2010

Leadership:

Organizational Assessment Improvement Plan

1. Executive Summary With a fragile economy upon us and healthcare reform looming ahead of us, Baylor Medical Clinic (BMC) faces many challenges to profitably deliver services to the DFW market. Our recent jump in unpaid balances and uninsured patients show that consumers in the local area have less money to spend on everything, including medical care and treatments. While healthcare reform promises to increase the number of insured patients, the long-term view is unclear as reimbursements begin to shift from being based on patient volume to more focus on quality and prevention. Our proposal for transformation recommends a two-component process to realize BMC being positioned to address the changing landscape of healthcare in the DFW market. We advocate implementing a new continuous quality improvement process to help identify, test and implement new business processes that eliminate waste and improve the quality of care delivered to our patients. This type of business redesign will enable BMC to better respond to and take advantage of competitive market forces such as retail health clinics, telehealth and remote patient monitoring. While we shift to a culture of continuous improvement, implementing an electronic health record will help BMC realize significant operational cost savings as well as provide a platform to analytically improve the quality and efficiency of care. The shift from the manual, highly inefficient paper based operational workflow to a digital work environment will be subsidized by federal stimulus incentives provided under the 2009 American Recovery and Reinvestment Act. Transforming how we run our business and powering our operations with modern technology will be welcomed by the highly technology savvy patient that we seem to draw our clinics. The ability for BMC to offer care and communication beyond our brick and mortar clinics will ensure our profitable longevity as leading provider of healthcare services.

2. The Organization Baylor Medical Clinic (BMC) is a multispecialty clinic that provides the DFW area residents with a resource for the latest advances in patient care and medical research. BMC was established in 1993, and we were the first clinic in the DFW market to merge primary care physicians and multi-specialty physicians under one roof in an effort to provide the best possible medical treatment and education for area families.

Today, BMC has grown to over 100 physicians combined with over 800 highly skilled medical professionals, and ancillary departments offering a network of medical support for our community. Our goal is to contribute to the well being of our patients while constantly evaluating how to improve our delivery of healthcare services. In 2009 BMC saw over 20,000 unique patients and generated over $100 million dollars in revenue. 3. The Current Situation (Create the Sense of Urgency-Kotters article) The healthcare services market in DFW currently reflects the current national outlook. Healthcare spending is unsustainable and threatens the fiscal stability of the US. The magnitude of this issue is often under appreciated, but very apparent in the 2009 fiscal numbers at BMC. In 2009 the following business trends at BMC also reflected the broader fiscal instability of the DFW market: Patient appointment no-shows rose by 168% - the reason for such an increase is most likely due to more of the local population losing benefits and facing increased co-payment and deductibles. Patients therefore avoided the cost of doctor visits in order to decrease spending. Patient collection balances increased by 143%. Many patients would arrive at the office with an insurance card, but without coverage. BMC staff would receive a rejection notice upon filing claims with insurance companies. 3

Lab related write-offs increased by 78%. Many insurance companies discontinued coverage of lab benefits. The only notification BMC staff received would be post patient visit.

The disorganization of the paper trail can also be witnessed as BMC physicians have admitted to consistently leaving paperwork at the hospital, in the car or at home. After an internal study the Sr. Management team at BMC revealed that critical work flows were dependant on paper. The study concluded that adoption of health information technology would drive significant improvement in operational and clinical initiatives. In this regard, 2009 was an important year because it brought forth several dramatic changes on the countrys path toward broader fiscal instability at the hands of rising healthcare costs. Two major points of note can have broader positive implications for BMC. The first of which is when the American Recovery and Reinvestment Act (ARRA) allocated over $40 billion for physicians and hospitals to adopt electronic health records. A Congressional Budget Office study determined that health information technology was a critical factor in controlling cost, enabling access and improving clinical care. The second is in regards to the Healthcare Reform being of top priority for Federal Legislators. The White House reported over 47 million people were either uninsured or underinsured. Healthcare Reform was finally passed in March of 2010 and will now increase the number of insured patients, but shift the reimbursement model to focus more on quality than volume. BMC has an opportunity to leverage federal stimulus and healthcare reform dollars to fund a much need shift from paper to digital based operational workflow. The adoption of health information technology will also enable BMC to be one of the first medical groups in the DFW market to migrate to modern technology platforms that can drive innovation in clinical care and operational efficiency. If BMC maintains the status quo with paper and does not make the change to digital workflow, our operational costs will escalate far above our revenues with-in 2 years.

4. Recommendation for change

Recommendation #1 Implement a quality improvement process called Kaizen.

The fundamental building block of our recommendation is based on transforming how BMC manages change. The paper based process we currently rely on hides a number of inefficiencies. Adopting technology before implementing a quality improvement process will be a mistake. With federal mandates of quality reporting, health information exchange and patient engagement looming, adopting a quality improvement process is key to developing a culture of continuous improvement. These mandates will shift the focus of our clinics from volume of patient visits to quality of patient care. In such an environment, technology becomes a more effective tool to support our business and clinical objectives. Our recommendation for developing a culture of continuous improvement is adopting a business process improvement methodology called Kaizen. Kaizen is a quality improvement process pioneered by Toyota and leveraged by leading global companies. Adopting Kaizen enables BMC to utilize common principles to define business and clinical quality improvement priorities. The methodology follows a simple process of identifying the criteria of increasing value, testing the change process on a small scale and if successful, the change is rolled out to the entire organization. Kaizen will enable BMC staff to eliminate waste and identify the functionality in technology tools needed to support our transformation.
Recommendation # 2 implement an interoperable electronic health record.

Once we have implemented a quality improvement process infrastructure we will be in position to implement technology to support the continuous quality improvement culture at BMC. As part of the stimulus bill passed in 2009, the federal government is providing an incentive of up to $65,000 per physician for those adopting an electronic health record. The incentives start paying out in 2011. BMC will leverage these incentive funds to offset the planned investment in electronic health records. We expect the net investment to be neutral. 5

We recommend BMC initiate the procurement of electronic health records with the guidance of Scinet Inc. Scinet Inc. is a leading healthcare consulting firm based and has a successful track record of guiding physician practices like BMC along the paper to digital transformation process. Here is the net sequence of recommendations that will enable BMC to successfully transform and adapt our organization to the emerging healthcare marketplace: 1. Engage in Kaizen study to establish quality improvement culture 2. Prepare RFP soliciting electronic health record vendor to support business objectives 3. Contract with Scinet Inc as management consultant during transformation time period 4. Purchase electronic health record application 5. Implement quality initiatives 6. Go live on electronic health records 7. Establish PMO for continuous quality improvement initiatives

5. Implementation plan (refer to Kotters Eight Step Transformation model) Target Dates Below. 1. Engage in Kaizen study to establish quality improvement culture (May 2010) 2. Prepare RFP soliciting electronic health record vendor to support business objectives (June 2010) 3. Contract with Scinet Inc as management consultant during transformation time period (August 2010) 4. Purchase electronic health record application (December 2010) 5. Implement quality initiatives ( April 2011) 6. Go live on electronic health records ( June 2011) 7. Establish PMO for continuous quality improvement initiatives (July 2011)

At BMC, the leadership team will use every vehicle possible to communicate the new vision and strategy and help the employees Understand and get thier buy in. The team will do thier best to remove as many barriers as possible and create short term wins by recognizing and rewarding employees involved in the improvements. we will define mid-term / long-term goals and we will press harder and be relentless with instituting change by articulating the connections between the new behaviors and corportate success.

6. Projected Cost: Kazien Cost model 7

Contract with SCINET Inc for EHR(Electronic Health Record) selection(RFP) and implementation services (3yr contracts) Purchase electronic Health Records (SaaS or Client/Server) Additional Hires o Three Clinical Infromatics Nurses o Two Project Managers o Three IT Staff

Cost of consultants

One study of 14 small physican practice found that electronic medical records cost an average of 44k per full time provider for the initial setup and an additional 8,500 dollars annually per provider to maintain. on the average these practices recouped the cost of thier EMR system in 2 1/2 yrs and thereafter profited about 23k per provider a year via improved efficiency. 7. Expected Results Establish Organization wide quality improvement process

Qualify for federal stimulus incentive dollars towards purchase of EHR. Per ARRA, the federal government will pay individual physicians as much as $44,000 to upgrade their practices from paper-based records to EHRs.

Reduce patient appoint no-shows by 60 % Reduce patient collection balances by 60 % Eliminate unnecessary Lab write-offs by 50% Goal for AR days on Hospital surgeries and consults - 18 days Eliminate 40 FTEs (couriers, chart keepers, medical records assistants, transcriptionists, etc ....)

8. How expected results will add value and contribute to overall success Adopting a culture of continuous improvement will not only eliminate inefficiencies in our business operations, it will also improve our ability to verify patient insurance coverage and benefits, improve collections and days in AR, decrease the number of no-shows and provide a platform for BMC to develop additional innovate care services. Innovation will enable BMC to establish new revenue streams that will offset the expected drop in reimbursement that healthcare reform is expected to cause in 2-3 years. While our proposal has focused on the financial and clinical implication of continuous quality improvement and technology, we were surprised that our research indicated the opportunity for BMC to improve physician and patient satisfaction. While implementing change is difficult, we believe that the end result will be a more relaxed physician staff that is able to focus more of their time on delivering quality patient care. The digital workflow will also enable our physicians to spend less time at the clinic and more time at home, with family.

Early adoption of EHR systems and valid comparative performance reporting would enable the development of value-based competition and quality improvement to drive transformation. Anthony Bower- EMR Transformation in Health care In conclusion we believe implementing the recommended changes will deliver - quality care that our patients will trust, profitability that our shareholders will appreciate and a positive work atmosphere which will enable our employees to thrive.

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