Advocate Medical Group was losing tens of millions of dollars per year, and managers of the multispecialty physician group practice were at a loss to pinpoint the problem.
They knew that physician productivity was lagging, billing and collections activities were woeful, and the annual turnover of office staff in more than 20 locations throughout the northwest suburbs of Chicago was approaching 30%.
But there was no system to discern and communicate the performance of a given physician or office location. That left managers largely in the dark about where to make a difference, and it kept doctors from grasping how well they were handling business duties and producing for the practice.
The fragmentary feedback that managers and physicians did get was too old, too incomplete or too unreliable to be of much help. And it handicapped efforts to make doctors accountable, because they would challenge the information, says Martin Doot, M.D., who started agitating for something better when he became a medical manager in 1998. "I couldn't stand toe-to-toe with them and say this is how it really is," he says.
Five years later, after sinking $5 million into enhanced information capabilities, the Park Ridge, Ill.-based medical group is able to say how it really is--almost up to the moment.
Every Monday, top executives pore over reports on important management details such as visits per day, number of patient no-shows, copayments collected, the time it takes to enter charges after a patient is seen, and errors in registration or coding that result in rejected claims.
Pinpoint access to these and other business fundamentals enables practice managers to retrieve and analyze recent volumes of visits or claims activity, says Cynthia Job, vice president of operations. New information systems permit comparisons by week or month, by physician or office staff member, by actual versus budgeted volume, or across a period of months to see if a trend is developing that requires investigation, Job says.
AMG executives say it's the start of a turnaround for the group, and better financial prospects combined with comprehensive information tracking will help lead to better patient care, says Chief Executive Officer Debra Geihsler.
Computerized reporting and analysis advancements are "helping us to move to the next phase of managing the care instead of reacting to the problem," she says.
Use of technology and other initiatives to reorganize the business, improve revenue-cycle management and spur physician productivity combined to reduce the medical group's loss by $12 million last year, according to Stephen Voss, vice president of finance.
"In both 1999 and 2000, Advocate Medical Group experienced losses in excess of $20 million," says Dan Parker, a spokesman for Advocate Health Care, a nine-hospital system that owns AMG. "In 2001 that loss was cut in half to $12 million, and that performance was just slightly ahead of the budgeted anticipated loss. So performance actually exceeded expectations."
Of that $12 million improvement, Voss says, between $5.8 million and $7 million was attributable to improvements in accounts-receivable management.
Those improvements encompass "effective use of technology tools and a variety of other steps including applying the human factor--having the right people who know how to use the tools well to mine the data properly and get the best results," Parker says.
Among the results:
* A 34% decrease in billing codes rejected by payers in 2001, compared with 2000. Through this September, AMG had achieved an additional 9% decrease.
* A reduction in bad debt as a percentage of net revenue to 4.2% in 2001 from 10.7% in the previous year.
* A reduction of days claims sit in accounts receivable to 73 in 2001, compared with 86 in 2000 and 106 in 1999. Through September, that figure had fallen to 60 days.
Along with bettering business practices, AMG has improved productivity of its physicians dramatically.
When Geihsler became CEO in 1998, only 80 of the 280 doctors then in the group were at or above the national median of productivity using an industry standard that compares physicians to others in the same specialty.
The Medical Group Management Association tracks the national trends in that standard of productivity, called "work relative value units," in its annual Physician Compensation and Production Survey.
Today, 90% of the 190 physicians on AMG's staff after a reorganization a few years ago are at the 75th percentile or higher--evidence they're seeing more patients, Geihsler says.
That productivity pays off for the doctors, because their compensation is based on a calculation of work RVUs, a measure of the volume and intensity of medical performance using visits, billing codes and other statistical profiling.
But a sophisticated model such as RVUs could not have been sold to the physician staff unless the doctors had confidence in a system that can pick apart the elements of a practice, Doot says. "The doctors know that their productivity-based compensation is based on reliable information."
Rebuilding the foundation
Evolving compensation incentives are one component of a four-year campaign to transform AMG from a loose confederation of salaried doctors to an integrated network of physician offices, guided by an equally integrated headquarters in which financial, operational and information systems executives work in concert instead of minding their own departments.
Before any progress could be made in stemming annual losses, the medical group had to shake a "hospital mentality" that hindered its operation and instill a culture that treated medical practice as a business instead of just the process of taking patients in, Geihsler says.
That meant creating an attention to detail, timeliness and accuracy--from the registration fact gathering through the matching of charges with services and prompt filing of clean claims to payers. Then the adherence to expectations had to be measured and the physicians and office staffers made accountable, she says.
Unlike a hospital, where patients are in for days and care is rendered intermittently, managing a medical group requires hour-by-hour concentration and an ability to react to problems quickly, Geihsler says.
"If 15 minutes pass and you've got 18 sites, you've already seen 270 people," she says. "If you lose your focus in a medical group, a lot of things can slip through your fingers in an hour."
Among other needs, having data available is crucial. Yet the prevailing hospital mentality didn't recognize that the pace and character of a physician business was different. In the case of computer support, "the system would go down for a day, or three days, and there wasn't this sense of urgency," Geihsler says.
But access to essential information for operations and management was hampered by more than computer-system availability. There was no internal system to gather and report data that both the group's management and the individual practices needed to scrutinize business and clinical performance and be able to do something about it, Doot says.
Scattered all around the group were sources of data, from demographics to credentials verification to billing and coding tallies, but they were separate and sometimes contradictory. "Nobody had integrated (the information), and because nobody had integrated it, it was useless," he says.
Back in 1998, Doot found he could not pull together the information he needed to compare doctors against benchmarks of productivity and outcomes. When he made his first round of visits to practices that were under his management responsibility, Doot discovered the doctors themselves didn't know how their practices were faring.
To get a clear picture of performance and isolate "information needed to change behavior," he had to manually match up pieces of two separate budgets, one for physician compensation and the other for office operations.
After six months of this, Doot called for the top executives of operations, finance and information systems to get together and determine what cross-disciplinary information was needed to "understand the practices and manage the group." The effort gained momentum when Geihsler came on board as chief executive.
"Out of that came reliable, rarely contradicted performance reports," Doot says.
Harnessing information's value
The medical group's problem with information support was not lack of computerization but rather an inability to make sense of the data that was stored in separate databases handling practice information, financial reporting, charge entry, utilization of resources and other statistics, says George Lesmes, AMG's chief information officer.
When doctors or office managers asked for information, they might get different answers depending on the person asked or the source of the data. "There was no rhyme or reason," Lesmes says.
It also might take a week for information technology staffers to sift through the databases and find what they hoped were the right elements pulled together for the needs of whoever was requesting the report, he says.
The result was a barrage of requests, a steady stream of communicating back and forth to get satisfactory reports, but nagging uncertainty at the end about whether the findings were based on reliable data, Lesmes says.
Without accuracy, the medical group's attempts to focus on practice improvement and gain credibility and cooperation were undermined, he says.
In addition, the summary reports that were published on financial and operational performance usually were not on a regular schedule nor delivered on time, Geihsler says. "If you wanted to know how you were doing in May, you might not find out until September," she says.
"We had data, but the delivery of that was 30, 60, 90, 120 days old," Lesmes adds. "And by the time you got the data, it was too late to do anything about it."
So sudden drop-offs in visit volume at one practice site or a backlog in entering charges at another--examples of problems that could be corrected quickly if detected early--cut into cash flow and revenue for weeks or months. That added up to annual losses as high as $30 million before AMG set out to build an integrated database five years ago, Lesmes says.
The investment in IT included enhancements to an existing healthcare information system from IDX Systems Corp., which was being used at only about 30% of its capacity, he says.
The medical group also implemented an analytical computer application that extracts information from the core IDX financial, managed-care and scheduling applications. It produces standardized reports on questions relating to billing and accounts receivable, utilization of services, physician productivity, payment and rejection experience, managed-care trends and other topics on which managers or physicians can take immediate action.
Expansive and more targeted information came easier, too. Anyone who wanted information could get it without going through the IT department.
"Instead of us being bombarded by requests, these people were doing it on their own," Lesmes says. "For the first time, people were getting the information that was there. It was always there."
The enhancements to the IDX system and the addition of a report generator called Analyzer, a joint product of Burlington, Vt.-based IDX and Burlington, Mass.-based Cognos Corp., nailed down the credibility and timeliness of AMG's practice information. The $5 million investment was a significant sum, Lesmes says, "but on a year-to-year basis it's chicken feed compared to what you get out of it."
Says Doot, "The information systems enabled us to use our relationship with the physicians, and our incentive model of compensation, by giving accurate feedback to physicians to move them in a certain direction. It guided, made more efficient and motivated docs."
Opportunity to affect productivity
The medical group went through several modes of ownership and compensation starting in 1996, when parent organization Lutheran General HealthSystem merged with Evangelical Health System to form Advocate Health Care.
Known as Lutheran General Medical Group before the merger, the renamed Advocate Medical Group separated from the new health system and contracted with it for management services, Geihsler says. But in 1999, AMG rejoined and became one of three medical groups under Advocate ownership.
When Advocate took the medical group back, managers under Geihsler tried to focus on matching the volume of demand for patient services with the physicians needed to meet the demand, and that resulted in paring the group to 190 physicians. The group also instituted a change in compensation based on a formula first devised by Medicare to pay physicians according to relative value units.
Physicians had been paid a salary under Lutheran General's ownership and then a percentage of collections from patients and payers, Doot says. The switch to RVUs created incentives to capture the billing codes and log the visits that determined to some extent how much physicians earned, he says.
Ready access to practice information allowed managers to check on how each physician was performing, both to single out doctors for good results and to illuminate problems. In late 1999, physicians agreed to make their data available generally to anyone in the group, allowing both managers and colleagues to view comparisons online by doctors, practices in the group, specialty, dollars or RVUs, or a host of other variables.
"I've had doctors say, `I don't think I can work any harder. I don't think any doctor can work any harder,' " Doot says. But then, he says, the doctor might be guided to the online results of a similar specialist or primary-care doctor who sees 25% more patients. The discussion then turns to how that other doctor does it, not how it can't be done.
"That kind of feedback of credible data is powerful in changing motivation, along with credible incentives," Doot says.
Another objective involved searching for physicians who had outstanding practices and determining what they do differently and better in the areas of finances, patient satisfaction and clinical outcomes. "We wanted to make heroes out of them," Doot says.
One doctor, for example, had a perfect record in assigning appropriate codes for services. Undercoding, or not billing for the full value of a service, was a problem uncovered at AMG after a practice-by-practice evaluation of billing levels made possible by the improved access to information.
After this doctor's record was brought to light, other doctors "volunteered to learn from him," Doot says. Practice directors and physicians, pressed for answers about their billing practices, admitted that they undercode and need to learn how to do it correctly and confidently. But they had been afraid to do it wrong--anyone who bills for more than they have coming could run afoul of Medicare fraud guidelines.
In its campaign to break into the black, AMG needs all the revenue it can justify. Physician output as measured by RVUs per full-time-equivalent clinician rose to 4,768 in 2001, a 10.7% increase from 4,307 in 2000, and annualized results to date in 2002 show an additional 1% increase to 4,812. But net revenue per visit remained flat between 2000 and 2001 at $168, and it fell 4% to $161 so far in 2002.
"What's complicated our lives is the payers," Geihsler says. The statistics reflect continuing pressure on reimbursement; despite an anticipated 1.2% increase in outpatient visits for 2002, net revenue is projected to decline 3% to $76.5 million, compared with $78.8 million in 2001.
Fine-tuning office practices
Besides pointing the way to better productivity, AMG's improved information capacity is helping to fix problem areas in the revenue cycle, ultimately improving collections and decreasing bad debt by 65% in two years.
The level of error before the deployment of data management and performance monitoring was "monumental," Geihsler says. Practices as basic as completing registration details accurately and entering charges soon after providing care were not routinely accomplished, and that led to inaccuracies, difficulty in documenting charges, wrong identification of payers and other miscues, she says.
Charge-entry delay was a particular problem. Ideally the charges should be entered the same day, but when Geihsler first came to AMG only 40% to 60% of charges were being entered into the billing system the same month as the corresponding service. Reports about charge-entry lag "caused me to gasp," Geihsler says.
AMG management used the reporting features of the new computer system to compile a performance record of office staff and medical coders, tracking registration errors, rejections from payers, and patients who were identified as self-pay when a little more digging would have revealed they were insured. The system compared charges entered versus budgeted, tracked patients who did or didn't show up, and compared logs of patient visits with charge activity afterward.
The key was not to put things off, says Job, the operations chief, and the computer system helped by posting arrivals immediately and allowing office staffers to collect copayments at time of service, things that couldn't be done before. In 2001, 79% of copayments were collected upfront, and that improved to 83% so far this year.
All that activity was available online to be monitored by the group's managers, and suddenly workers were accountable for errors, delays and slow work compared with colleagues, Geihsler says.
AMG followed the accounting with training on how to do the job better. For example, it drove home the importance of matching charges with medical services at the end of the workday instead of days or weeks later. If a charge is missing from a doctor's billing form, a staff member can catch the doctor before he goes home and while the visit is fresh in his mind, Job says.
Worker response is captured in measures of productivity and staff turnover. Claims processors are averaging 60 accounts per day, triple the 20 they averaged before the combination of accountability and training. A staff turnover percentage that once hovered in "the high 20s" is now 16%, below the average for medical groups, Geihsler says. And last month there were 20 openings among the 600 office positions at AMG; the group averaged 120 openings before the turnaround plan began.
By the end of 1999, practices in the group were entering 84% of charges in the same month as the service, a level matched in 2000. The percentage rose to 87% in 2001, and recently it topped 90%. Geihsler's goal is 95%, finance chief Voss says. "She has set some good standards and expectations," he says. The information system "shines a light on these things so there's a high level of accountability."
The longer a claim is outstanding because of errors, omissions or processing delays, the less likely it will be paid, Geihsler says. More than half of AMG's accounts receivable were more than 90 days old in 1999, but that percentage gradually declined to 40% in 2001 and 32% as of September. Bad debt as a percentage of net revenue, once in double digits, stands at 3.8% this year, Voss says.
The medical group budgeted a $9 million loss this year and was on target until an industrywide malpractice insurance crisis intervened with unanticipated increases in premiums, says spokesman Parker. "If you factor out that unplanned $5 million hit, then Advocate Medical Group remains on track to achieve its budget plan for the year, which would be an improvement over the prior year."
Breathing room for medical initiatives
With the business side of practices now closely monitored and under control, physicians are able to focus more on monitoring their patients, says Kevin McCune, M.D., one of four medical managers responsible for improving practice performance.
For example, AMG is four months into a computer-assisted review of diabetes care by each of its physicians.
A Web-based clinical network operated by Advocate Health Care (Aug. 20, 2001, p. 16) integrates information compiled on patients from throughout the health system. The network recently added posting of laboratory test results from Quest Diagnostics, a major reference laboratory company, McCune says.
The initiative involves tracking a list of objectives for treating chronic diseases, such as conducting annual eye exams for diabetes patients, administering flu shots and keeping cholesterol levels under control. The computer network assembles reports from primary-care doctors and ophthalmologists, among others, and it monitors laboratory test values for levels that require a patient to be contacted and scheduled for an office visit.
"Over time, it's sure to lead to better management of our diabetes patients," he says. Financial improvement laid the foundation for the clinical program, securing "the money we need to have collected so we can continue to do good work," McCune adds. "Without that, we could not have embarked on some of these other initiatives."