Case Study:  Reorganization of an Orthopedic Physician Practice

Executive Summary
A 10-surgeon orthopedic group, operating at 4 sites, Center for Orthopaedics (CFO) retained the services of Integrated HealthCare (IHC) to address a perceived problem of excess overhead cost percentage.  In the consultant’s initial analysis, the actual core problems were identified as revenue-generation, related operational process design and organizational effectiveness.  Specifically, decision-making was ineffective because circular arguments and frequent revisiting of issues either precluded taking decisions or interrupted their implementation. 

With IHC’s help, CFO has restructured operations, created a centralized call center, decreased delays in claims processing and established physician productivity targets.  In governance, we increased CFO’s effectiveness by adding a new Board member, establishing a majority vote principle for decision-making on contentious issues, and ending the previously repeated “revisiting” of issues, once decisions were voted.

As a result, median physician compensation has risen over 18%.  Furthermore, we have set the stage for future growth by recruiting 2-3 new physicians (with no anticipated incremental overhead) and hiring an executive to enhance marketing and finance.  Achieving these results required substantial physician involvement and commitment to change.  Moving away from individual secretaries and creating the call center took 3 to 4 months and required substantial physician patience. Similarly, developing the physicians’ understanding of their role in securing revenue, which does not begin and end with the patient encounter, has proved essential to CFO’s revenue growth. 

Practice Context/Major Challenges
Initially, CFO posited a self-diagnosis of excess overhead costs.  However, IHC’s detailed Practice Assessment revealed a different set of core challenges.  Physician productivity lagged national and regional benchmarks.   In part, this sub-par performance had been disguised by the highly profitable Physical Therapy (PT) business.  In addition, group operations resembled a set of individual practices sharing a roof, rather than a genuine group practice. 

Further, decision-making at the senior level was thwarted by dissent and resulted in lack of clear direction to staff and among the physician partners.  In short, the physicians were working hard, but because of the operational and decision-making inefficiencies, a significant portion of that effort was wasted.

The weakness in governance stemmed from the Group’s recent turbulent history.  CFO had formed as a merger of two groups in 1998.  Then, in 2002, three of the partners left the Group due to philosophical differences.  Focusing on revenue-generation versus quality of care, the sub-group’s departure caused the equivalent of organizational “self-doubt.”  At the beginning of the engagement, IHC found this self-doubt manifesting itself in continuous revisiting of decisions. 

We describe the Project’s initiatives in 4 areas:  leadership, physician relations, operations and finance.

Over time, these new approaches became habits for the Exec as a whole, and the productivity of meetings—and the solidity of decision-making—grew.  To implant this new, linear approach to decision making, the Exec and IHC worked to inform and build support among the entire partnership. 

With this improved communication flow came support for making difficult decisions.  Perhaps the most difficult, early decisions involved two disgruntled surgeons. 

Specifically, one surgeon blamed CFO’s poor functioning on the Operations Manager, to a fair degree unjustifiably.  In addition, this MD was called up for military service multiple times.  Initially, the Group paid his full salary, but by the third call-up, CFO recognized its economic inability to sustain such largesse, especially while this MD refused to acknowledge his own inability to maintain private practice.  His economic demands and increasing efforts to agitate dissent within the Group overwhelmed the benefits of his presence.  With IHC’s support, the Exec determined that he should leave the practice, and an agreement was executed. 

Another surgeon—of only a single year’s tenure—had joined CFO immediately prior to entering his fellowship.  As a result of his fellowship, his goals changed, and he exhibited a preference for academic, rather than private practice.  Again, with IHC’s help, the Managing Physician, in concert with the entire Exec, confronted this surgeon about his change of goals and established a mutual decision-making timeline for whether this surgeon should stay with the Group.  The mutual decision involved his departure. 

In addition, IHC helped the managers do their jobs, without undue interference.  Historically, CFO physicians had micro-managed staff, pulling them in different directions.  In effect, the staff were accountable to EACH physician, rather than to ALL the physicians.  Changing this dynamic reduced re-work loops; it also corrected the dilution of execution because of staff resistance or lack of clarity.  The practice of “going around” the Exec was ended, supporting more linear policy implementation.  While effecting these changes challenged both ingrained behaviors and the sense of power of some staff, gradually the salutary effects began to become clear.

Monthly monitoring of activity was put in place, as was a policy of “inviting” under-performing physicians to meet with the Exec.  One surgeon reduced his activity level to such an extent that his draw and expenses (direct and allocated overhead) were exceeding his revenue.  We established an aggressive, weekly monitoring program, reviewing weekly office hours, visits/surgeries performed and resulting revenue-generation.  This approach turned around this surgeon’s performance, so that his activity level can now support his expenses.

Now that the physicians were working more as a group, we could turn our attention to operational issues.  First among them concerned the lack of group practice behavior or operational design.  Each surgeon had his/her own secretary, who managed all booking and patient follow-up.  This system drove high costs per physician and precluded any scale efficiencies from the practice. 

To address this problem, we agreed on elimination of individual secretaries, creation of a centralized call center, and standard scheduling templates.  These changes entailed major operational restructuring, and not insignificant dislocation in the physicians’ lives for a period of time.

In addition, IHC worked with the Exec to lead the entire Group to a deeper understanding of the links between revenue and operations.  From the doctor’s traditional perspective, revenue-generation began and ended with the patient encounter (visit, procedure and/or surgery).  In reality, however, generating revenue includes five steps: 

In each of these operational steps, the physicians have a role to play.  IHC drove the reorganization consonant with these five operational phases of revenue generation.

IHC’s first step involved creation of the call center, by ending the policy of assigning each physician an individual secretary.  This change enabled improved leverage of staff into functionally organized roles:  appointment scheduling, surgical booking, test authorization and script refills, and site management. 

Supporting this new system, a telephone system with ACD was installed.  Both patients and physicians had to adjust to this automation, which required a significant round of improvements after the pilot.  In addition, we worked with each physician to set appointment schedules and templates for surgical booking.  

During the transition to the call center, substantial staff turnover occurred, requiring recruitment/training of new staff.  In addition, patient and physician complaints were registered.  After some 4 months, the operation stabilized, and a Continuous Quality Improvement (CQI) program is now in place.

The new site managers were given two distinct roles:  supporting MDs and overseeing performance at clinical sites.  MD support was critical, given the challenge to the surgeons of shifting from their long working relationships with secretaries to this centralized approach.  Thus, each site manager was assigned several physicians for whom he or she would act as liaison with the new system.  This role ensured follow-up on multiple patient issues as they arose and provided a single point of contact during a surgeon’s busy day.  In terms of site performance, the managers have become leaders in their sites, ensuring quality patient service, adequate staffing, and productivity and supply management. 

Simultaneously, IHC worked with the Exec to create and enforce policies that pressed the surgeons to deliver timely and adequate information required for billings.  We developed an option for purchasing dictation for those physicians uncomfortable with the EMR in use.  We set financial penalties for failure to complete charts on a timely basis and created a “warning system” to inform the doctors before they incurred fines. 

Finally, we set a policy that delegated decision about coding to the certified coder, thereby reducing delays due to arguments about coding.  With these policies in place, compliance has grown substantially, and the Exec feels empowered to discipline non-compliant physicians.

Results Achieved During Project
The most visible and readily measured result is the median increase of over 18% in per physician compensation since our implementation effort began.  We attribute this growth to the improved and more systematic scheduling of patients and efficient use of physician productive time.  Without question, the physicians are working hard, but now the system supports those efforts. 

Furthermore, with the operational reorganization completed, CFO can move aggressively in recruiting new physicians, without adding additional administrative costs.  This scalability of operations has great long-term value.  We further believe that ongoing performance improvement will occur, as call center staff gain experience (current average tenure is only 3-4 months) and as the site managers grow into their roles (current average tenure at 3 months).

These concrete—and easily measured—project results reflect the progress made in the realm of organizational functioning.  Newly strong and clear governance/decision-making has enabled CFO to make and implement decisions.  In addition to the operational paradigm changes discussed above, the reduction in internal, physician-physician dissent, has allowed for more linear decision-making and implementation on real issues. 

Financial management has benefited, as the Exec has pushed through securing an additional loan for improvements initially paid for by operating income, and a restructuring of banking relationships.  These decisions flowed from the Exec’s ability to focus on key, emergent issues (such as the lag in billings), rather than continually re-visiting decisions made. 

Taking this more focused leadership approach, the Exec has also been able to take action to improve clinical productivity.  Two significant examples include:  (1) corporate support for the recruitment of an NP for a pediatric orthopod, who has a greater need for nursing support due to the nature of a pediatric practice and (2) strong and consistent pressure on an under-performing physician to increase office hours and generate more activity/income.  Such issues had existed—and had been discussed—before IHC was engaged, but only in context of the organizational revitalization has decision-making and execution taken place.

Furthermore, the physicians need to develop an organizational culture in which they hold each other accountable.  Developing such a culture challenges pre-existing behaviors at a group and individual level.  The effort expended by the Managing Partner, along with the consultants, was substantial, often involving multiple sessions per week. 

Ultimately, this effort brought the Exec into line as a management body and then drove the adoption of a single mission, approach to practice and supporting operational policies.  While difficult, this experience of reorganization taught the physicians how to effectively deal with conflict, prioritize and make—and hold to—decisions.

Second, physicians need to understand that revenue-generation does not begin and end with the patient encounter (visit, procedure and/or surgery).  The process begins with scheduling, then moves through reception/data collection, chart completion and into the billing process.  At each step, there is a critical role for physicians. 

Creating common approaches to scheduling and organizational rules for collection of physician-driven information (charts) lead to effective collection processes.  In this effort, the culture of mutual accountability noted above creates the foundation. 

Combining this accountable culture with an understanding of the revenue cycle defines the context for routine monitoring of physician productivity.  In a case where a given physician is lagging, such monitoring identifies the problem early, and the effective organizational leadership takes action—holding said under-productive physician to agreed-upon standards.

Finally, shifting from individual secretaries to a common call center is emotionally and organizationally challenging.  Again, an effective organizational culture and broad support from physicians is critical to success.  Operationally, creating a call center requires much patience—in system selection and design, call-tree design and modification, new role definition and training, and performance monitoring and improvement. 

We suspect that our experience of significant turnover is not unique.  Nevertheless, with physician constancy and consulting support, creating a call center is feasible and beneficial as it delimits individual physicians’ ability to manipulate (i.e., decrease) his/her schedule and because it ensures that new patients are pulled into the practice as rapidly as possible.  In reviewing CFO’s revenue growth this year, we conclude that the call center was a significant, contributing factor to that success.

To support the marketing of these new physicians, as well as existing physician and PT services, the organization will hire a CEO, who will focus on marketing, PT and finance and billing.  The latter two areas will be further streamlined, based on the initial improvements made by IHC.  This CEO will also conduct a thorough assessment of space needs, real estate array and expenses, with 2005 being the appropriate time for such activity in the context of upcoming lease expirations. 

Finally, operations management will focus on a CQI program, with goals to improve performance by the call center and site managers and to enhance patient service overall.