Enhancing Your Practice's Revenue - California Orthopaedic ...

More documents

Recommendations

Info

careful planning, creation of a realistic business plan andimplementation of a good governance structure.• JV arrangements need to be developed with great care toensure compliance with government regulations.• As far as compliance is concerned, the greater numberof stakeholders, the more important it is to “dot all theI’s and cross all the T’s (and the more difficult this canbecome).• The blueprint for the initiative must include amechanism for addressing disagreements, since these aresure to arise over time.• All JVs must include a mechanism for “unwinding”because times change and circumstances change(including federal and state regulations); nothing lastsforever.Contact: Frederick Meyer, MD: freddoc937@me.comChapter 9Service Line Co-ManagementBy Craig Mahoney, MDWhat Exactly Is Service Line Management?In today’s healthcare environment, hospitals are realizingthat they cannot be all things to all people. Given limitedresources, it is not possible for them to provide a fullrange of high-quality medical services to everyone inthe community in a cost-effective manner. They areincreasingly focusing their human and capital resources onwhat are now referred to as “service lines.” A service lineis a group of services that relates to the treatment of a setof diseases, disorders and/or conditions. Resources can befocused and coordinated around specific groups of patients.Service line management (SLM) covers all the activitiesthat go into overseeing a given service line. This includes(a) what clinical functions should be included, (b) requirementsfor physician and allied health staff, (c) requirementsfor equipment and space, and (d) back-office supportactivities; e.g., billing and collections.The introduction of SLM to the healthcare field beganin the early 1980s; the impetus was implementation ofthe prospective payment system (PPS). PPS resulted in asea-change in terms of the way hospitals were paid. Patientsadmitted into the institutions had to be classified into “diagnosisrelated groups” or DRGs. DRG payments receivedfrom government agencies covered all the services to patientsduring their stay. Thus, management of costs becameextremely important because reimbursement, except underunusual circumstances, was fixed.By grouping related services together into service lines,hospitals were able to calculate total revenues and totalcosts associated with the lines. This allowed them to decidewhich lines they wanted to focus on, at least from a financialstandpoint. The approach is not dissimilar to Ford MotorCompany looking at the profitability of one car model,for example, relative to another one, and making decisionsregarding the models’ futures.A: High Profitability B: Low Profitability1. High Volume A1 B12. Low Volume A2 B2Service lines can be classified as high volume-high profitability;high volume-low profitability; low volume-highprofitability; and low volume-low profitability.Each hospital needs to determine where the services itoffers fall in the above grid. Orthopaedics and cardiologyalmost always fall into quadrant A1. Medical services typicallyfall into quadrant B2.It makes economic sense to actively manage service linesin quadrant A1 because this will maximize cash flow for theinstitution as a whole. That in turns means that the additionalcash can be allocated to other arenas. The old adagethat “a hospital full of patients is always a profitable one”is not true if many of the patients suffer from conditionsthe institution cannot treat in a high-quality, cost-effectivemanner.Note: focusing on service lines such as orthopaedics doesnot mean that other service lines should be ignored. Forexample, if a service is high volume-low profitability (B1),managers should be looking at ways to inrease profitability,either by improving revenues or eliminating (unnecessary)costs. By the same token, if a service line is low volumehighprofitability (A2), managers should be looking at waysto increase volume. If the hospital wishes to continue tooffer low volume-low profitability services (B2), it is criticalto move as many other service lines as possible into the A1quadrant, and actively manage them. The more money ahealthcare institution generates from high volume-highprofitability services, the more it will be able to continue toserve the community in other arenas.Advantages of Service Line ManagementThere are numerous advantages to service line managementincluding:• Coordination of care among related clinical areastranslates to improved overall quality of care.• Revenues and costs can be aligned to determine serviceline profitability.• Traditionally independent “silos” (e.g., nursing, imaging,PT/OT) start working together.32© 2011 American Academy of Orthopaedic Surgeons
• The hospital develops strategies for “targeted growth” asopposed to just “expense management.”• Marketing can focus on specific service lines, rather thanjust, “We’re the best.”The $64,000 Question: What RoleCan Orthopaedists Play in Co-managingService Lines?In the past, hospital executives were traditionally chargedwith overseeing the myriad services delivered in healthcareinstitutions. They came to the table equipped with a greatdeal of knowledge derived from their education, includingfinance, accounting, personnel management and so forth.Many however did not have clinical backgrounds thatwould enable them to understand the complexities ofpatient care. (Nursing was often an exception to this but,again, “nursing services” was typically a silo, independentof other silos.)Hospitals are increasingly recognizing the value of askingphysicians to help co-manage service lines because they dounderstand the complexities of patient care and have recentlymade great strides to improve their business acumen. Thephysicians receive payment in return for this assistance - -just like any other hospital executive. Conceptually, thearrangement is similar to using consultants or outside managersin private business. In that situation, the personnelare on specific projects. The consultants have a defined setof goals and are engaged for a predefined amount of time.They are paid based on time spent and/or goals achieved.In the case of orthopaedics, the service line could (a)cover all musculoskeletal care provided in the institutionor (b) focus on specific orthopaedic subspecialties such asadult hip and knee, spine, and/or trauma, where manyof the operations associated with the care of patients arecoordinated. Doctors can be compensated in a variety of ways,including an hourly, case-based, or annual wage. They mayalso receive bonuses based on clinical outcomes, patient satisfaction,improved operating room efficiencies and/or overheadmanagement, as stipulated by contracts.Why Is It Vitally Important for Hospitals to UseDoctors in Service Line Management?Hospitals have been asked by the Centers for Medicareand Medicaid Services (CMS) to launch focused initiativesto improve quality of care. In the future, it is likelythat payment will be increasingly based on successfuloutcomes, and not on a specific diagnosis, regardlessof what resources are allocated to treat that diagnosis.Physicians represent a logical partner to help the hospitalimprove quality of care delivered in the institution andthus maximize reimbursement that the institution receives.They can also help with cost management. Doctors canassume a variety of roles in service line management,ranging from overseeing patient flow to establishing “med/surg” purchasing guidelines to setting up audit programsmonitoring outcomes.How Do Hospitals and Physicians Go aboutDefining “Orthopaedic Service Lines?”Service lines can be defined in a number of different ways.One alternative relates to anatomic site or body system.This is easy in principle but can be confusing in practicesince multiple medical specialties can work within thecontext of any given site or system. It can also complicatecompensation arrangements if only one medical practice isengaged to manage a service line.The use of diagnosis related groups (DRGs) refinesthe body system approach because they classify hospitalcases into one of approximately 500 groups. This allowsthe hospital and the medical group to (a) come to closureregarding exactly what the service line will consist of froma clinical standpoint; (b) agree on what they jointly want toaccomplish; and (c) decide how physicians should be recognizedfor their contributions. Physicians and the hospitalalso need to identify how results will be tracked.The bottom line is that whatever the two parties ultimatelydecide constitutes the service line, is the service line.The line can involve some of the members of a medical sectionwithin a subspecialty in a given hospital system, or allof them. It can incorporate all associated ancillary services,or just some of them. And the line may or may not belinked, from a marketing perspective, with related lines.Specific Benefits of Service Line Co-managementThe “quality of care benefits” of including orthopaedicsurgeons in service line management have already beenmentioned above. Orthopaedists are in a good positionto help out in this arena because they are very focused onthe quality of the work they themselves perform both inthe office and the hospital. Since outcomes in inpatientorthopaedic care also depend on actions of hospital staff,functionality of equipment, and so forth, they tend to paya great deal of attention to “institutional issues” that mayarise. After all, if there is a poor outcome, regardless ofwho may be at fault, a lawsuit is likely to name both thephysician and the hospital.Another benefit relates to expense management. In theirown practice settings, orthopaedic surgeons are very awareof recent cost increases, including salaries, benefits, occupancy,and “med/surg” supplies. Many may be alreadyworking with their institutions on ways to trim unnecessaryexpenses in those institutions in such a way that quality isnot compromised. As business owners (versus employees)they truly understand that a dollar saved translates directlyto the bottom line.© 2011 American Academy of Orthopaedic Surgeons33
Page 3 and 4: Enhancing Your Practice’s Revenue
Page 9 and 10: Section 1PersonnelChapter 1Non-Phys
Page 11 and 12: Difficult cases can lead to diagnos
Page 13 and 14: enefits from an “image” standpo
Page 15 and 16: • Have we met all current regulat
Page 17 and 18: OperationsRegardless of organizatio
Page 19 and 20: develop and oversee the plan? Often
Page 21 and 22: expenses for the ASC for a period o
Page 24 and 25: have to be replaced periodically. T
Page 26 and 27: Section 3The HospitalChapter 7On-Ca
Page 28 and 29: coverage on specified holidays. Whi
Page 30 and 31: • Partners must recognize that th
Page 34 and 35: When physicians are compensated by
Page 36 and 37: QualificationsAs a minimum, you mus
Page 38 and 39: Space-sharing ArrangementsWhether y
Page 40 and 41: Section 5MarketingChapter 12Marketi
Page 42 and 43: Wise practices first perform market
Page 44 and 45: Appendix:Ten Top TipsBy Steven E. F
Page 46 and 47: Resource List (On-line Links effect
Page 48: Product No. 05247ISBN: 978-0-89203-

Enhancing Your Practice's Revenue - California Orthopaedic ...

Create successful ePaper yourself

Delete template?

Save as template?