How many times has Hollywood produced a picture with the following theme? It goes like this: Two people who lead very different lives swap bodies during a thunderstorm or supernatural event and then see life from a very different perspective. A popular television show has the CEO going undercover to experience life as a front-line employee. There are always revelations for the CEO. Could a peek into the lives of the C-suite administrators provide any revelations for the front-line employees?

Imagine experiencing life as the CFO or CEO of a health care system. What decisions would you be faced with? What would be your priorities? What kinds of challenges would greet you every morning? The executive suite’s operations, marketing and financial executives all have a different focus, but all have to communicate in a common language to get things done. This month, TechNation takes a look at the realities of the C-suite by asking some chief executives about the decision-making process and clinical engineering’s role in that process.

The COO (chief operations officer) may be the chief manager best known to the biomed department. Responsible for the daily business operations of the hospital, he or she also is responsible for the hospital’s profitability, HR and policy enforcement. The COO reports to the CEO. The COO also has the delicate task of balancing the satisfaction of the hospital staff with the hospital’s responsibility for compliance with laws and regulations.

This year, the senior management team in the C-suite is faced with some significant challenges. Changes to Medicare payments to hospitals and additional rules and requirements from CMS (Centers for Medicare and Medicaid Services) will impact hospital revenues and procedures. These changes necessitate a number of decisions that must be carefully considered.

Changes on the horizon

There are several changes to our current health care system that are a result of the Affordable Care Act.

Medicare payments to hospitals will change over the next couple of years. Some of those changes are already effective. New rules from CMS affect payments to hospitals and include other provisions based on readmission rates and quality surveys.

The pay rates to hospitals include a documentation and coding adjustment that will reduce payments by 2 percent, but the IPPS (Inpatient Prospective Payment System) rules suggest a 1 percent projected increase in payments to hospitals for inpatient services at acute care hospitals as of this writing. These changes affect 3,400 acute-care facilities. Payments resulting from the long-term acute care hospital prospective payment system will increase by 1.8 percent as of this writing.

There are also changes to the Hospital Inpatient Quality Reporting Program, including an increased emphasis on the prevention of infection in acute care facilities. Those facilities will be required to begin reporting on their quality measures by October 2012. Beginning in October of 2013, any noncompliance will result in a 2 percent payment penalty. Readmissions will also become a focus for reduced Medicare payments. A new Hospital Readmissions Reduction Program will begin with rules for excess readmissions of myocardial infarction, heart failure and pneumonia patients. Those rules go into effect in 2013.

From the top

Matt Davis, FACHE, Chief Operating Officer at North Florida Regional Healthcare puts the experience of C-suite executives concisely. “Each day, leaders in health care are faced with decisions that must be made. As we become more refined in our delivery models, decisions on marketing, operations and overall strategy must continue to be centered on the patient,” he says.

Chief executives are tasked with making decisions daily that affect hospital staff, patients, budget, the hospital’s reputation and compliance with rules and regulations. “We work in an environment that is ever changing from a product standpoint as well as a reimbursement standpoint,” Davis says. “There are many times where a technology might be the next greatest thing. However, you still must stay grounded in your analysis to assure you look at the entire gamut of care for a patient. In each decision there is rarely a universal approval of the decision made. However, you must consider all sides to assure that moderation between stakeholders is possible.”

The broad effects of decisions made by senior executives in health care and the focus on patient care are echoed by Tom Malasto, COO, Community Hospitals of Indianapolis and CEO of Community Heart and Vascular. Malasto points out the importance of a collaborative effort as a key goal of leadership. He believes that many of the recent regulatory changes have created a dialogue between the key components of the health care community. That dialogue is a positive step forward.

“Health system leadership, the biomedical team and all of our team use a common criteria for the decisions we make,” he says. “The criteria are centered around what is best for patient and employee safety, the patient’s clinical outcome, making services more accessible and decreasing cost. Health care reform, although necessary, has accelerated the need to become more effective and efficient in the services we provide. Neither effectiveness nor efficiency can be adequately addressed without a high level of collaboration from providers along the entire care continuum. A significant portion of senior leadership’s time is focused on developing these relationships.” Malasto sees health care evolving more into a “team sport.”

“That same decision-making criteria that we use at the bedside, which needs to be about the patient and what is in the best interest of the patient and their clinical outcome and their safety. How can we make health care more accessible to the patient? And how can we decrease the cost so we can continue to provide it for as many people as we need to, to be able to serve the population and the communities that we all take care of?”

Malasto says that whether it’s a marketing decision, finance decision or employment decision, “We’re all trying to make those decisions with that same criteria, not just at heart, but truly as the rubber hits the road or the pen hits the paper, we are making decisions with the patient in mind. We’re having to make those decisions across a very complicated system,” he says.

He says many decisions are not as easy or obvious as they appear, because the effects must be considered from every angle. “Many times those decisions have a ripple effect that cut across many divisions of the organization, and so at times our job is to make sure that it may be the right decision for the department, but is it the right decision for the organization? That does, at times, prolong that decision-making process, but if you’re too quick to jump to a solution and have not thought out what is the ripple effect of that upstream and downstream, you can create a lot more work and clearly what is not an ideal experience for the patients or our employees,” he says.

Malasto says his facility’s employees are a big part of the decision-making process. He tries to help his employees understand that departmental decisions often have facility-wide impact. That impact, as well as how a decision fits in with the hospital culture and identity, must be considered.

“The best thing that leadership can do in that regard, from the highest levels through the manager and the supervisor level, is to share as much as possible and be as transparent as possible,” he says. “It’s important to let people know why decisions are being made and how they’re being made so that they can begin to put that puzzle together.”

The biomed shop’s role

How can the biomed department contribute to the challenges faced in the C-suite? One former COO has a particularly unique perspective on the biomed shop at his hospital. Dr. Rich Davis, PhD, Biomedical Engineering and the Associate Executive Director, University Hospitals and Ross Heart Hospital, The Ohio State University Medical Center, repaired equipment long before rising to the executive suite. His perspective as a senior manager is shared with the biomeds at his institution.

“I consider it my role to make sure the clinical engineering leadership is well informed about the business side of the hospital,” Davis says. “Maybe it is because in my earlier career in that same role I did lack the context on how the hospital was doing, although I think it is much more typical for hospitals to be transparent in their financial and operational statistics now than then.”

Davis explains how hospitals work to stay on target with their goals and how the biomed shop is a key component. “The term is “alignment” when the various departments and their directors are aware of the mission and priorities of their hospital and define their own departmental goals to translate departmental success to institutional success,” he says. “Although they might be perceived as an “overhead” department, clinical engineering leverages a lot of resources through their planning, installation and maintenance of the pool of medical equipment throughout the hospital.

“Since clinical engineering touches virtually every aspect of health care delivery, it is critically important that they know not just the operational priorities but also the strategic priorities, both of which they can positively impact, to achieve that alignment. The clinical engineer’s expertise in technology can partner with the clinical leadership to design facilities giving the hospital a strategic edge over the competition, while separating hype from science.”

Davis also provided his view on the changes next year resulting from new regulations and the search for more efficiency in the process. “There are substantial incentives to hospitals to upgrade their IT infrastructure and to design integrated models of care, requiring significant investments in each at a time when lower rates of revenue growth are virtually assured. Part of that will take the form of reductions in payments for institutions failing to meet quality measures, certain readmission rates and patient satisfaction goals,” he says.

“Further, the cost shifting of governmental and self-paying patients onto the commercial or managed care payers is likely to reach its limits. Collectively, these limits on revenue, and potentially capital funding for medical equipment, are going to force efficiencies upon the current operation of hospitals.”

Some of Davis’ most insightful comments are those that offer biomed departments suggestions to deal with the challenges that future change might bring. With the new rules from CMS mentioned earlier, the biomed department can impact revenues and patient satisfaction.

“A typical way clinical engineering is perceived is that they can ‘fix it’ for $40 per hour instead of a vendor’s $250 per hour. While generally true, it’s an overly simplistic view of the savings and therefore (the) value of a clinical engineering department,” Davis says. “Vendor service typically is a profit center much more so now than historically, and their cost to keep an engineer on the road is greater in salary, infrastructure and travel support than an in-house engineer. Their advantage is that they can specialize training for better competence, whereas the hospital needs each engineer to be multi-competent depending on the size of the institution and department.” “Striking that balance of skills and scope is the first issue of the clinical engineering leader in truly delivering the same quality of service at that lower cost. The further value is in the ability of the in-house engineer to deliver service in minutes instead of hours or even days. The downtime of an ICU bed or an MR imaging suite is far more costly than the differential between the hourly rates,” he says.

“Done right, in-house clinical engineering keeping up-time at its peak saves the cost of owning excess capacity in equipment and facilities as well as a potential cost in real dollars due to lost revenue and poor patient satisfaction penalties or to lost customers when procedures are cancelled. An added value that may be worth more than all of the above is an honest appraisal of the end of life on a well maintained piece or system of medical equipment that permits an extra year, two or even three (a 42 percent improvement on a seven year depreciation cycle!). That pearl of information gives discretion to senior management on when to “pull the trigger” on replacing capital, giving some flexibility in cash flow that generally does not exist in other expenses. Revenue shortfalls and alternate capital needs will put pressure on dollars allocated for replacement, because other than technology-based improvements in throughput, or exceptional cases of poor reliability, replacement equipment is pure cost without direct payback.”

A team approach

Tom Malasto concurs that a cohesive team approach is best. “First and foremost, the clinical engineering team must be an active member of the operations team. Too many organizations engage the biomed or clinical engineering team on the back end of decisions that involve the purchase or utilization of clinical equipment.” Malasto includes four “key areas of contribution” among the ways that the biomed shop can contribute:

1. Optimize service contracts. Consider performing first call on key pieces of equipment and other innovative approaches to preventive maintenance.
2. Challenge department leadership to use equipment more efficiently, including sharing amongst departments when safe and feasible.
3. Be actively engaged in the annual capital budgeting cycle.
4. Be actively engaged in the evaluation and decision-making of all purchases of clinical equipment throughout the year.

Malasto suggests that the biomed shop can respond to the challenges that the C-suite faces by being part of the decision-making process.

“Finally, it is important for the C-suite to understand and appreciate the value a strong clinical engineering team brings to their organization,” he says. “Recognizing and emphasizing the importance of the clinical engineering team’s involvement in clinical equipment decision-making goes a long way to provide much needed recognition at the department level and throughout the organization. Our clinicians’ confidence in the reliability of the equipment used in the diagnostic and therapeutic services offered is critical in their ability to provide safe and high quality outcomes. An effective and engaged clinical engineering team is critical component of any successful hospital or health system.”

“A highly transparent environment with all of your employees is really critical to success,” Malasto says.

Davis agrees that biomeds play a valuable role. “As we go forward in decreasing revenue times, it is imperative that we take care of the products we have to service our patients,” he says. “Many health care organizations will be required to do more with the products over a longer period of time. Biomed and clinical engineering play a key role in the asset management function of a hospital. Health care providers will not have free capital laying around to replace items due to poor upkeep or mishandling.”