by Jon Saxton

There's more to teach than ever, and it takes more time to mentor students from the classroom to the bedside. At the same time, faculty are pressured to bring in more dollars for research and see more patients to generate revenue.

While faculty here have chosen the prestigious, but less lucrative path of academic medicine, they are dismayed over the growing disparity between their incomes and how much physicians in private practice make. The university can't afford to subsidize medical education and research programs, let alone patient care. The dean of the medical school doesn't have enough endowment or other income to adequately supplement salaries and other costs.

Facilities for teaching, research, and care are increasingly strained, undermining both physician and patient morale.

Some physicians are leaving the faculty to practice in the private sector. Faculty determined to hang on and ride out unprecedented change watch in frustration as former students and colleagues entice patients to newer and more accessible facilities.

After years of growing uncertainty and frustration, the tension among clinical faculty is palpable. Increasingly in doubt is the ability of the medical school to sustain its commitment to be among the leading centers for medical education in the nation.

What was once a fertile and thriving medical practice based on higher learning and service is being overrun by a virtually impenetrable thicket of painful choices and trade-offs.

The following year, The Emory Clinic opened as a private partnership of Emory physician faculty.

The opening sowed the seeds of unprecedented growth for the medical school. Over almost five decades, its physicians have provided some of the best medical care in the Southeast, if not the nation. The elite, by-referral-only clinic was well positioned for a period of extraordinary growth in medical services and spending -- both public and private. It thrived around a fee-for-service payment system that rewarded care providers handsomely. As its reputation grew, The Emory Clinic reaped year after year of bountiful harvests in the form of new and grateful patients, a growing stream of revenues to the university, and ever-increasing prosperity for its physician partners.

Then, in the late 1980s and into the 1990s, this almost bucolic environment began to collapse. Major corporations rebelled against employee health care costs that were growing by as much as 20% per year. The public was more and more dissatisfied with a health care system where 30 million people, mostly low wage workers, could not afford health insurance.

The Clinton administration failed in its attempt to overhaul the health care system in 1993. As strong political and economic forces collided and swirled around this policy vacuum, an invasive seedling, known as managed care, spread across the health care terrain. It took root and grew quickly, transforming the health care environment into a briar patch of razor sharp competitors.

To increase productivity and contain costs, health maintenance and other types of managed care organizations (MCOs) promoted new models of insurance, provider payment, and care management. Governmental and private sector payers reduced payments for health care services. The fee-for-service reimbursement system was reined in and replaced in many areas by capitation (fixed payment per covered life) and other payment schemes that required health care providers to share or assume the risk of cost overruns in providing care.

It was organized as a private partnership and had developed more than 28 separate "sections," corresponding to different medical and surgical specialties and subspecialties, more or less mirroring the departmental organization of the medical school. Each section operated with almost complete autonomy under the direction of its section head. All scheduling and staffing decisions and functions were handled within the sections, which were responsible for their own bottom lines.

But section heads, who were also physicians, were not necessarily skilled business managers. Health care was a profession, not a business. Leading health care professionals in academic medicine simply did not dirty their hands digging into profit-and-loss statements or developing productivity measures. They were chosen for their professional accomplishments, primarily as department chairs.

In contrast, the for-profit health care organizations that grew and spread so explosively in the 1990s are tough market competitors. They focus on managing care to provide better customer service at lower cost. These new competitors promise employers and others who pay health care premiums lower prices and better care management.

To accomplish this, the MCOs demanded discount pricing from medical products and drug suppliers. They began moving away from "global contracting," with health care providers like The Emory Clinic, instead selectively contracting for certain specialized health care services, like transplants or heart bypass surgery. They raised private capital to construct attractive, up-to-date facilities and to make their names a household word to consumers. They set out to lure patients from their competitors and to bring private practice physicians into their networks.

"It was really something to see these big, national companies suddenly come into our area beginning in the late 1980s and just start buying up everything in sight," remembers Saral. "Eventually, they even tried to buy a big piece of Emory's business. Columbia/HCA wanted to buy Crawford Long Hospital and work out a provider partnership with us at a time when a significant infusion of capital and the opportunity to partner with the biggest and most aggressive new organization in the health care marketplace could not be dismissed out of hand. That was probably the biggest wake-up call for all of us."

By 1989, clinic revenue collections already had been declining for several years and were the cause of increasing concern. Projections showed that the clinic could be in the red within a few years for the first time in its history. Such revenue declines would affect both faculty salaries and funds relied on by the medical school and the rest of the university to support academic programs.

Clinic and university leaders evaluated many options. Section heads sought relief from dean's taxes (a fixed percentage of net clinic revenues paid to the medical school to support the academic missions) and other overhead payments. Most recognized that reducing payments and contributions to the university alone would not be enough. The clinic would have to become a better competitor in the new health care marketplace.

But four decades of relative autonomy, decentralized authority, and insulation from market forces meant that the clinic was a difficult institution to change. Over several years, efforts were made to streamline and coordinate operations such as billing and collecting. Section leaders were encouraged to adopt stronger business practices, and all faculty were pressed to see more patients. But faculty grew increasingly frustrated with the changing environment, new demands on their time, and the prospect of falling salaries.

The clinic's financial position continued to deteriorate. As in the post World War II era, the university and Woodruff Health Sciences Center (WHSC) leadership decided something had to be done.

James Laney, then Emory's president, and Charles Hatcher, then director of the WHSC, saw no option but to push for the clinic to move away from its unwieldy partnership structure and into a nonprofit, but still independent operation, more closely aligned with the university. They wanted a faculty practice organization that could respond more effectively to the new health care environment.

Emory established 15 satellite facilities in the Atlanta metro area, including a large state-of-the-art, multidisciplinary outpatient facility - The Emory Clinic North - in Alpharetta, a high-growth area north of Atlanta. New billing, collections, accounting, and record-keeping systems were ordered. Services and management were consolidated in coordination with Emory and Crawford Long hospitals. Columbia/HCA and Emory reopened discussions on a partnership.

For some clinic physicians, these changes promised a new era of growth and prosperity. For many others, the new initiatives seemed to generate far more heat than light. New systems and processes seemed as much a cause as a potential cure for the clinic's ills.

The implementation of the new billing and collections system was particularly unpopular with many physicians and section heads who were reluctant to centralize more core administrative functions, such as rescheduling and patient check-in, and lose sectional autonomy. On top of that, the transition to the new systems turned out to be far more difficult than anticipated. The central business office and physicians and their staffs had to learn new systems and procedures.

Initially, the new system and related business processes were not configured to handle the unexpected volume and complexity of Emory's new managed care contracts. Unanticipated billing and collecting mistakes and bottlenecks resulted in delayed and lost billings running into millions of dollars over the course of a year.

Judy Williamson, hired away from KPMG Peat Marwick, joined the clinic as director of practice services in 1995. She recalls that time vividly.

"At the same time that we were introducing the new system, which had a big learning curve, our volume of patients increased significantly. We went from a few to well over 100 managed care service contracts. These contracts are critical to our ability to see patients and get paid for it. But no two contracts are exactly alike. Managing them was a nightmare for physicians, their staffs, and for the central billing office. And the Health Care Financing Administration was adjusting Medicare rates as well."

Most painful was the distressing dip in faculty and staff morale. "Our business office became the focus of a lot of faculty frustration, and for a while there, the blame game became pretty intense. But we are past that now. Today, we're looking at the systems together and figuring out how we can make them work for patients, physicians, and the rest of the organization."

The environmental assessment revealed that local and national health care competition would continue to intensify while managed care and insurance payments for health care services would continue to fall. In addition, an unprecedented congressionally mandated reduction in federal hospital and physician reimbursement (the Balanced Budget Act of 1997) would reduce clinical revenues to Emory by more than $100 million over the next five years.

"Emory needed to further reduce costs, improve access and customer service, and become a more flexible and responsive clinical organization," Johns says. "Failure to do so could have had catastrophic consequences."

As a first step, Emory Healthcare was created as the administrative home and new public identity of Emory's health care system. On January 1, 1998, the clinic officially became part of Emory Healthcare. In February, the existing board of 40 clinic physicians was restructured into a more manageable board of nine (two clinic section heads, two elected clinic physicians, Saral, Johns, and representatives from the Emory Healthcare, WHSC, and university boards). Also brought within the administrative oversight of Emory Healthcare over the next 14 months were The Emory Children's Center, Wesley Woods Center of Emory University, the physician practice at the Emory-Adventist Hospital joint venture, and most recently, a limited partnership with Columbia/HCA's metro Atlanta facilities.

With streamlined organizational and management structures and the hiring of a new chief financial officer, the clinic's financial stresses were tackled with renewed vigor. In addition to billing and collections problems, there was the need to address costs associated with faculty physician practice. All sections share global costs, including the medical school dean's tax and costs of maintaining medical records, the central business office, human resources, legal counsel, scheduling, and a new capital building fund. Sections also must cover office expenses. Altogether, clinic expenses other than physician compensation eat up about 60% of revenues.

Allocating and reducing those costs is no easy task. For some specialties and clinic sections, the costs of providing care are high relative to what the physicians charge and collect from patients or their insurers. For others, particularly some surgical subspecialties, revenues are much higher in relation to their costs. For instance, a neurologist might see three patients in 75 minutes and receive $85 for each office visit. A cardiothoracic surgeon may spend the same amount of time in surgery and charge thousands of dollars.

Complicating this debate is the fact that some physicians and sections are more clinically focused, while others focus on research. Unlike community hospitals and physician practices, an academic center must have both.

But measuring and comparing their respective contributions to the whole in financial terms is difficult, and made more so by differences in how expenses and payments for clinical and research grants are counted and allocated.

Costs and revenues generated by a clinician are fully accounted on the clinic's books. Grant awards won by clinician investigators flow through the medical school dean's office and often do not cover all costs. In addition, National Institutes of Health grant awards impose a salary cap of about $135,000 as well as a limit on overhead support. Anything above that must be picked up by someone else. As a result, competitive salaries and certain expenses for clinical investigators often must be subsidized through clinic revenues.

The fee-for-service payment system kept revenues relatively high so that all sections did well enough to pay competitive salaries and cross-subsidize some clinical research. In the new era of significantly reduced reimbursements, it's much harder for some sections to cover their costs, let alone generate a surplus. To help, a variety of cost- and revenue-sharing arrangements have been tried. But by 1996, even the collections of the higher-paying specialists and higher revenue-generating sections were being squeezed. They were increasingly unwilling to cover shortfalls in other sections.

Today, the debate continues to rage about fairness, equity, and how to allocate responsibility for financial performance among physicians, clinical investigators, and sections.

Collecting the bills

The patient access and revenue improvement team (PARIT) is addressing two of the most pressing problems at the clinic: reducing patient time-to-appointment and improving the billing and collections system.

This team of section business managers, central business office personnel, the clinic CFO, and Williamson has focused on upgrading billing and collections systems such as IDX and helping the central business office and sections better understand how to use them.

"When IDX was implemented in 1995," says Williamson, "we had only a couple of managed care contracts. Within months, there were 135. That meant 135 different sets of rules. One contract might allow a referral by an approved primary care doctor, while another says the referral must be pre-approved through the insurance company. One contract requires a co-pay, another doesn't. So it wasn't just the number of contracts but the new complex processes for getting paid for work performed. If we didn't follow the rules exactly, we didn't get paid. The incredible ramp-up of volume and complexity together were just overwhelming. We're still catching up to that."

Williamson points out that The Emory Clinic is not your average physician group practice. "Ours is a very large, very high- volume practice organization," she continues. "We have about 70,000 patient encounters per month and generate up to 8,000 new bills a day. Those are very big numbers. Most organizations don't generate that many bills in a week."

Handling this volume well and efficiently takes sophisticated (and expensive) technology and people trained in how to use it.

It takes about 10 minutes for Williams just to describe the process of generating and collecting a bill -- a process that can take months. (See "Collecting the Bills," page 11.) That's why the committee has worked hard to upgrade, simplify, and standardize the billing and collections system itself. The only fix possible, Williamson says, is to enlist everyone, from physicians to staff, to learn how to fully use the technology. This is no simple task.

"Mastering the system's complexities takes time that already overworked staff don't have. You can't simply shut down the clinic for a month to allow everyone to attend training courses and seminars," Williamson says. "Every day there are thousands of patients to see and schedule, 7,000 to 8,000 new bills to send out, and thousands more to follow up on."

Additionally, some section heads and physicians remain unenthusiastic about the new systems and the continued centralization of such traditional section functions. They complain of the loss of traditional academic prerogatives and autonomy. Nevertheless, in this and in the somewhat less complex, but equally sensitive area of patient scheduling, Williamson and others report an increased level of cooperation from section leaders.

One of the most important functions of the committee has been its debunking role, says vascular surgeon Alan Lumsden. He was one of the many faculty who thought that the business office and the attempt to centralize many business functions was to blame for most of the difficulties of the past few years. But after digging into the evidence, he and other members discovered that such views commonly shared among physicians and passed along in locker rooms and lunch rooms were simply wrong.

Through its "Vital Signs" project, the committee found that Emory is actually in better shape than most academic centers. Some are millions of dollars in the red and being forced into layoffs and restructuring. Emory not only has avoided such catastrophe but also has actually laid the groundwork for carving out a strong market position. By taking the bold, if painful, steps of installing new administrative, information, and business systems, Emory is now in the enviable, if admittedly still daunting, position of learning to properly employ and implement them.

"I must say," admits Lumsden, "I have been surprised by this experience. I've gained a new appreciation for just how complex an organism this is. Though we are all having to make some painful adjustments, the fact is that we are still a viable organization in control of its own destiny."

The Emory Spine Center is a good case in point. "Success can't be imposed from above. It can't be imposed at all," says Scott Boden, director of the center, who co-chairs the operations committee with Douglas Mattox, chair of otolaryngology. Boden is very direct about both the clinic's challenges and the best path forward. He believes most progress is at a local level.

"Leadership in each section must be convinced that they can succeed in this environment, but only with the proper skills and knowledge. Our committee's goal is to empower physicians and sections with the knowledge and leadership and management skills necessary to succeed."

Boden also admits to being one of the physicians early on who had to be convinced that the clinic's problems weren't simply due to central business office incompetence. But in 1994, with the support of clinic director Saral, Boden created the Emory Spine Center as a distinct clinical and academic business unit. Branching off from the orthopaedics department with a cross-disciplinary group of relevant specialists, the spine group spent many long hours working together to make the new center both a successful business and an excellent clinical center. Support for clinical research was factored in to the business plan as well.

The result has been the creation of an Emory "center of excellence" that, after its first year, has grown revenues by 18% to 20% per year. And far from being an exception, the center is an example of what must become the rule, Boden believes.

"Physicians are data and evidence driven," Boden insists. "We simply decided that we were going to compete in this arena and then looked at what that would take -- what it would mean for the way we practice and for our academic goals. We found that being successful was a matter of adding business skills to our professional repertoire and then adapting our culture according to the new data and knowledge this brought to us."

The Spine Center brought together specialists - orthopaedists, neurologists, radiologists - who often otherwise compete to provide patient services. Outside the center, a patient with back pain might see each of these specialists separately, requiring separate, time-consuming appointments and duplicate x-rays and other tests along the way. By bringing together all needed services and expertise under one roof, care has been expedited, coordinated, and provided at lower cost.

Boden's experience with the Spine Center and several other sections suggests that it is possible to create similar cost and patient-focused improvements in each section and throughout the organization. "These are all very smart, accomplished people. All we do is provide good, hard evidence about where the bottlenecks, problems, and opportunities are. Then, we try to provide some good guidance on how to add the necessary skills and knowledge to improve section and clinic-wide performance."

Everyone is now aware of the need to improve core patient service processes and business functions. And the responsibility of reconciling business functions with our academic missions is squarely in front of every section. Saral, along with the operations committee and others, is encouraging sections to adopt shared information and business processes with other sections whose specialties are often jointly required for the management of patient care.

While the change process is increasingly being championed by clinic sections and physicians, the clinic has not been left simply to its own devices. An Emory Healthcare financial realignment program, implemented last September, fortified the finances of the clinic with a $27 million package relieving it of certain debts and obligations, reducing the dean's tax, and instituting other burden-sharing measures. As was the intent when the clinic was incorporated within Emory Healthcare, the clinic is now able to benefit from leveraging resources of the larger organization and the university.

From the Director  /  Letters

Through Thicket and Thin

Traveling Well

Wanted: More Good Nurses

Moving Forward  /  Noteworthy

Nurses' Prescriptive Authority

Trash or Treasure?

Words spoken by Emory President Goodrich White in 1953 seem as relevant to the spirit of the clinic's current efforts as they were at its inception almost a half century ago.

"No university, no professional school, no medical school exists for its own glory and prestige, for the aggrandizement of its own name or of its faculty members and staff. Institutions exist to serve. This sounds 'preachy' and pompous. But we cannot convince the general public of the merits of our program, our activities, and our decisions if they are not based upon a sincere concern to meet responsibilities and to render service to the public whose stake, in the last analysis, is the major one."

As long as the clinic continues to sow this seed, the faculty will continue its harvest of leadership and progress in health care.

Jon Saxton is a consultant in health policy and communications for the Woodruff Health Sciences Center and serves as executive editor of Momentum magazine.