Quality Improvement

Modeling the Financial Benefits of a Physician Adviser Program

October 2, 2017 12:39 pm

A new specialty, the physician adviser (PA), has emerged in the last 10 years to fill the need for a physician leader who can specifically focus on utilization management (UM), quality and documentation improvement, medical staff and hospital board education, and C-suite physician advocacy.

In fact, the demand for seasoned physician advisers has rapidly outpaced the market supply. The best solution to the shortage may be to build a program internally and recruit within your own medical staff.

When considering a new PA program or evaluating a current program, the facility should use a pro forma to quantify expected results. Dashboards with key performance indicators (KPIs) should also be used to measure improvement or adherence to benchmark goals. Financial analysis may provide evidence of success and demonstrate how the PA program can support margin and revenue integrity.

Program Goals

Developing the PA dashboard and pro forma begins with stating the benefits of the program and then, as specifically as possible, quantifying the expected results. Begin with a list of program benefits, then determine which of them can be quantified financially. Benefits of the program may include (but are not limited to):

  • Improved physician engagement
  • Reduced dollars at risk for Medicare payment denials, including through recovery audit contractors (RACs)
  • Reduced dollars at risk for commercial payment denials
  • Reduced number of government and RAC audits 1
  • Reduced number of lost appeals
  • Reduced average loss per case
  • Improved margin for observation patients
  • Clinical documentation improvement
  • Oversight of utilization committee
  • Reduced dollars spent on overutilization
  • Reduced dollars spent on attorneys and outsourced services
  • Reduced avoidable days
  • Reduced risk of compliance errors

Develop the KPI Source List

From these benefits, develop a list of KPIs, including the source of the information and the final goal. Note that areas such as physician engagement are not on the list but may be measured in your organization separately. For our purposes, the final benefit to the hospital’s compliance rate and margin can serve as evidence of physician engagement.

To maximize the benefit of the PA program, both process and outcomes should be measured and reported to the utilization management committee (UMC). Whereas process indicators indicate whether a particular PA is performing efficiently, outcome indicators demonstrate effectiveness.

If you have multiple PAs, each should have an individual dashboard performance. Below are samples of KPI metrics to consider.

Monthly Process Indicators:

  • Average time from case management first-level review to PA-completed second-level review
  • Average time from referral to PA to completion of second-level review
  • Number of second-level reviews
  • Number of physician-to-physician discussions on bed status
  • Number of conversions from observation to inpatient
  • Number of peer-to-peer meetings for appeals
  • Number of peer-to-peer meetings for authorization
  • Number of RAC appeal letters written/reviewed
  • Number of commercial appeal letters written/reviewed
  • Number of administrative law judge (ALJ) hearings attended
  • Number of education sessions taught to physicians
  • % Utilization meeting committee attendance (Goal: 100%)
  • % Attendance for other assigned committees (Goal: 100%)

Quarterly Outcome Indicators:

Quarterly Outcome Indicators:

  • Observation patient—average length of stay (LOS) in hours
  • Inpatient LOS
  • Number of observation-to-inpatient conversions
  • Number of inpatient-to-observation conversions
  • Number of Code 44s
  • Number of bill holds for lack of documentation (DNFB)
  • Number of self-denials
  • Case-mix index
  • Readmissions
  • Authorization obtained for appropriate bed status after peer to peer
  • Overturned RAC denials on appeal
  • Number of clinical documentation improvement queries (tracked and trended for reduction based on physician education)
  • Total number (not dollars) of initial denials
  • Number of final denials
  • Dollars in final denials
  • Total number of overturned denials
  • Number of denials overturned after peer to peer
  • Number of successful appeals to ALJ
  • Cost per case (inpatient)
  • Cost per case (observation)

Model the Financial Impact

Now that you know what you are going to measure, including where you can source the information and your final goal for each metric, you can develop a model to demonstrate the expected financial impact of the PA program. 

Calculate the difference between where your organization is now and where you expect it to be by the end of years one through five. Use this document to determine how and when to proceed with a PA program. Once the program is in place, the KPIs should be continually measured and reported to demonstrate that you are meeting these goals. 

A PA pro forma tool, developed with support from the board of directors of the American College of Physician Advisors, can be used as a baseline for metrics that are measured quarterly to inform leadership and the medical staff on how well the PA program and utilization management are working. The tool is in editable form, allowing each facility to customize it for their needs. 

Read more entries on the Physician Business Adviser Blog.


a. According to proposed changes by the Centers for Medicare & Medicaid Services (CMS) to the RAC program, hospitals that improve their systems and reduce denials will see a decreased audit focus, with smaller limits on Additional Documentation Requests (ADRs). See: “Recovery Audit Program Enhancements.”


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