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AAOS Now

Published 6/1/2014
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Evalina L. Burger, MD; Jennifer Bruining-Doner, BA; Robert D. D’Ambrosia, MD

Transparency in Academics: A Pathway to Growth

Evalina L. Burger, MD; Jennifer Bruining-Doner, BA; and Robert D. D’Ambrosia, MD

Transparency, as generally used, implies openness, communication, and accountability. Driven by the concept of transparency and shared governance, the department of orthopedics at the University of Colorado School of Medicine (CU SOM) has recently gone through a metamorphosis.

In the traditional academic CU SOM department, governance is from the top down. Professional and financial decisions are made by the chairman and may lead to either magnificent growth or miserable failure. The orthopedic department at CU decided to implement a governance model that would parallel business operations typically found in private industry, while supporting the mission of an academic medical department. This business model was based on transparency and accountability in financial operational processes, departmental governance, and physicians’ compensation methodologies.

Prompting a change
Rapid growth, spurred by the construction of new hospitals on the CU SOM campus and across the Denver and Boulder communities, led to operational fragmentation and the formation of silos across hospitals and divisions. Professionalism and other behavioral issues became problematic, and financial transparency became an issue.

To address these changes, an outside facilitator was engaged and a retreat was held to openly discuss strategic and growth opportunities, as well as dysfunctional operations. Because a lack of information had led to speculation that had the potential to destroy collaboration, the creation of effective communication channels became an action item.

A “transparency committee” was formed with representatives from every hospital and/or division and charged with designing a pro forma template for transparent reporting to foster trust and collaboration. The first step included reviewing and revising the department’s mission, vision, and values statement. The new mission statement became the standard against which conduct and decisions were tested going forward.

Financial processes
The first area to be addressed was the creation of departmental financial processes and methodologies. The goal was to be able to report on the profit and loss of each individual business unit within the deparment. A business unit was defined as any provider or group of providers that works together. Typically, this is a specific surgeon with associated clinical extenders, but it can also represent a group of surgeons aligned under a single business model within the department. Although revenue processes had previously been established, it was necessary to determine a formula to allocate direct and indirect business expenses within the department.

To support a cost allocation formula that also fostered transparency, the following categories of business expenses were identified:

  • Departmental overhead—the indirect expenses associated with administering the educational, research, and clinical operations within the department
  • Divisional overhead—the indirect expenses associated with administering the educational, research, and clinical operations within a specific division of the department
  • Provider overhead—the direct expenses associated with a specific provider to support clinical and research efforts

Because provider overhead expenses were direct expenses, they were allocated directly to a provider’s profit-and-loss statement. However, a way to allocate expenses associated with divisional and departmental overhead back to the individual provider units needed to be developed.

Two primary factors in this allocation were resource utilization and earning power. Based on these factors, calculating department overhead would create a tiered system of surgeons, nonsurgical physicians, and midlevel providers.

The transparency committee then developed both compensation and resource utilization ratios for the three groups. The analysis of resource utilization took into consideration the following categories:

  • all full-time employee (FTE) utilization (administration, human resources, clinical revenue support, strategic growth analysis
  • mission (education, research, and academic)

Costs for FTE utilization were assessed to each employee on an equal ratio. Mission costs were assigned only to physicians, who typically use these resources more than midlevel providers do.

The success of this effort depended largely on a cultural change in the way progress was communicated to the faculty. All decisions and proposals were presented to the faculty on a regular basis, with a gradual transference of decision making to the faculty. Faculty became more interested in the governance of the department, and resource utilization became everyone’s responsibility as people began to understand its impact on the bottom line.

Complaints diminished as an avenue to address problems was developed. An understanding of departmental cost drivers also helped reduce complaints and foster resource sharing.

Eventually, the transparency committee was transformed into an executive committee to support the chair and foster the concept of shared decision making. The department was restructured to emphasize service lines and break down the silos that had been created by the existence of the different hospitals. Once the faculty had accepted this concept, it was presented to and endorsed by the dean.

Compensation methodology
Employee compensation is the largest business cost associated with an academic medical practice. Within the CU SOM, departments are able to facilitate market-based competition salary packages with the use of incentive dollars, which are available if the department generates an initial profit at the end of a fiscal year.

In the orthopedics department, the physician total compensation plan had the following goals:

  • support market-based compensation among faculty based on performance and achievements
  • support faculty practices preferences and academic variations
  • demonstrate alignment with the academic mission

The finance committee was tasked with creating a new strategy for incentive plans. Because the orthopedics department had a three-part mission, it was decided to recognize all three areas. Because the clinical mission included services to all patients, regardless of insurance status or impact on profit margins, the finance committee evaluated the need to recognize this care. The final plan allocated incentive dollars as follows:

  • 50 percent based on individual unit profitability
  • 20 percent based on noncommercial patients, as defined by work resource value units (wRVUs) associated with these visits/procedures
  • 30 percent based on academic achievements

This allocation increased the incentive distributions for mission-based accomplishments and required a new compensation methodology, which was subsequently developed by the finance committee.

Dashboards
To support the academic achievement portion of the incentive plan, a self-reporting process was created to report achievements. Faculty use a point system to report clinical, research, education, and service activities. The points form is revised and adjusted every year based on faculty input.

The creation and dissemination of a transparency dashboard, highlighting key operational and financial data, was the next step. The department reports annually on education, research, and clinical accomplishments. Important data points, such as wRVUs and total physician compensation, are benchmarked against national data points.

The dashboard not only facilitates communication and transparency among the business units, it also serves as a strategic tool for administration to proactively identify opportunities and risks across the department.

Outcomes
This model has become an excellent recruiting tool and is particularly helpful in determining salaries and measuring the value of appointments that support the department’s mission. It has also spread to the research faculty, with reporting of output, grants, and funding that should help align the clinical and research faculties to better serve the stated mission.

However, this is a challenging model to implement and requires a significant change in culture. As participants collaborate and earn respect from each other, the traditional model of secrecy around remuneration is exchanged for one of collaboration and healthy competition through sharing strategies.

Department leaders may find total transparency treacherous to negotiate, particularly around when to communicate potentially sensitive issues and how to negotiate differences among faculty expectations. The department executive has a dual responsibility—both to the department and to the dean—and must represent and protect the department faculty within the SOM.

So far, the positives outweigh the potential negatives. The culture of acceptance and collaboration, as well as the phenomenal growth experienced under this model, has been amazing. Publication output has improved and student scores have risen. The department is better situated for healthcare changes because it has the ability to look at mission-based care and a model to determine the impact of change.

Evalina L. Burger, MD, is professor and vice chair, clinical affairs; Jennifer Bruining-Doner, BA, is director of finance and administration; and Robert D. D’Ambrosia, MD, is professor of orthopaedics, at the department of orthopedics at the University of Colorado-Denver. The authors wish to acknowledge the members of the transparency taskforce—Travis C. Heare, MD; Kyros Ipaktchi, MD; and Armando F. Vidal, MD—for their hours of dedication to the process.