As the provider market continues to consolidate, competition among organizations for contracts will become increasingly aggressive. To successfully bid and survive in this environment the mental health organization will need to closely monitor internal costs.
As costs are successfully controlled, the organization must also monitor clinical productivity, the revenue side of surviving managed behavioral health.
Without accurate cost information it is unlikely that our contract assumptions will be realistic which could lead to financial disaster for even the best provider. The object of the costing process, therefore, is to allocate all clinical and administrative expenses to the user defined cost categories. These can be used to calculate costs by payer, plan, program and discipline. If costing is conducted at the service level then it can be correlated with other patient and programmatic data.
In order to maintain a competitive position in the marketplace without going out of business, it is also important to be able to identify the high-risk consumers. The patient can then be case managed to provide the most cost effective service. To accomplish this, utilization and cost data must be tracked by both clinical and demographic variables so treatment protocols can be evaluated in terms of efficacy and cost. The actual data can be compared to your projected costs to continually evaluate costing assumptions and methodology.
There are two very different methods of calculating cost. The most frequently used method is to create cost centers in your general ledger, e.g. program, location, etc. and then post all payroll, payables, and general journal transactions to the appropriate account in one of these cost centers. The costs by discipline or service type are then calculated (typically at the end of the year) by dividing the number of services into the total cost for the cost center. Administrative expenses such as executive salaries, MIS, etc. should be allocated based on the estimated the proportion of the expense consumed by the cost center). The costing process should allow the user to define allocation tables that are used to distribute the expenses as they are reported to the pre-defined cost categories. The system should be able to allocate expenses to multiple cost categories based on pre-defined amounts or percentages. Ideally all expenses should be posted to one of the cost categories. This includes both clinical (direct and indirect) payroll and administrative costs (payroll, operating expenses and depreciation).
A more powerful method is to use a dedicated costing module that allows the user to create costing units over and above the chart of account structure. The user assigns the time period, and other patient, therapist, or financial variables to be used to define the costing unit. The program will track actual time reported by individuals for each cost center worked in that then allocate the appropriate proportion of their payroll to that cost center for each pay period. This process requires tight integration of all modules and the maintenance of a transaction history file for all expenses and fixed assets. The costing software should be integrated with both the financial and clinical programs. This give the costing system the ability to report costs by a wide variety of patient and service related variables including age, sex, race, diagnosis, presenting problems, treatment goals, etc. The costing units are definable for a user specified period of time such as an episode or the total duration of care, so your are not dependent on the reporting periods used in the general ledger, e.g. month, quarter or year. For maximum flexibility the costing system should be able to perform multiple iterations to look at costs for different variables and over different time periods. Since episodes of care do not typically correspond to our financial reporting periods, it is necessary to maintain historical data across fiscal years.
This requires that all of the journal detail for the fixed asset, accounts receivable, accounts payable, and payroll files be kept on-line and made available for the cost analyses. The costing reports should not only include GL cost center categories but also independent costing units defined by the user on an as needed basis. Some of the standard costing data may be displayed on the screen while the ad hoc reports are typically printed out on a monthly basis. Often a good strategy is to start by printing a summary report, then move to greater levels of detail as required. Some of the cost reports that are useful include:
- Summary Capitation Cost Report by Plan
- Patient Utilization Report by Payer
- Capitation Cost Report
- Outcome Cost Report
- Cost Report by Health Plan
Clinical Productivity:
Managed care greatly impacts clinician productivity. This impact can be grouped as follows:
- Authorizations & Utilization Management
- Case Management
- Paperwork & Reports
- Meetings
Authorizations & Utilization Management:
The practitioner / provider is no longer independently determining the need, type, level, or duration of care. Often an external reviewer pre-approves (or denies) services. This means the clinician must spend what can be an inordinate amount of time documenting the need for services and communicating with the external authorizer. Even before treatment can begin, providers can "waste" significant amounts of time just working to obtain authorization to treat a client.
Centralizing this authorizing process and combining it with Utilization Review can improve an agency's efficiency. Assisting the process with automation can not only improve the efficiency but also the approval and referral rate. A provider that quickly complies with external authorization protocols and communicates through a network is less expensive for a managed care entity to use than a provider using a manual (slow) process is.
Case Management:
In many public agencies and providers serving a primarily publicly funded consumer population, clinicians have traditionally devoted a great deal of time in case management activities. These include brokering and linking with other services, attending interagency service planning meetings, helping to arrange transportation, assisting with external referrals, talking on the phone with clients, family members, and referral sources, etc.
In a recent project with a rural community mental health center serving 8 counties, clinicians spent about 15% of their time in case management activities. It can be a difficult decision to reduce this activity and expect other community agencies to "pick up the slack". Within a managed care environment providers must carefully assess and plan the structures necessary to meet realistic case management objectives and, importantly, carefully document - and communicate to payers -- the amount of time these activities require. Combined with outcome studies, providers and managed care entities may find common ground when it is discovered that effective case management supports reduce recidivism and are, therefore, most cost effective to cover than to deny.
In addition to identifying consumers with high case management needs and organizing services for them within a distinct "stabilized care" program, automated client tracking and case management applications can help reduce the negative impact clinicians' case management activities often have on their productivity.
Paperwork and Reports:
In recent workflow studies conducted by the authors, clinicians spent between 23-35% of their time on paperwork. This included clinical charting as well as required internal and external reports.
The sheer volume of forms can absorb far too much time. One behavioral health provider had over 1,500 different forms! In addition to the volume of forms, their format and routing can be disastrously chaotic, inconsistent, duplicitous and, well, bewildering to use.
Centralizing medical records and using a "unit record" approach can improve this area. However, it is often wise to review all forms, revising them to consistent data conventions, routing, and format. When this process is part of pre-automation preparation, the likelihood of a successful transition to an electronic medical record is much greater.
Meetings:
Peter Drucker, the famous management consultant and author, is reported to have stated "you can either work or meet, but not at the same time". That may be an exaggeration in the behavioral health field, but too many clinicians spend what amounts to days out of every month attending a plethora of meetings. As necessary as these may seem, management must "guard" their clinical staff's schedules.
Again, automating communication capabilities can reduce the time involved in dragging clinicians from one place to another for meetings.
E-mail, teleconferencing, and real time document sharing (e.g. conducting an interagency treatment planning meeting in which all the participants are simultaneously able to access and work on a client's treatment plan) can seriously reduce the amount of time clinicians spend traveling to and attending meetings.
About The Authors:
Bruce Johnson, M.S., is President of Johnson Consulting Services, Inc., an information management consulting firm that specializes in working with healthcare, social service and managed care organizations. He can be reached at (800) 988-0934, www.jcsconsultants.com or by e-mail at jcs@eos.net. Mr. Schafer is a clinical records and operations management consultant. He specializes in working with managed care, behvavioral healthcare and child welfare organizations. He can be reached at (800) 661-2435, www.schaferconsulting.com or by e-mail at steve@schaferconsulting.com.
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