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June 13, 2014
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Hospital's consulting firm costs brought into question
by Lora Whelan

 

    Calais Regional Hospital (CRH) is one of three hospitals in Maine that utilizes the services of the healthcare industry consulting firm Quorum Health Resources, which is based in Tennessee. Quorum supplies the contracts for the hospital's two top staff members, CEO Michael Lally and CFO Nancy Glidden, and it assists the hospital with group purchasing savings on medical supplies and equipment and with access to national benchmark data for a number of administrative areas used by hospital departments such as human resources, compliance and information technology, and for areas such as productivity and revenue cycles.
     Rosemary Plorin, president of the Tennessee‑based Lovell Communications and a spokesperson for Quorum, says, "QHR has a vast, active, dynamic set of data from consulting hospitals" that is collected every month and made available to client hospitals within 60 days. QHR has about 60 critical access hospitals across the nation as clients, with two in Maine and another two in New England.
     With the recent news by CRH of an operational deficit of $500,000 within the first two months of the year, four lay‑offs and a reduction of 500 hours across all departments, at least two people affiliated with CRH are wondering whether the use of a consulting service with a significant price tag is still relevant in the face of such budgetary pressures. The hospital's contract with QHR costs $412,000 per year for the consulting arm, which does not include the salaries and benefits associated with the CEO and CFO. Vanessa Sylvester, representative for Local 116 of the Maine State Nurses Association, and Union President Rebecca Lacasse question the need for such pricey services. "Why is Calais Regional sticking to this consulting model?" Sylvester asks.
     Plorin states, "I can't speak to the specific needs of Calais Regional Hospital, but it's often more effective and beneficial for hospitals to tap into resources and synergies of the 'basket,' and when layering in the cost purchasing [savings] it's a high value proposition." CRH spokesperson DeeDee Travis has explained that, among the many uses of the consulting service, it "provide[s] important perspective about how hospitals are dealing with similar issues, such as reduced volumes, on a regional and national level."

The roots of benchmarking
     The use of benchmarking in the healthcare industry has its roots in the Xerox Corporation. While it's hard to imagine that Xerox Corporation has anything to do with healthcare, in the late 1970s the company famous for copying machines was slipping behind its overseas competitors. In 1981, to get its house in order, Xerox made famous a little known process called benchmarking, a performance system used to analyze product, services and methods between organizations in the same industry in order to create a continuous loop of best practices. By 1989 Xerox was recognized for its turnaround with the Malcolm Baldrige National Quality Award. Just a few years later benchmarking was adopted by the healthcare industry.
     According to a report issued by Longwood Publishing, a company that distributes commentaries and news from and for academics, scientists, clinicians, policymakers and administrators, in the 1990s the Joint Commission on Accreditation of Healthcare Organizations defined benchmarking as a measurement tool for monitoring the impact of governance, management and clinical and logistical functions. The 2012 report, "Benchmarking: A Method for Continuous Quality Improvement in Health," by Amina Ettorchi‑Tardy, Marie Levif and Philippe Michel, notes that the tool was modified over time to accommodate the healthcare field by including: comparison of performance outcomes to identify disparities; the analysis of processes and success factors for producing higher levels of performance; and the need to meet patients' expectations.
     However, the report states, a drawback to the healthcare field's use of benchmarks has been the use of it as "a simple comparison of outcomes, whereas it should really be taken further, to promote discussions among front‑line professionals on their practices in order to stimulate cultural and organizational change within the organizations being compared."

Other options available
     There are other options out there for hospitals looking for benchmark data and group purchasing options. Doug Jones, former CEO of Down East Community Hospital (DECH) and before that Maine Coast Memorial Hospital (MCMH) in Ellsworth, noted while he was still DECH CEO that the hospital uses independent consulting firms to gather specific staffing benchmark data and is part of a strong purchasing group through Eastern Maine Healthcare System (EMHS) in Bangor. Jones wasn't sure that the savings were quite on par with those achieved through QHR, but he felt it was a good service and met the hospital's needs.
     DECH and MCMH are former clients of Quorum, with Maine Coast terminating its relationship and buying out Jones' contract in 2004. DECH's client relationship with QHR ended in 2009 when the hospital was placed by a state superior court in receivership with EMHS as receiver. Jones came on as interim CEO and remained when the receivership ended in 2010 until this May when he resigned.
     Quorum itself offers a la carte consulting services for those hospitals unable or not needing the full plate of services. There are many healthcare consulting firms that provide similar services to QHR. One way to find out which consulting service might most help a hospital define and act on benchmarks is the array of peer-learning opportunities available through membership in the Maine Hospital Association. Jeffrey Austin, vice president of governmental affairs at MHA, has as members just about every private hospital in the state, including CRH and DECH. The association provides meetings and forums for members to discuss common concerns and to learn from experts brought in for specific topics. Austin explains that the association provides hospitals with quality and financial data gathered and compiled from the entire state membership. "It's data that they can see, but they decide how best to use that information. That's a big part of what we do. The information flows back to them and they decide whether to use a consultant to help them" use it.
     In addition, the association provides vetted services. "It's a collective way to interview, screen and semi‑negotiate with entities." A member hospital might choose to hire the consulting services of a vetted website designer. "It's a screening tool, but we don't negotiate contracts," says Austin. The association's use of peer‑to‑peer learning meets a portion of benchmark criteria put forth by the Longwoods report: "Benchmarking's key characteristic is that it is part of a comprehensive and participative policy of continuous quality improvement. Indeed, benchmarking is based on voluntary and active collaboration among several organizations to create a spirit of competition and to apply best practices. Conditions for successful benchmarking focus essentially on careful preparation of the process, monitoring of the relevant indicators, staff involvement and inter‑organizational visits."
     Using consulting services comes down to what a hospital feels able to manage with its own staffing, says Jones. Small hospitals have little redundancy, so setting aside staff time to work on managing data and different consulting contracts may not be feasible. Plorin explains, "All hospitals use consultants. One benefit of a company like QHR is that they can utilize economies of scale and synergy instead of consulting in isolation." Although benchmarking has proven to be helpful, the Longwoods report cautions the tool has not been studied enough to know whether it is fully effective, stating that "benchmarking has specific features that set it apart as a healthcare innovation. This is especially true for healthcare or medical-social organizations, as the principle of inter‑organizational visiting is not part of their culture. Thus, this approach will need to be assessed for feasibility and acceptability."

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