I believe that the most important measures to track for any healthcare site are those that measure patient health, financial health, and management of time and effort. These three, as you know, are closely linked. Working to improve one affects the other two. Unfortunately, many healthcare sites fail to track the impact of financial health at their site(s), or if they do, fail to link these efforts with quality improvement efforts. Hospitals do a better job than primary care sites, in general, because they have staff devoted to just this issue. However, even at hospital sites those who track financial measures are not commonly part of teams that work with quality improvement of clinical measures.
The best businesses track quality improvement of product and financial measures. They are careful to see what changes in processes of manufacturing or services affect the bottom line. Accountants of such businesses are consulted by quality improvement teams or actually a part of the team. They want to know if changing a process that improves quality is too expensive, if it has a serious effect on the bottom line or if it saves on expenses while improving the product or service (which commonly happens).
Healthcare sites should adopt this approach. One QI medical site that advocates this is TransforMed. The TransforMed site chronicles the progress and achievements of primary care sites that are adopting the Advanced Medical Home model under the guidance of the American Academy of Family Physicians. In the area of practice management the authors advocate a disciplined financial management approach, which includes cost-benefit decision making, optimized coding and billing, and revenue enhancement. However, even though TransforMed advocates financial tools, an economic case for the Advanced Medical Home has not been documented yet, according to a white paper by the American College of Physicians. It seems that they haven’t completely followed their own advice.
For many of those who do track financial measures, the emphasis is wrong. Instead of thinking globally, that is having a budget and tracking a wide variety of accounting measures to see the cumulative effect on the bottom line over time, they concentrate on only one or two measures, which can lead to poor processes and perceptions. This can be the income produced by the individual patient, for instance. Some physicians and primary care office managers avoid having staff spend too much time with patients on whom they believe they would lose money; this is good business sense, isn’t it? Primary care physicians at times don’t spend the time needed with chronic care patients because to do so would have a negative financial impact, supposedly. This lack of focus or a focus on the inadequate measures leads to a failure to see what the true impact of alternative approaches in the healthcare setting is; advocates of the Chronic Care Model argue that their approach improves finances or is budget neutral. Hospitals are guilty of this too. Too many hospitals track savings from a quality project with a narrow focus only on the department undergoing a process transformation without looking at the overall impact on the operations of the hospital.
Another new potential pitfall for healthcare providers in budgeting and finances is focusing too much effort on achieving pay-for-performance (P4P) goals in order to improve income. In a recent Robert Wood Johnson Foundation study, “Paying for quality: Understanding and assessing physician pay-for-performance initiatives”(available free from the Foundation, see their web site), the results of pay-for-performance initiatives are mixed. In one geographical region, for instance, there may be a variety of P4P initiatives from various payers, which can lead to conflicting goals and processes. The report goes further to state that P4P revenue may not be cost effective and does not provide significant income when compared to the overall income of the healthcare site. Any site seeking improved income through P4P initiatives should be careful to track the impact on a good set of financial measures and patient health.
What, then, should you be measuring to assess the financial state of your site and the impact of new quality improvement initiatives? There are actually many good measures to track. The measures required by the IRS for reporting on business income and expenses are a good starting point, but these are hardly adequate. Hospital accountants are generally more familiar with other good tracking measures as they have been trained for such. If you are at a primary care site, you might want to contact an accountant who specializes in healthcare expenses and income to help set up an system that your bookkeeper can effectively use. I have also found two good free articles from the American Academy of Family website which list many useful measures and ways of implementing the measures, although the articles do not discuss how to use quality improvement tools in conjunction with financial measures. For instance, the articles do not discuss how to use process improvement to raise the productivity in the coding and billing department. The two articles are “Look Beyond Your Practice’s Bottom Line” (Albert Y. Yu and Jonathan E. Rodnick) and “Three Steps to an Effective Practice Budget” (Keith Borglum). Some of the measures that they advocate are:
–revenue per FTE physician
–staff hours per FTE physician
–cost per square foot of site
–total compensation per FTE staff
–work revenue value units per encounter.
Keeping a focus on a good set of financial measures at a healthcare site helps insure its financial health. Doing so, according the Borglum, “results in a smoother, more profitable, less stressful practice.” Combining financial measures with quality improvement efforts leads to improved profits and improved patient health and satisfaction. SSM Health Care of St. Louis, a Baldrige Award winner, by concentrating on the right economic measures and quality improvement has increased its share of the St. Louis market over three years to 18 percent while three of its competitors have lost market share. For four consecutive years the organization has maintained an AA investment rating, a rating that is maintained by fewer than 1 percent of all U.S. hospitals. By maintaining this rating the system has drastically cut the cost of borrowing money and improved the bottom line while improving patient satisfaction and health.
Overall I contend that many healthcare sites overlook a good financial system to track the success of their improvement efforts, that if they do so that they often track the wrong measures or not enough measures, and that they don’t integrate accountants as part of all QI teams. If they do make use of good financial measures in tracking the financial health of their respective sites, then the payoff will be significant, both in terms of the bottom line, patient health and satisfaction, and finding enough time to get important things done.