Thursday, June 21, 2007

How we manage

I often get questions as to how we manage this place. I usually jokingly reply that we don't manage, we cope. But we really do try to have a close alignment between the medical and administrative staff in support of the overall goals that are adopted each year by our Board of Directors. Those goals, in turn, are guided by our overall mission and informed by the strategic plans that have been approved by the board for clinical care, research, and education.

I thought you might like to see excerpts of this year's annual operating plan to get a sense of what it contains. Those of you who have been reading this blog for a while will not be surprised by some of the items included. There are three main categories -- improvement in clinical results and patient safety; improvement in patient satisfaction; and improvement in the organization's financial results.

Please remember that I am not presenting the complete document. Also, things arise during the year that can cause a change in plans. But this does present an example of the kinds of issues that attract managerial attention at an academic medical center like ours. The plan is based on analysis and conversations among people in all parts of the medical center. To that extent it is "bottom-up." But then it is formally adopted by the senior managerial and clinical leadership and then by the Board of Directors and becomes a "top-down" document against all are held accountable. Of course, it is widely shared with the staff by being available on the hospital's website and in meetings with people throughout the organization.

Fiscal Year ’07 Annual Operating Plan

Each year our budget and related annual operating plan offer new challenges and opportunities for success, and this is especially true of fiscal 07. While our ‘07 AOP is built around the three key areas of quality, satisfaction and financial performance as in prior years, you will note a slight shift in emphasis reflecting the challenges in this year’s budget.

This year there is an increased emphasis in implementing a more rigorous approach to improving productivity, managing clinical resources, and developing clinical pathways and in monitoring and measuring the success of these efforts. Many of you will be asked to participate in these efforts, and we appreciate your support.

We remain committed to and focused on clinical quality and patient safety and satisfaction, as they remain the primary elements defining our institution and its role in the medical community. We have achieved major progress in our quality of care and patient safety and have developed a track record of innovation in these areas. We have likewise seen continuous improvement in our satisfaction scores. In addition, we have been successful in developing programs that support the growth and career development of our employees. In ’07, our goal is to hold these gains and selectively build on the successes in these areas.

As always, this plan is supported by detailed and specific tactics and measures that will ensure our ability to be successful and measure our progress. We will periodically provide updates on these more specific actions to our Board, physicians and staff. We ask for your support and welcome suggestions on how to achieve these goals in FY’07.

Goal 1: Promote Continuous Excellence in Clinical Quality and Patient Safety

a. Achieve the goals in our annual quality and safety plan adopted by the MEC [The faculty's Medical Executive Committee] and PCAC [The Board's Patient Care Assessment Committee], including:
1. Implementing programs for patient safety, environmental safety, and emergency/disaster preparedness that ensures BIDMC’s readiness for JCAHO survey;
2. Achieving top 10% ranking in all the JCAHO/CMS quality indicators;
3. Achieving target performance in hand hygiene in 80% of critical care units and demonstrated improvement in 80% of inpatient units;
4. Achieving further improvement beyond 2006 rate in ICU central line associated bloodstream infection rate and best practice standards for VAP prevention;
5. Achieving influenza immunization rate of 60% of direct care providers.

b. Full implementation of key IS projects in patient identification, OR specimen tracking, and POE [computerized provider order entry] for ambulatory chemotherapy patients.

c. Continue to develop coverage plans and facility plans to meet patient needs and accommodate volume growth.

d. Expand the roll out of the clinical trials patient registration tool to two additional high volume departments/divisions.

e. Develop and implement patient safety initiatives in the Shapiro Simulation and Skills Center including training in the placement of central venous lines and in triggers/crisis management.

f. Achieve higher rates of donor conversion and organs/donor than the national goals for organ donation.

Goal 2: Ensure Outstanding Patient, Physician, and Employee Satisfaction and Loyalty

a. Achieve 95th percentile for patient satisfaction in inpatient, ambulatory surgery, and ambulatory visits and 90th percentile for the emergency department.

b. Complete the roll out of customer satisfaction training and job reclassification in all patient care areas.

c. Implement key recommendations from Referring Physician Survey including formal outreach to first time referrers and identifying selected enhancements to discharge fax for referring physicians.

d. Develop and implement a plan for assessment of core residency program performance in attracting and training residents.

e. Continue to foster open communication between employees and management through Town Halls, Executive Walk Rounds, and Management Roundtables.

f. Create and implement programs to recruit and retain an outstanding and diverse workforce including competitive benefits and compensation programs, career development programs, and leadership development programs to enhance the strength and capabilities of our managers.

Goal 3: Sustain Financial Strength through achievement of our inpatient and outpatient volume goals and increased focused on productivity targets

a. Achieve 3% operating margin

b. Support growth to achieve budgeted inpatient and ambulatory volumes.

c. Completing the Facility Master Plan and developing list of recommended multi-year facility actions required to ensure adequate capacity for ambulatory visits, surgical cases, and inpatient admissions.

d. Achieve significant productivity improvements required to reach the 07 budgeted cost/case and cost/visit and to prepare for FY08 budget by:
1. Implementing LEAN initiatives in 5 key areas with a focus on reducing costs and enhancing revenue;
2. Strengthening clinical resource management around high cost services in the OR and procedural areas;
3. Developing clinical pathways in partnership with physician program leaders to reduce variability in high volume/high cost DRG’s;
4. Continuing to identify and carry out projects to reduce energy utilization.

12 comments:

Barry Carol said...

I have a few financial questions.

1. How good is your intelligence with respect to your competitors' cost structure? What is your estimate of BIDMC's overall cost advantage / disadvantage or does it vary materially by specialty – cardiology, oncology, orthopedics, neurology, etc.?

2. Over the last several years, what was your trend increase in total compensation cost per employee?

3. Same question for all other (non-labor related) costs per bed?

4. Approximately how much of the increase in reimbursement rates from private payers was attributable to cost shifting to make up for inadequate increases from Medicare and Medicaid as opposed to underlying unit cost increases at the hospital?

Paul Levy said...

1. Not good. Dunno, and virtually impossible to tell.

2. Varies widely by job category, and I would rather not disclose the specifics for competitive reasons.

3. About at inflation. For details on energy costs, see my posting on that.

4. Cannot disclose.

Anonymous said...

EB3 here
what did the red sox marketing deal cost and what perks, such as season tiickets, were included?

Paul Levy said...

Please see below for a full explanation of the Red Sox sponsorship: http://runningahospital.blogspot.com/2007/03/play-ball.html.

I will not disclose the cost.

Tickets to games are included in the deal and are distributed to our employees and doctors. (Yes, including me from time to time.)

Matt said...

I just got out of my Master level Accounting class, and we touched on "Balanced Score Cards" or what I like to call dashboards. A lot of your measures and tactics fit into what was described in the course as score card elements.

One I fail to see in your list that was recommended by the book was is distinct section on the "human resource investment."

Of the case study we did it was the hardest element to develop goals and measures for. We resorted to retention rate, required education hours, and cross training type goals.

Does your facility plan for anything like that?

Matt said...

whoops...just saw it, it's point F under part 2

thats what I get for skimming before commenting

Anonymous said...

EB3 again,

Thanks Paul,

That will finely get rid of me. (see Dan Kennedy's Blog)

I hope you learned a valuable lesson as you pioneer the blogosphere.

'Don't respond to nut jobs like me!' The more you acknowledge them the more they won't go away.

The real crazy ones will take you down with them.

I was just having fun. Keep up the Good Job. :)

Ernie

p.s. - good for you for printing my comments. But don't let nut jobs ruin your blog.

Charles Maynard said...

Paul, I implemented something similar to your Goal 2.C in 1988 at University Hospitals of Cleveland and can tell you from experience the value it can bring.

The project created daily (previous 24-hours) admit/discharge reports, confirming the attending, referring and primary care physician using the admit report. The referring and PCP received a notifying phone call that their patient had been admitted, who the attending was and how he could be reached. Similarly, the referring and PCP were notified when their patient had been discharged.

I had implemented a computerized physician referral program in 1987 and by merging and tracking the admit/discharge data with the referral data, was able to account for over 12,000 new patient relationships and over $41 million in net revenue over the subsequent 8-years.

Anonymous said...

Paul;

Along the lines of your financial goals, I saw on "A Healthy Blog" Mass. state data saying BIDMC had a 64 million operating surplus in FY 2006. I realize that is dwarfed by Mass. General's what, 294 million for the same year?, but I am curious about how these surpluses work in a nonprofit institution. Educate someone like me who was never in business; is this just a rainy day fund against bad times, is it like an endowment and used to generate interest income, etc. or what? So your interest in increasing productivity and cutting costs, while entirely understandable, is aimed at increasing this surplus?
I have always been confused on this subject re nonprofit organizations, not just hospitals but churches, etc. Why wouldn't the IRS see this as really a profit, and at what point does it put nonprofit status at risk?

Paul Levy said...

The surplus is generally used for investment in facilities and equipment. Here's an example. Our budget includes, say, $65 million in depreciation. But most people would agree that a hospital needs to invest 1.2 or 1.3 times depreciation just in renewal and replacement of plant and equipment (i.e., not expansion) because of inflation. So, if you just break even, you do not have sufficient funds to do that. If we have a margin of $30 million (3%), it permits us to make that investment, plus what we need for expansion. (In our particular case, too, we are catching up on deferred renewal and replacement investment from during the five-year period that the hospital lost $40-$70 million per year.)

I guess if you were lucky enough to make more of a margin than you needed for inevstment purposes, you could plow it into your endowment to generate future income and or give yourself a "shock absorber" against a bad year.

This is not at all like a profit in a corporation, which is distributed, at least in part, to shareholders. In a non-profit, there is no distribution of the surplus to private parties or individuals. The IRS certainly understands this distinction, and the laws make it perfectly acceptable for a non-profit to earn a margin.

Just a final point, not all operating surplus is cash. Sometimes there are accounting entries that add from the cash bottom line figure. Obviously, non-cash income can't be used for investment purposes.

Barry Carol said...

Paul,

Could you speak to the general issue of occupancy rates? Since hospitals are a high fixed cost business, you, presumably, want to spread those fixed costs over as much volume / occupancy as possible. On the other hand, since patient flows are unpredictable, especially through the ER, you need a reasonable amount of capacity to handle those admissions. Is there a targeted or optimal occupancy rate for an AMC like BIDMC? Also, does it differ from what a community hospital would need to sustain its business model? If so, to what extent and in what direction? Finally, what is the revenue mix between inpatient and outpatient services, and is it better or worse from a management (and margin) perspective if outpatient services gain share at the expense of inpatient services? Just curious.

Matt said...

Replying to Barry Carol's Comment:

As I mentioned in one of my earlier comments, I'm just coming out of an Accounting class where we were doing a lot of break even analysis type stuff.

My question, is on your comment of "Since hospitals are a high fixed cost business..." I agree hospitals have high fixed costs but it was always my presumption that it was the variable costs that were the highest factor, supplies and the human resource factor.

Occupancy rate is great, but patient mix and Length of stay seems all that more crucial for managing costs. Efficient care seems more cost effective than just filling a bed, because as soon as you have a bed filled that becomes a cost generator. Just my understanding of things anyway.

I'm coming from a unique perspective though. Since Hurricane Katrina my hospital has been operating near or at capacity. Our Parish saw 10 years of population growth overnight from people migrating from New Orleans to our area, just north of the city. Since I've worked here capacity hasn't been an issue, and we are adding almost 100 more beds to meet demand.