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Factors in successful move to organized care systems.

Organized care systems, distinguished managed care networks established and man by third-party payers and health maintenance organizations, are much more congenial environments for providers, especially clinicians, than managed care systems have been. In this article, the author describes five factors that believes will be critical to the success of organized care systems. These factors are of universal concern to integrated health care systems, especially those being formed from regional systems of not-for-profit hospitals.

If organized care systems (OCSs) are to replace managed care organizations as we know them, or at least compete successfully with these already existing and well-financed health care delivery and financing mechanisms, they will have to attract physicians, reduce costs, develop an effective governance structure, implement financial and information systems aimed at computerized medical records, and overcome the hospital culture from which they have largely sprung.

* Attract and retain primary care physicians, and selected subspecialists, to fill voids in specific geographic regions covered by the OCS.

The OCS needs to attract physicians to join its delivery system and stay in the system once they have joined. The OCS needs to identify all the benefits to physicians of locating in communities it serves and to demonstrate what it can do to reduce the costs physicians incur in relocating to those communities and operating practices there. The OCS needs to understand that physicians become most loyal to the sources of their patents, whether they come from within a group practice, from other satisfied patients, from independent physicians outside the practice, from managed care firms with whom they have contracts, or from employers under contract. Hospitals, and hospital systems, usually cannot deliver patients, especially to primary care physicians with outpatient practices. On the other hand, the OCS can channel members of its health plan to physicians. The OCS does have a means, probably more than one, to direct patients to selected physicians. Physicians, like the rest of us, consider whether to move to a community, or whether or not to remain in a community, on the basis of their job satisfaction and security, their sense of value in that community, their influence in contracting decisions that will effect their future income, and the support system offered to them and their families. Traditionally, the most successful group practices have been most adept at recruiting and retaining physicians. The OCS needs to learn, and take guidance, from its successful group practices and to defer to them in the recruitment of physicians.

* Reduce the costs of delivering excellent care within the OCS.

Increasing proportions of the OCS's total revenue will come from capitated contracts, in which revenue is fixed and costs must be managed well, and less from discounted fee for service. The OCS is not one homogeneous entity. Within the OCS, hospitals are still paid discounted fee for service for the large majority of patients, while medical groups may now receive more than half their revenue through capitated contracts. A conflict of incentives between hospitals and medical groups must be overcome. The OCS needs to take the longer view that capitation as a form of payment will increase in importance and prevalence for the foreseeable future. In spite of political inclinations to the contrary, the OCS needs to begin to act more like a constellation of group practices. It also needs to give information to physicians as promptly, accurately, and completely as possible, showing them how their practice habits and patients' outcomes compare to those of their peers. With these data, the OCS can begin to function as a learning organization for its clinicians, allowing them to learn from each other and to improve their work together. This is not a familiar habit to most hospitals. If they are involved in total quality improvement, it is usually for service quality improvement, spawning countless committee meetings to reduce the time tissue samples take to reach laboratories, to increase the palatability of food for patients, to reduce retakes of x-ray studies, or to increase the speed with which interoffice mail moves through the system.

Each of those projects may have merit, and they may all make participating administrators proud, but the 80:20 rule screams out the need for better data about processes of care and outcomes for patients in the hands of clinicians and for an organizational structure that rewards time spent by clinicians in redesigning processes of care. The time and resources consumed in service quality improvement studies, including the training of managers for them, must be matched, at least, by investment in information systems, health services and clinical research technologies, and staff to analyze data and by incentives for clinicians to participate in continuing clinical quality improvement studies. That's were the money is, not in making the mail move faster, the meals taste better. or tissue samples reach the laboratory sooner.

* Develop a governance structure to promote the success of the OCS.

The OCS needs a governance structure to free it from the tyranny of disaffected minorities when the majority wants to accomplish something the minority opposes. In the OCS's case, a federal form of governance may be suitable, and necessary. In federalism, suggestions about management of the organization may well percolate up from the operating units. Agreement on standards for clinical practice", managed care contracting, financial accounting, and information systems implementation may be developed, should be developed, in the operating unit. Once the most influential governing body of the organization votes to adopt those standards, about anything, however, the separate operating units, including group practices, must adhere to them. If this discipline is not in place, there can be no hope of creating an integrated health care system, or the integrated information infrastructure on which the integrated health care system will depend. Computer systems of any kind need precise data definitions and specific data collected in specific ways, meaning the same thing in every location of care, if the OCS wants to implement computer-based patient records in all its locations.

Think of the chaos that will prevail in managed care contracting i every operating unit is permitted to cut its own deals with purchasers of health, care services, insurers, and self-funded employers. The OCS will have no leverage in the marketplace and no means of standardizing its contracts to take advantage of potential economies of scale.

* Develop and implement financial and clinical information systems that integrate all components of the OCS electronically to create computer-based patient records.

The OCS may be one of the largest and most respected integrated health care delivery systems in its region, but it probably faces the daunting task of integrating many disparate transaction and telecommunication systems to create useful electronic data interchange about patients and services rendered to them. The OCS probably has grown dramatically in hospital facilities and group practices in the past decade but treated them as parts of a consortium, allowing them to maintain their own transaction systems and databases. Where a number of operating units use the same software vendor for the same functions, they may have created separate databases at each location, making integration of data across facilities difficult.

The OCS needs to establish a federal form of governance to establish and enforce standards for data definitions, data processing, and data communication among its operating units. Then it needs to define its functional requirements for clinical and financial transaction systems and determine where functional requirements deemed necessary are not now being met. it should concentrate on making those functions available. Assuming that the information systems plan will have as its core goal the creation of a computer-based patient record at every location of care for all patients of the OCS, the implementation plan will include establishing a governance structure for the planning and procurement of systems, for budgeting and raising capital, and for selecting and standardizing communication networks and transaction systems. No activity of senior executives, physician leaders, and members of the board of OCSs is more important than setting up the process for systems planning and procurement to create integrated computer-based patient records for all facilities.

* Overcome the culture of hospitals, and create i culture for organized care.

A culture for organized care must be created. This is a culture that is not of hospitals alone or of physicians and group practices alone. It is of both and of ancillary health care providers and facilities, too, melded together to care for populations of people over time under fixed budgets. and at a profit. The only persons licensed to write orders for most medical treatments are physicians, and the operating costs of these organized care systems will be determined largely by their costs, and the effectiveness with which physicians manage the myriad therapeutic choices facing them for their patients will make or break the OCS. Medicine is so discretionary that physicians must be leaders of these organized care systems and be held responsible and accountable for their leadership. With their responsibility must come authority.

Therein lies a huge rub, a source of friction among physicians and managers in the OCS. The managers of hospitals control most of the capital assets of the OCS, but physicians control most of the intellectual assets needed to direct the care of patients in the OCS and thereby control the operating costs of the OCS. The culture that emerges cannot maintain this "we" versus "they" mentality - with managers scoffing at physicians for not understanding business controlling budgets and purse strings of the organization in spite of physician, and with physicians dismissing managers for not understanding medicine and undermining their authority at every turn. The OCS needs physician managers with authority over the major operating budgets to break that deadly cycle and to produce successful integration of physicians' work into the very fabric of the OCS. To succeed in this, the OCS needs to identify physicians who have cast their lot with it and merged their assets with it and treat them better than physicians who only contract with it or with its health insurance products. Physicians in an IPA are not equal to physicians who are employees of the OCS or of subsidiaries of the OCS.

The OCS needs a mechanism to make operating units whole financially when they are asked to invest their scarce resources for the sake of the larger organization. Without the OCS funding standardization of information systems, for instance, operating units will be reluctant to invest in standardized systems when existing systems work well for them but do not promote the larger good of computer-based patient records or standardized managed care contracting.

The OCS needs a specific, well-defined, detailed strategic plan so that all leaders - clinicians and not - will know by reading it whether a potential hospital, group practice, HMO, or other business venture should be added to the organization if the opportunity to do so presents itself. Most OCSs have grown by opportunity, not strategy, because defining strategy in detail risks offending constituencies that orbit around not-for-profit hospitals. Without that specifity, however, the organization is doomed to squander its capital and good will on unwise acquisitions and to face inadequate capital for investment in infrastructure. A big, confused, inefficient OCS is no more sustainable or viable than a small, confused, inefficient OCS. Better to remove the confusion with a specific, attainable strategic plan and the inefficiencies by substantial investments in standardized information systems and clinical process improvements than to row big and collapse from insufficient funds.

Ultimately. the success of the OCS depends on successful, efficient, effective clinical work, which means clinicians having incentives aligned with the rest of the OCS and deciding what needs to be done in the OCS. Paying lip service to clinicians and managing in spite of them will no longer work. The culture will change from a hotel and insurance business trying to micromanage clinicians from the outside to a clinical business with clinicians inside it responsible and accountable for operating profits or losses of business.

The OCS needs to attract physicians, and their capital, who want to become part of an OCS and to commit their future income and professional satisfaction to the success of the OCS. The OCS needs to ask physicians, especially primary care physicians in the same region, what is and is not appealing about joining the OCS. The OCS needs to know what changes it can make to its culture and organization to make joining it more appealing to physicians.

Asking questions like this openly and eagerly will go a long way to signal to those inside and outside the organization that the OCS is serious about becoming a physician-friendly place. Without physicians as allies, sharing common incentives, the OCS is carrion. More entrepreneurial organizations will feed on its carcass until it ceases to exist.



* Attract and retain care physicians, and selected subspecialists, to fill voids in specific geographic regions covered by the OCS.

* Reduce the costs of delivering excellent within the OCS.

* Develop a governance structure to promote the success of the OCS.

* Develop and implement financial and clinical information systems that integrate all components of the OCS electronically to create computer-based patient records.

* Overcome the culture of hospitals, and create a culture for organized care.


The introduction of nonionic contrast media about a decade ago caused a furor in the radiology community that continues today. Use of nonionic or low-osmolar contrast media (LOCM) instead of ionic or high-osmolar contrast media (HOCM) has profound economic consequences because of the cost differential. LOCM typically costs 15 to 25 times more than HOCM. It is estimated that more than $1 billion is spend on nonionic media each year in this country.

Because of fear of malpractice litigation and concern in the radiology community that cost should not be a factor in determining the use of contrast medias, the use of LOCM has risen dramatically over the years, reaching as high as 100 percent conversion at many hospitals. Other hospitals have tempered its use by assessing the risk to patients, limiting use of LOCM to a certain subset of patients at increased risk for reaction to contract agents. Hospitals, medical schools, and even the American College of Radiology have varying guidelines on such risk assessment.

The cost debate has spilled over into the radiology community to the point where even hospitals with a total conversion to LOCM are now considering a more judicious balance in the use of HOCM and LOCM. Those with a mix already in place are reviewing their criteria in order to obtain increased use of HOCM.

To find a balance, more institutions are using a premedication regimen that eases the contrast reaction. Successfully in use at three South Florida hospitals since 1981, the regimen has a reported rate of adverse reactions that is remarkably low. The premedication regimen involves the combined use of an H1 antagonist (Atarax) and an H2 antagonist Cimetidine (Tagamet), which are administered to all patients on the evening prior to contrast agent administration and 1 to 2 hours preceding the contrast study. In a comparison of costs, Cusmano indicates a total contrast media cost of $131,502 for his group of hospitals vs. $1,415,530 for a similar group of hospitals using LOCM exclusively.

Given the substantial cost savings, more institutions are reverting to increased use of HOCM, using risk assessment guidelines and premedication regimens. This has resulted in a notable leveling-off of the market for nonionic media in the past year. It is anticipated that the trend toward increasing use of nonionic media seen clearly in the past may actually be reversed.
COPYRIGHT 1995 American College of Physician Executives
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Author:Ruffin, Marshall
Publication:Physician Executive
Date:Jun 1, 1995
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