Cost Reduction

Purchased Services Contracting for Employed Physician Practices Cuts Cost, Improves Service

December 12, 2018 11:48 am

Piedmont Healthcare’s five-step process ensured physician buy-in and end-user adoption.

Purchased services contracting is common practice for hospitals and health systems, accounting for 20 to 30 percent of a hospital’s total expenses, according to Vizient. Primarily used for laundry, food, marketing, telecom, and other nonmedical supplies or services, the purchased services approach is a proven source of savings across the healthcare supply chain.

A new care setting to consider for the purchased services approach is employed or managed physician practices. The traditional, decentralized method of contracting for third-party services is the norm for medical groups, and it represents a significant percentage of their annual spend. When practices are employed or managed by a health system, the expenses incurred from disjointed purchasing become a significant cost burden and financial concern.

Healthcare organizations can relieve administrative burdens and reduce overall practice costs by taking over the purchased services contracting process for physician partners. Piedmont Healthcare, one of Georgia’s fastest-growing health systems, saved time and dollars for its employed physician practices by securing a purchased services contract for one operational function: after-hours answering services.

Disadvantages of Siloed Answering Services

Before centralizing and contracting with a single company for after-hours answering services, Piedmont Healthcare’s employed practices were using more than 13 different vendors across more than 170 locations. The combined hard-dollar cost for after-hours answering services across Piedmont’s practice locations was $416,272 per year. Different fee structures and use-based surcharges were common. Finally, significant operational and management costs were incurred by each practice team that was spending time on the following activities:

  • Vetting and evaluating vendors
  • Implementing systems and services
  • Overseeing and managing vendor relationships

Another challenge with siloed physician practice answering services is variable and disconnected clinical communications that negatively impact physician satisfaction, practice staff productivity, and timely patient care. Service quality, clinician workflow, and patient experience fluctuated across the 13 answering-service vendors.

Variable levels of service and quality among the vendors meant inconsistent ways of communicating with patients and different processes for relaying and escalating messages to physicians, which did not align with Piedmont Healthcare’s image as a high-quality, unified health system. Finally, disjointed systems made it difficult for Piedmont physicians to identify the correct on-call provider for specific patient or clinical situations over weekends and overnight. A step-wise approach to consolidating after-hours answering services across Piedmont’s employed physician practices was needed.

5 Steps to Physician Practice Buy-In

While implementing purchased services across employed physician practices can be complicated, Piedmont realized the cost savings are worth it. Starting with one of Piedmont’s most active practices, Piedmont Pulmonary and Sleep Medicine, the health system successfully converted the purchasing of after-hours physician answering services from siloed decision making across 170 locations to an organized and consolidated project.

The following five steps ensured physician buy-in, practice management support, and end-user adoption.

Step 1. Conducted a thorough assessment by gathering information from each practice location through stakeholder conversations, review of existing contracts, and analysis of the general ledger to capture fixed and variable cost.

Step 2. Gained executive buy-in by reviewing assessment findings, using data to illustrate the business case, and gaining support to navigate roadblocks.

Step 3. Analyzed performance by comparing spend and utilization as well as evaluating quality and efficacy of current outcomes, stakeholder satisfaction, existing vendor performance, and ease of doing business.

Step 4. Evaluated vendors capable of standardizing our practices’ answering services by addressing stakeholders’ needs and goals and made recommendations based on the analysis and strategic imperatives.

Step 5. Monitored improvements and cost savings through metrics reporting and user feedback and by building upon communication improvements.

Cost Reduction Achieved

One of the first questions asked by Piedmont’s finance team was: Is this economically achievable? To address this question and reduce overall answering service costs for the employed practices, Piedmont took the following steps:

  • Secured a lower per-provider monthly fee through volume purchasing and stabilized practice costs by eliminating disparate, variable expenses related to use-based surcharges.
  • Used a scalable platform to ensure Piedmont’s ability to expand as more practices are acquired and locations added. Currently, hundreds of physicians across the 170 locations are on the new centralized, after-hours answering service platform through the purchased services contract.

Piedmont reduced hard-dollar costs by $89,212. Practices also benefited through time and soft-dollar cost savings associated with no longer having to manage separate after-hours answering service vendors.

The new platform was introduced to practice operations through extensive workflow analysis, incorporation of provider-specific communication preferences, proper training, and system support. These steps ensured a high level of user adoption and continue to drive Piedmont’s return on investment (ROI). Ongoing communication of the project’s ROI to finance executives includes monitored metrics reporting, feedback from physicians, and goals for ongoing communication improvements.

Physician Feedback

Standardization of after-hours answering services has helped Piedmont physicians communicate reliably and create a singular experience for patients. Physician satisfaction with the system is high, and five key benefits have been achieved:

  • Nonurgent messages are delayed until the next working day, so physicians aren’t called in the middle of the night for routine issues.
  • Home and mobile phone numbers are masked when calling patients.
  • Call schedule changes can be made on the fly by physicians or their staff.
  • Patients are happier with the consistent and timely management of their calls.
  • Information is easily communicated and shared with colleagues.

As a byproduct of this project, Piedmont has eliminated manual steps in identifying the correct on-call provider, which historically was very confusing, inconsistent, and often led to erroneous contact.

Expedited delivery of messages has made it easy for providers to act upon new information, which has improved response times, and therefore patient, nurse, and frontline staff satisfaction with the process.

The organization is also able to ensure consistent, secure management of protected health information (PHI) in all communications and create a platform to support continued growth of the employed physician group.

Ryan Bowcut is the executive director of operations, Piedmont Healthcare, Atlanta.

Merrie Wallace, RN, BSN, MN, is the chief revenue officer for PerfectServe, Knoxville, Tennessee, and is a member of HFMA’s Tennessee Chapter.


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