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IT for managed care at Mercy Healthcare.

A player in one of the most competitive markets in the United States manages multiple HMO relationships and balances information needs with integration while illustrating the adage "service first, and sales will follow."

Editor's note: This article is excerpted from the book Change Drivers: Information Systems for Managed Care. Information in this article has been updated to reflect changes at Mercy Healthcare Sacramento since publication of the book.

A pioneering participant in one of the country's most competitive managed care markets, Mercy Healthcare Sacramento (MHS), a member of Catholic Healthcare West (CHW) is rapidly building a successful integrated delivery system and is showing, in the process, that business success can be combined with an unswerving dedication to service. MHS's organizational strategy is to develop an efficient, flexible, low-cost delivery network around a set of integrated service lines, a strategy requiring teamwork and solid systems and telecommunications support. The success of MHS's strategy is evident: In 1987, MHS the organization operated three hospitals and had revenues of $150 million; in 1997, MHS had six hospitals and total revenues of over $563 million.

MHS is highly mission-driven, with a strong emphasis on service to the community. The Sacramento market is hotly competitive, with three delivery systems -- Sutter, MHS and Kaiser -- as the principal competitors. MHS' business strategy is to assemble and refine an integrated regional delivery system based on affiliations with physician organizations, capitated risk-sharing and building strong product lines in key specialty areas such as cardiovascular services. The organization has committed itself to a long-term reengineering process to adapt itself to these goals and has taken the important step of appointing a senior vice president for clinical integration. In turn, MHS's strategic goals for information technology are specifically dictated by its overall business and clinical strategy and by reengineering requirements.

IT strategy

MHS has never sought technology leadership in the use of IT. Rather, the organization has pursued a practical strategy of careful risk-reward balancing, direct connection of information technology to business goals, and a willingness to accept mixed-vendor environments.

MHS's IT strategy is guided by several basic rules.

First, integrate the enterprise. This usually means choosing software with high potential for integration rather than "best of breed."

Second, buy software, don't develop it. This allows MHS to minimize IS overhead as well as to acquire proven, manageable products.

Third, develop user expertise, make systems coordinators responsible to user departments and functions for successful installation of systems.

Fourth, justify systems investments in ways that make sense. Require the system's sponsor -- typically the regional department manager or service line vice president -- to justify systems in terms of reduced costs or improved performance or care quality.

MHS first stated its basic IT strategy in 1993: the organization would implement systems that supported improved information sharing across the continuum of care. Further, the systems would be easy and intuitive to use, capture data on both outcomes and costs of care, support clinical guidelines and provide universal access to patient information.

IT tactics

These goals were translated into specific projects: implementing a regional network and upgrading hospital cable plants; selecting integrated core systems (PHAMIS/IDX LASTWORD) to replace the aging IBAX 4000; and, implementing an EMPI and migrating data and operations to implement the new systems. Then, once enterprise integration was complete, implementing clinical guidelines, pathways and critical care systems began. Significantly, the plan called for the creation of a new position: medical director of clinical information systems. By working with regional physicians on clinical-IT issues, the holder of this position, Dr. Paul Miller, has been central to MHS's move towards clinical integration.

Subsequent updates to the 1993 plan included: implementation of LASTWORD modules to support clinical pathways and critical care; centralization of registration, admitting and appointment scheduling enterprise-wide through a call center; further expansion of LANs; implementation of integrated optical imaging for patient accounting and the integration of home health, surgery, long-term care and rehab systems.

The selection of the LASTWORD system was made in 1994 by a 15-person regional selection team after reviewing eight competing products. LASTWORD was chosen for its:

* Ability to support a large, integrated regional health care delivery organization;

* Superior application functionality, particularly in the clinical area -- needed to implement MHS's clinical integration initiatives;

* Functionality in both inpatient and outpatient areas;

* Ability to support a complete electronic patient record; and,

* Ability to integrate patient information across service lines.

Implementation of the LASTWORD system has been treated by MHS as a top priority. Specific installation objectives are to:

* Replace IBAX as quickly as possible to eliminate the operations and maintenance costs associated with the IBAX system.

* Complete the enterprise integration to allow users within MHS to access data independent of location and to produce system-wide reports.

* Make new clinical/patient care applications available to MHS as quickly as possible.

* Implement systems in a manner that does not negatively impact MHS operations.

Implementation, like selection, of the LASTWORD, system is a regional effort involving not just information systems teams but, significantly, the process redesign team as well. The process has been divided into two principal phases:

Phase 1: Establish enterprise system (foundation)

* Applications: ADT, medical records, order entry/results reporting, pharmacy;

* Integration: master member index; and,

* Activities include all data conversions, interfaces and development of system-wide data definitions, reports and procedures.

Phase II: Implement advanced clinical systems

* Applications: physician/clinician access, patient care documentation (charting and pathways), scheduling and point of care, followed by critical care;

* Activities include working with clinical integration and process redesign teams on overall tactics and with a team of clinicians to define a common architecture and standards to be used in system design.

One benefit of the PHAMIS implementation has been that it has increased standardization among the MHS hospitals. As information, particularly clinical information, is more rigorously aligned to support managed care, IT-supported processes come to follow a more common model. In addition, it is allowing MHS to employ formats developed at other PHAMIS sites as "envelopes" for clinical guidelines and pathways.

Implementation is being managed by a regional team involving not just IT and users, but also the process redesign team. Implementation has been divided into two principal phases. These are (1) establishing the enterprise system foundation, which includes all data conversions, interfaces and system-wide data definitions, and (2) implementing advanced clinical systems, including working with clinical integration and process redesign teams.

Adapting to managed care

While MHS's approach to core systems has been conservative, emphasizing step-by-step reengineering and building of patient management and clinical capabilities, the organization has been much more aggressive in managed care -- a necessary adaptation to its highly competitive managed care environment.

This aggressiveness and much of MHS's early restructuring followed a difficult financial period in the late 1980s. Realizing that it had to reduce costs, MHS, quickly consolidated three hospital admitting departments into one, centralized all corporate functions in a single facility, pushed revenue in accounts receivable down from 115 days to 55 and implemented the applications needed to get control of its business day-to-day. These included the Software 2000 (now Infinium) HR and payroll systems, DKD/Med-stat ASCENT financial decision support and the HBO & Company Trendstar cost accounting and budgeting system. These, in turn, were linked to financial feeder systems.

By 1991, MHS had created a solid, enterprise-level financial transaction and decision support system around an open architecture.

MHS has positioned ASCENT and Trendstar to perform complementary functions. ASCENT provides both business office support (coordination of billing, days-to-pay contract monitoring, stop-loss calculation, reimbursement calculation) and runs a nightly interface to the clinical and medical records systems, providing demographic and billing detail. The system primarily reorganizes and combines existing data but is a reliable workhorse, recovering $6 million annually in contract underpayments. Trendstar, a true decision support system, is used for more analytical tasks: cost accounting, budgeting and financial modeling -- in particular, to project the financial impacts of contracts across a variety of contract variables, including shifts of populations from one contract to another. Trendstar has proved especially good at integrating data across categories such as general ledger, case mix and contract data, and also in budgeting and modeling. In addition, it provides physician profiling and cost data for guideline and pathway development and allows MHS to monitor case management and utilization control.

Both systems provide cost accounting functionality, but, since Trendstar is rebalanced to the general ledger monthly and provides wider range of data sorts than does ASCENT, it is the main source for cost data.

On the clinical management side, MHS uses the 3M APR DRG Grouper for severity adjustment and mortality prediction; APACHE III is being considered for ICU case data analysis and ICU benchmarking. The Summit system is used for case management in cardiovascular services. The therapy departments have an in-house-developed, PC LAN-based functional assessment tool, used mainly for protocol tracking on outpatients, and respiratory medicine has a similar system that supports pulmonary rehabilitation.

These managed care systems are intended to work with the HSII system, which has been implemented at the Catholic Healthcare West Medical Foundation (and a potential candidate for CHW-wide deployment for ambulatory managed care) and IDX, which is used by the Hill Physicians Group.

Facility-level integration has been implemented using the Century Analysis Incorporated (CAI) interface engine. Interfaces have been designed and implemented; the HBOC 4000 Charge Master has been converted to the PHAMIS format, and the master patient index conversion has been completed.


MHS has avoided the common mistake of stuffing applications and starving infrastructure. The organization has aggressively upgraded its networks by implementing, at all its facilities, structured cabling systems which in turn act as nodes on MHS's new wide area network. The WAN uses an IBM RS/6000-based network management system and a telemanagement administration database that provides high-speed digital connectivity. In addition, MHS has upgraded its voice systems and has system-wide voice mail.

Lessons from MHS

MHS is not invariably successful. Projects have been put on hold here and mistakes made; users occasionally complain about IS support, as they do everywhere. Yet, MHS maintains a consistently high batting average. Here are some reasons:

* Information, and information and telecommunications systems, are managed as MHS-wide assets. Although input is solicited from the individual facilities and a considerable effort is made to a just to their preferences, the final decision is based on the best interests of MHS as a whole.

* Information systems and telecommunications are seen not as a "support service" but as the most important tool in accomplishing the organization's cost, quality and integration objectives. Information and telecommunications initiatives are carefully coordinated with process and organization reengineering.

* MHS plans information and telecommunications initiatives carefully and monitors progress against the plan.

* MHS incorporates IS cost-benefit analyses directly into the service line business plans, which are then rolled up into the corporate business plan. This places responsibility for applications with line management, while assuring decisions support MHS-wide goals and meet MHS-wide technical standards.

* MHS's business and financial analysts, who are charged with developing meaningful pictures of MHS's business position from a variety of financial and clinical data, exercise significant influence over the systems and telecommunications planning.

* MHS has a performance culture that is exacting without being punitive, that rewards initiative and sees failure as a source of information rather than evidence of incompetence, and that places a high priority on openness, teamwork and realistic optimism. The tone is set at the top and is, ultimately, a reflection of MHS's values-based orientation.

Still on the agenda

MHS, like all other health care organizations, is in an environment that sets ever-higher standards for success. The organization is still working to provide complete profiling data to physicians and enhance its case management abilities. It must continually improve its ability to manage its multiple HMO relationships and balance its own information needs with the need for further integration with CHW as the latter emerges as a major regional force in health care. But, based on its success to date, MHS will continue to show what can be accomplished, even in a highly risky, competitive market, by an innovative and compassionate organization.

About the book...

Change Drivers: Information Systems for Managed Care, (AHA Press, 1998; $45), Editor: Roy Ziegler for First Consulting Group.

Published in cooperation with the American Hospital Association Center for Health Care Leadership, the book outlines the role of IT in the health care industry's transition to managed care. In addition to the case study, the book's three sections focus on business and clinical issues; flow analyses of managed care transactions and related support systems; and systems planning and implementation, including data administration, telecommunications and emerging technologies. A glossary of managed care terms and a list of managed care technical organizations are also included. Contact the publisher at 800-AHA-2626 to order.

Philip M. Lohman is a director in First Consulting Group's World Practice Support Group and a member of the advisory board of Health Management Technology. His honorarium is being donated to The Multiple Sclerosis Foundation, Inc. in Fort Lauderdale, Fla.
COPYRIGHT 1998 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1998 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Company Operations; an excerpt from the book "Change Drivers: Information Systems for Managed Care"; Mercy Healthcare Sacramento's IS management philosophy
Author:Lohman, Philip M.
Publication:Health Management Technology
Date:May 1, 1998
Previous Article:Coping with merger mania: IT's new role.
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