Finding the Balance Between Clinical Quality and Business Metrics
Picture yourself as a tightrope walker crossing a wire marked "Success." Your balancing pole has a weight on the right side marked "Quality Patient Care." Your pole on the left is marked "Sound Business Operation." Obviously you are now in a complex, tricky balancing act.
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| "Superior patient care is not at odds with running a sound business."—Ivan R. Sabel, CPO, chairman and CEO, Hanger Orthopedic Group Inc. |
Now picture some of your audience lobbing rotten tomatoes at you. These could be labeled "Increased Government Regulation/Administrative Costs," "Encroachment," "Decreased Reimbursement," etc.
This could be a picture of the current environment faced by every O&P company owner, whether a small Mom-and-Pop, a larger multi-facility company, or a big publicly traded company such as Hanger Orthopedic Group—all are facing similar challenges.
To change the analogy for a moment, imagine you are a fish swimming along within your school when you notice a very large fish swimming along nearby. As you swim through dangerous waters, you become more and more concerned about the large fish and are very alert to its movements. What is the big fish like? What are its intentions? Where is it going?
With those thoughts in mind, The O&P EDGE takes a comprehensive look at Hanger, by far the largest single company in the O&P field, in a related series of articles in this issue and online at oandp.com/edge. Lately, Hanger has loomed even larger in the O&P part of the healthcare ocean as its network management company, Linkia, has ignited discussions around company water coolers, coffee stations, and the OANDP-L listserv.
Hanger comprises several units: Hanger Prosthetics & Orthotics, which includes its patient care centers; SPS, the largest O&P distributor in the United States; Innovative Neurotronics, which is developing new neuromuscular technology; and Linkia. Hanger also owns the Newington Certificate Program in Orthotics & Prosthetics, which is accredited by the National Commission on Orthotic and Prosthetic Education (NCOPE) in cooperation with the Commission on Accreditation of Allied Health Education Programs (CAAHEP). Newington soon will offer a masters degree program in prosthetics and orthotics which will meet requirements of the University of Connecticut and the state. Also part of the education offering is a residency program in which students fulfill the residency requirement for eligibility to take the American Board for Certification in Orthotics and Prosthetics (ABC) certification exam. (Editor's Note: For more information, see "O&P Ascends Professional Summit," The O&P EDGE, October 2006.)
Hanger has 624 patient care facilities in 45 states, more than 1,000 certified practitioners, and provides O&P care to about 850,000 patients annually, according to Sabel.
Focused Strategy
In reviewing Hanger's operations, one can see that Hanger has developed a well-thought-out strategy of vertical integration, expansion, and controlled diversification.
Regarding business strategy, Harvard Business School online comments: "The fundamental purpose of strategy is to integrate the activities of the organization around a distinctive position in the market, which yields a competitive advantage that hopefully can be maintained for some period of time."
One business website defines "vertical integration" as "the potential within an enterprise to incorporate all aspects of management, production, sales, and distribution into [its] business operations."
In a degree of vertical integration, Hanger's core competency is providing orthotic and prosthetic services through its patient care centers; however the company has gained a measure of cost savings, additional revenue sources, and control over the entire process via its distributor, SPS; its new technology development through Innovative Neurotronics; and its network management company, Linkia, which contracts with insurers and other payers to provide its services. Plus, Hanger's residency program encourages a pipeline of the next generation of practitioners to flow into Hanger patient care.
Expansion Planned
According to Sabel, Hanger's strategy includes continuing to acquire O&P facilities "that will densify our existing areas of service as well as those that will take us into areas where we don't yet have a presence." He added, "What we are looking for are facilities that provide superior patient care and would contribute to our strategic advantage."
New technology is a key part of Hanger's strategy. Sabel sees patient care and technology as major growth areas for O&P. "However, new technology development can't just be a new widget—we need to show quantifiable beneficial outcomes for patients," he added.
"As demographics indicate, the aging population will drive increased need for O&P services," he continued, "but we'll have to demonstrate the efficacy of treatment and do cost-benefit analyses." Areas of increased demand for O&P services are expected to be in the Sunbelt states of Arizona, California, Texas, and Florida, as well as other prime retirement locations.
"We're working on technologies that would benefit our patient base, and we define our patient base as anyone in need of rehabilitation products or services'—this obviously includes orthotics and prosthetics but also encompasses a larger spectrum," Sabel said.
When asked if Hanger was considering the acquisition or formation of any other research & development companies in addition to Innovative Neurotronics, Sabel noted that because of its significant market presence, Hanger is continually being approached by technology developers to help commercialize their ideas and products. "The decision as to whether to acquire or partner is really a case-by-case decision and is based primarily on what the benefit would be to our patients in these relationships." He continued, "We have a number of other areas and products that we are currently exploring, but because of confidentiality agreements, I'm not in a position to disclose them."
Hanger works in both patient care and research in cooperation with the military, and has provided patient care at Walter Reed Army Medical Center, Washington DC, and Brooke Army Medical Center, San Antonio, Texas, as well as for veterans elsewhere. Hanger also has been involved with the exciting research in thought-controlled prosthetics being carried out at the Rehabilitation Institute of Chicago (RIC).
In expanding its services and presence, is Hanger considering adding other healthcare professionals to its team? Sabel did not shut the door on this possibility. "We view ourselves as an O&P provider, and that is what we currently are," Sabel answered. "O&P is our core competency, but we are always looking at areas that can better service our patient base. Our patients may come to us with one specific need—for an orthosis or prosthesis—but they may have other needs. So as we continue to develop the company, we would be looking at anything that is within the overall rehab continuum."
Do Bottom-Line Concerns Impact Care Quality?
There have been frequent comments in the profession that the business pressures of being a large publicly traded company with the need to be focused on cost concerns, profit, and the bottom line have unfavorably impacted the quality of Hanger's patient care. Looking at the situation realistically, all O&P companies face similar pressures, although Hanger has the added pressure of meeting shareholder expectations of growth and stock value. Throughout the profession, there have been practitioners running the gamut from high-caliber, mediocre, and even downright bad as far as patient care; this range is not restricted to any one type or size of company. And even the best practitioners are not likely to say they have managed to satisfy every single patient or referral source. Much of what has been said is of the "he said, she said" variety—impossible to either confirm or refute, a fact emphasizing the need for the profession as a whole to continue developing quantifiable outcomes measurements and data to take judgment out of the subjective realm into the objective and provable.
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Hanger is developing clinical protocols, which is a major responsibility of its chief medical officer, John Rush, MD. Protocols have been developed for microprocessor knees, burn masks and care, upper-extremity care, and plagiocephaly, for instance, Rush said.
Aiding Hanger's patient care are specialized national and regional practitioner teams, such as its Upper-Extremity and Lower-Extremity Prosthetic Programs, under which practitioners with a high degree of expertise in specific areas travel to locations around the US to assist with especially difficult, complex cases. Heading the Upper-Extremity Program is Troy Farnsworth, CP, FAAOP; heading the Lower-Extremity Program is Kevin Carroll, CP, FAAOP. These highly experienced practitioners provide a resource for Hanger facilities to tap into when needed.
Hanger also requires all facilities contracted with Linkia to be accredited according to the pending CMS (Centers for Medicare & Medicaid Services) regulations. Sabel is a former president of ABC and strongly believes in its practitioner certification and facility accreditation standards and requirements.
Hanger maintains its own program of practitioner education, the annual Education Fair in Reno, Nevada. Said Sabel, "We put a considerable amount of our resources back into our education program. It's very important that all our practitioners have access to the latest technology and the training behind that technology. We want our practitioners to 1) be able to make informed choices; and 2) to be competent in applying those choices."
Cost-Benefit Tools
Looking at business metrics, Hanger has created an extensive analysis of the myriad componentry choices and has established what it calls "appropriate protocols" around these choices, Sabel explained. An example is a microprocessor knee protocol, called the PAVET system, which Sabel noted, also has been adopted by a number of payers as the prerequisite for authorizing a microprocessor knee.
"We have also developed a program which we call Hanger's Best Value Program, which is a clinical guide as to what components are appropriate for a particular treatment; the guide includes a cost-benefit analysis of these choices," Sabel said. "However, the actual decisions as to what componentry is used and what treatment protocols are followed for a particular patient is the decision of the practitioner."
However, Hanger does give bonuses for achieving certain revenue levels, which could put pressure to select lower-cost options—the same pressure that some HMOs put on their physicians.
Hanger maintains a central Human Resources department for recruiting staff, but from this source, facility managers interview and select new hires, after they have received authorization for additional personnel they feel are needed, Hanger explained.
Some practitioners have asserted that there is a "cookie-cutter" mentality at Hanger that dampens individual initiative and creativity in finding solutions. However, standardization of processes and procedures is a rather typical situation in large corporations.
Said Sabel, "From time to time there are concerns voiced about the quality of patient care provided by a large publicly traded company, because of certain pressures from stockholders and the need to watch the bottom line. This revolves around Hanger, since we're unique—the only large publicly traded company in this arena."
Both Sides of the Coin
"I think it's important to remember that I've guided this company for the last 20 years; before that, I was a small, independent private practitioner," Sabel continued. "No one understands the advantages and the limitations of being a small, independent practitioner more than I do, but I also recognize the advantages that a large company has. Obviously, we have significant access to capital to invest in technology, systems, and other advancements for our constituents—patients, practitioners, and payers.
"When I started in 1986, Hanger was a coalition of small independent providers," he continued. "We built this company by acquiring Mom-and-Pops in all these geographic locations and harnessing the energy and entrepreneurial spirit and clinical capabilities into a cohesive organization of providers. I believe we provide superior clinical care."
Sabel sees the O&P field as continuing to maintain healthy competition, although he said that he expects the O&P industry over the next five years to continue to consolidate. "Technology will be a significant driver, and the challenge will be to provide superior service and a cost that is justified to payers through protocols and better patient outcomes."
He added, "One thing that drives most of us is that we have a positive impact on people's lives. And as you look at sheer demographic numbers, and as the population lives longer, there is greater need for our services. There's room for all of us to meet the needs of the population we serve."
