change, you can find some measure of comfort in the sultry summer days, and prepare for the impact of the changes.
Those Devilish DetailsEven if you may already have achieved a comfort level with the idea of the severity-adjusted DRGs, other details set forth in the IPPS proposed rule will also require your attention. In particular, you may need to deal with the heat-producing effects of the following provisions:
The SizzlersThe real “dog days” for hospitals are likely to come from the final two of the details described above.
This last proposal, hidden behind the unassuming phrase “budget neutrality adjustment,” may prove the most important for its reach and dollar impact on hospitals. CMS contends this is an adjustment for the “paper” inflation of care levels derived from improved coding, which the agency suggests leads to overpayments. The agency believes that adoption of the MS-DRGs it is proposing “would create a risk of increased aggregate levels of payment as a result of more comprehensive documentation and coding.” And because the Secretary of HHS has broad discretion under section 1886(d)(3)(A)(vi) of the Social Security Act to adjust the standardized amount so as to eliminate the effect of changes in coding or classification of discharges that do not reflect real changes in case mix, CMS wants to exercise that authority.
The Medicare Actuary has estimated that an adjustment of 4.8 percent over two years will be necessary to maintain budget neutrality for the transition to the MS-DRGs. The plan, therefore, is to reduce the IPPS standardized amounts by 2.4 percent each year for FY08 and FY09. To give that a little context, the market basket update is slated to be 3.3 percent. The American Hospital Association has estimated that the financial impact of this provision, typically referred to as a “behavioral offset,” will be $25 billion over five years.
In the next-to-last point above, CMS has proposed freezing capital payments to all hospitals, excepting rural hospitals. CMS’s rational for this proposal is that during the period from FY96 through FY04, every type of hospital and geographic grouping of hospitals realized a positive aggregate margin from their capital IPPS payments, whereas, capital margins for rural hospitals lagged considerably behind the margins for urban hospitals. The proposal would give rural hospitals the full 0.8 percent update in FY08 determined by the update framework.
The CMS analysis of capital margins shows that during the period of 1998-2005, hospital inpatient Medicare capital margins for various types of hospitals were as follows:
Bank on the hospital industry mobilizing over the next several months over these two CMS proposals in particular.
A Chance for InputThe proposed rule was published in the May 3 Federal Register. Comments to CMS on the proposed rule will be accepted until June 12, 2007 (see instructions in the Federal Register), with a final rule to be released by Aug. 1, 2007. The policies and payment rates would take effect Oct. 1, 2007.
Your comments could make a difference in CMS’s writing of the final regulations, so don’t hesitate to participate in the process as long as there’s still time to do so And don’t forget to add these publications to your summer reading list.
There is a constant debate, in the media, if not in board rooms, regarding how much business executives are worth. Some amazing compensation packages have been given to chief executives, where many millions are common, and even a hundred million or more is not unheard of -- in recruiting, rewarding and retaining, and even in “golden parachutes” when they leave.
This same lofty evaluation of executive worth is reflected in executive health programs offered by hospitals and physician practices, and in hospital “VIP suite” accommodations that many firms pay for in order to make their executives healthy and happy. But the science behind such evaluation is remarkably weak. It is easier to attribute the success of a business, in general and in any particular year, to executives than to scientifically demonstrate the connection between what executives have actually done and the results achieved. But it is not necessarily more accurate to conclude that success has really been caused by such executives.
One of the many approaches to improving an organization’s performance is to work on empowering employees to improve their performance. This reflects the obvious reality that the organization’s performance is largely the sum of the workforce’s performance. And the empowerment of employees – improving their abilities to perform, their motivation to perform, their “just-in-time” awareness of best practices when engaged in performing their roles – is usually accompanied by systems that reduce the executive role to one of enabling, more than directing and controlling.
When organizations think highly of their employees’ worth, they often increase their investments in employee benefits and development. A large number of employers are returning to the old “paternalistic” practice of offering onsite medical clinics, for example. These have significantly greater roles than the former “occupational health” focus on pre-employment physicals and job-injury care. They offer the same kind of convenience, of both place and time, as do retail clinics, along with a wide range of proactive health protection and improvement services, roughly the same services as do executive health programs, though not at quite the same “luxury” level.
Businesses can be arrayed along a continuum reflecting their overall sense of the value of their employees. Some are doing their best to reduce total employment, replacing employees with customer self-service, offshoring and outsourcing functions, relying on machines wherever possible. Many pay their employees as little as possible, and also tend not to offer them any health or other “fringe” benefits that long ago passed being of only “fringe” importance to employees. These do not invest in employee health, development, or anything beyond making sure slots are filled.
Healthcare organizations usually fall toward the other end of the continuum, appreciating the significant and irreplaceable value of many of their employees, at least. Many outsource some functions, usually support and overhead activities, in contrast to basic care delivery and revenue generating functions. And most tend to pay their executives significantly less than the compensation packages given to for-profit business executives, though some not-for-profit hospitals have been criticized for their generosity with their CEOs on occasion.
One of the most revealing examples of the worth of employees emerged recently at the West Jefferson Medical Center outside of New Orleans. After purchasing, for $3.5 million, the CyberKnife cancer treatment technology, in January 2006, and making it a prominent feature in its advertising, it suspended use of the technology in February of 2007. And the reason for letting the machine stand idle was the lack of a single employee who was necessary to operate and maintain it. [M. Gordon “Idle Medical Equipment Upsets Board” (New Orleans) Times-Picayune Apr 18, 2007 (www.nola.com)]
Like the loss of a kingdom for want of a horseshoe nail, the lack of this key employee, who apparently wanted more than the hospital administration thought appropriate, meant that the machine could not be used, since there was no one else who could make it work. Whatever the “justice” of the situation, the hospital was left without the use of and revenue from this high-tech machine because of not having an employee, suggesting that in this case, at least, the employee was worth a great deal.
As hospitals are increasingly being compensated based on their quality and cost performance, the value of employees should increasingly be determined through performance measurement, evaluation and compensation. Already, the science of measuring the worth of employees -- in terms of performance measures such as revenue per employee, productivity, quality and customer satisfaction – is well advanced.
It seems likely that the worth of employees as objects for health maintenance and improvement, job skills development, and pay-for-performance (P4P) compensation will increasingly be recognized by hospitals and other healthcare organizations whose revenue is based at least partly on P4P revenue. Of course, as employees, themselves, become more aware of their worth, issues of what is adequate and fair compensation are sure to arise, with the relative compensation of executives vs. employees playing a major role in judging what is fair and adequate.
Dan DeLaySenior Vice President, Supply Chain Analytics, VHA Inc.
The NBA playoffs are underway and let’s be honest, I love this game! But my beloved home team is out, suffering a collapse of epic proportions in the first round. Locally, our superstar, Dirk Nowitzki is getting a lot of bad press and many are placing the blame solely on his shoulders, highlighting the fact that superstar athletes capture a lot of the attention. If a team is successful, everything seems right with the world and the season looks good. However, if the team fails to live up to expectations, every fan becomes a coach and every sportscaster becomes a critic, putting the star player under enormous skepticism. Thankfully, we don’t deal with that kind of scrutiny in the health care industry … but the day may be fast approaching.
Drawing the analogy to the health care world, just who are the superstars? Let’s face it; many would consider doctors to be the superstars in health care. (Although, I also know how important nurses are.) For hospitals, doctors have a huge impact on patient care -- they can also have a huge impact on the hospital’s supply budget. When one doctor demands the right to use specific, expensive medical devices, this may not seem like a big problem. However, when dozens of doctors make the same demands, the whole team, meaning the hospital, can suffer.
To get superstar athletes to perform at their best, it sometimes takes an agent or coach to whisper a motivational thought in their ear, “Hey, get out there and show me some heart, set an example for your teammates.” The same is true with superstar doctors. You have to show them the data that indicates, “Hey, if you keep this up, our hospital will suffer financially, and you won’t have a place to demonstrate your tremendous talent.” Granted, this argument is a little hard to make in towns where the doctor has other acute care facilities to practice…
To help superstar doctors measure their impact on the hospital’s financial and clinical performance, you need to show them how much revenue they bring into the organization, the expenses they generate and their clinical outcomes and then compare them to their colleagues. Power forward or orthopedic surgeon, it doesn’t matter -- no one likes to be told they aren’t the team’s best performer, or that they’re hurting the team. Most doctors will be willing to take some steps to improve their performance, especially when the hospital can demonstrate that the doctor will win something in return.
Once you have this data, you could use it to turn any doctor into a supply chain superstar.
HFMA’s 2006-2007 Chairman Joe Fifer stood on stage and spoke, but no one was listening.
Joe was attempting to open the 2007 Leadership Training Conference—the annual event to support HFMA’s chapter officers. About 500 people were in the ballroom. Joe is a strong presence and a strong speaker. When he talks, people usually do a whole lot of listening and nodding. But this time, no luck.
The people were not so much ignoring Joe as they were enjoying each other’s company. Everywhere I looked I saw big smiles and animated conversations. Everyone was having too much fun to stop.
Eventually, before Joe had to resort to jumping up and down and waving his arms, the audience members took their seats.
Later in the conference, I had the privilege to lead several workshops for new HFMA chapter newsletter chairs. It was my first extended contact with HFMA chapter leaders, so I figured I should start with the basics. I asked the participants what they saw as the purpose of their chapters. My logic was that the chapter newsletters should complement that purpose.
“Get members,” one participant said immediately.
“Educate,” said another after the briefest of pauses.
A longer pause followed. Then someone called out from the back of the room, “Have fun.”
If HFMA’s chapter leaders were forced to rank these three goals, having fun probably would come in third. Yet spending time with HFMA’s chapter leaders convinced me that they have figured out that achieving the loftier goals is a whole lot easier if you’re having fun. In fact, they know that segregating fun from their other goals is unnecessary and unwise. For HFMA chapter leaders, getting members is fun, educating each other is fun, and being part of a group with a unified purpose and spirit is the most fun of all. Fun is the joy they find in their profession and each other.
My younger brother has a difficult time at a buffet. The chicken or the ham? The biscuits or the bread sticks? The cobbler or the cake? My brother’s buffet problem was exacerbated by the fact that he both worked and ate each day at a university cafeteria.
My brother has autism. One of the many and varied symptoms of autism is an inability to make the logical steps and intuitive leaps that characterize our everyday decision-making. This problem may be especially evident among many people with autism, but it sure isn’t limited to them.
We all occasionally have trouble choosing between the pasta primavera and the ravioli, the Lincoln biography and the Grisham thriller, or the urgent phone call and the urgent e-mail message.
The importance grows rapidly as the decisions become more strategic. Launch a new product or increase sales of an existing product? Diversify your services or focus on your core business? Staff up or outsource?
In this month’s cover story in hfm magazine, “Growing the Top Line,” Mark Grube offers some context for and examples of strategic decision-making in health care today. He explains why hospital revenues need to grow and why operational efficiency and an effective revenue cycle must be accompanied by volume growth. He identifies the information needed to make decisions among the possible strategies to achieve growth. And he offers several examples of strategies that hospitals and health systems have chosen and successfully implemented.
All of this good information may be best summarized in a quote that Grube presents from GE chairman and CEO Jeffrey Immelt: “You have to have a plan, and you have to stick with it. You have to modify it at times, but every day you’ve got to get out there and play it hard.”
Need to decide whether to return the phone call or answer the e-mail message? You may not need a formal plan, but you do need some criteria in place that you rely on to set priorities. Need to decide whether to strengthen your local market share or increase your geographic reach? Then you really need a plan--one that considers a multitude of market and internal factors. And as Grube suggests, you need to work that plan, or the capital markets will have “significant cause for concern.”
During his first weeks on the job at the university cafeteria, my brother would stand, tray in hand, on his lunch breaks and stare at the options, unable to choose, a growing line of grumbling college students behind him. But with a little help, he made a plan. He mapped out the foods offered on most days and a schedule for which days he would choose which foods. Within a week or two, he was breezing through the line like a pro and proud of the accomplishment. Whether we learn this lesson from the chairman and CEO of GE or from an autistic man working at a cafeteria, it’s a lesson worth learning.
Revenue Integrity through Claims Submission and Management by MedAssets MedAssets works with providers to help reduce AR days, increase cash flow, reduce bad debt, and enhance the overall operational efficiency and accountability of the hospital's revenue cycle.
