Now, you will develop recommendations to improve productivity and patient satisfaction. Consider what you know of Lean Management and Six Sigma principles and practices. Based on this understanding, ask yourself: What would the president and medical director want to know before making any financial and organizational decisions?
The Assignment:
- Based on the metrics you selected in Week 5, analyze opportunities for improvement using Lean Management and Six Sigma principles (2 pages).
- Develop five measurable stretch goals (2 pages).
- Create a presentation with speaker notes, 5–7 slides in length (200–400 words per slide), that defines a culture of accountability and quality excellence and recommends how to foster this in the emergency department.In this physical care service (PCS) there are different productivity metrics that can be used to evaluate the success of the health care reform as it is given in the comprehensive data in table 3.3 and 3.2 of physical care service where some of its corporation health care reform was located. It is evident that in these two locations each had its own productivity view as each offer different emergency services based on the patient. However, in these services of health care industry we will focus on innovation which gives us improved quality and reduces the cost of productivity. Some of this productivity changes in the two locations clearly shows us that proper productivity growth of any sector is low to some extend based on inpatient and outpatient services as most of metric that we have used are there to improve performance of the health care after certain duration. Some are used to handle customers services based on service that they receive from their operation and compensation. However, it is clear and evident that some of this metric(s) have some dividend which separates accuracy of patient treatment.
According to the information given it is clear that it gives us the patient records and histories of debt which to some extend gives one an aggressive credit on matters of policy addressed and pay time of services. Some of metric(s) calculate and figure out the gross profit of healthcare sector based on workforce done. For example in the alpha center most of efficient data is limited as they focus on occupational health clients. Based on this consent of information it is clear that this productivity works more on workforce as input and output per patient varies based on illness. With the estimated patient service it is clear that most of productivity provides comprehensive outcome based on accountability and timeframe of patient.
In subsequent locations that have been given it is clear that one can use metrics to evaluate performance of patient as it provides numerous changes based on situation of occupation of patient either private or occupation view of the health. In literary view terms we may use it to increase productivity as it helps one to learn some of mistakes and monitor results based on performance that has been done in laboratory. Most of physical care services uses metric(s) to lower efficiency of patient as they value their input view based data on behavior and optimal performance of some of machines. In addition, some provide services which gives us some convenient in matters of patient satisfaction. Metric(s) hence can be used to evaluate optimal performance of patient which is centered on the glimpse of resources and charges.
Based on success of organization of health care reform some of data may be used to measure patient services based on schedule of charges and medication as each physical practitioner in both of two locations has its own variation of composing its data. However, some will give huge limit of information which has no benefit when we focus on wage of staff physicians who are being employed in the health care sector. In addition, some of information given may also have some variation in allocation which maximizes the performance of healthcare reform as it tries to manage basic information which may be effective in achieving optimum resources that monitors operation of the care services given to some of patients.
P hysician Care Services, Inc. (PCS), was founded as a for-profit corporation on January l, 2000. Three physicians each own 20 percent of the stock, and one physician owns 40 percent. PCS currently offers non emergent care services in two locations-at the Alpha
Center just outside the city limits of Middleboro in Mifflenville and at the Beta Center in Jasper, close w\he Jasper industrial park and suburban neighborhoods. At these locations ambulatory medical care is provided on a walk-in basis. PCS centers do not offer emergency services. If a patient arrives needing emergency services, an ambulance is called to transport the patient to the nearest hospital emergency department.
The Alpha Center opened in January 2000. Originally, it only treated occupational health clients. This policy was changed in 2004 when private patients were accepted. The Beta Center opened in January 2006 and has always treated private as well as occupational health clients.
PCS specializes in providing services that are deemed convenient by the general public. Patient satisfaction remains its highest operational goal. At present, staff physicians employed by PCS do not provide continuing medical care. PCS physicians refer patients to area physicians as warranted for continuing and/or specialized medical care. Although patients often return to a PCS center, chronic illness management is not provided.
77
78 The Middleboro Casebook
PATIENT SERVICES
OCCUPATIONAL HEALTH CLIENTS
Occupational health clients are sent to a PCS center by their employer for treatment of a work-related injury (which is usually covered by workers’ compensation insurance), for pre-employment or annual physicals, and for health testing, which are paid for directly by the employer. Because of special work conditions, usually involving hazardous chemicals or materials, some local corporations contract with PCS to provide comprehensive physicals in accordance with Department of Transportation and ocher federal and state laws and regulations. Local corporations consider PCS a cost-effective and convenienr alternative to a hospital emergency department. These corporations use PCS in lieu of employing a phy sician. Corporate clients expect PCS to assist with all phases of case management involving worker injury. They hold PCS accountable that their workers receive timely, appropriate, and cost-effective services. I
Physicals for Occupational Safety and Health Adminisrration compliance are cur rently priced between $300 and $500 each. Physicals for local police and fire include pulmonary function tests (PFn, laboratory tescs, and electrocardiograms (EKGs). 1hey are currently priced between $250 and $350 per physical, depending on contractual vol ume. Pre-employment physicals are typically priced becween $60 and $95 and include a urine dip test. Services provided for occupational health clients are billed directly to the employer.
PRIVATE (RETAIL) CLIENTS
Private clients also seek medical care from PCS centers. AU aspects of general medical care are provided except 08/GYN. Private patients are attracted to PCS because they do not need an appointment. PCS accepts cash, checks, and credit cards at time of service. As of 2008, PCS directly bills the larger health insurance plans covering ics market area:
+ Statewide Blue Shield
+ American Health Plan
+ Cumberland River Health Plan
+ Central Scace Good Health Plan
At time of service, retail clients covered by these plans are screened to verify eligibil ity and to determine whether they have satisfied any required deductibles. If deductibles have been met, patients will be required to pay just the copay amount, and a bilJ is sent electronically co the insurance plan for the account’s balance. If deductibles have not been
met, then the insur. patient d, ro claim r A recent i approxim
Ai vice is ref sive credi
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ORGAN
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Case 3: Physician Care Services, Inc. 79
met, then the patient will pay the bill at time of service, and PCS will enter the bill into the insurance company’s system as partial fulfillment of any outstanding deductible. If the patient does not have coverage from one of these insurance companies, she receives a bill to claim reimbursement directly from her insurance plan. PCS also directly bills Medicare. A recent study suggested chat these four private insurance companies and Medicare cover approximately 85 percent of PCS’s private clients.
Any client who has a history of bad debt at PCS or is unable to pay at time of ser vice is referred ro a hospital emergency department for service. PCS maintains an aggres sive credit and bad debt collection policy and does not serve Medicaid patients.
Patients living within a 30-minute crave! distance from a PCS center typically con stitute 80 percent of PCS’s private pay patients.
ORGANIZATION AND MANAGEMENT
Each center is located in approximately 6,000 square feet of rental space devoted to patient services. The Alpha Center is located on main roads between Middleboro and Miffienville in a small shopping center. The Beta Center is located on the first floor of a new office building adjacent to a large shopping mall in Jasper. Ample parking is provided in both locations. Each center maintains attractive signs.
Each center is open 60 hours per week, 8:00 a.m. to 7:00 p.m. on weekdays and
� a.m. to 2:00 p.m. on Saturdays. Both centers are closed on Sundays and Memorial Day, July 4, Thanksgiving, Christmas, and New Year’s Day. Each center has four fully furnished patient examination rooms and one extra room. Currently each center has some excess space.
For patient care the minimum staffing at each center is one receptionist/billing clerk, ohe medical assistant, and one physician or nurse practitioner. Additional staff (e.g., advanced registered nurse practitioner, physician assistant, medical assistant) is scheduled based on anticipated high-volwne days. Typically the nurse practitioner works on Satur days and assists with physicals and other services on high-volume days. Physician assistants also assist on high-volume days.
The central administrative and billing office is an additional 2,500 square feet and is located adjacent to Alpha Cenrer. The central office staff includes the president, medical director, director of nursing and patient care, business office manager, and the billing and bookkeeping staff.
CHARGES
Each center uses the same price schedule. The basic visit charge (CPT 99202) has changed each year.
So The Middleboro Casebook
January-December Private Pay ($)
2010 94
2011 99
2012 104
2013 110
2014 120
Current detailed prices include:
CPT Procedure
Code Description
99201 Office visit, brief, new
99202 Office visit, limited, new
99203 Office visit, inter, new
99204 Office visit, comp, new
99211 Office visit, min, est
99212 Office visit, brief, est
99213 Office visit, limited, est
99214 Office visit, inter, est
99215 Office visit, comp, est
Occupational ($)
161
170
180
189
201
Price($)
96
120
201
226
65
96
201
201
294
Additional charges are levied for ancillary testing and specialized physician services,
such as suturing. A patient rerurning for a medically ordered follow-up is charged $96
for the return visit. Based on Current Procedural Terminology (CPT) comparison, PCS
fee levels are competitive within the area. No similar medical service is offered within a
45-minute radius from each center. In the past-as part of an advertising campaign to
attract private pay patients–each May and June PCS has offered discounted physicals,
such as camp physicals for children at $48 and for all children in a family for $69.
Steve J. Tobias, MD, board chair and president of PCS, says national studies sug
gest that urgenc care visits are at least $10 less than a visit to primary care physician in
Case 3: Physician Care Services, Inc. 81
private practice. Other studies indicate that urgent care visits cost $250 to $600 less than emergency department visits for the same CPT code.
Some occupational health clients are charged based on a negotiated volume-based price, especially for physicals. PCS’s medical director negotiates specific fees for physi cals and specific medical tests ordered by an employer. Typically, an employer approaches PCS in need of a specific type of physical, such as the annual physical required by the Department ofTransportacion for all operators of school buses, or specific medical test for employees. PCS submits a bid to perform a specific number of physicals based on a flat rate per physical.
As of 2007, PCS does its own payroll. Employees must have direct deposit with a local bank. Each employee receives an electronic pay stub biweekly (with accrued balance of vacation and sick time) and a W-2 at the end of the year.
BOARD OF DIRECTORS
The board of directors is composed of the four physician owners and meets quarterly co review operations. The annual board meeting occurs in December, at which time officers are elected for the coming year. As majority stockholder, Dr. Tobias is chairman of the board and president of PCS. JayT. Smooth, MD, is the board secretary. Other board mem bers are Rita Hottle, MD, and Laura Cytesmath, MD. Current owners have che option
,�uying any available stock at its current book value. An outsider can purchase stock in This company only if all the current owners refuse to exercise this option and he receives the approval of the existing owners. It should be noted chat PCS has paid a stock dividend in three of the last five years.
PRESIDENT AND MEDICAL DIRECTOR
Dr. Tobias is also the medical director of PCS. He is a graduate of the medical school at Private University and has completed postgraduate medical education at Walter Reed Army Hospital in general internal medicine. He is board certified in general internal medicine, emergency medicine, and occupational health. He also holds a master’s in public health from State University. As medical director, Dr. Tobias is responsible for medical quality assurance programs and the recruitment and retention of qualified physician employees. He is also responsible for securing the services of consulting radiologists to read all X-rays. He receives a separate salary as medical director and as president. Compeosation for the medical director position began in 2008. Before Dr. Tobias founded PCS, he �as a full-time emergency physician at Middleboro Community Hospital.’He originally worked to estab lish joint venture urgent care centers with Middleboro Community Hospital. When this approach failed, he recruited th� other stockholders and moved ahead with PCS. As presi dent, Dr. Tobias is responsible for the management of all resources and strategic planning.
:: The Middleboro Casebook
Dr. Tobias schedules the other physicians and the nurse practitioners. He also works in the centers and provides on�call services as needed. He has consulting medical staff privileges in th� Department of Medicine at Middleboro Community Hospital.
CLINICAL STAFF
In total, the clinical staff is composed of eight physicians, three nurse practitioners, and two physician assistants. All physicians hold medical staff privileges at an area hospital.
Name
Bennet Casey, MD
Mark Welby, MD
Steve Tobias, MD, MPH**
Jay Smooth, MD *
Rita Hottle, MD*
Laura Cytesmath, MD*
Micah Foxx, DO, MPH
Melisa Majors, MD
Carl Withers, ARNP
Jane Jones, ARNP
Gerri Mattox, ARNP
Rutherford Hayes, PA
Mary Fishborne, PA
* Owner
** Owner and president
Medical Specialty
Family practice
Family practice
Emergency medicine
Emergency medicine
Emergency medicine
Emergency medicine
Occupational health
Occupational health
Family and adult health
Family and adult health
Family and adult health
Certification
Board certified
Board certified’
Board certified
Board certified
Board certified
Board certified
Board certified
Board certified
Until 2007, staff physicians were retained as independent contractors and received no benefits above their hourly wage. Beginning in 2007 when nurse practitioners were added, physicians (and all ocher employees) who worked more than 1,000 hours were provided comprehensive benefits, including family medical coverage. Also as of 2007, PCS reimburses all physicians and nurse practitioners for their medical malpractice insurance. Full coverage is provided when a member of the medical staff works 1,400 hours at PCS. Others receive a partial reimbursement.
f
(
a
a
Case 3: Physician Care Services, Inc. 83
Physicians are paid $100 per hour. Nurse practitioners receive $50 per hour. These payment levels have been fixed for two years and are considered within the appropriate market range. Ors. Smooth, Hottle, and Cycesmath also work as emergency physicians at Middleboro Community Hospital. Dr. Casey serves as medical director one day per week at an area corporation, where he specializes in occupational health. Dr. Welby also works at Convenient Med Care, Inc., in Capital City. Dr. Foxx, who recently relocated to Jasper with her family, is available to work no more than six shifts per month, a condition she has established until her children reach school age. Dr. Majors also works as an emergency physician in Capital City. Physician assistants are paid $40 per hour and assist physicians on anticipated high-volume days.
Dr. Tobias schedules all members of che medical staff for work on a monthly basis with the understanding that if a physician is unable to work, it is her responsibility to secure a replacement from the qualified medical staff of PCS. Physicians and nurse prac titioners work an entire shift (e.g., 11 hours on a weekday). Fridays and Saturdays are typically assigned co the nurse practitioners. Physician assistants are on call for busy days to assist physicians.
The clinical staff of PCS meets quarterly to review areas of concern. Dr. Tobias does random reviews of medical records to ensure compliance with standards of clinical practice. He is also responsible for all issues involving credentialing.
�ICAL ASSISTANTS
Medical assistants at each center are trained to cake limited X-rays, draw specimens for laboratory testing, do EKGs, and conduct simple vision and audiometric examinations. Each center is equipped to do:
\
1. On-site X-ray
2. PFT
3. EKG·
4. Audiometric and visual testing
5. Some laboratory testing (e.g., strep screen, dip urine)
6. Drug and breath alcohol testing
A regional laboratory processes more advanced labo�tory work. Two medical assistants are assigned to each weekday shift. One is assigned for 7
hours per day (i.e., 35 hou;rs per week) and the other is assigned for 4 hours per week day and Saturdays (i.e., 25 hours per week). Responsibilities include examination room
84 The Middleboro Casebook
preparation, assisting the physician or nurse practitioner, patient testing, case manage ment, scheduling visit follow-up care, and addressing patient questions. Each center main tains a pool of qualified medical assistants who are trained, evaluated, and scheduled by the director of nursing and clinical care.
CENTRAL OFFICE STAFF
Dr. Tobias devotes his time co being both the president and medical director at PCS and filling in at a center when needed. As president he is responsible for the ove1:aU manage ment of PCS. Joan Carlton, LPN, is director of nursing and clinical care. She trains, supervises, and schedules the medical assistants. She is also responsible for ordering medi cal supplies, meeting with occupational health employers as needed, and general admin istrative duties as assigned by Dr. Tobias. If needed, she substitutes for a medical assistant
I
at a center. Martha Coin directs the business office and has three full-time staff. She sched-
ules the receptionist staff at each center. She and her staff assist the receptionists and billing clerks at each center, manage all insurance billing, and manage the general led ger, including accounts payable and accounts receivable. If needed, she or a member o her staff substitutes for the receptionist at a center. The central office billing staff also maintains a list of available (and trained) fill-in receptionists to cover absences and other needs.
RECEPTIONIST STAFF
One full-time (35 hours per week) front desk receptionist is hired for each center. Aside from greeting and registering all patients, the receptionist is also responsible for appoint ments, billing, records for occupational clients, and managing cash receipts. One or more additional receptionists are hired for the remaining 25 hours per week.
ADDITIONAL INFORMATION
In 2008 PCS began using URGENT CARE MIS, an electronic medical information, gen eral ledger, and billing system. Computer terminals were installed in the reception area in each center, at the central office, and in each examination room. PCS uses this system for all phases of financial and medical record keeping and billing, appointment services, case management, staff scheduling, and data management. This system captures, stores, and reports all CPT codes and links medical procedures with revenue and expense informa tion. The health insurance billing system has a direct Internet link with the participating insurance companies and Medicare. PCS purchased the hardware and lea�ed the required
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Case 3: Physician Care Services, Inc. �;
software for ten years. It receives hardware maintenance, software updates, and technical assistance from the vendor.
A 2013 study of medical records indicated chat the mosr common CPT codes ac PCS are
+ 99212/3 and 99202 Office/Outpatient Visit,
+ GOOO I Drawing Blood,
+ 85029 Auromated Hemogram, and
+ 71010/2 CbesrX-Ray.
Injuries and rechecks generally account for 20 percent of all visits. Paper medical records char existed prior to 2008 arc retained in active file for seven
years, and chen transferred to closed files. When interviewed, Dr. Tobias indicated that discharging Nancy Scone, RN, as
director of nursing and clinical services in 2012 was a hard decision. Some employees still regret this situation. Scone was well liked bur just could not get along wich some of the physicians and had a great deal of difficulty coping with multiple job responsibilities. Ac the end of her tenure she refused co provide patient care as needed at the Beta Center.
�er she was discharged, Stone complained chat she had “too many duties co do well, and · PCS was more interested in getting patients in and out than in providing patients qual ity medical care.” She has retained an anorney and informed Dr. Tobias that she is suing him and PCS for “wrongful discharge.” As she scared ac the initial hearing for the lawsuit, “Meeting job expectations was hard when the job lacked any formal job description.” Dr. Tobias shared in the interview that he felt compelled co act even though Scone is che sister of the vice president for human resources at Carlstcad Rayon, a growing occupational health client of che Alpha Center, and thar additional details are not available given chat chis case is currently being handled by legal counsel.
Dr. Tobias seated chat the owners should look forward to achieving even greater corporate profitability. Dr. Tobias indicated that no one foresaw che terrible first three years of financial losses. He also said chat within the past few years, PCS has earned its place in the regional medical care system and ics future appears solid. le should be noted that, at che end of 2007, one of the original physician parmers, who is no longer affiliated with PCS, exercised his option co be bought out by anocher stockholder. Dr. Tobias was the only partner willing at that time to increase bis ownership in PCS.
Dr. Tobias also indicated chat che owners might now be in che position to open a third and even fourtb location. He also discussed purchasing buildings co house che existing centers and adding s<?me services to better serve cheir occupadonal and private pay clients.
86 The Middleboro Casebo ok
“We are a debc-free corporacion char is beginning to earn serious profits,” he said. “Along the way we have distinguished ourselves by the high quality of care we have provided–ou� patients and occupational health clients are delighted with our highest level commitment co patient care, convenience, and affordable prices. While it has been a Jong road, I have every reason to believe we wiU continue co prosper and expand.”
The original real estate leases on che Alpha and Beta Centers expire at the end of 2015. Dr. Tobias said chat he timed the expiration of these leases co coincide with when PCS would be ready to make a major strategic move. Each current lease has a renewal clause for up to 36 months, with an escalation clause so chat rents do not increase more than 15 percent per year. Tobias estimates that appropriate facilities could be acquired for $150 per square foot (including land, site improvements, and facilities) and thac it would cake approximately six months from the time the concracc was executed to when the center could be fully operational.
1
When asked co identify future challenges, Tobias noted that he felt char volume had just about hit the level at which coral service time averages about 20 minutes. He did indi cate, however, that there might be a need for larger waiting rooms and that those patients waiting for more than 90 minutes might be a problem. Tobias was, however, pleased that patients generally reported “complete satisfaction” with the quality of care provide� PCS. Dr. Tobias repeatedly cited the competent clinical and administrative staff. Overall, he indicated that he was concerned about continued rapid growth. “Our early success with occupational health may be slowing. If we lose a significant amount of manufacturing in our area, we potentially lose occupational health clients. Our future in occupational health will follow the local economy.”
Dr. Tobias noted that regional unemployment has already affected occupation health. Fewer people are being hired and working. Fees paid by the workers’ compensa tion program have been fixed for 24 months. People who are unemployed lack health insurance. Dr. Tobias expressed a greac deal of optimism that the full implementation of the new federal health insurance plan (the Patient Protection and Affordable Care Act) would significantly expand PCS’s pool of private clients.
Two years ago, PCS instituted an appointment plan for occupational health clients, which Dr. Tobias reported has been very successful. Under this plan, occupational health clients are scheduled for physicals or medical testing. Under the “call before you come” sys tem, patients (or employers) can call ahead to determine the approximate wait time, make a decision, and-if they want service-register for service at an approximate rime that day, thereby ensuring themselves a specific place in the queue for service even before they arrive at a center. Every patient who arrives at a center is given an approximate wait rime by the receptionist and told they need not wait in the waiting area to preserve the scheduled time for their appointment. While “first in, first out” is generally used, urgent care cases (especially injuries) are bumped ahead of nonemergency patients. Signs in the waiting area
Case 3: Physician Care Services, Inc. 87
explain co patients chat some occupational health clients are served by appointment and that appointments override arrival order.
PCS advertises its services in the regional market. It uses billboards on main roads and newspaper advertising. It also uses an extensive website and social media. The director of nursing and patient care visits current and prospective occupational health clicnrs and typically answers approximately 15 to 25 telephone inquiries per monch regarding quotes for specific services, such as employee physicals.
When interviewed, other PCS physicians offered differenr perspectives. Three phy sicians expressed concern about the manner in which Dr. Tobias schedules the physicians. �lbey were never sure exactly how many shifts per month they would work and at which center. All prefer to work ac only one center and indicated that this type of stability leads co a better medical care team.
Records suggest that certain physicians may have productivity profiles significantly different from those of ocher physicians. It appears that on busy days, revenue per visit drops, a trend that suggests that physicians do less ancillary resting when they are busy. The target for physicians and nurse practitioners is 3 to 4 patients per hour. Three physicians have also requested extra compensation for busy days. They concend that they cend ro be scheduled on “very busy days” and receive the same hourly compensation as physicians who work on slower days. Dr. Tobias indicated that he does not feel that their claim is warranted.
In 2010, two (nonowner) physicians said that because they are paid by the hour, they should be paid for the time they spend treating chose patients who arrive right before closing time. Up until chis change, all staff were only paid for the hours in their shift (e.g., 11 hours), which was sometimes less than the number of actual hours worked. Employees are expected co treat all patients that arrive during working hours even if chis extends their work tifue beyond closing time. All physicians reported chat they felt that their pay level was reasonable given their responsibilities.
Six occupational health nurses at area corporations were interviewed. Each indi cated chat she and her corporation were satisfied with PCS. A number of these nurses indicated chat they appreciated PCS-specifically the medical assistants-keeping them informed about specific patients and that PCS was creative in explaining restriction and suggesting “light duty,” medically appropriate work an injured worker could perform for the employer as an alternative co her regular duties until she was ready co resume her regular duties.
Dr. Tobias recently returned from a professional meeting with statistics that he felt could help PCS better estimate irs future market. These statistics apply to this state:
The Middleboro Casebook
Average Number of Physician Visits-Ambulatory Care per Person,
· per Year, by Age and Sex (National Statistics)
Age Males Females
0-14 3.37 3.09
15-44 1.99 3.92 (includes OB/GYN)
45-64 2.98 4.34
65+ 4.51 5.19
NOTE: Visits unrelated to workers’ compensation and occupational health
Ac chis meeting, Dr. Tobias also learned chat ocher urgent care corporations use the following parameters in their fiscal and market planning.
+ For every 15 percent increase in a basic visit fee, there will be a 25 percent
reduction in utilization of retail patients without health insurance (i.e., who
pay by cash, check, or credit card).
+ Patients covered by insurance, including Medicare and commercial insurance, are generally not price-sensitive as long as the annual increase in the basic visit fee does not exceed 20 percent.
+ Annual increases up to 15 percent in ancillary charges do not affect the number of new visits by retail clients. It appears that ancillary charge increases
above 15 percent may reduce return visits by as much as 45 percent regardless of payment source.
At the next board meeting, Dr. Tobias plans to discuss a series of new ideas and
opportunities chat deserve the board’s attention. Currently his ideas and opportunities include the following:
PRESCRIPTION DRUGS FOR RETAIL PATIENTS
This service is currently available to patients covered by workers’ compensation. State law
allows physicians (and nurse practitioners) co dispense prescription drugs as long as adequate
records are maintained. National firms specializing in drug repackaging let PCS buy prepack
aged prescription drugs ready for sale to a patient. PCS has already established its formulary
.e
Case 3: Physician Care Services, Inc. 89
for workers’ compensation patents. PCS has determined that by maintaining 12 specific drugs in pill form it can meet approximately 60 percent of the retail demand that PCS
physicians create for prescription drugs. The charge for prescription drugs for workers’ com pensation patienrs is directly billed co the employer as part of the overall charge for service.
Dr. Tobias indicated that PCS should consider extending this service co all patients. By only providing “high-volume” drugs, PCS can guarantee high inventory turnover. An appropriately sized initial inventory for retail patients can be capitalized for a center for $1,000. All suppliers promise a next-day replenishment of inventory items. The shelf life of all drugs is more than one year. Even with a markup of 800 percent, PCS prescription prices will be competitively priced in the area. The question is whether this service should be expanded to retail patients. By reviewing medical records of current retail patients (non physicals), PCS has determined the number of prescriptions received per visit by patients.
Age of Patients
0-14
Average Number of Prescriptions
Received per Visit
1.20
0.80
1.10
The average supplier cost per PCS prescription is estimated to be $5. To maintain the pr�posed inventory, additional software costing $12,500 per year is required to verify insurance coverage and copays and process insurance payments. Dr. Tobias would like co potentially begin this service within six months. Questions remain, however, whether any prescriptions issued by PCS should be refilled without another medical visit. Questions also remain as to billing procedures when patients do not have a current prescription plan card at cime of service. An urgent care center in Capital Cicy recently ended its pharma ceutical sales to retail patientS because of the high number of refused claims by drug plans.
DRUG TESTING FOR HEALTHY EMPLOYEES
The director of human resources at a local company, a current PCS occupational health client, has stated that itS new labor concract includes a clause stating ·that “all workers and job applicanrs are subject to mandatory random drug testing and any worker who fails or refuses the test will be i�ediately discharged or not hired.” The client has asked PCS co perform drug tests on referred-workers or job applicants.
90 The Middleboro Casebook
Note that under the new state law and workers’ compensation regulations, drug resting is also required for all workers who are injured at work. Employers are also able to institute rand9m drug testing. Some other clients have even requested that PCS select some of cheir workers for testing using a random selection process. A process using employee Social Security numbers has been discussed. Other occupational health clienrs have previ ously suggested that PCS begin this cype of service.
Currently a test is available from a reference laboratory for a processing cost of $8 per test. Results screen for the presence of all common illegal drugs. The list price for this test is $42 and $63 if a certified medical review officer (MRO) reads the test. Dr. Tobias is a certified MRO. The test requires about IO minutes of a medical assistant’s time, specifically to maintain compliance with the chain of custody protocol during collection.
PHYSICALS BY APPOINTMENT FOR EMPLOYEES
Increasingly, employers are issuing formal requests for proposal (RFPs) for occupational health physicals that require appointments. For example, a current RFP from a local employer is for 350 annual physicals during 2015 that must be done between 3: 15 p.qi. and 4:30 p.m. Monday through Friday at che Beta Center. (The company’s empl�s work 7:00 a.m. to 3:00 p.m.) The physical must include the following components:
PCS List Price
Medical history and $70
examination
EKG $70
X-ray chest $101
Urine (dip) test $20
Complete blood count $40
with differential
Vision screen $27
Audiometric test $3
Each physical will take approximately 80 minutes to complete. The PCS list price for this package of services and tests is $331. PCS vendor coStS for the physical (e.g., X-ray reading fees, laboratory charges) are estimated to be $70.00. The PCS bid for this contract will be evaluated on the basis of total price and fulfilling expectations related to schedule and timing.
92 The Middleboro Casebook
Staffing could include one full-time physical therapist (PT) at $80 per hour (or $75,000 plus benefits) and pare-rime physical therapy assistants (PTAs) at approximately $25 per hour. PTs can simultaneously manage between two and five patients and supervise a PTA, who provides the direct therapy, given specific creatmenr plans. Dr. Tobias also says chat PCS may be able to contract for the needed PT and PTAs from local nursing homes. The PT must do the initial patient evaluation and establish rhe treatment plan but need not be on site to supervise che PTAs.
Equipment for each center could be purchased and installed for approximately $30,000 (five year depreciation, no salvage value). Operational coses, such as laundry and medical supplies, are estimated to add approximately $15 per visit. The one-rime infor mation system upgrade for ambulatory physical therapy would cost $6,500. Other coses may need to be estimated. A consultant has recommended chat PCS only service workers’ compensation patients co start, but Dr. Tobias indicates chat full coverage needs to be considered.
OTHER ISSUES
The board members know chat one member of the board will come co the next b� meeting in hopes of discussing whether PCS is for sale and how best to position PCS for sale. He believes chat PCS cannot be a long-term successful player in the increasingly competitive medical marketplace. He stated, “I am very concerned chat the big box stores will add walk-in services to go along with their pharmacies. I just do not see how we can compete. Our market area is just too volatile!” It is known that Dr. Tobias has always said he would be willing to sell PCS for “the right price.” He has also stated when the regional economy and manufacturing pick up, PCS’s occupational health business should rebound along with its overall profits.
PCS is liable for a 31 percenc federal tax and 9 percent state tax on its profits. Carry-forward losses experienced in the initial years of operation have expired. Local real estate taxes on owned land and buildings are 4 percent of assessed valuation. Current assessed valuation of land in the county is approximately 40 percent of market value or total development cost.
Originally three-year renewable leases were used to secure the needed medical equipment (e.g., X-ray machines, computers) and most furniture. In 2005 PCS’s accoun tant recommended that because PCS was now earning a profit and had used all of its carry-forward tax credits, it should consider borrowing funds to purchase needed equip ment and should cancel all outstanding equipment leases. Between 2005 and 2007, it did. Each center required between $150,000 and $200,000 worth of new equipment. The only equipment leases that remain are for color copiers and general office equipment. PCS maintains a line of credit with a commercial bank in Capital City. Its cost of capital is 2.5 percent above the Wall Street journal prime rate.
Case 3: Physician Care Services, Inc. 93
Based on its annual credit review, PCS has been informed chat its cost of capital could increase by 1 or 1.5 percentage points over the next 18 months. The bank seated
that the management and organization of PCS are seriously flawed: “PCS has become too
dependent on Dr. Tobias in his many roles. His duties need to be divided between two or more qualified professionals.” If PCS does not address this situation, its credit worthi ness will be significantly downgraded. This situation was also noted in the 2013 audit and
management lerter.
Officials in the City of Jasper have requested a meeting with PCS to discuss emer-
gency planning and expanded services. Their specific questions will include whether PCS
would expand hours on Saturday and offer services on Sunday afternoon. Their letter indicated that the majority of urgent care centers nationally offer services on Saturdays (8:00 a.m. to 8:00 p.m.) and Sundays (9:00 a.m. co 7:00 p.m.). A formal response to this inquiry is due within the week.