Chapter 07: Strategic Decisions and Increasing Patient Numbers

Chapter 07: Strategic Decisions and Increasing Patient Numbers

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Description

Dr. Leach begins this segment by observing that strategic decisions evolve over a process. He demonstrates his point with examples from 2008-2009, when the administration addressed disturbing reports that MD Anderson was less productive than it should have been. He describes the metrics used to assess productivity and underscores the importance of bringing relevant information to the groups in a position to change matters.

He notes that a key indicator of the institution’s success is the number of new patients seen: this number was slipping in 2008, and this fact was pointed out to the faculty leadership, initiating an eighteen-month difficult process of change that resulted in a broadening of “faculty templates” (the types of patients each faculty member sees). Dr. Leach comments on how academic and corporate contexts respond differently when changes are instituted and notes that MD Anderson no longer has the luxury of such long lag times given an economic climate that demands more responsiveness.

Identifier

LeachL_02_20121127_ C07

Publication Date

11-27-2012

City

Houston, Texas

Topics Covered

The University of Texas MD Anderson Cancer Center - The Finances and Business of MD Anderson; MD Anderson History; The Business of MD Anderson; The Institution and Finances; Fiscal Realities in Healthcare; Institutional Processes; Overview; Definitions, Explanations, Translations

Transcript

Tacey Ann Rosolowski, PhD:

This is Tacey A. Rosolowski, and today is November 27, 2012. The time is about 3:06, and I am in Pickens Tower on the twentieth floor in the Office of Business Affairs interviewing Dr. Leon Leach for our second interview session. So thank you for agreeing to talk to me again. Leon Leach, MBA, PhD Thank you.

Tacey Ann Rosolowski, PhD:

We were just starting to talk about some decision-making that happened in—I think you said 2007?

Leon Leach, MBA, PhD :

2008 or 2009.

Tacey Ann Rosolowski, PhD:

Okay, you were going to take me through a decision.

Leon Leach, MBA, PhD :

Yep, your broader question before we got into this was, how are decisions made, and you asked me to kind of point to an example.

Tacey Ann Rosolowski, PhD:

Uh-hunh (affirmative).

Leon Leach, MBA, PhD :

Well the big strategic decisions are much more of a process than a given point.

Tacey Ann Rosolowski, PhD:

Uh-hunh (affirmative).

Leon Leach, MBA, PhD :

And if you were to trace the history of the changes we made in 2008 and 2009, why they occurred, and the various decision points, it would start with some concerning financial reports that surfaced—gosh, probably early in fiscal year 2008 probably around the turn of the calendar year—where it appeared that we were getting a little less productive on an FTE equivalent, and we brought that data to the attention of various groups that could effectuate change in that.

Tacey Ann Rosolowski, PhD:

And what was the source of that report, by the way?

Leon Leach, MBA, PhD :

Those were our financial reports—our monthly financial reports.

Tacey Ann Rosolowski, PhD:

Okay.

Leon Leach, MBA, PhD :

And we share them with anybody who’s interested. It’s very transparent—the numbers are out there. The numbers are the numbers. And we, you know—there’s so many numbers that sometimes you have to add the analysis to it to give color to what the numbers are trying to tell you. We do try to interpret that. We do try to give the analysis. There’s a monthly report that goes out from the CFO. When we become concerned about the trend line with certain indicators and certain metrics that we know our performance is driven by—like the number of initial visits, number of new patients seen, number of consulting services—if we see that going in the wrong direction, we don’t rely just on the people reading the financial reports because frankly a lot of people—well, it’s not what they’re all about. They would rather read the New England Journal of Medicine in the evenings than our monthly financial report. So we will make a concerted effort to make sure the groups that can change these things are aware of what’s happening. And we do that usually through standing meetings that are already scheduled on a monthly basis, but our presentation will be more focused on what we see as being a particular challenge.

Tacey Ann Rosolowski, PhD:

Can I interrupt you just for a second to ask you for a list of those metrics that you pay really close attention to—you said that there was a list of several that—

Leon Leach, MBA, PhD :

Well, the ones that we pay the most attention to I just mentioned. They are initial visits and consultations. They drive so much of our business that if they get—there’s a whole bunch of metrics that are available that we look at. It’s kind of like running a blood test—you know, it has so many different components—an SMA-12 or an SMA-16. And if you’re looking for a disease, it may only be the white blood cell count or one component of those sixteen that you really focus on. Well, these are the couple of components that we really focus on of the major drivers. There’s almost an inverse correlation between how well we do financially and how many new patients we see. I shouldn’t say inverse—it’s direct correlation. We do much better financially when we see more new patients. So in 2008, that was slipping off, and we started pointing that out to faculty leadership. But there are so many other indicators, and there are so many other areas when you’re in an organization as complex and complicated as MD Anderson that the numbers can be confusing. And there are other things you could look at and say, “Well isn’t this a problem” or “Isn’t that a problem.” Well, they may be, but they’re not going to have the effect on your bottom line that the major drivers can, like number of new patients seen. If we order too many paperclips, that’s an expense that perhaps we didn’t have to incur, but it’s not going to be of the same magnitude as not seeing enough new patients. So we went through probably an eighteen-month period before we actually got traction with that—that action had to be taken there, because it was not a pleasant action. What we did to fix that was we broadened faculty templates so they would see more patients—

Tacey Ann Rosolowski, PhD:

What does that mean, “broadened faculty templates?”

Leon Leach, MBA, PhD :

Well the templates are—you know, “I see this kind of patient.” The analogy I use when we’re talking about this to non-faculty folks is, we have people that are so specialized they only see left-handed Australians. You know—well, we think that maybe you could see some right-handed Australians and maybe even some people from New Zealand. So it takes you maybe a little bit out of what your real specialty is and what you really like to do, but you’re equipped to do this—you can see somebody that’s right-handed from Australia. So we changed the templates so that they did have a broader approach due to patients that would qualify for their care.

Tacey Ann Rosolowski, PhD:

And how is that done? Who made the decision on how the template would be expanded for each—?

Leon Leach, MBA, PhD :

Well, ultimately the department chairs have to work with their individual doctors to get this done. It’s not something that you just throw a switch and it happens. Another lever that was used at the time was faculty travel. It wasn’t that the faculty wasn’t working hard. They were working hard, but they might be away making speeches about their science, which is—that’s a legitimate part of what we do—we’re here to educate. But if you’re doing that forty percent of the time instead of maybe twenty percent of the time, that becomes more problematic because the financial support really comes from the operations of the hospital and clinics, so we have doctors there to see the patients. So those types of macro-level changes were made—

Tacey Ann Rosolowski, PhD:

So you put a cap on faculty travel? Is that what happened?

Leon Leach, MBA, PhD :

Yes, we basically put limitations on faculty travel. That was very unpopular as you can imagine, but it solved the financial problem. And there were other things that we did, but they were the two main ones that addressed seeing more patients. That decision wasn’t made in one meeting where we said, “Okay, this is what we’re going to do.” That decision was a process of getting the folks that had to do it to do it, and it took eighteen months. Once the faculty understood the necessity and accepted the necessity intellectually to make these changes and be stronger financially, it got done in about six months’ time. It was relatively quick, but it was eighteen months of moral suasion to fix a problem that was fixable in six months’ time—that’s what our faculty fix was in. You wouldn’t see that kind of thing in corporate America. Corporate America has much more command and control. When the problem was identified, it would have been fixed shortly thereafter by throwing a switch, whereas academic medical institutions take a lot more time to massage the—to get to the right answer. That was a luxury that we no longer have. With the managed care organizations and the changes that are coming about, stricter payment controls, and folks wanting to pay less not more, we’re not going to have the luxury of debating decisions like that over an eighteen-month period when they can be fixed in six.

Tacey Ann Rosolowski, PhD:

What do you see coming in that situation?

Leon Leach, MBA, PhD :

I see the time period for discussion—and I think there has to be a time period for discussion—being greatly shortened and starting to mimic what would happen in a business situation when you are faced with these kinds of challenges. Because the world is not going to wait for academic medical centers to change. CMS, the folks that run Medicare, are going to make the changes on their time schedule and not what’s convenient for academic medical centers.

Tacey Ann Rosolowski, PhD:

For the record, CMS is? Leon Leach, MBA, PhD Center for Medicare Services, I think. That’s the entity that governs Medicare at the federal level. And you’re going to have managed care companies that are going to get a lot more heavy-handed in negotiating because they’re under pressure, too. So we’ve got to be much more responsive to our environment and the factors around us than what we have been. There are always two ways to fix a financial problem. One is to increase the revenue, and the other is to reduce the expenses. We have a particularly difficult time reducing expenses. The easier answer for us seems to be increasing revenue, but you can only do that so much and so far. It’s got to be—you’ve got to use both sides of the sword.

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