Revenue Growth: Efficiency in Healthcare
By Frank Cohen, Director of Analytics and Business Intelligence
Note: This is the second of a four-part series on improving your practice processes and workflow to boost revenue. The first article can be found here.
Negotiating better contracts would certainly be beneficial, but many practices, suffering from the “Eeyore syndrome” (named for the gloomy, anhedonic donkey in the Winnie-the-Pooh books), are unlikely to pursue this process because they haven’t assembled or reviewed the data to support their position and don’t want to spend time arguing with carriers for scraps. For example, conducting a cost analysis would allow a practice to see which procedures have a higher cost-to-collection ratio, enabling it to potentially negotiate carve-outs for those procedures. Bottom line? Increasing revenues using traditional methods often costs too much time and resources to make any net gain.
Efficiency suggests the ability to do something well or reach a specified goal without wasting resources.
- Lean Six Sigma has emerged as the “horse and carriage” of process improvement for medical practices.
- Efficiency is key in healthcare
The idea of profitability being tied to linear algebra actually is quite archaic and is not very applicable in a complex system, of which healthcare fully qualifies. See, in a linear system, a one-to-one relationship exists between the components, and it’s usually pretty easy to manage. In a complex system, we see a many-to-many relationship, and the idea of complexity itself is tied to these interrelationships between players.
Yet even with all of the complexities on the nonclinical side of practicing medicine, there remains a beacon of light. And the word of the day (or decade) that describes this beacon is efficiency. It’s a word that all of us know and probably use routinely, but far fewer of us actually recognize the power of this weapon in the battle against declining profitability and even fewer know how to wield it effectively. For our purposes, efficiency is the ability to do something well or reach a specified goal using the least amount of resources possible. It’s also the ability to achieve the same results with less resources or achieve more or better results with the same amount of resources.
Here’s a real-life example. A subclinical staff member escorts a patient to the exam room where, inter alia, she spends three minutes verifying questions the patient completed on your questionnaire while in the waiting room. Once completed, the physician enters and repeats the same process, spending another three minutes verifying the same questions already reviewed by the subclinical staff.
We asked the physician about the redundancy of the process, and he said that a speaker at a conference told him that this process would result in fewer errors with regard to the answers provided by the patient – a noble rationale that speaks to the heart of quality of care and, on the surface, seems like sound advice. In subsequent questioning, however, we discovered that the practice never measured the error rate before engaging in this redundant step, nor did it measure the error rate during this redundant step. So while the goal (reduce errors on intake forms) was commendable, the practice didn’t know whether a problem existed in the first place and had no way to know whether this additional step improved either the safety or quality of patient care.
We conducted a test on this process and couldn’t find a single occurrence in which a patient answered the questions differently for the physician than for the subclinical staff member. We did, however, find instances in which the patient responded to the subclinical staff member differently than they had on the questionnaire they completed in the waiting room (a finding we attributed primarily to patients misinterpreting questions on the questionnaire that were later clarified by the subclinical staff). As a result, we advised the physician that, by eliminating the step in which he repeated the questioning, the practice could save three minutes per visit without negatively affecting the quality of care.
The physician replied, “My problems here go way beyond three minutes a visit.” This statement is true if you only see a few patients a day, but this practice saw 80 patients a day, which translates to 240 minutes (or four hours) of wasted time per day. In an ideal scenario, we could easily convert those four hours into value, but in our real world, because a base set of constraints exists in any process, we would likely only be able to convert around 25%, or one hour, of that time. So if this practice sees about four patients per hour, with an average revenue of $116 per visit, this results in an additional $92,800 in revenue per year. And that’s just from one modification to one process. Think about the revenue opportunities you might be missing out on simply because of a few obscure steps in your work flow.
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— Frank Cohen (firstname.lastname@example.org) and Jason Stephens (email@example.com). Frank is Director of Analytics and Business Intelligence at DoctorsManagement. Jason is Director of Consulting Business Partners & Vendors at DoctorsManagement.