When Hospital Infections Go Down, Pay Raises and Bonuses Go Up at UMC
by Maggie Van Dyke
To show they were serious about reducing hospital-acquired infections (HAIs), leaders at the University Medical Center made HAI reduction a strategic goal and tied incentive pay to annual results.
Few, if any, hospital staff would object to an organization wide initiative to reduce hospital-acquired infections (HAIs). Physicians, nurses, and other clinicians would applaud any effort to improve the quality and safety of patient care.
And recession-weary, reform-conscious administrators would be doubly happy once they saw that doing the right thing would also save dollars. According to one analysis, 50 percent to 80 percent of all inpatient operating losses can be blamed on HAIs (Cardinal Health analysis of 3.1 million admissions).
But how can hospital leaders engage all staff in achieving this laudable goal—when success requires a coordinated, cross-discipline effort across traditional hospital silos?
“Part of it is making sure you have an overall goal and aligned incentives,” says Kevin Burns, CFO, University Medical Center (UMC), Tucson, Ariz. “You have to have individual goals and incentives that are aligned with the organization’s overall strategy.”
In other words, UMC puts its money where its mouth is when it comes to reducing HAIs.
Tying Goals to Pay Incentives
About two years ago, senior leaders at UMC completed a disciplined strategic planning process and identified seven focus area goals related to service, people, quality, financial, and growth (see the exhibit).
One of UMC’s quality goals focuses specifically on reducing HAIs, or nosocomial infections.
Every fiscal year, senior leaders set specific targets and stretch goals for each of the seven goals. For example, in FY09, UMC set a goal of reducing infections by 10 percent.
All UMC leaders—from managers to the CEO—set individual goals that are tied to the organization’s seven goals, as appropriate. For instance, a nursing manager of a unit that handles a high volume of respiratory patients might establish a goal of reducing respiratory-associated infections by 5 percent. Then, every quarter, all leaders develop a 90-day action plan that outlines the specific steps they will take to meet their individual goals.
At the end of the fiscal year, pay raise and bonus amounts depend on how well the individual and the organization did in meeting all the goals—including the HAI goal. The amount of the incentive is based on a range of potential achievement, from no accomplishment (no incentive), to hitting the target (midrange incentive pay out), to hitting the stretch goal (highest possible incentive pay out)
Nonmanagement staff also receive an incentive in the form of an annual bonus.
“Tying HAIs and other goals to individual raises and bonuses has definitely made a difference,” says Burns. “We went from a merit pay system that was a fairly subjective approach to one that is much more objective in nature. The vice presidents, directors, and other leaders all know where we stand in terms of contributing to the organization’s performance.”
Why HAIs?
UMC leaders have traditionally put a major emphasis on providing high-quality care. The hospital’s board established a quality committee in the 1990s, long before it became the fashion. And the chief medical officer and quality leader, Andy Theodorou, MD, a pediatric intensivist, helps drive quality improvement initiatives throughout the organization.
“We probably spend as much time talking about quality as finance at board meetings,” says Burns.
The focus has paid off: UMC has ranked in Thomson Reuters top 100 hospitals for high performance four years in a row, and was recognized as one of the top five leaders in quality by the University Health System Consortium in 2008.
So setting a strategic goal related to reducing HAIs was a natural fit for UMC.
The availability of good benchmark data on the costs associated with hospital infection rates was another deciding factor in choosing HAIs as a quality goal. The goal is not only commendable—it’s now measurable, thanks to UMC’s relationship with a vendor that supplies detailed HAI data.
“The number one reason we want to reduce HAIs is, of course, is to improve patient care, says Burns. “Another important reason is that high-quality care drives financial results. And, with HAIs, we have verifiable data that we can monitor, demonstrating the financial benefit of reducing infections. To me, that is a perfect marriage.”
At UMC, the marriage has rapidly saved millions of dollars. Eighteen months after setting the HAI goal, UMC had accomplished the following:
Avoided $1.93 million in incremental costs
Prevented 156
Avoided 984.4 bed days
UMC has accomplished these savings by assigning a team of appropriate clinicians to reduce the rate of each major group of HAI infections. For example, one team of clinicians is attacking ventilator-associated pneumonia (VAP) and another one is going after blood culture contaminations.
These ongoing work groups identify and implement specific HAI prevention strategies. Once a quarter, representatives from each work group provide a report to UMC’s leadership group on what the team has accomplished, what the next steps are, and what the results have been, including how much money the hospital has saved by preventing infections. “The nurses on the teams are enthusiastic about their progress. They know they are helping our patients and reducing costs,” says Burns.
In some cases, UMC has had to invest money to prevent infections—but the hospital is still coming out ahead. For instance, Burns had no trouble approving a $300,000 a year plan for prescreening patients on admission for MRSA and other serious infections so that infected patients could be proactively isolated when necessary. “We can easily make up that $300,000 by reducing our infection rate by one percentage point, which means preventing HAIs and shortening lengths of stay.”
Training and Tracking Are Key
Providing organizationwide education and training about UMC’s strategic goals and incentive plan has been a key to success, says Burns. UMC holds offsite leadership institutes on a quarterly basis for all the organization’s leaders. These offsite meetings provide good opportunities for UMC’s CEO and other senior leaders to educate the vice presidents, directors, and managers about the new strategic goals.
The CEO also spreads the word to all employees via regular town hall meetings. “We also had a group of very enthusiastic directors who agreed to lead the process,” says Burns. “The directors did the training on a department-by-department basis and made themselves available for questions.”
Another key to success: Continually tracking progress and sharing results. “We operate under the philosophy that if you measure it and monitor it, you will improve it,” says Burns. All UMC employees are given regular updates—via the hospital’s Intranet and bulletin board poster displays—on how close the hospital is to meeting or surpassing its HAI target, as well as other goal targets.
All UMC leaders can also track progress toward their individual goals via a human resource software tool.
HAIs Are Going Down
UMC is gradually—and successfully—decreasing HAIs. For example, the hospital’s housewide infection rate for blood culture contaminations decreased from a high point of 7 percent in 2008 to 2 percent within the last few months.
“Our goal is continuous improvement,” says Burns. “Ultimately, we want to have zero nosocomial infections. But it’s important to set the goals fairly and realistically, striving for steady, incremental improvement from year to year.”
The hospital will meet its HAI target for the fiscal year, based on results through the third quarter. (Final results are not yet in for UMC’s fiscal year, which ended in June.) “We’re really excited with our progress, but we always know there is more work to be done,” says Burns.
Unfortunately, the current economy has thrown a wrench in UMC’s incentive plan. As organizations across the country have had to do, UMC was forced to put a freeze on merit raises, and incentive bonuses may be unlikely for the fiscal year. While the hospital is holding its own financially, leaders need to take precautions to ensure the financial health of the institution. “When things return to normal, and we hope this is soon, we will go back to merit raises, and incentive bonuses will be reinstated,” says Burns.
UMC staff can also feel immense pride in knowing that their collaborative work to prevent infections has so far saved more than 150 patients the undue suffering of an HAI. And they are preventing more infections every day—while also reducing costs.
“In the current environment, where we are facing payment changes and are under huge pressure to reduce costs, this is a tool that can be put in place to improve patient outcomes and, hopefully, reduce the risk of draconian cost-cutting actions in the future,” says Burns. “This is a chance to involve your physicians and staff in a quality-based initiative right now.”
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Maggie Van Dyke is the editor of the Leadership e-newsletter (mvandyke@hfma.org).
Interviewed for this article: Kevin Burns is CFO, University Medical Center, Tucson, Ariz., and an advanced HFMA member in the Arizona chapter (kjburns@umcaz.edu).
For more on this topic, access the ANI 2009 presentation by Kevin Burns and Drew Deaton, Director of Finance and Operations, Cardinal Health MedMined Services.
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Table: UMC Focus Area Goal
Service: Overall inpatient satisfaction
Service: Overall emergency department patient satisfaction
People: Employee turnover rate housewide
Quality: Mortality rate overall—observed/expected ratio
Quality: Nosocomial infection marker
Financial: Operating margin
Growth: Growth in adjusted patient days