The time was right for a healthcare Renaissance, asserts Richard Afable, M.D., executive vice president and chief medical officer of Catholic Health East.
The old bricks-and-mortar focus was out. It was time for a rebirth of physician power, a resurgence in physician influence on strategic health system decisionmaking, and Afable was determined to bring his vision to CHE, the 33-hospital, not-for-profit system based in Newtown Square, Pa.
"My view is we're coming back full circle," Afable says. "Because of paper-thin margins, the denial of coverage and slimmed-down government reimbursements, the provision of care is the determining factor in the measure of success. Managing the process of care has become more important than managing the tangible assets."
Acting on his vision, Afable outlined a role for physician executives at CHE that rarely has been seen in traditional hospital hierarchies in the past 70 years. He designed a pilot program centered on the creation of three new hospital positions, staffed by his Renaissance physician executives, performing jobs with financial and operational responsibilities in addition to the traditional medical management duties of a chief medical officer.
With his ideas committed to paper in a formal job description, Afable persuaded CHE to put its money where his vision was.
Since January, CHE has paid premium prices to hire three physician executives to key leadership positions overseeing nine of its hospitals.
Manuel Anton III, M.D., joined 500-bed Mercy Hospital in Miami in January as senior vice president and medical director.
Jay Pomerantz, M.D., in April was named the senior vice president and chief medical officer at 587-bed Holy Cross Hospital in Fort Lauderdale, Fla.
Mark Baumel, M.D., in July was hired as chief medical officer and senior vice president of medical management of CHE's Mercy Health System, a seven-hospital group based in Conshohocken, Pa.
All three physicians are healthcare Renaissance men, with experience in clinical care, healthcare management and managed care contracting.
"For the individual physician executive, this is a message of hope," Afable says. "I haven't heard from anyone who didn't think this was a good thing, except a few hospital CEOs."
So far, count the chief executive officers at CHE who hired Anton, Pomerantz and Baumel among those who think Afable's idea is a good thing.
Holy Cross CEO John Johnson says it is a business necessity to keep an open mind in the current healthcare environment. Handling accounts receivable offers one example of the efficacy of the new physician executives, Johnson says.
Receivables present knotty problems that physician executives can best help untie.
"It's becoming more complicated by the physician's role in the process--from authorizations to prescriptions to proper documentation for proper coding," Johnson says. "Having a physician involved who can interface between various elements, from case management to the physicians themselves, is quite satisfying and is in fact much better received when it's physician to physician."
Johnson says Pomerantz has pinpointed and corrected a number of areas where Holy Cross had lost revenue. A lack of coordination between case management and collections was the problem. Due to Pomerantz's ability to talk about issues of clinical practice "nose to nose" with other physicians, his revenue cycle improvement initiatives will become even more successful as those relationships mature, Johnson says.
Afable says giving broader powers to physician executives makes sense because the emphasis in healthcare administration has shifted from capital management to patient care. Afable developed the hypothesis that results desired by both the hospital's administration and its medical personnel would be achieved by integrating care management and business processes and improving handoffs from one department to the next.
"I saw a great amount of inefficiency that could be diminished or even eliminated through mutual participation and shared outcomes," he says.
Afable's rationale for selecting clinical leaders to oversee the sharing was that patient-based functions--case management, utilization review, resource consumption and quality, among others--are critical for institutional success under managed care.
In addition to fulfilling the traditional medical management duties of a CMO or vice president of medical affairs, physicians holding the new position Afable envisions are responsible, to varying degrees, for the functions of managed care contracting and revenue capture, including coding, billing, chart review and payment recovery.
Afable is not alone in his thinking, nor is the notion of physicians assuming COO-level duties unique. Administrators and physicians at several other hospitals and health systems--Central DuPage Health in Winfield, Ill.; Parkview Hospital in Fort Wayne, Ind., and Hamot Medical Center in Erie, Pa.--have their own initiatives to empower physician leaders with more operational and strategic accountability. But such thinking is rare, for historic and financial reasons.
A historical division
A line between physicians and lay hospital administrators was first drawn in the 1930s, says Duncan Neuhauser. He is a professor of epidemiology and health management at Case Western Reserve University School of Medicine in Cleveland and author of a book on the history of healthcare administration.
Previously, about a third of hospitals were run by doctors, another third by nurses and the final third by members of the clergy, Neuhauser says. In 1933, the American College of Healthcare Executives was founded, and with its inception began an organizational effort to educate a new class of professional hospital managers.
The 1950s and 1960s were the golden era of medicine, Neuhauser says. Because economics were very good for physicians going into private practice, that is what most did.
"If a doctor could make three times as much in practice, why would he or she give it up to run a hospital?" he asks. As a result, fewer and fewer physicians went into hospital management, though several large teaching institutions founded by doctors continued to be run by them.
Today, about 200 of the nation's 5,000 hospitals are led by physician CEOs, a number that hasn't changed much in the past 20 years, according to Tom Dolan, president and CEO of the Chicago-based ACHE. Of the 23,000 ACHE members, just 500 are full-time physician administrators, some CEOs and some not.
What has changed over time is the number of physicians gaining business experience, either through formal education or other specialized training, Dolan says. Physicians have a better understanding overall of the importance of a clinical background for developing a hospital's business strategy, he says.
"I really applaud CHE for the experiment," Dolan says. "I think it's a great one. Physicians can be excellent communicators to other physicians within an organization who may not understand the varying pressures faced by the hospital."
The blending of the different cultures of administrators and physicians will be the biggest hurdle in a project like CHE's, says Dan Beckham, president and CEO of The Beckham Co., a strategic planning and consulting firm for hospitals and health systems based in Whitefish Bay, Wis.
"There are antibodies in the traditional hospital organization that work like white blood cells to attack foreign bodies," Beckham says. "And physicians are the foreign bodies in that culture, even if it's not overt. There's a lot of adjustment that needs to take place on both sides. It takes a confident and enlightened nonphysician CEO to do something like that."
Yet Beckham is hopeful about the endeavor, noting the growing number of doctors going to business school and coming back with a background even some administrators might not have, such as a deeper understanding of marketing, strategy and finance.
"These boys have been to the rodeo now," Beckham says, referring to the doctors, male and female, who have survived the changes wrought by managed care. "They're not the naive babes they were before. In a perverse way, as much as conflict still exists, because of what's happened in managed care, there is a stronger recognition that physicians and hospitals are in the same boat."
Jennifer Grebenschikoff is vice president of the Tampa, Fla.-based Physician Executive Management Center, the executive search firm that helped place Pomerantz and also placed Afable at CHE three years ago.
The role of the physician executive, as outlined by Afable, is not for everyone, Grebenschikoff says.
"You have to know you are the messenger and people will be shooting at you from all sides," she says. "You have to have a thick skin and broad shoulders, to be assertive and innovative. It's truly for people who aren't in a box."
The pay, on the other hand, should compensate somewhat for the stresses and strains.
"An organization would probably have to add 10% to 15% to the salary of a typical CMO to get the person with the credentials to do this," she says. "They need to understand that the money they're spending to bring someone in is an investment and not an expense. They'll get so much back in savings and value added that they shouldn't even be thinking about the money."
Mercy Health System CEO Mark O'Neil says he and other members of the team that recruited Baumel knew the compensation for his position would be at the very top of the range for what is being paid for medical administration. And, down the road, they would need to think of incentive compensation objectives that would meet the organization's needs in that area.
"We did say, 'What's it going to take to get the best of the best?'" he says.
Part of the challenge for the three Renaissance physicians at CHE is to explain and demonstrate the integrated concept to both their fellow hospital executives and their clinical colleagues, advocating that the dividing line between them needs to be blurred if not eliminated.
From the start, Anton says he has concentrated on consensus building and sharing information early at Miami Mercy. Bringing tolerance and diplomacy to the mix, without letting one's vision be washed away, is the balance he seeks.
Anton says he places heavy emphasis on creating working groups that operate more as task forces than traditional committees. Within the purview of his three core domains--clinical services, quality and the business office--Anton convenes integrated meetings with these task forces to work on appealing denials, improving registration services, examining authorization units and concurrent review.
Similarly, the new managed care steering committee he chairs involves the business office, with its issues of denials and prompt pay, and the finance department, which tends to look at managed care contracting with an eye toward profitability and market share.
"By involving the business office, we got feedback on how the plans pay, what our accounts receivable with them are, how difficult the interpretation of language is for billers and collectors, and on what denial strategy the companies use and how they are adversely affecting us," Anton says. "Finance then has the opportunity to reflect on the profitability of each of the plans."
At the same time, Anton visits with physicians who have large patient panels with companies Mercy is negotiating with, informing them of the hospital's strategy so that the doctors won't be surprised by final decisions.
"I believe that's a relatively novel development," he says. "Most hospitals do that in a vacuum from the physicians."
Involving physicians more closely in utilization review has had the similar result of making doctors feel more ownership of the process, Anton says. Some may feel threatened when their practice patterns are scrutinized, but on the whole, he says, the doctors feel they have more control in terms of contributing observations and understanding practice trends.
At Holy Cross in Fort Lauderdale, Pomerantz says that, while he's working harder than ever, he's having a lot more fun. He credits his pleasure to the camaraderie and support fostered by the cooperative model and his high level of accountability.
That's not to say solutions are quick to reveal themselves.
While a classic physician profile is that of a problem-solver, Pomerantz says he has had to make a transition "from being the fixer to being the facilitator."
"For someone to be successful in this role, they need to feel comfortable feeling uncomfortable," Pomerantz says. "There's a lot that's unknown. In the medical world, physicians aren't comfortable with the unknown."
With Holy Cross once tracking a 25% claims denial rate, Pomerantz has helped reduce that to 9%. Johnson, the Holy Cross CEO, says he is confident that Pomerantz will help the hospital reach its goal of 5% by the end of the year.
Baumel, who clearly has the desire, also has the added challenge of administering not just one facility but a seven-hospital system. Baumel worked for six months as a consultant at Mercy Health before he was hired, then was promoted in July.
Baumel says he took the job to be where the action is.
"The guiding light to me was to realize there were other opportunities to influence larger issues in medicine," Baumel says. "Traditional VPMAs may not have been brought into the center of strategy. They may have had ideas bounced off of them for an opinion, but they have not been primarily responsible for setting strategy and also for implementing major operational initiatives."
Baumel's first big initiative was a significant overhaul of Mercy Health's utilization management, whereby he has completely outsourced it to a physician-run organization that takes on all the tasks of communicating with the attending physicians and appealing to managed care companies.
"We expect a 300% to 400% return on the dollars spent for this initiative," Baumel says. "In the first month and a half, even with startup issues, we ended up with a twofold return on our money."
It's interesting to note that Anton has taken the opposite approach, bringing a previously outsourced UM and denial appeals program back inhouse to the business office. Utilization review advisers no longer work on an ad-hoc basis but now make daily "UR rounds," meeting regularly with the nurses and physicians involved. Review has intensified, but with more medical backup throughout the process, the reaction has been mostly positive, Anton says.
Baumel contends that since most of the fat of materials management and purchasing already has been trimmed from large health systems, future improvement of margins will come from clinical strategies such as utilization management, clinical program development, physician recruitment and retention.
"What we're left with are clinical initiatives as the major area for performance improvement within the institution," he says. "That's where a more-empowered VPMA's role comes into the fore. It is really a product of the time. The frontiers for improvement are on the clinical side."
CEOs O'Neil and Johnson say they no longer consider these new positions trial runs.
"Once you understand the person is capable and doing a good job, it becomes a true commitment," Johnson says.
"From my perspective, this is a necessary change in the way we do things," O'Neil echoes. "These physicians are really thinking over the long term about how to improve quality and access and reduce costs. It is no longer an experiment if we as a team are fitting that into our overall strategy."