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Whitepaper

athenahealth, Inc. | Published: December 2012

Executive Summary

The pressure exerted on group practices to grow, often through integration with additional practices or with larger healthcare systems, has been strong for years, and the trend shows no signs of abating. There are multiple reasons for this trend. One is the desire for critical mass to gain leverage with payers in specific markets as payer reimbursement declines relative to increased cost. Another is the shift to quality-based reimbursement, risk contracts, and Accountable Care models—all of which require actuarial data and expertise in pricing insurance along with the infrastructure to handle population management.

While group growth may bring advantages, growing a group efficiently and with minimal disruption is a real challenge. The cultural, operational, and infrastructure demands can be significant, and, if they are not handled effectively, the attempt to grow can throw a group into a tailspin. In this paper we delineate seven possible pitfalls that must be addressed on the way to a successful growth trajectory. They include:

  1. Inability of Infrastructure to scale due to IT and capital constraints
  2. Inability to rapidly deploy technology or processes to new parts of the enterprise
  3. Day-to-day operations consume time required for growth and talent management
  4. Inadequate visibility into performance and operations
  5. Limited standardization and workflow efficiency
  6. Inadequate mechanisms to drive process compliance at the point-of-care
  7. Lack of insight into ordering patterns of community physicians


In light of these challenges, successful practice growth cannot happen without adequate planning and the commitment to address growth drivers. It takes preparation, planning, the right tools, and often the assistance of partners that understand the complexities of on-boarding new providers and practices efficiently and effectively. This whitepaper discusses seven strategies that will go a long way toward managing growth successfully:

  1. On-board new providers without major capital expenditure
  2. Deploy an IT infrastructure and interfaces that scale quickly with minimal investment.
  3. Employ rapid, comprehensive implementation, training, and adoption procedures.
  4. Integrate acquired practices rapidly into the operational infrastructure and measure their success regularly.
  5. Employ scalable, standardized processes with workflow controls and best practices across the organization.
  6. Measure financial and operational performance and community ordering patterns regularly.
  7. Ensure no unexpected costs for, or disruptions of, technology, knowledge, and services.


The Growing Trend Toward Larger Group Practices

The pressure exerted on group practices to grow, often through integration with additional practices or with larger healthcare systems, has been strong for years, and this trend shows no signs of abating. According to a July 2012 press release from Irving Levin Associates, a healthcare business intelligence firm, “The dollar volume of merger and acquisition activity in the health care industry more than doubled in the second quarter of 2012 compared with the previous quarter, despite a decline in the number of transactions announced. In fact, with $61.2 billion in announced mergers and acquisitions in the second quarter, it was the most active quarter since the second quarter of 2011 when nearly $75 billion of health care M&A deals were announced. The 251 announced mergers and acquisitions equaled the year-ago number.”1

There are multiple reasons for this trend. One is the desire for critical mass to gain leverage with payers in specific markets as payer reimbursement declines relative to increased cost. John Briggs, MD, an athenahealth client who is a co-founder of the largest OBGYN group in Florida, says, “In a five doctor group, I was a voice that went unheard and [we were] getting killed with decreasing reimbursement levels and higher costs of doing business, so we developed ourselves into a group. Now the voice I’ve always had is for the first time actually being heard.” Another pressure driving growth is the shift to quality-based reimbursement, risk contracts, and Accountable Care models—all of which require actuarial data and expertise in pricing insurance along with the infrastructure to handle population management.

This trend is not surprising, considering some of the advantages that come with growth, such as:

  • Economies of scale
  • Combined interests and talents
  • Enhanced negotiating position
  • Greater market access
  • Pooled capital
  • Risk sharing
  • Enhanced peer consultation
  • Control [of referral patterns]
  • Strategic advantages [in complex systems of care]2


7 Pitfalls to Successful Growth

Growth may bring advantages, but the cultural, operational, and infrastructure demands can be significant, and, if they are not handled effectively, the attempt to grow can throw a group into a tailspin. Here are seven significant obstacles to successful growth.


1. Infrastructure is not able to scale due to IT and capital constraints

Back-office software solutions usually require expensive on-site server hardware, complex software packages, and a technical staff (in-house or outsourced) capable of installing upgrades and patches as well as wrangling with these systems to keep them functioning effectively. The amount of time, capital, and staff required to expand such solutions during growth can become prohibitive.

In addition, rapid hardware obsolescence can lead to costly errors and require expenditure of even more money for upgrades—upgrades that are often difficult to implement, lead to errors, and reduce productivity. On top of this, it’s difficult for software to keep pace with increasingly complex and frequently changing healthcare industry standards, regulations, programs, and insurance rules. The more people in your group who are using outdated software, the greater the number of errors will be made that require follow-up and eat up expensive staff time.

Taken all together, these infrastructure constraints can make growth impractical to initiate or endanger its success.


2. Inability to rapidly deploy technology or processes to new parts of the enterprise

In addition to the technical demands—and expense—of installing new hardware and software at new sites as a group expands, there is the cost of training new providers and staff. Not only must they learn how to use the software, but in addition they must learn new ways of operating to align themselves with the group. Between the time required for installation of the hardware and software and the difficulty of new practices learning it and adapting to new procedures, productivity can take a significant hit. And if that hit is dramatic enough or happens often enough, it can be fatal to successful growth.


3. Day-to-day operations consume time required for growth and talent management

Successful growth requires perspective, the long view, the ability to step back from day-to-day operations and lead the way strategically. But if day-to-day operations are so demanding that this time is not available, growth will either not happen or will lack strategic rigor, jeopardizing its long-term success.

Another problem with overwhelming operational demands is that those demands will grow with the group, requiring more and more staff members to keep up with them. Finding qualified staff for IT, billing, and clinical coordination is difficult enough—and then you need the operating funds to pay them. The time and cost of finding, training, and paying new operations staff can seriously inhibit a group’s growth.


Figure 1. A Breakdown of One Highly Demanding Staff Task

Allocation of Nonclinical Full-Time-Equivalent Staff Performing Billing And Insurance-Related Activities

fig1

SOURCE: Authors’ calculations based on key-informant interviews Sakowski J A et al. Health Aff 20009.28:w544-w554


4. Inadequate visibility into performance and operations

As a group expands, it can become increasingly difficult to keep track of which providers and staff members are performing well and which are struggling—yet this information is key to managing a successful enterprise. Group leadership needs to know through robust business analytics how well a group is performing in areas such as productivity, coding, billing, and collections. In addition, leadership should establish baseline benchmarks to enable trending of performance indicators over time. Organizations that successfully manage growth have clearly defined metrics of “success” and create the systems and structures to consistently monitor performance.


5. Limited standardization and workflow efficiency

Lacking process standardization and well-defined workflows in areas such as filling appointments, processing patients, adhering to clinical guidelines, making copay collections, checking eligibility, and closing patient encounters causes inefficiency across your group. Without standard processes and workflows it is much more difficult to integrate new providers and staff into a group. The sooner new practices can be helped to adapt to standard processes and workflows, the sooner they can contribute to the success of the group.

An example of the financial price for not having process standardization is the non-collection of co-payments and deductibles, which can add up to big losses across a growing organization. Self-paying clients accounts for 19% (and rising) of the average practice’s accounts receivable.3 And yet, 81% of self-pay net revenues are never recovered.4


6. Inadequate mechanism to drive process compliance at the point-of-care

Standard processes and workflows will only work, however, if their effectiveness can be measured. You can establish operational and clinical procedures, but, if there is no way of knowing whether or not they are being complied with, they aren’t very useful. You cannot grow successfully if it’s impossible to measure noncompliance and inefficiency and rectify it. This is especially true when on-boarding new providers and staff. If you can’t monitor their success at adapting to your group’s processes and workflows, you can’t help them become efficient and productive, which means they will be drag down the success of your expansion.

The Meaningful Use federal incentive program presents growing medical groups with considerable upside— up to $44,000 per provider in Medicare incentives—with equally impactful penalties lurking ahead for noncompliance. Achieving Meaningful Use and successfully participating in other Pay for Performance programs across a growing enterprise requires tight process control and the ability to influence provider behavior on measures. If you struggle with Meaningful Use, you will struggle more as risk-based reimbursement models demand ever tighter control at the point of care.


7. Lack of insight into ordering patterns of community physicians

Consultant Andrew J. Cremé includes “Not knowing where your business is coming from” among his “Seven Deadly Sins of Growing a Medical Practice.”5 Every sizable group operates in a competitive market and depends significantly on referrals from primary care physicians in the community. According to the recent ReferralViewSM study undertaken by athenahealth and Halley Consulting, for example, one-fourth of all family practice visits resulted in a referral—a significant volume.6 Your group needs a good system—both procedural and technical—for tracking referral patterns. Without this, you may be in the dark about leakage of referrals to other medical groups or hospitals.

For example, practices employed within a group are under contract to send referrals to the group. But are they, in fact, sending a percentage of patients elsewhere? If they are, your group needs to know and to understand why. Visibility into what’s happening with referrals is key to managing them. It should not only be easy to make referrals to a medical group, but the group also needs to be able to track those incoming orders, identify patterns, and see opportunities for growth as well areas where growth is being hampered.

If you don’t know where your business is coming from, you are at the mercy of unknown market forces and have no idea how to help your group grow. Where do you put your energies? What kind of actions are likely to increase your business and help enable growth?

The potential consequences of not being able to overcome these seven obstacles include:

  • The inability to execute on strategic plans
  • Stalled growth and organizational under-performance
  • The erosion of profit margins
  • High balance sheet risk (e.g., bad-debt write-off, underutilized assets, debt service costs)
  • Costly bad decisions and missed opportunities due to lack of insight
  • Loss of market share and talent to competition
  • Compromised opportunities for optimal standardization


Despite the seriousness of these obstacles, it is possible to overcome them. The following section outlines the kinds of strategies that make this possible.

Florida Woman Care: Patient-Centric Medicine—and Profitability, Too.

FWC Management Company, the management arm of Florida Woman Care, grew the group from 30practices at the end of 2009 to 250 practices at the end of May 2011, making it the second largest OB/GYN practice in the state. One might assume that growth this rapid would be painful and interfere withphysicians’ ability to serve their patients, but that is not the case with FWC. “Our purpose in this groupis to take a lot of administrative tasks off the physician’s plate, so they can practice they way theyalways wanted to,” says COO Nancy Brown.

FWC is has been able to sustain profitable, non-disruptive growth by employing the strategiesoutlined in this whitepaper, assisted by its partner-like relationship with athenahealth.

Among the advantages of partnering with athenahealth as FWC grows, Brown names:

  • The ease of implementing athenahealth‘s scalable, cloud-based platform with new practices
  • The level of training and support athenahealth provides each new practice
  • The way athenahealth’s software and services immediately make things easier for practices by standardizing processes and controlling workflows and taking work off their hands
  • The ability to measure performance—operationally and financially—and act upon it

“When physicians join the group they usually enjoy a 20-30 percent increase in their reimbursements,even if they decide to see fewer patients,” says Brown. “athenahealth takes on much of each practice’spatient communication, routine billing, and administrative clinical work, which immediately takes someof the pressure off of physicians and staff. And each practice quickly has more insight into its financialsituation, with actionable data that makes the practice more efficient…I would say athenahealthrepresents about 50 percent of our success story.”

Seven Strategies to Drive Successful Growth

Successful growth does not happen haphazardly. It takes preparation, planning, the right tools, and often the assistance of partners that understand the complexities of on-boarding new providers and practices efficiently and effectively. Here are 7 strategies that will go a long way toward managing growth successfully.

1. On-board new providers without major capital expenditure.

Capital is precious, and the less you need to expend to grow the better. Installing, maintaining, and upgrading an EHR can be a significant capital expense. Many systems require an upfront investment of hundreds of thousands of dollars along with significant ongoing costs for maintenance and upgrades. According to a 2011 Health Affairs study, the initial per-physician costs for software-based EHRs averaged $46,659 over the first year, and in “an average five-physician practice, implementation cost an estimated $162,000, with $85,500 in maintenance expenses during the first year.”7 Maintaining one’s own IT staff, or contracting for IT services, can be equally or even more expensive.

The alternative is the cloud-based service model, where all providers access a single instance of the same software on a network that is fully maintained by the service provider. Upgrades are free and happen continually, which means the software never goes out of date and it stays current with requirements for Meaningful Use Stage 2, ICD-10, and other industry requirements coming up. This approach significantly reduces the investment in hardware and in IT staff to maintain hardware and software. Some vendors base their fees on your revenue, meaning they succeed only if they help you succeed.

On-boarding new providers is another significant cost for growing organizations. The less capital you lay out to bring on each new provider, the sooner you’ll profit from each provider’s contribution to the group. In order to do this, you need clearly defined, scalable processes and workflows (see #5 below) and system-wide technology that is easy to learn and easy to use and makes it possible to efficiently integrate new users.


2. Deploy an IT infrastructure and interfaces that scale quickly with minimal investment.

Because private and governmental payer rules, requirements, and quality programs change constantly—in some cases, almost daily—your EHR and practice management system is only as good as its most recent iteration. Most EHRs bring themselves fully up-to-date only with patches and expensive upgrades, which quickly become outdated again. And as your group grows, you will need to pay for more and more users of these systems, making maintenance and upgrades increasingly expensive.

If you use an EHR that is cloud-based, maintained by a vendor with its finger on the pulse of payer policy changes, you will have a system that is continually upgraded at no cost to you. This enables you to make fewer mistakes on claims, getting them paid fully and faster. With up-to-date information on quality program requirements, such a system also enables your group to take better advantage of these programs, which can increase revenue. Payments available from Pay for Performance programs can average 7% of physician compensation, though they can be as high as 30%.8

A cloud-based service requires little upfront financial investment and gives your group the benefit of continually and automatically upgraded software, clinical data and protocols, and payer rules as well as having the collective lessons of every practice on the network immediately integrated into the system for the benefit of all.


3. Employ rapid, comprehensive implementation, training, and adoption procedures.

To achieve quicker and less expensive on-boarding of providers and staff in newly acquired practices you need:

  • The ability to implement your group’s systems and procedures swiftly
  • Rapid, comprehensive. and effective training on those systems and procedures
  • The ability to foster rapid adoption of procedures and processes


The faster and less complicated it is to move new providers and staff onto your billing, practice management, clinical, and patient communications systems, and train them in their use, the quicker they’ll become productive. And your group processes and procedures must be well-organized and clear enough to match your systems’ efficiency and ease-of-use.

To ensure these things, when you choose these systems, be sure that your vendor will:

  • Actively assist you in matching your processes and procedures to your systems’ functionality
  • Make it easy to implement your system in newly acquired practices
  • Provide comprehensive training that gets new users up-to-speed quickly
  • Continue to actively partner with you as your group grows and changes


Figure 2. Typical athenahealth Implementation Timeframe

4. Integrate acquired practices rapidly into the operational infrastructure and measure their success regularly.

An article in The New England Journal of Medicine entitled “The Four Habits of High-Value Health Organizations” has this to say about measuring and reviewing practice performance.

For many, measurement of clinical operations is driven by external audiences: payers, regulators, and rating agencies. Although high-value organizations share this reporting obligation, they primarily use measurement for internal process control and performance management. They collect more (and more detailed) measurements than those required for external reporting, selecting those that inform staff about clinical performance.9

Once a new practice is successfully integrated, the next step is measuring that practice’s success over time, adapting to your procedures and performing at the level you expect. Knowledge is power. Your systems need to provide useful workflow metrics that will help you use staff more effectively, identify providers who are having a harder time adapting and performing, measure provider productivity against national benchmarks, etc. That way, you can provide training and assistance before the situation gets out of hand and turns growth into a drag on your group, rather than a spur to greater success and profitability.

With a cloud-based practice management and EHR service, you can have dashboard-level views of practice and provider performance, along with peer benchmarking across an entire provider network.


5. Employ scalable, standardized processes with workflow controls and best practices across the organization.

An article in Family Practice Management that characterized the “ideal practice” noted that:

Efficient practice design, including the wise use of technology and improved workflow, reduces staffing needs and enables ideal medical practices to reduce overhead. While overhead in a typical family practice is roughly 60 percent of revenue, overhead in ideal medical practices averages nearly 35 percent.10

This highlights one of the most dramatic benefits of scalable, standardized processes and workflows: the ability to grow your group without a bloated staff to eat up profits. If you establish processes and workflows based on best practices—ones that are flexible enough to grow with your group—and have the capacity to monitor their use, you will be able to manage your group with a lean, efficient staff.

For example, a popular assumption is that scale requires a centralized billing office, document management team, clinical quality managers, etc. But hiring good staff can be hard and very costly. Instead of growing overhead as you scale, you can shift these “centralized” operations to a cloud-based service that can execute on these areas of work more efficiently and cost-effectively.


6. Measure financial and operational performance and community ordering patterns regularly.

Good management is impossible without good data. Your billing, practice management, clinical, and patient communication systems should record the kind of data you need to keep your group on track as it grows. Your systems should also deliver actionable business intelligence based on this data in easily run, easily understood reports. Without this kind of information at your fingertips, the benefits of growth can be quickly derailed. With it, you can measure and optimize physician and staff productivity and financial performance across enterprise; tweak processes, procedures, and workflows to make them more efficient; and take advantage of community ordering patterns to increase business. In other words, you can actively manage your group through successful growth.


7. Ensure no unexpected costs for, or disruptions of, technology, knowledge, and services.

Another key to successful growth is having everything your group needs to function successfully and not having to worry about unexpected costs and disruptions. This means that you need to have systems and services to manage your group that are reliable and always up to date on payer rules and procedures, compliance mandates, quality program requirements, and so on.

Cloud-based services have a decided advantage in this area. They are updated continually to incorporate changes in rules, procedures, or requirements initiated by payers or government agencies. And this is done at no cost to your group and with no disruption of your activities. In addition, as indicated above, since cloud-based systems are networked with groups across the country, best practices developed for one group on the network that are useful to all can be incorporated for every group on the network—again, without cost or disruption. With the convergence of Meaningful Use Stage 2 and the ICD-10 transition requiring massive changes to your practice over the next two years, it is essential to have nimble solutions that can adapt to all the change that’s coming.

By using the approach to smart growth outlined in these seven strategies, your medical group can:

  • Be nimble and expend less capital
  • Use fewer staff to achieve growth
  • On-board new practices without risk of degrading performance
  • Negotiate better contracts (e.g., payer, labs, etc.)
  • Enjoy complete visibility into community ordering patterns, operations, clinical decisions, and financial performance
  • Achieve transparent and predictable control over total cost of ownership
  • Increase market share and achieve profitable growth
  • Operate with a strong balance sheet, reduced capital expense, and lower operating costs
  • Be flexible enough to invest and expand in ancillary lines of business and new acquisitions
  • Enjoy better brand recognition and Increased influence
  • Achieve increased provider productivity and satisfaction
  • Make it easier to recruit, on-board, and retain providers
  • Free up your group leadership to focus on strategy

The choice to grow or not is up to each group—assuming market forces don’t simply make it necessary. But whatever your approach to growth might be, it is important to approach the process thoughtfully and strategically. There are many significant obstacles to successful growth—from IT costs and constraints to unstandardized or inefficient workflows to inadequate insight into operations and performance. But there are also strategies for overcoming all of these obstacles in order to ensure your success—from cost-effective, scalable technology and services to easily reproduced best-practice workflows to business intelligence that keeps you on track. In order for your group to follow an upward arc toward sustained growth, you must take advantage of the processes, tools, practices and assistance that are available to help ensure that success.

athenahealth: A Partner to Help You Grow Swiftly and Cost-Effectively

In order to grow your group successfully, you need more than a vendor or service provider—you need a partner. A partner is in it for the long haul, keeping on top of your business—as well as industry trends and best practices—and providing insight into your business that will drive successful expansion. athenahealth is that kind of partner. It provides integrated cloud-based services with everything you need to help ensure successful growth, including:

Cloud-based Software

  • Low implementation fees and no licensing fees
  • Hardware requirements limited to PCs with Internet access
  • Continuously updated software that greatly reduces IT resources and costs
  • Accessibility from anywhere via Internet
  • Dashboard analytics and reporting that provide comparative benchmarks
  • Intuitive, easy-to-use system that shortens training time for new employees and providers
  • Five-stage patient workflow to ensure the right work is done by the right person at the right time
  • Care coordination software to streamline the flow of incoming orders

Billing and Practice Management Services & Electronic Health Record Services

  • Much of each practice’s routine work (e.g., eligibility, posting, claim follow up, submission, tracking, reminder calls, etc.) taken on by athenahealth to reduce FTEs per provider
  • Consistent workflow and best practices enforced across all practices (e.g., check-in/out, no-shows, billing slips, co-pay collection)
  • Standardized implementation methodology, including onsite training, supplemented by self-service and on-line training, and enrollment services
  • Patented billing rules engine to handle new payers and markets
  • Pre-built clinical content, medical libraries, provider directories, pharmacy directories, clinical terms and P4P programs

Patient Communication Services

  • Patient self-service tools that make it more convenient for patients to self-schedule, complete registration steps, make payments, and communicate with practices, removing busy work such as patient calls to reduce FTEs per provider
  • Outbound communications that reduce workload for clinical and office staff
  • Self-pay collections that make it easier for patients to pay upfront and online

Care Coordination Services

  • Management of ordering and referral process through back-end payer-side work and preadmission services
  • Surfacing of relevant order information by athenahealth to provide detailed visibility into order patterns, which helps guide decision-making

Navigant Healthcare: Solutions that Create High-Performing Health Care Organizations

Navigant Healthcare brings together a team of more than 550 seasoned consulting professionals and industry thought leaders to support clients in designing, developing and implementing solutions that create high-performing healthcare organizations.

They take a unique interdisciplinary approach to clients’ challenges. This means they work as one team with one goal, leveraging the strengths and expertise of senior-level consulting professionals in the delivery of integrated solutions

With the depth and breadth of their industry experience as health care executives, clinicians and physicians, Navigant enables clients to build their capabilities and achieve sustainable peak performance around quality of care, cost, leadership and culture in today’s changing health care environment.

Their primary solutions are in three areas:

  • Strategic Advisory – They provide healthcare executives with objective, practical, results-oriented assistance to set strategic directions that enable long-term growth.

  • Operations Management and Implementation – They have extensive experience, and a successful track record, helping healthcare organizations implement solutions to improve financial, operational and quality performance.

  • Outsourcing and Technology Solutions – They provide outsourcing and technology solutions to help clients improve efficiency and make more informed decisions based on better information management.

Endnotes

  1. "Dollar Volume Of Health Care Mergers And Acquisitions Doubles In The Second Quarter Of 2012, According To New Report From Irving Levin Associates, Inc.,” Stephen M. Monroe, Irving Levin Associates, Inc. July 19, 2012, http://www.levinassociates.com/pr2012/pr1207mamq2.
  2. “Strength in Numbers: Advantages of Group Practice,” Practice Central, August 2, 2006, http://www.apapracticecentral.org/business/management/group-advantage.aspx.
  3. Faculty Practice Solutions Center (FPSC) Billing Office Survey, Feb 2008.
  4. The Advisory Board Company, Financial Leadership Council 2007, “Cultivating the Self-Pay Discipline.”
  5. “The Seven Deadly Sins of Growing a Medical Practice,” Andrew J. Cremé, Orlando Medical News, August 8, 2012, http://orlando.medicalnewsinc.com/the-seven-deadly-sins-of-growing-a-medical-practice-cms-1493.
  6. “ReferralView: A First Look at National Referral Patterns from Primary Care Practices,” an athenahealth and Halley Consulting Group whitepaper (available at athenahealth.com), October 2012.
  7. “The Financial And Nonfinancial Costs Of Implementing Electronic Health Records In Primary Care Practices,” Neil S. Fleming, et al, Health Affairs, March, 2011,http://content.healthaffairs.org/content/30/3/481.abstract.
  8. “Med-Vantage and Leapfrog Present Early Results From 4th National P4P Survey,” Med-Vantage/Leapfrog press release, March 9, 2009,http://www.reuters.com/article/2009/03/09/idUS216044+09-Mar-2009+BW20090309.
  9. “The Four Habits of High-Value Health Care Organizations,” Richard M.J. Bohmer, M.B., Ch.B., M.P.H., New England Journal of Medicine, December 1, 2011.
  10. “Improving Efficiency, Quality and the Doctor-Patient Relationship,” L. Gordon Moore, MD, and John H. Wasson, MD, Family Practice Management, September 2007.