Creating value strategies either increases revenue or decreases your expenses.
Dr. Laurence N. Benz, PT, DPT, OCS, MAPP, and Dr. Rob Wainner, PT, PhD, DPT, FAAOMPT, ACC
One of the first principles that we teach in strategy is that value-creating strategies have to either increase your revenue or decrease your expenses. In essence, the value focus must translate at some point to your bottom line. Therefore, if you collect outcomes in your practice, then they should translate to your overall bottom line. However, the way clinical outcomes best translate to your bottom line is not how you might expect.
In our experience, practice owners are often frustrated because they do not see an immediate and direct impact of outcomes on their financial results. Here, I will look at clinical outcomes from a holistic perspective—one that we think will deepen your appreciation for how clinical outcomes play a role in creating a value strategy as well as a source for financial gain.
By an old school definition, we were taught many years ago that outcomes can be measured in terms of clinical (functional) or patient satisfaction, loyalty, and experience. When clinical outcomes are discussed as part of a strategy, most clinicians and clinic owners confine their perspective to third-party systems that collect traditional outcomes and then aggregated and eventually result in summary reports and searchable databases.
We have been encouraged that unless our practices collect functional outcomes, we will not be in the game with payers and our data must be our talking points. In fact, the American Physical Therapy Association (APTA) and specialty firms have made strategic initiatives to enter in the repository and reporting business using proprietary and other means that allow for providers to submit data and for consolidations, analysis, and summary. More recently, the mandated Physician Quality Reporting System (PQRS) caused a real tipping point and an opportunity for these approved registries to combine clinical outcomes with required Centers for Medicare and Medicaid Services (CMS) reporting.
But where are the “goods” to support the focus on clinical outcomes and pay for performance (P4P) initiatives? Are payers moved in a way that matters when we present our outcomes to them in an effort to substantiate our clinical efficacy? There is minimal evidence that any of our third-party produced outcomes have ever been used to obtain anything other than standard form contracts. Has any of this helped produce revenues or gains in one’s financials? Despite the lack of evidence, the pressure and emphasis continues.
For years our practice has systematically collected and reported traditional clinical outcomes using an outcomes database system (there are plenty of acceptable systems out there), as well as non-traditional measures using CARE (Compassion and Relational Empathy questionnaire) along with patient loyalty scores. But are clinical or functional outcomes enough? We do not believe so, simply because there can be assumptions surrounding their conclusions. Adding patient loyalty or a measure like CARE can be great additions simply because they are drivers of intrinsic motivators around areas that physical therapists (PTs) value: empathy, compassion, positivity, listening, and letting the patient tell their story and set their own goals.1 The CARE measure even allows each PT, clinic, or company to see how they rate versus a standardized database of more than 5,000 physios in Scotland!
At the same time, we have used a simple financial metric related to the return we get from our outcomes: “return on quality.” Return on quality (ROQ) is the actual cost of collecting, analyzing, and training incurred from quality initiatives and determine whether our resulting incremental revenues are worth the cost. When looked at from that perspective, an easy conclusion would be they have not. The trouble with looking at ROQ is that it only looks at direct expenses and revenues and does not take into account the most significant factors related to indirect costs in our business: the well-being, productivity, and retention of our therapists.
A natural question would be “how do outcomes affect these significant, indirect cost-related factors?” The simple answer is internal motivation. While the concept is simple, Dan Pink, author of Drive The surprising truth about what motivates us, has done an excellent job helping us identify the essential elements of internal motivation as they relate to meaningful work: autonomy, mastery, and purpose (A.M.P). The question then becomes how to leverage these three elements in an intentional way in order to build internal motivation.2
When considered in the context of A.M.P., one can see where focusing on and measuring outcomes is a nearly perfect fit in a practice like ours, where clinical excellence is a cultural pillar. Our therapists are able to exercise a high degree of autonomy in managing their patients. We also heavily support their pursuit of clinical mastery with certification, residency, and fellowship training in terms of time and tuition. Both of these elements are undergirded by a higher sense of serving and purpose. What we have found is that outcomes are a linking element that helps practically integrate all three elements of A.M.P by providing our therapists a standard to aim for and a mark to measure themselves by. Said differently, by setting a bar you can measure your growth by, as well as compare yourself to others is an essential element to facilitate and sustain internal motivation.
If we dropped our third party outcome tools, what would be the unintended consequences? First, we would lose a significant part of what attracts physical therapists to our company in the first place: a model that incorporates clinical excellence, service excellence, and care and compassion excellence. This in turn would severely affect our ability to provide our therapists with credentialed post-graduate training programs at our current level of scale. Without the ability for our therapists to measure their individual performance and we our corporate performance, we lose accountability and the ability to aim for an evidence-based standard. Taken collectively, the total loss is greater than the sum of the individual parts. The result is that we experience the most damaging loss of all: a significant loss of internal motivation in our therapists.
At the end of the day, we strongly believe our clinical outcomes efforts substantially reduce or eliminate recruiting costs, staffing shortages, and turnover. There are a variety of formulas for determining those indirect costs if one wanted to go to that granular level, but we do not think there is a need to do so. A clinical excellence focused culture leads to higher engagement (an easy and established measure) and increased therapist satisfaction, both of which lead to higher patient satisfaction. By the way, the third party produced analysis is not critically important to us centrally, but it is to our PTs who desire the feedback and comparison to a larger database. Internally, we put more emphasis into our own metric-completion rates (number of new patients with outcome measures/total number of new patients) because it supports the intrinsic motivator of mastery and avoids what we see in the field as “cherry picking” selectively using only certain patients for outcomes.
The value creating strategy around outcomes counter intuitively is not about payers—it is about our knowledgeable workers and their motivation and internal reward systems: mastery and purpose. The strategy of outcome collections is about values—your values as an organization and what you are trying to produce. Show me an organization that does not enhance primary intrinsic motivators for PTs and we will show you an organization with frequent turnover and where extrinsic motivators like money and status are the primary emphasis.
The return on quality from a revenue standpoint is probably impossible to calculate but this reflects one of our core management credos: “at times we do not get what we measure, we get what we emphasize.” If you want a strong clinical culture that is accountable, third party clinical outcomes is a must—it is the modern day equivalent to a reflex hammer and goniometer. But if you want to see how they truly impact your bottom line, you will have to look beyond the obvious.
Dr. Benz is the chief executive officer and partner of Confluent Health that includes multi-state private practice physical therapy clinics, Evidence in Motion, and Fit For Work. He can be reached at Larry@physicaltherapist.com.
Dr. Wainner is Leadership Coach and partner of Confluent Health that includes multi state private practice physical therapy clinics, Evidence in Motion, and Fit For Work.
1. Mercer, S. W. (2004). The consultation and relational empathy (CARE) measure: Development and preliminary validation and reliability of an empathy-based consultation process measure. Family Practice, 21, 699–705.
2. Pink, D. H. (2011). Drive: The surprising truth about what motivates us. Penguin.