Sunrise, FL-based Pediatrix Medical Group has purchased a neonatal physician practice based in Alexandria, LA. The practice has a volume of 8,000 annual patient days at the neonatal intensive care unit. During 2008, Pediatrix has acquired eight physician group practices, including neonatal, maternal-fetal, pediatric cardiology, and anesthesia practices.
Employers scrambling to rein in health costs tab are making employees shoulder more of the cost, and hoping they'll make better buying decisions. Some insurance companies now publish the prices charged at local hospitals for common procedures to allow patients to compare, and the federal government has started releasing death rates at hospitals across the country for some common killers. But some experts argue that the information still isn't enough for consumers to make life-or-death decisions.
Grady Memorial Hospital will receive a $5 million gift from medical insurer Kaiser Permanente, and most of the funds will pay for medical care for one year for 1,000 chronically ill poor people. The gift will support two of Grady's urgent missions in Atlanta, designating $3 million for care of the needy, and the remaining $2 million for trauma care. Grady supporters hope the gift sets a new bar in giving to the financially-struggling hospital.
I got a bill the other day from Vanderbilt University Medical Center for $144. I don't know about you, but $144 is real money to me, especially with twins on the way for my wife and me. The trouble was, while my wife has had her share of doctor visits, I haven't been to VUMC as a patient since my bout with tennis elbow almost a year ago. No, I don't play tennis, but I do a heckuva lot of typing and mousing, which seems to have aggravated, if not created, the injury. I've had mixed results retraining myself to use my left hand for the mouse, but I've always admired switch-hitters, so I'm kind of proud of myself. But I digress.
Turns out the $144 bill is for an x-ray I had of the arm last November. In case you're wondering, this was a first notice—I thought my insurer had taken care of this charge long ago. In fact, had I looked hard enough, I probably could've come up with the EOB. But I had other things to do. So I got on the phone the next day to do a little investigating. And since I have a handy digital voice recorder hooked up to my phone for interviews, I decided it would be prudent to have a record of my phone call for this nine-month-old bill. The phone was answered on the second ring by a real person—in fact, a really nice person. I'll call her Faye. Faye informed me immediately that the call may be recorded for quality control purposes. Fine. I let her know that I was recording it as well. For, um, quality control purposes.
After taking down my name, address, phone number and billing number, Faye intoned, "How can I help you?"
"Well, I just got a bill from you guys yesterday that's about nine months old for $144," I said.
"Hmm," said she. "I don't understand that, because I'm showing your account with a zero balance."
"That's great news," I said. "I don't understand the bill either, but we're making progress. What would have generated the bill?"
After telling me she didn't know, I asked her what I should do with the bill.
"Tear it up," she said. "It's not accurate."
"OK, no problem, thanks for your help."
And Faye and I went on about our busy days.
What's the point of this story, you might be asking yourself? Well, besides being an entertaining respite in your otherwise stressful day, it's a window into how far hospital billing has come, and how far it seems to have left to go. Several years ago, I had a similar issue with a different healthcare provider in town. It got to the point where, after loads of phone calls back and forth, the hospital sent a collection agency or two after me for the $20 copay it said I owed for a doc-in-the-box visit. Despite my production of a canceled check to prove I paid the fee, the calls, letters—and the threats—kept coming.
Eventually, I just started to ignore them, and they eventually went away. Somehow though, I suspect my otherwise pristine credit score still has this blemish on it through no fault of my own, though I haven't expended the energy to try to find out.
Based on my personal experience, it seems hospitals have gotten a lot better at this. Departments and vendors communicate with each other much better. Errors like my $144 bill still happen, but they can be resolved much more quickly and easily and with a lot less stress on both sides. Based on my professional experience, I see the software and Web-based products that keep the links of the chain in billing and collections tied together. Many of them are very impressive and help alleviate many of these errors before they even get started, no doubt. But that prior disagreement over the $20 copay has left me scarred but smarter.
So I think I'll hold on to that bill from VUMC for a little while longer. And the recording I made of the phone call. Just in case.
Editor’s Note: Our Top Leadership Teams event is coming up this October in Chicago. I know travel is getting expensive, but if you only go to one event this year, this is the one, and I’m not just saying that because HealthLeaders signs my paycheck every two weeks. We’ve got a two-day agenda packed with some of the top leaders in healthcare today, and they’ll be revealing their operational secrets in a series of panels over the course of the conference.
Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at pbetbeze@healthleadersmedia.com.Note: You can sign up to receive HealthLeaders Media Finance, a free weekly e-newsletter that reports on the top quality issues facing healthcare leaders.
In healthcare's highly competitive marketplace, your brand has to be developed into something extraordinary. It must evoke a positive rational as well as emotional response from all your stakeholders, including patients, physicians, employees, and donors. But most importantly, your brand needs to drive the bottom line. In Part 1, which ran in last week's HealthLeaders Media Finance e-newsletter, we outlined a plan for CFOs to measure true return on investment from your marketing team's efforts. This week, in Part 2, we will go through steps to improve ROI once you're able to measure it.
Analyze and Improve
ROO
To analyze your ROO efforts, cross reference service line initiatives by target audience, message, channels of communication, and identify what is working and what isn't. Design of experiments is important in the Analyze and Improve phase. This tool is used to determine the priority of competing marketing opportunities. DOEs provide information on which variables have the greatest impact on the objectives. The basic premise is that certain elements of a process are held constant while other elements are varied. This is used to maximize and minimize various results.
ROI
Let's look at a real-world financial forecasting example. Last year, for instance, perhaps your hospital attained CyberKnife technology. The business goal for the year was 100 CyberKnife prostate procedures. Therefore, your financial goal was 100 times the average net income per procedure. For ease of math, let's say the net income is $500,000. Hypothetically, it took $300,000 to create 1 million impressions (message exposures) though print, radio, out-of-home, and direct mail within a four-month span to attain 500 qualified candidates interested in your hospital's CyberKnife prostate procedure. Out of those 500 candidates, 100 procedures were scheduled.
Now say your hospital attains the daVinci technology the following year. For simplicity, let's say your business goal is also 100 daVinci prostate procedures. If the marketing launch is approximately the same time of year, to the same target audience, you can forecast how much media, how much direct-to-physician marketing time and materials, and total budget you need. You can even calculate adjusted returns based on diminished or expanded marketing budgets. If your budget to launch the daVinci program decreases from $300K (used to launch CyberKnife) to $200K, your results may also diminish by 30%.
In our CyberKnife example, to calculate profits, start with the $500,000 total net earnings (which are gross reimbursed income—not including bad debt, charity care, etc.—minus the cost of the service for all 100 procedures). Then subtract out the marketing costs for the campaign ($300,000) to calculate profits ($200,000).
$500,000 - $300,000 = $200,000 profit
To calculate ROI, divide the net income ($500,000) by marketing costs for the campaign ($300,000) to give you the percentage of ROI.
$500,000 / $300,000 = 166% ROI
You can also divide the marketing costs for the campaign by 100 to get a marketing cost-per-procedure for forecasting.
$300,000 / 100 = $3,000 per patient
As you track the trends, these costs will go down. The cost per procedure when launching a new program, per our example, is far more than the incremental cost for every new patient thereafter. If it is not, you are doing something wrong.
Please keep in mind the following when calculating ROI:
1. The launch scenario outlined above was a very simple example. If the service is in the middle of its product life cycle, you need to pull a series of quarterly financial reports and benchmark new tracking against that financial history.2. When calculating the actual net income, work with your CFO to identify the fixed and variable costs, as well as the break-even point (BEP).3. CFOs should define what portion of growth will be "credited" to marketing.4. Adjust financials for the time-value of money.5. Always conduct a scenario analysis with forecasting to define the most plausible outcomes based on multiple variables. In our example, variables may include what technologies your competition owns, what new technologies are in the pipeline and when they will be available, and the diminishing procedure rates after your health system or your competition acquires new technologies.
Report
The simpler the presentation of critical success data, the better. No executive likes a huge stack of data without a summary of the analysis and what its implications are. That's why dashboards are recommended. They are designed to reflect what the organization is most interested in knowing in a snapshot format. Named after easy-to-read automotive dashboards, these are management reporting tools highlighting LMIs in easy-to-read pie charts, bar charts, and tables. They consolidate important data into one page (or dashboards), allowing busy managers to quickly understand the success or failure of given initiatives. They also allow for fast adjustments based on market responses. Common elements of marketing dashboards include total marketing spending, media mix allocations, ROO, ROI, and a calendar of what marketing initiatives are being conducted when. All aspects should be color-coded by service line.
Getting started
CFOs should work with marketing leadership to define LMIs based on your business and marketing goals. By conducting a bi-annual survey to first-time patients during a one- to two-month duration, marketers can prioritize LMIs. Analyze how patients decide to use a particular service. Who were their key opinion leaders (family members, physicians, etc.)? Was the determination swayed by their insurance carrier, HMO, or PPO? Or was it based on a marketing activity? Calculate what percentage of new patients arrived through what channels. Assess what marketing source was most influential to tell if customer-related or physician-related marketing is having an impact.
Next, conduct a SWOT analysis of current marketing function support systems such as contact center staffing levels during peak and non-peak hours, current call volumes, referral and conversion rates, IT functionality and data collection, analysis and reporting, existing referral policies and procedures, Web application development and database integration, and revenue reconciliation. Take a look at the ability to match caller requests with existing clinical data, current marketing costs, and current ROI/ROO measurement devices. What information is missing to accurately provide the intelligence to track and forecast? Use this analysis to define what you would need in a tracking system.
Actually setting up a tracking system is unique to each healthcare system and varies widely based on human resources, financial resources, and IT sophistication. There are many customer relationship management (CRM) systems that can be used for capturing marketing intelligence as well as tracking results and forecasting.
Once your system is in place, test it. Begin by tracking a single service line initiative. Smooth the wrinkles before expanding your tracking system to other areas. Slowly add other service lines.
Work together
Healthcare CFOs and marketers can work together to aggressively drive the bottom line given the right information. By following these guidelines, you can set up ROO and ROI tracking systems that maximize results and lower expenses.
Gabrielle DeTora is a Strategic Healthcare Consultant in Philadelphia, PA. She may be reached at 908-447-9231 or info@GabrielleDeTora.com. To learn more about effective ROI tracking go to www.GabrielleDeTora.com.
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Few patients would know to ask whether their doctor is being paid by a company that profits from the device about to be implanted in their body. But recently, congressional investigators have questioned whether some agreements with doctors, particularly those who perform lucrative and increasingly common spine surgeries, are appropriate or even legal.