Robert G. Larrison, Jr., MBA, FACHE, director, Rehabilitation Services, The Regional Medical Center at Memphis, Tennessee

ORGANIZATIONAL INFORMATION

Hospital A is a 620-bed nonprofit medical teaching facility serving a metropolitan area of approximately one million people. The hospital was established in 1829 and provides general medical/surgical services, ambulatory care, and obstetric care. The medical center is home to a well-respected level I trauma center, regional burn center, and level IV neonatal nursery. Hospital A serves a 150-mile radius that includes a five-state region with air ambulance service. It was originally chartered with the purpose of taking care of the sick traveler; local citizens were not admitted. The hospital is recognized as the oldest in the state and over the years has broadened its mission to serve all who need care regardless of their ability to pay. Given this mission and limited financial resources, competition for funding hospital projects is fierce.

BRIEF STATEMENT OF THE PROBLEM

As with most healthcare organizations, Hospital A is constantly trying to reduce expenses. Departmental directors and vice presidents work closely to identify areas for improvement while operating on very lean budgets. One such opportunity for improvement was the average length of stay (ALOS). Because of the volume of trauma and burn admissions as well as the level of charity care, the medical center expects to have an ALOS higher than the national average. However, over the past nine months ALOS began to escalate beyond budget forecasts. Because of the severity of their injuries and medical complications the hospital's patients are particularly difficult to place.

Adding to the ALOS problem was the hospital's commitment to charity care as a safety-net hospital. Twenty to thirty percent of our services are delivered to "self-pay" patients, who often have weak social support systems (transportation, telephones, education, and family support) that lead to noncompliance following discharge. Many times these patients reenter the system through the emergency department, causing rework and service redundancy. Finally, patients who are insured by the state Medicaid system face limited discharge options. Reimbursement levels are not high enough to cover costs, and area providers minimize the financial impact by limiting admissions.

DESCRIPTION OF THE PROBLEM

In 1999, I relocated to the area to assume the position of director of rehabilitation for Hospital A. I was made aware of the challenges the hospital faced, including growing numbers of uninsured patients and shrinking government support. At the time the vice president of professional services expressed an interest in the growth of post-acute care services and indicated that the hospital would be supportive of such initiatives. I accepted the position with the intention of stabilizing current rehab operations and growing the post-acute care continuum.

As I settled into my new role I researched the history of post-acute development and was surprised that a hospital with a level I trauma center and regional burn center did not have any post-acute service line. I met with case management to examine current discharge patterns and patient financial services (PFS) to look at cost reduction and revenue opportunities. Parallel to this I researched the history of previous post-acute proposals and found that approximately one year prior to my arrival the hospital had applied for and received a certificate of need (CON) for a skilled nursing facility (SNF). In addition, previous rehab directors had proposed inpatient rehabilitation dating back to 1995.

I also noted that rehabilitation had very little influence and was not a well-respected service in the hospital. I believe this was primarily the result of two factors: the availability of therapists and the fact that leadership was focused on day-to-day operations. The hospital had used and was still using a great number of outside contract staff to provide acute care and outpatient rehab. Staff lacked loyalty to both the department and medical center and was not invested in the growth and development of programs that would benefit the organization. Keeping in mind that the overall goal was to improve patient care and create value for the medical center, I decided to implement a course of actions to simultaneously improve the reputation of rehabilitation, demonstrate the value of our department, and improve our position within the organization. I needed to gain the confidence of senior management to help the hospital select the most appropriate post-acute service line. As a byproduct, rehabilitation would be better positioned to receive future funding.

As I continued my research, case management provided data that began to frame a clear picture. Intuitively we believed that the trauma and burn centers attracted patients who were appropriate for post-acute care. The discharge data indicated that the greatest number of these patients had been discharged to an inpatient rehabilitation facility (IRF). In fact, over the previous two-year period the hospital had discharged on average 300 patients per year to providers in the local metropolitan area. Approximately 70 additional patients were appropriate for discharge to an IRF, but because of funding source these patients did not have the option of placement and were sent home with family support. Although we could not generate data to support our theory, we were confident that many of these patients returned to our medical center through the emergency department for complications such as medication management, pressure sores, respiratory problems, and psychiatric/social issues. I proposed that many of these patients would not reenter the system if post-acute care options were available, preventing service redundancy and problems with ALOS.

PFS analyzed the payer mix and found that the trauma and burn centers supported a solid reimbursement structure. The greatest percentage of patients discharged to local rehab facilities were between the ages of 18 and 65 and were covered by commercial reimbursement, Medicare, and in-state Medicaid. A very small percentage of uninsured patients, approximately 2 percent, were offered such options. Medically complex cases appropriate for long-term acute care (LTAC) represented our second largest post-acute group, followed by discharges to SNFs. Further financial analysis indicated that inpatient rehab could support a payer mix with the following distribution: 19 percent Medicare, 37 percent commercial insurance/worker's compensation, 16 percent in-state Medicaid, 13 percent out-of-state Medicaid, and 15 percent charity care.

Inpatient rehabilitation clearly could improve the hospital's financial performance by generating revenue and reduce ALOS by providing a release valve for discharge planning. My research provided a base of information to present to executive staff. I knew there had been previous proposals, and the information I had collected provided logical arguments for why this service would create value for the organization.

ADMINISTRATIVE DECISIONS

Phase I
Several post-acute proposals had been made prior to my arrival in 1999, and the medical center had secured a CON for an SNF. I reviewed all available proposals (SNF, IRF, LTAC), both those made by companies interested in joint ventures and those made by previous directors. The common theme was that the medical center should pursue an IRF managed and operated by a for-profit company. Previous rehab directors agreed with this assertion. The hospital, however, had not committed to any post-acute project.

The general consensus among executive staff, physicians, and nursing was that post-acute services were needed. My research indicated the hospital was not confident that it had the internal expertise to operate such programs and would be more comfortable with a partnership arrangement. At least three companies had submitted joint venture/partnership proposals to operate skilled nursing and/or rehab programs for Hospital A. Each company was eager to provide this service and to move the program(s) forward. All agreed to share risk by providing capital for construction and facility improvements.

After thorough investigation of the need for such services and review of all pertinent proposals I formed a strategy to propose the development of an IRF. Unlike previous directors and outside companies, I believed the greatest value to the organization would be provided by a center owned, operated, and managed by the hospital. My thoughts were in contrast to common wisdom as presented by many others, and I knew I should begin an education program focused on two elements: what is inpatient rehab and why we should run it.

At this point I had decided to eliminate the pursuit of an SNF to clear the way for rehab. However, significant resources had gone into the development of the SNF CON. Although pursuing the SNF option first was logical because of the CON, the SNF CON was an obstacle to what I believed would truly add value. A closer examination of the skilled nursing proposal showed that we had no internal expertise to operate the facility, and the patient discharge volume did not suggest that this would be the best service line to pursue.

Armed with supporting data, I began to discuss our options with my vice president. Concurrently, I tried to find allies in other senior managers who knew about rehab or had been responsible for it at some point in their careers. I also began to survey other directors to make sure our current services were meeting their needs, again to gain support from as many advocates as possible. I was fortunate to find that our COO had been responsible for rehabilitation when he was a vice president at another institution. He had also recently contracted with a consultant specializing in post-acute services. The COO soon introduced me to the consultant and asked that we work together on developing the continuum. Having the COO as an advocate significantly improved our chances of opening a rehab facility.

I continued to educate staff at all levels (plumbers, housekeeping, directors, managers, clinicians, physicians, and executives) about rehab, preaching one clear message: We have the internal expertise to run the program, and it will benefit the medical center. After discussing my ideas with my vice president and COO and collaborating with the consultant, I was invited to the annual strategic planning session to present my case for the development of an IRF. The planning session provided a forum for all interested parties to present projects to the executive staff. Each project was evaluated and considered for development in the next budget year beginning in July 2000. Several projects were presented, including three post-acute services (LTAC, SNF, and IRF). Following the planning session the executive committee ranked inpatient rehabilitation second in the list of hospital initiatives for the fiscal year ending in 2001. My explanations of the value of rehab seemed to have been heard.

Phase II
Once the medical center had committed to the rehabilitation center I intensified my education efforts. I focused on informal interactions such as how quickly we responded to phone calls, how accurate we were when completing requests, and a myriad of other activities. These interactions set the tone for our department and communicated how we would operate the IRF. On the advice of my vice president, I had initiated the CON process in January 2000.

As the CON moved forward I analyzed previous rehab proposals and found that the construction costs for the center were substantial. Each proposal recommended the use of unoccupied shell space located on the medical center campus. Construction estimates were between $2.5 and $3 million. Although rehab was gaining a solid reputation and received a "priority" ranking for the following year, I was still not confident that we would receive this type of funding given the history of the department. Adding to this, the hospital is affiliated with a medical school and university faculty who had already developed cash-intensive programs. I was concerned about the funding issue and discussed this with my vice president, emphasizing the positive attributes rehab would have on revenue, expenses, and ALOS. We forfeited the SNF CON 45 days prior to applying for the rehab CON, and in July 2000 Hospital A was awarded a CON for a 20-bed IRF.

I continued to meet with other directors, especially those in case management, nursing, and quality improvement. This allowed me to listen to their needs, gain support, and encourage executive staff to commit to timelines. Next, I approached key physicians who would be major referral sources. The trauma, plastic surgery, neurosurgery, orthopedics, and medicine departments were supportive. They would support the project with referrals as long as our service was equal to or better than that of other metropolitan providers.

As I worked with my vice president, he recommended that I continue to push for timelines, but another large project began to overshadow inpatient rehab. Two months had passed since receiving the CON, and I did not have a commitment from executive staff. I realized why when it was announced that our hospital would attempt to merge with another small hospital operated by the university. The idea was that we would consolidate services and develop a university medical center. Both hospitals would move into a large facility, literally across the street, donated by a third healthcare organization. At that point, September 2000, inpatient rehab was put on hold.

Phase III
Even with this interruption, I remained hopeful. We continued to make substantial changes to acute care and outpatient services. We changed the staff structure and eliminated contractors. We added services and focused our efforts on employee retention. Customer satisfaction became paramount; everyone (employees, other departments, patients, and vendors) was a customer whom we needed to please. This was a critical step in bringing respect to our department and demonstrating value in ideas that were generated from our team.

I continued the internal marketing campaign by using the hospital newsletter, quality reports, in-services, and meetings to highlight rehab staff and their achievements. Within 18 months the department had gone from one of the least known to one of the most well-recognized. We exceeded hospital quality standards and won many customer service awards.

As the merger moved forward I analyzed rehab opportunities with the proposed university medical center. The donated facility was operating a 58-bed rehab unit that would dissolve following the merger. I proposed that we could transfer our CON to the new location and open the center as soon as the merger was complete. Executive staff agreed, and we planned to implement this plan once the merger was final. After six months of analysis the merger proposition did not materialize. In April 2001, I began to pursue inpatient rehab once again.

Phase IV
Toward the close of the fiscal year I was given the opportunity to present the business case to the executive staff a second time. The CFO recommended that I enlist the help of PFS and discharge planning to analyze the effects of the new prospective payment system scheduled to take effect in inpatient rehab in January 2002. In short, our patient population still provided a positive revenue opportunity for the medical center.

The facts held true a year later; Hospital A was potentially losing a tremendous amount of revenue by discharging its most highly reimbursed population to other area providers. In fact, one provider was located within three blocks of the medical center. The business case was straightforward, and I again presented facts and figures on the benefit of having the IRF program versus an SNF. Pro formas, budgets, and timelines were prepared. I reemphasized our internal expertise and provided a construction alternative of $1.4 million to the previous estimates of $2.5 to $3 million. The project was again listed as a priority for the new budget year 2001-02. I was confident that the program would be funded and operational by the end of 2001.

I pushed for defined timelines and financial resources but was not able to get any commitment. Despite the educational efforts and arguments in our favor, executive staff was not familiar enough with rehab to commit the necessary resources. At the same time I lost one of my best advocates. The COO resigned to accept a position with another organization. Executive staff requested that we regroup and again entertain the proposals submitted by the rehabilitation companies.

Minor changes were made in the companies' presentations, and they were still very eager to run the program. All proposals were profitable, so I used the rehabilitation companies' analysis to demonstrate why we should manage the program ourselves. I argued that outside companies stood to gain significant revenues from a partnership and we would not reap many rewards in this type of arrangement. We would have much less control, and ALOS would not be improved as charity beds would not be as readily available. I also explained that we had completed most of the hard work by developing the CON and budget. After careful consideration, it was decided that we could internally operate the program; however, I still did not have defined timelines or financial commitments.

I continued my education efforts and made a decision to enlist the support of a new medical director. Although supportive of rehabilitation, my current medical director was an internal medicine specialist. After discussing it with my vice president I changed medical directors to a board-certified physiatrist who was well-known in the medical community and recommended by our CEO. He was a tremendous asset to our program. He was able to assist in recruitment efforts and helped to communicate the value of rehab to the CEO.

As the planning phase began to move forward, nearly a year after receiving the CON, I found that other projects, some of which were not considered at the beginning of the year, were placed in front of the rehab unit. As weeks turned to months and the project continued to be delayed funding became the primary issue. Although the project was positive on paper and would assist in decreasing ALOS, decision makers could not commit the money necessary to get the project off the ground; other things were more pressing. To move the project forward I was convinced I had to find my own financial resources.

In June 2001, I turned to the medical center's foundation and executive director. I explained the project and argued that dedicated money is needed to make it happen. The director suggested that we collaborate and approach a large philanthropic organization that was sympathetic to healthcare initiatives in the region. Over the next 45 days we developed a grant proposal asking for $1 million. Our own foundation committed an additional $100,000 contingent on the $1 million award. I sought the approval of my vice president before engaging and again met with support.

To the surprise of the medical center, the grant proposal was accepted, and the CEO and I were asked to present the request to the group's executive committee. We were awarded $1 million specifically earmarked for the construction of an IRF. The grant was awarded in such a way that if the money was not used within the guidelines (specific purpose, timelines, and progress updates) of the grant agreement, it could be withdrawn.

The hospital now had $1.1 million in committed funds to construct an IRF within the next calendar year. The hospital would need to provide the project with an additional $300,000 to complete construction. This investment would provide for an estimated $3.4 million first-year gross return and a five-year gross return of $18.2 million. Following the grant award the project began to take off. A new level of commitment had been achieved. The medical center received its first installment of the money in December 2001 and the second installment in March 2002.

RESULTS

Architects and engineers were contacted immediately, and demolition/renovation plans were developed; the scheduled opening date is January 2003.

The primary purpose of this effort was to improve patient care. An on-site rehab program specializing in traumatically injured patients will allow the opportunity to provide better continuity. The community will benefit as the center will offer more discharge options to the main medical center, reserving 15 percent of its available beds for charity care. The program will hopefully prevent rework and future admissions to the emergency department. It will provide a revenue stream for the medical center and help offset some financial shortfalls. Physicians, residents, and interns will have the chance to follow patients after discharge and have more exposure to rehabilitation. The center will provide training for allied health students and local nursing programs as well. We expect this to be the first post-acute service in our continuum, which may include SNF, LTAC, and day programs. Lastly, because this is the largest single grant in the hospital's history, it is a proving ground for good stewardship and may lead to other substantial contributions.

CONCLUSION/RECOMMENDATIONS

When managers begin a project they must know who the key players are and how to best approach them. Research your project and be diligent. Find advocates, and do not assume that anyone knows anything about your project. Embark on an education program, listening more than talking, and set the example of how you will operate by being responsive, on time, and accurate. These attributes will informally communicate your mode of operation and help you recruit the best and brightest when you begin to hire staff. I suggest you treat everyone in the organization as if he or she has something to contribute. Some of the most useful information I received came from staff maintenance personnel on how to approach the construction estimate. They knew the history of other proposals and suggested that I propose a less expensive construction alternative. Patience, persistence, and salesmanship are attributes vital to any project's success. Remember that actions speak louder than words, so lead by example. Be creative and think outside of the box, and read between the lines for a better understanding of why your project is not making progress. Now the real work-implementation-begins!

Sources

The source material for this case report was documented from my own experience over the last 24 months. The report was chronicled from the efforts made by myself on behalf of the medical center to develop an inpatient rehab center. Development of the center would not have been possible without the support of administration, The Med Foundation, Plough Foundation, and a cast of individuals who offered advice. The design of our center was modeled after another rehab hospital where I worked in the early 1990s. I was fortunate to have a clinical mentor who shared his experience and allowed me to be involved in his efforts to develop a 68-bed rehab program. This exposure made a lasting impression that I believed I could transfer to another organization. Special thanks to Jeffrey A. Brandon, FACHE, Maria van Werkhooven, FACHE, Mark W. Thorne, and Kerry N. Dunning for their encouragement.