The emergence of drug-eluting stents in the marketplace--and paying for them--is a "huge issue" for Atlantic Health System. The three-hospital system based in Florham Park, N.J., has one of the busiest cardiac-surgery programs in the state and even participated in some of the clinical trials before they were approved.
But so far the hands of Joanne Conroy, M.D., have been tied when it comes to negotiating a good price that covers the cost of the breakthrough technology, a tiny artery-opening device that is coated with a drug aimed to reduce the need for readmissions due to inflammation. There are no price breaks even for them.
"We got more stents, and we got them faster. That was our break," says Conroy, who is chief medical officer and vice president of academic affairs at the system.
With only two vendors to choose from, the price hasn't budged since the Food and Drug Administration approved the first such stent a year ago and the second last March, says Conroy, an anesthesiologist. If and when it comes time to make a decision about which of the two to exclusively purchase for the heart surgery program, she says she is going to leave it up to the system's 34 interventional cardiologists after feeding them the information they need.
"They are a pretty good group of guys. They make tough decisions. They believe the quality is similar and they understand the impact on the hospital and (saving money) will allow us to reinvest in other problems," she says.
Such is the life of a chief medical officer--walking the tricky tightrope between what physicians say they need to provide the highest quality care possible and what a healthcare organization says it needs to stay financially viable.
As CMO, Conroy is in a relatively new and evolving position for physician executives. Generally saddled with more administrative duties than a chief of staff, the CMO lies just one tier below the chief executive officer. In theory, the title puts CMOs on the same plane as the chief financial officer and other CXOs, as some call them, says Mary Frances Lyons, M.D., senior vice president for headhunting firm Witt/Kieffer and director of its national physician search practice.
"It reflects a change in job description. The CMO sits at the table with fellow members and is part of the strategy planning and brings the medical viewpoint to bear," she says.
Increasingly, the work of the CMO is focused on quality issues. At big systems, "CMOs are concerned with the work product as defined by the care patients receive in an industry that is starting to benchmark itself nationally," Lyons says.
Earlier this month, for example, Tenet Healthcare Corp., the troubled Santa Barbara, Calif.-based hospital chain, named physicians to fill the newly created CMO posts in the company's five regions as "an important step" in its efforts to ensure patient safety and quality care. The CMOs will report to Jennifer Daley, M.D., Tenet's senior vice president of clinical quality. Tenet says it assigned one physician to each of its California, South Florida, Southern states and Texas regions. Two physicians share the CMO post for the company's Central-Northeast region. Tenet said the CMOs will evaluate new medical technologies and programs and work with regional and hospital management teams, as well as hospital medical staffs, on patient safety and quality-of-care matters.
Though CMOs everywhere share a prestigious position as one of the most senior physicians in a healthcare organization, their job responsibilities vary widely.
"Most in one way or another are closely tied to improving clinical efficiency and effectiveness," says Richard Kunnes, M.D., vice president for clinical and operations consulting for hospital cooperative VHA. The CMO charts treacherous territory, trying to find the common ground--if there is any--between the hospital's bottom line and physicians' fastidious preferences. Increasingly that means focusing on quality-of-care issues, but sometimes--not frequently enough for Kunnes--it means tackling supply chain issues.
"The CMO's most important job is cost-effective quality care, of which supply-chain management is an important piece," Kunnes says, noting that physicians influence the purchase of about 75% of all supplies purchased by the average hospital. Supplies in turn are the second biggest expense on a hospital balance sheet next to labor, accounting for up to 25% of total hospital operating costs, he says. "What's the most expensive supply in hospitals? The physician's pen, because everything they do affects supplies," he says.
Lyons says that when she conducts a search for a CMO, "the single biggest thing we're looking for would be building a culture of accountability in the medical staff and joining forces with the hospital to provide the best benefit of resources and highest quality of care." The job requires management and business acumen, political astuteness and conflict resolution skills. "The high-intensity part of their job is the smooth running of the trains and the patient delivery enterprise," Lyons says.
On the other hand, noting that nearly everything somehow indirectly affects supplies--length of stay, intensive-care unit utilization, and medical errors--Kunnes says he believes supply-chain management could consume 40% of a CMO's time at best practice hospitals. Most hospital CEOs undervalue its significance, he says.
To assess their roles in making medical technology decisions for their hospitals, Modern Physician interviewed three CMOs around the country. Though the three come from markedly different backgrounds and work at markedly different hospitals, they all share one thing in common: They are the key people at their organizations for making both the clinical and financial cases for purchasing expensive new technologies.
Joanne Conroy, M.D.: Getting out in front early
On a rare day when Conroy, 48, had a night free of appointments, she packed nine meetings into a day that stretched from 7 a.m. to nearly 6 p.m.
She started the day with a group of about 25 people constituting the so-called "clinical council" at Atlantic Health System's Morristown (N.J.) Memorial Hospital, including the 15 clinical chairs, the chief nursing officer and members of the administrative team. The director of finance also is a fixture, though he happened to be on vacation that day. She formed the working group when she arrived at Atlantic three years ago from the Medical University of South Carolina, where she was senior associate dean.
"There were physician silos and administrative silos when I got here," Conroy says.
The group, which meets monthly and is replicated at the other two hospitals in the system--the whole shebang meets quarterly--tackles decisions that require comment from both the administrative staff and physicians. That frequently means taking a sober look at expensive new technologies and figuring out ways that the hospital can afford them, if at all. For example, the clinical council has been responsible for setting a "shelf price" for orthopedic implants in order to limit, in the interest of controlling spending, the number of different implants the orthopedic surgeons use in surgery. Supply costs eat up as much as 60% of the total reimbursement hospitals receive for hip and knee procedures, according to the orthopedics unit at Novation, the joint group purchasing organization for VHA and University HealthSystem Consortium.
"We found most of our physicians were pretty good about pricing, but then one or two put Cadillac implants in every patient," Conroy says. "But it was interesting: once we shared with the guy that he was the most expensive, he spoke to his colleagues and figured out what they were doing because their outcomes were not any different."
Earlier this month, the council put the finishing touches on a survey that will help forecast Morristown's ability to integrate technology, and it went through a systematic process of determining where the hospital lies on the adoption-of-technology curve.
"We believe we are early adopters," Conroy says. "We believe we have to adopt early on a lot of times, even before it's financially advantageous."
As early adopters, the same group is charged with identifying new technologies coming out and deciding which of them would benefit the health system in terms of reaching "our potential and (establishing) a constant environment of clinical excellence," Conroy says. "A lot of time it is decided by talent and technology. ?You need the talent to use the toys, and you need the toys to attract the talent. You can't have one without the other."
The council has decided to focus on cardiac technology because of its large open-heart surgery program. The council is currently deliberating on where it needs to be with non-invasive imaging and is looking at the 32-slice computed tomography scanner, which has not even come on the market yet. Many people believe CT imaging will eventually replace cardiac catheterization, she noted (Modern Healthcare, Dec. 1, 2003, p. 28). The downside is that purchasing the new technology could erode revenue from cardiac catheterization, "but this is where the new imaging modalities are moving in terms of better care," Conroy says. Forecasting that the technology will probably be prevalent by 2006, the council decided if Morristown were to be an early adopter, it would need to have it by 2005.
Technology councils that work through the various service lines, which report to Conroy, support other technology decisions throughout the Atlantic system. Conroy says she meets with the chairs of these groups individually. Generally, however, she leaves most decisions up to them. "I hire them because I know they are going to do the right thing. I don't micro-manage at all."
Conroy, who stays sharp by scrubbing up every Thursday to work in the operating room, guesses that she spends about 10% of her time on technology decision-making "because I push it down to the people dealing with the problems at the sites." Still, the toughest technology decisions are ahead for the system.
"The most painful decisions that we have to make over the next five years are going to be about how much technology we can afford and how we can leverage it to give the best care to our patients," Conroy says. "That decision has got to be made by physicians and administrators together."
Morris Seligman, M.D.: Cutting edge, not bleeding edge
When Morris Seligman, M.D., was 13, his father set up an office for him in the basement of their home so he could trade stocks. By high school, Seligman was following 50 different companies. Though he always wanted to be a doctor, he took a slight detour before medical school, first earning an MBA and working as a stockbroker and CPA. An internist, he has worked as an emergency room physician, but it wasn't long before hospital administrators took notice of his business expertise. After stints as medical director at several organizations, for the past 18 months Seligman, 48, has been senior vice president, chief operating officer and CMO at 250-bed Salina (Kan.) Regional Health Center.
Seligman says he has a role somewhat different from most CMOs because of his dual position as COO, which was held by lay people before him. As CMO, he leads about 120 active physicians. In terms of technology adoption, Seligman places the hospital between mainstream and early adopters depending on the technology. "We're on the cutting edge, but not on the bleeding edge," he says.
The process for making technology decisions is evolving, he says. For example, the information technology department reports to the hospital's chief financial officer, but because of his background, he is involved in the clinical aspects. He played a key role in purchasing a new picture archiving communication system that will go beyond the radiology department to the business side of the hospital and will even be tied in to interested neighboring hospitals. He also was the point person when two gastroenterologists proposed purchasing a special scope to allow full diagnostic and staging of malignancies, he says. The scopes made sense clinically but not financially, but Seligman gave it a green light because he felt it would be important for the cancer center the hospital is developing.
Seligman's involvement in technology decisions depends on the magnitude of the technology, he says. In orthopedics, "where we had great success," he and the surgical director put together a price list of what the hospital was willing to pay. Two out of the hospital's three orthopedic vendors eventually agreed to play along.
Many physicians are learning that it's easy to work through decisions with a CMO of Seligman's business background, he says. But with his feet firmly planted on both sides, Seligman is in the center of discussions whenever a new technology with big financial implications comes forward. Generally, if a piece of technology exceeds a $50,000 threshold, it reaches him.
"In the past it seemed like we would just do it because it was the thing to do, but it was not given a full analysis. Hospitals have to be concerned not only with what they can do clinically, but they have to figure out a way to pay for it," he says.
"The healthcare system is on the verge of going broke, and I see people like me being very critical in blending the clinical and nonclinical aspects of healthcare to hopefully improve the system," Seligman says. "One advantage of having both roles (of COO and CMO) is juggling the limitation of resources and the maximum output for the best care."
Mike Finley, M.D.: Newer not always better
As the vice president for medical affairs at 270-bed Christus St. Michael Health System in Texarkana, Texas, Mike Finley, M.D., takes a sober look at new technologies, weighing what they will cost against how they will fit in with the community and the mission of the hospital. For all intents the CMO, Finley, 51, is one of very few paid physicians on staff. Though his job primarily is to ensure the quality of care and make certain the hospital has a quality medical staff to provide it, medical technology decisions often present a conundrum, he says. "It's one of our challenges to try to stay at the leading edge but take in consideration the volume of patients that will be impacted, the cost of that new technology and whether it fits in with our mission and core values," Finley says.
Finley, who specialized in family medicine, says the hospital is "progressive" when it comes to new technology. "We are not research-oriented, but we do have a progressive medical staff, and when we bring in new surgeons or technical specialists, most of the time they are trained with the new technology and that's when you try to match their needs," he says. "Newer is not always better. You have to be very careful with this."
Typically, reimbursement lags behind new technologies, Finley notes. Drug-eluting stents provide the perfect example. Right now the reimbursement for drug-eluting stents is not covering the costs, but as the technology is fine-tuned and doctors become more efficient at providing the procedure, costs will come down, he says. But early on, the decision was made to have them and the wheels were set in motion to establish the pricing and train physicians to use them.
With the closest tertiary hospitals in Dallas and Little Rock, Ark., both 200 miles away, St. Michael provides most services to give another option to patients living in the draw area of 400,000 people. With that in mind, Finley just gave the OK to add on an imaging system for neurosurgery that will allow physicians to perform state-of-the-art brain surgery. Two neurosurgeons, who were sending patients to Dallas or Little Rock for the procedure, had requested the technology.
The neurosurgeons and a value analysis team studied the cost of providing the service, although Finley says it was difficult to project what kind of volume the technology would bring to St. Michael. Looking at the area's demographics, they conducted a statistical analysis and then had "a frank discussion" with the neurosurgeons, he says. They conservatively projected that the system, which costs about $250,000, would bring in about 35 cases a year. Besides the financials, the team considered the service it would be providing to patients who would otherwise travel a long way, Finley says.
"We decided it was something the community needed, and it was a long step up from the previous technology," Finley says.