Case Studies

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Case 1: Partner Troubles

A moderately large 100+ member multispecialty partner model group practice in the Southeast found themselves with dwindling profits, internal dissention over division of payments and difficulty recruiting new physicians. They were the major group in the local hospital and since there was not a significant competitor in the market, they should have been ale to prosper. But they were struggling.

As part of a larger reengineering project, which included front and back office redesign, the medical structure was reviewed. The city in which they were located was moderately sized, with a population in excess of 60,000 and almost symmetrically placed between two major urban areas. There was a moderate mix of blue and white collar workers, a fairly young population and a reasonable proportion of insured patients to uninsured. Managed care was approximately stage two, providing a significant, but not debilitating effect on the reimbursement profile.

The practice had one main and two satellite locations, but the main location housed most of the physicians, leaving only a scattered few primary care practitioners housed in the satellites and even fewer of the specialists making regular visits to them. Intragroup referrals were not mandatory and a significant proportion of the patients were referred elsewhere.

Reimbursement was based on salary plus bonus, with the bonus based on visits. To be eligible for the salary and bonus, one had to be a partner in the group. Partnership, conferred after at least 2 years of salaried employment, required a unanimous vote of the active partners. At the point that we became involved with the group, black balling was a common occurrence and had eliminated several physicians from the group, since they almost always left the group all together after a negative vote.

The group had an executive director, who was a non-physician and a governing board made up of generally elected partners plus a president. Only Partners were able to vote.

Our diagnosis highlighted the weaknesses as follows:

	The proportion of primary care to specialty care physicians was skewed towards specialties, limiting the referral base and limiting the development of future satellites.
	Salaries for primary physicians were too low to attract new high caliber physicians.
	The bonus methodology did not stimulate good practice principles, patient relations, interpersonal interactions or quality care.
	The method of selecting new partners was damaging to the growth and perpetuation of the group.
	There were insufficient strategies in place to cope with increases in managed care revenue versus fee for service revenue.
	Poorly maintained referral discipline was eroding the group's profit margin.

In approximately four month's time, we were able to demonstrate significant changes in the group's dynamics.

	The partners voted to change their bylaws, allowing new partners to be elected with a 75% positive vote.
	Salaries were readjusted, with the specialists voluntarily subsidizing the primary care salaries, in order to raise primary care salaries to market plus 10%.
	Bonus payment were calculated quarterly, based on volume, dollars, quality and citizenship, but with withholds for unjustified external referrals.
	Physicians were given extensive coaching in areas directly affecting the bottom line: Cost containment, clinical pathways, scheduling efficiencies, use of paraprofessionals, and marketing opportunities.
	the governing board was expanded to allow a non-voting member who would represent the salaried physicians.

The partnership has flourished: There are almost triple the number of the original partners, with a proper balance between primary and specialty care, making them one of the largest clinics in the Southeast US. There are multiple clinical locations outside of the main campus, including several specially designed specialty facilities.

Case 2: "A stitch in time..."

A moderately large Midwestern Hospital needed a complete overhaul. The bottom line was in the red by $7 million over the year before, The CMO had been let go along with the CEO, Their physician practice was not performing, either by patient or monetary indicators and the feuding medical staff were involving the Board in daily decisions. We participated in this reengineering project, which lasted just short of a year, with the express assignment to revise and revitalize the physician side of the business.

During the diagnosis phase of the engagement, multiple deviations from best practice behavior were discovered:

	Within the hospital's supporting community, a seat on the board of directors was considered a plum voluntary position . Positions on the board were such a symbol of status within the community, that more consideration was given to the social position of the potential appointee than either their interest or ability. The board became immense over time and concentration of these board members within a local country club, along with the more prominent members of the medical staff, led to communication channels and lines of influence completely outside of the traditional ones within the hospital. This dysfunctional hospital board and its associated incursions into hospital operations negated the management authority and effectiveness of the CEO and CMO.
	Departmental chairs surfaced as iconoclastic leaders, often feuding among themselves for political control or access to resources. Departments had become overstaffed and inefficient. Chairs did little quality assurance or compliance work and no reports were produced regularly. Clinical paths were not used.
	During a spate of physician practice purchases, where politics rather than value were more influential in the purchase decisions, a rift was created in the medical staff. The "have nots" resented the "haves" setting up classic "Hatfield-McCoy" type feuds throughout the hospital environment.
	The purchased practices did not come close to the break even point. Practices that had been prominent and profitable before purchase, became bloated with staff, inefficient, and expensive, while the physicians demanded larger salaries and more perks.
	The Emergency Department had long waits, physician complaints related to referrals and bad consultations, and bad outcomes. Ambulance traffic was rerouted in excess of predicted standards, sending potential paying patients to other facilities. In addition, delayed admissions decisions, delayed admissions and documentation problems led to decrease reimbursement. A review of patient care logs revealed that LWOT cases were excessive and COBRA violations were frequent.
	A gross disproportion between primary care and specialist physicians had led to decreased referrals, inter-practice cannibalization of patients and reduced inpatient activities.

The hospital board was convinced that an interim CMO would best facilitate the changes that were needed to correct the medical staff problems, which would then allow recruitment of a better permanent CMO. The corrections that were instituted, resulted in a massive turn around in clinical operations and contributed significantly to the bottom line.

	In conjunction with a self administered reduction and repopulation of the hospital board, strict guidelines against interference in clinical operations were established. For instance, an Equipment Review Board process was established to insure that the medical staff set purchase priorities via consensus, eliminating "squeaky wheel" behavior by individual physicians and inappropriate board member intercessions.
	Replacement of the Chiefs of Emergency Services and Psychiatry headlined the restructure of clinical leadership where the chiefs were required to report to the CMO. New job descriptions, with performance standards tied to reimbursement, insured that clinical efficiencies, clinical paths, budget guidelines and quality assurance activities assumed primary importance to each of the chiefs.
	Zero sum budgets within the physician practices insured that each practice would have to break even to exist and performance bonus amounts were uncapped. The physicians were placed within a "modified residency" practice environment where a professional administrator managed supportive functions en masse.
	A new Department of Family Practice was established, given its own admitting wards, and physician privileges were developed that allowed the family practitioners expanded procedural latitude while retaining specialty department jurisdictions.
	The relationship between the Chief of Staff and the CMO was refined to increase synergy and decrease conflict. Together they revitalized medical staff peer activity to insure efficient completion of medical records, utilization standards and discipline of unacceptable physician behavior. In the process, several physicians who were unwilling to practices within the set standards were released from the staff.
	A permanent CMO was recruited, oriented and installed after a national search. A two month mentoring period eased the transition.

Within a year, the hospital experienced a nearly $13 million turn at the bottom line, due in large degree to changes in the medical staff; Revised organization, discipline, economy and alignment of incentives made fundamental changes in the structure of hospital operations.