Give Your Business A Report Card Using Key Quality Metrics

Medical GradeRoutinely examining the key quality metrics of a healthcare business is key for keeping a business up-to-date on the overall quality of the services that the business provides to its patients.  The Ambulatory M&A Advisor takes a look at some of the biggest improvement areas, the importance of efficiency, and more when it comes to observing the key quality metrics of a business.

Bobby Stamper, Valuation Consultant, Pinnacle Healthcare Consulting says that in healthcare, key quality metrics can vary widely based on specialty, site of service, and even within individual entities.

However, metrics generally fall into four categories: quality outcomes, clinical processes, operational efficiency, and patient satisfaction.  Some key quality metrics in an ASC setting could be related to surgical site infections, rate of complications, and antibiotic timing.

Other metrics in an ASC setting may not be directly related to clinical quality, but operational efficiency, such as on-time starts, standardization of implants, and hospital transfers/admissions.  Patient satisfaction is also important to measure and track within healthcare organizations as a measure of the patients’ perception of the entity, he says.

Jonathan Grigsby, CPA, KraftCPAs explains that in key quality metrics, structure addresses the medical office from the quality of the facilities themselves to the processes and procedures in place used to run the office.

“A medical practice can have a high quality facility, but  it may not have the personnel, policies, and systems in place to support the experience a patient has visiting the facility,” Grigsby says.

Process addresses the care being given to the patients.

“Is the physician providing the right amount of care for the patient?  Are patients receiving recommended preventative care? Are lingering health concerns with patients being followed up on after the appointment or procedure?”

Finally, outcome addresses the patient’s health and well-being after the care is given.

“What reoccurring issues are patients experiencing after care has been given?  What is the survival rate for life threating issues addressed by the practice?

All three of these metrics factor into the patient’s overall experience, which in turn result in patient retention and referrals,” he says.

Basic Areas of Improvement

Bert Orlov, Director with Eisner Amper says there are always two aspects when talking about healthcare as a business.  One is the economic performance of the practice.

“You want to look at how much money it makes just like any other business.  The other dimension is, like any other business where it focuses on the quality of the patient service, the outcome of the care.  That is historically not much reflected in the economics except for indirectly when a hospital or doctor gets a good reputation where patients go.  Historically revenue is not a reflection of how good a job a hospital or physician does, but rather, how many units of service they provide,” Orlov says.

“That is starting to change with ACOs and shared risk contracts.  That said, I think we need to obviously look at the drivers of revenue and the drivers of cost.  Revenue is about volume and managed care rates while cost is kind of two pieces.  One is the provider side, and the other is everything else that is involved with the business.”

When aiming to improve a healthcare business, Stampers says some of the largest focus areas for improvement are related to clinical quality, operational efficiency, and patient satisfaction.

“Quality and efficiency are becoming more important as many insurance plans (including both government and commercial payors) are shifting from a volume-based payment, to a value-based payment where quality and low costs are rewarded and poor quality is penalized via lower reimbursement rates,” Stamper says.

“Concurrently, maintaining high levels of patient satisfaction are important to garner patient loyalty which promotes growth and increased revenues through a positive reputation within the community.”

Putting a Process in Place

Improving one’s quality metrics is easier said than done, so putting a process in place can be crucial to examining and improving business efficiency.

In terms of the revenue side, Orlov says the critical processes are getting patients in, scheduling them, marketing the practice, because that is what drives revenue.

“For most practices, it is also about managing the revenue cycle. In terms of efficiency on the expense side, the big driver there is staffing.  There can be lots of different models, and what we refer to as occupancy cost like rent, and other stuff; those are the big drivers,” Orlov says.

“It is worth noting that there are some specialties where there are drug costs and things like that, but for most physician practices, it is really the staff and the space of the office.”

According to Stamper, it is important to actually be measuring various metrics within the business in order to assess current performance and direct goals for the future.

“That said, an entity must have systems and protocols in place in order to continually measure its performance to achieve desired improvements.  A lot of organizations want to improve certain aspects of their business, but do not have the tools in place to actually measure baselines and progress toward goals,” Stamper says.

Grigsby says the first step in examining a practice’s needs for efficiencies is gaining access to data such as billing and financial reports along with benchmark data to compare to the industry standards.

Although practice data is a critical part, it alone does not allow development of assumptions and recommendations. Performing interviews, in addition to gathering data, is integral an integral part as well.

“As with a golf scorecard, the numbers will tell you how many strokes it took to get to the hole, but not how to improve your swing. Practice data is the golf scorecard, and interviews provide the operational insight to assist in improving your game,” Grigsby says.

Knowing how the experience is for a patient of a provider is a huge piece in finding areas of improvement is also essential, Grigsby says.

“Usually, this requires outside consulting or patient surveys to find the results of the experience without internal bias. If a patient is moved through check-in and their appointment in a timely manner, then billed correctly, and receive the required follow-up, they will continue to come back and recommend the practice to friends and family.  If there is a weakness in the workflow of the patient’s visit, addressing the issue causing the weakness will have a domino effect improving other metrics in the

Although the financial aspect of key quality metrics is important, Grigsby and Stamper say they are not the only areas of concern.

Stamper says there are certain metrics such as cost per case that are defined directly by improvements in lower costs.  However, these types of metrics are often accompanied by various clinical metrics to ensure that essential services are not being withheld and high quality outcomes are still achieved.

Often, when working to determine which metrics to track, an entity may assess the total opportunity of a metric based on how much money will be saved or earned through the achievement of a goal.  Not all quality metrics are defined by a dollar value, but it is perceived that improved quality and efficiency will flow through to the bottom line of a healthcare business, Stamper says.

Grigsby says that while they all can have a financial impact, not all quality metrics are financial based.

Having the efficiencies in operations, the right support staff that benefits not only the provider but the patient, and the systems servicing as a strong backbone to help automate and ease the processes of the team will help to make the practice run as a well-oiled machine.

Areas Often Overlooked

Stamper says it is important that each entity is looked at on an individual basis as characteristics of performance can vary widely based on the type of business, geographic location, and population served.

“What may be a large opportunity for one business to improve, may already be a strength of another business.  All healthcare businesses needed to maintain a focus on core business infrastructure and processes but should also follow the lead of government and commercial payors and recognize that clinical quality and outcomes are becoming more and more important as it relates to full reimbursement for medical services—and work to be proficient in those areas,” he says.

Grigsby adds that it is not uncommon to see a provider and their practice administrator focus too much on the bottom line.  Revenue may be down due collections or patient volume, but expenses will be addressed to compensate the net income taking a downward turn instead of addressing why revenue is decreasing.  Grigsby reminds owners that it is easy to look at expenses and make cuts when revenue is decreasing rather than looking at collections and patient volume to see what is driving the reduced income.

 

If you have an interest in learning more about the subject matter covered in this article, the M&A process or desire to discuss your current situation, please contact Blayne Rush, Investment Banker at 469-385-7792 or Blayne@AmbulatoryAlliances.com.

Share This:

Share on LinkedInTweet about this on TwitterShare on FacebookShare on Google+Email this to someonePin on PinterestBuffer this pagePrint this page

Share This:

Share on LinkedInTweet about this on TwitterShare on FacebookShare on Google+Email this to someonePin on PinterestBuffer this pagePrint this page