Mission-based budgeting: removing a graveyard.

Many activities in today's medical schools no longer have medical students' education as their central reason for existence. Faculty are hired primarily to provide clinical service or to make discoveries, with the role of educator of secondary importance. Budgeting in medical schools has not evolved in concert with these changing roles of faculty. The cost of medical students' education is still calculated as if all faculty were hired primarily to teach medical students and their other activities were to support this "central" mission. Most medical schools still mix revenues without regard to intent and cannot accurately determine costs because they confuse expenses with costs. At the University of Florida College of Medicine, a group of administrators, chairpersons, and faculty developed a budgeting process now called mission-based budgeting. This is a three-step process: (1) revenues are prospectively identified for each mission and then aligned with intended purposes; (2) faculty productivity, i.e., faculty effort and its quality, is measured for each of the missions; and (3) productivity is linked to the prospective budget for each mission. This process allows the institution to understand the intent of its revenues, to measure how productive its faculty are, to learn the true costs of its missions, to make wise investment decisions (subsidies), and to justify to various constituents its use of revenues. The authors describe this process, focusing particularly on methods used to develop a comprehensive database for assessment of faculty productivity in education.     

Overcoming a perfect storm: an academic cardiology section's story of survival.

Increasingly, academic institutions are grappling with financial pressures that threaten the academic mission. The author presents an actual case history in which a section of cardiology in an academic health center was confronted with huge projected deficits that had to be eliminated within the fiscal year. The section used eight principles to shift from deficit to profitability (i.e., having revenue exceed costs). These principles included confronting the brutal facts, managing costs and revenue cycles, setting expectations for faculty, and quality improvement. The section accomplished deficit reduction through reducing faculty salaries (nearly $2 million) and nonfaculty salaries ($1.3 million) and reducing operational costs while maintaining revenues by increasing individual faculty productivity and reducing accounts receivable. In the face of these reductions, clinical revenues were maintained, but research revenue and productivity fell (but research is being fostered now that clinical services are profitable again). These principles can be used to stabilize the financial position of clinical practices in academic settings that are facing financial challenges.     

A mission-based reporting system applied to an academic pathology department

We report how data from the University of California (UC) Davis mission-based reporting system (MBR) can be used to define contributions for each division within a Department of Pathology based on faculty rank and series, and to evaluate whether these contributions are in alignment with the missions of the department and the goals of the school's leadership. MBR summary reports were generated for each division within the Department of Pathology; these reports illustrated the average contribution for each faculty rank and series in each of the following missions: investigative/creative work (research), teaching, clinical service, and administrative/community service. All divisions contributed equally to the teaching mission, averaging approximately 1/3 of a faculty member's time. Research was the primary mission for faculty in both the Research and the Clinical Pathology divisions, whereas clinical service was the primary mission for Anatomic Pathology. Both Anatomic Pathology and Clinical Pathology also played a large role in the administration/community service mission. These roles were appropriate based on the division's distribution of faculty in each of the faculty series. The average contribution to both the research and administrative/community service missions were larger for the Department of Pathology than it was for the school as a whole. The Department of Pathology's average contribution to both the teaching and clinical service missions was less than the school's average. We conclude that MBR data creates unique profiles for divisions and the department and enables interdepartmental comparisons that would not be possible by other means. Within the context of our school, the present analysis illustrates that the Department of Pathology is fulfilling the expectations of the school's leadership. In a more general sense, these profiles allow appropriate monitoring of the workforce, funds flow analysis, allocation of resources, and strategic planning in an academic medical center.     

The metrics process: Baylor's development of a "report card" for faculty and departments.

In 1996, Baylor College of Medicine began the first year of its "metrics process," collecting, analyzing, and reporting data on the performance of each individual faculty member and each department in achieving the school's missions of education, patient care, research, service, and finance. This article is a report of the first two years of the process, with updates about the 1999 process, future plans, and lessons learned. The primary goal of the metrics process is to provide meaningful data to assess and improve the performance of faculty and departments across all missions. The authors (1) indicate the categories chosen, within each mission of the school, for measuring faculty time and effort (e.g., patient care, with or without learners) and state the measures chosen (e.g., percentage of time); (2) describe the development of questionnaires in 1996 and 1997 to acquire data from faculty, in the chosen categories and measures, about the time and effort they spent; and (3) report highlights of the resulting departmental data that were gathered in 1997. Among the key categories and units of measure chosen for measuring faculty (and departmental) time and effort are research grant dollars (total and per research full-time equivalent, or FTE); basic research grant dollars per square foot of laboratory space; percentage of faculty who spend at least 50% of their time in research who are National Institutes of Health principal investigators; numbers of inpatient and outpatient visits per evaluation and management FTE; total relative value units (RVUs) per patient-care FTE; patient-care income/RVU and expense/RVU for total faculty and support staff; percentage of faculty with at least one leadership position in a state or national organization; and income in excess of expense, by mission (e.g., patient care). Results of comparing data from the first two years of the metrics process demonstrate marked improvements in performance for most research measures (i.e., items of measurement agreed upon for the metrics process). The process is continually being redeveloped; the ultimate challenge is to place the objective measurements in a context where less objective qualities (e.g., innovation) also figure importantly in the evaluation and fostering of excellence. The metrics process is providing important management data, encouraging significant discussions among faculty and chairs about performance and accountability, and aiding greatly in departmental goal-setting and ultimately in determining the overall performance of the school.     

Creating a mission-based reporting system at an academic health center.

The authors developed a Web-based mission-based reporting (MBR) system for their university's (UC Davis's) health system to report faculty members' activities in research and creative work, clinical service, education, and community/university service. They developed the system over several years (1998-2001) in response to a perceived need to better define faculty members' productivity for faculty development, financial management, and program assessment. The goal was to create a measurement tool that could be used by department chairs to counsel faculty on their performances. The MBR system provides measures of effort for each of the university's four missions. Departments or the school can use the output to better define expenditures and allocations of resources. The system provides both a quantitative metric of times spent on various activities within each mission, and a qualitative metric for the effort expended. The authors report the process of developing the MBR system and making it applicable for both clinical and basic science departments, and the mixed success experienced in its implementation. The system appears to depict the activities of most faculty fairly accurately, and chairs of test departments have been generally enthusiastic. However, resistance to general implementation remains, chiefly due to concerns about reliability, validity, and time required for completing the report. The authors conclude that MBR can be useful but will require some streamlining and the elimination of other redundant reporting instruments. A well-defined purpose is required to motivate its use.     

Measuring faculty effort and contributions in medical education.

A national panel on medical education was appointed as a component of the AAMC's Mission-based Management Program and charged with developing a metrics system for measuring medical school faculty effort and contributions to a school's education mission. The panel first defined important variables to be considered in creating such a system: the education programs in which medical school faculty participate; the categories of education work that may be performed in each program (teaching, development of education products, administration and service, and scholarship in education); and the array of specific education activities that faculty could perform in each of these work areas. The panel based the system on a relative value scale, since this approach does not equate faculty performance solely to the time expended by a faculty member in pursuit of a specific activity. Also, a four-step process to create relative value units (RVUs) for education activities was developed. This process incorporates quantitative and qualitative measures of faculty activity and also can measure and value the distribution of faculty effort relative to a school's education mission. When adapted to the education mission and culture of an individual school, the proposed metrics system can provide critical information that will assist the school's leadership in evaluating and rewarding faculty performance in education and will support a mission-based management strategy in the school.     

Measuring contributions to the clinical mission of medical schools and teaching hospitals.

This is the final report of a panel convened as part of the Association of American Medical College's (AAMC's) Mission-based Management Program to examine the use of metrics (i.e., measures) in assessing faculty and departmental contributions to the clinical mission. The authors begin by focusing on methods employed to estimate clinical effort and calculate a "clinical full-time equivalent," a prerequisite to comparing productivity among faculty members and departments. They then identify commonly used metrics, including relative-value units, total patient-care gross charges, total net patient fee-for-service revenue, total volume per CPT (current procedural terminologies) code by service category and number of patients per physician, discussing their advantages and disadvantages. These measures reflect the "twin pillars" of measurement criteria, those based on financial or revenue information, and those based on measured activity. In addition, the authors urge that the assessment of quality of care become more highly developed and integrated into an institution's measurement criteria. The authors acknowledge the various ways users of clinical metrics can develop standards against which to benchmark performance. They identify organizations that are sources of information about external national standards, acknowledge various factors that confound the interpretation of productivity data, and urge schools to identify and measure secondary service indicators to assist with interpretation and provide a fuller picture of performance. Finally, they discuss other, non-patient-care, activities that contribute to the clinical mission, information about which should be incorporated into the overall assessment. In summary, the authors encourage the use of clinical productivity metrics as an integral part of a comprehensive evaluation process based upon clearly articulated and agreed-upon goals and objectives. When carefully designed, these measurement systems can provide critical information that will enable institutional leaders to recognize and reward faculty and departmental performance in fulfillment of the clinical mission.     

Mission aligned management and allocation: a successfully implemented model of mission-based budgeting.

In response to declining funding support and increasing competition, medical schools have developed financial management models to assure that resource allocation supports core mission-related activities. The authors describe the development and implementation of such a model at the University of Wisconsin Medical School. The development occurred in three phases and included consensus building on the need for mission-based budgeting, extensive faculty involvement to create a credible model, and decisions about basic principles for the model. While each school may encounter different constraints and opportunities, the authors outline a series of generic issues that any medical school is likely to face when implementing a mission-based budgeting model. These issues include decisions about the amounts and sources of funds to be used in the budgeting process, whether funds should be allocated at the department or individual faculty level, the specific metrics for measuring academic activities, the relative amounts for research and teaching activities, and how to use the budget process to support new initiatives and strategic priorities. The University of Wisconsin Medical School's Mission Aligned Management and Allocation (MAMA) model was implemented in 1999. The authors discuss implementation issues, including timetable, formulas used to cap budget changes among departments during phase-in, outcome measures used to monitor the effect of the new budget model, and a process for school-wide budget oversight. Finally, they discuss outcomes tracked during two years of full implementation to assess the success of the new MAMA budget process.     

Sponsored-research funding by newly recruited assistant professors: can it be modeled as a sequential series of uncertain events?

PURPOSE: Recruitment of junior faculty with an investigative focus is essential to regenerate and expand the research mission of academic health centers. Predicting funding profiles for junior faculty is limited by variability in the timing, magnitude, and duration of projected research grant funding. The author demonstrated the validity of Monte Carlo simulation to predict sponsored-research revenues by newly recruited faculty. METHOD: Demographic characteristics and funding profiles were determined for assistant professors recruited to Yale University School of Medicine in four separate fiscal years (1992-93, 1993-94, 1996-97, 1997-98). These data were applied to develop and assess the simulation model. RESULTS: Only when assistant professors were subcategorized by type of research was it possible to accurately predict recovery of both direct research costs and facilities and administrative costs. Simulations illustrated both the high degree of variability among individual faculty and also the advantage of a prediction tool that displays the range and probability of all possible outcomes. CONCLUSION: Sponsored-research funding by newly recruited assistant professors can be modeled as a sequential series of uncertain events and used to predict consequences of imminent changes in federal funding for biomedical research.     

Financial impact of physician assistants on medical practice.

A study of revenues generated and expenses incurred by 12 physician assistants (MEDEX) who had held salaried positions for at least one year was conducted to determine their financial impact on primary-care practices. Daily charge logs were used to make annual estimates of MEDEX-generated revenues. One method of estimating annual revenues produced a mean of $28,190 per year, and a second method yielded a figure of $30,210 per year. Financial statements were used in two different ways to estimate annual expenses related to the employment of the MEDEX. One procedure indicated average costs of employment were $15,900, and the other $20,100. Ten of the 12 practices in the study experienced substantial gains of estimated revenue over expenses ascribed to the activities of the MEDEX.     

The Academy at Harvard Medical School: nurturing teaching and stimulating innovation.

The Academy at Harvard Medical School, established in 2001, was formed at a critical moment for medical schools in this country. Several decades of enormous growth in the biomedical research and clinical care activities of medical school faculty have resulted in great societal benefit. The unintended consequence has been a decline in faculty time and reward for the educational mission that is unique to a medical school. The impact of this decline is particularly felt now because the explosive growth in the science and technology relevant to medical practice, coupled with dramatic changes in the health care delivery system, calls for new models for the education of the next generation of physicians. The mission of the academy is to renew and reinvigorate the educational mission of Harvard Medical School (HMS). By bringing together a select group of some of the school's most talented and dedicated faculty and providing direct support for their work related to education, the academy has created a unique mechanism for increasing the recognition of teaching contributions of both academy members and the teaching faculty at large, fostering educational innovation, and providing a forum for the exchange of ideas related to medical education that cross departmental and institutional lines. The authors describe the academy's membership criteria, structure, governance, activities, institutional impact, and plans for long-term evaluation, and indicate challenges the academy will face in the future.     

Developing a new faculty practice plan with a model for funds flow between the hospital and the plan.

The majority of academic health centers are experiencing significant difficulties balancing their research, teaching, and clinical missions while maintaining adequate financial performance. One of the major areas under intense scrutiny is the specific financial relationship between the hospital and the full-time faculty. A realignment of the funds flow between these two entities is becoming essential to the future viability and ultimate survival of many health systems. The authors describe a model that evolved as part of the integration of the faculty practice plans of their institutions when they merged into a single health system, and that provides a framework that specifically addresses these issues of funds flow. The model includes (1) a strong partnership between the hospital and the full-time faculty; (2) a governance model of chairmen, faculty, and administration; (3) flexibility for the department chairs to set salaries and make significant financial decisions relative to their departmental performances; (4) a specific formula for funds flow for graduate medical education dollars from the hospital to the clinical departments; (5) local front-end charge capture and back-end central collections; and (6) clear and consistent definitions of revenue and expense items for both partners.     

A computerized faculty time-management system in an academic family medicine department.

The authors describe the development, implementation, and evaluation of a computerized faculty time-management system (FTMS) in the Department of Family Medicine at the University of North Carolina-Chapel Hill. The FTMS is presented as an integrated set of computerized spreadsheets used annually to allocate faculty time across all mission activities of the department. It was first implemented in 1996 and has been continuously developed since then. An iterative approach has been used to gain consensus among faculty about time resources needed for various tasks of all missions of the department. These time-resource assumptions are used in the computerized system. Faculty time is allocated annually by the department vice chair in negotiation with individual faculty, making sure that the activities planned do not exceed the work time each faculty member has available for the year. During this process, faculty preferences are balanced against department aggregate needs to meet mission commitments and obligations. The authors describe how the computerized FTMS is used for faculty time management and career development, department planning, budget planning, clinical scheduling, and mission cost accounting. They also describe barriers and potential abuses and the challenge of building an organizational culture willing to discuss faculty time openly and committed to developing a system perceived as fair and accurate. The spreadsheet file is available free from the authors for use in other departments.     

Improving clinical productivity in the academic setting: a novel incentive plan based on utility theory.

PURPOSE: Academic internal medicine practices face growing challenges to financial viability due to high overhead, competing institutional missions, and suboptimal physician productivity. The authors describe the development of a clinical incentive plan for a group of academic subspecialty physicians at the Dana Clinic, an outpatient setting at Yale School of Medicine, and report on results of the first year's experience under the plan. METHOD: Utility theory was used to assess the risk profile of clinic faculty and identify incentive payments that would optimize faculty benefit or "utility" while minimizing departmental costs. Under the plan, physicians who reached a productivity target based on work Relative Value Units (wRVUs) between October 2003 and November 2004 had overhead costs covered and received a fixed payment to support salary; additional incentive payments were available for those exceeding the target. Physicians failing to reach the target were responsible for their own overhead costs and received no fixed payment. Physician productivity as measured by wRVU per full-time equivalent (FTE) was compared for the year prior to, and the year following, incentive plan introduction. RESULTS: Forty-seven members of eight academic sections were included in the analysis. Median productivity improved by 34%, with 42 of 47 physicians showing improvement. Significant improvements were also noted in collections (62%) and visit volume (23%), and shifts were observed in coding patterns. CONCLUSIONS: The unique threshold-based structure of the incentive plan, as determined through utility theory modeling, as well as permitting physicians to choose how to achieve the wRVU target were key features of its success, resulting in improved productivity without increasing practice resources or faculty salaries.     

The academy movement: a structural approach to reinvigorating the educational mission.

Despite its fundamental importance, the educational mission of most medical schools receives far less recognition and support than do the missions of research and patient care. This disparity is based, in part, on the predominance of discipline-based departments, which focus on the more sustainable enterprises of research and patient care. Where departmental teaching is emphasized, it tends to center on trainees directly associated with the department-leaving medical students unsupported. The authors argue that the ongoing erosion of the educational mission will never be reversed unless there are changes in the underlying structure of medical schools. Academies of medical educators are developing at a number of medical schools to advance the school-wide mission of education. The authors describe and compare key features of such organizations at eight medical schools, identified through an informal survey of the Society of Directors of Research in Medical Education, along with direct contacts with specific schools. Although these entities are relatively new, initial assessments suggest that they have already had a major impact on the recognition of teaching efforts by the faculty, fueled curricular reform, promoted educational scholarship, and garnered new resources to support teaching. The academy movement, as a structural approach to change, shows promise for reinvigorating the educational mission of academic medicine.     

The views of U.S. medical school deans toward academic primary care.

PURPOSE: To understand the views of U.S. medical school deans about their primary care faculties. METHOD: In 2000, the authors mailed a questionnaire containing 43 multipart items to deans of 130 U.S. allopathic medical schools. The questionnaire assessed the deans' attitudes about and evaluation of primary care at their school and their school's efforts to strengthen it. Deans were asked to compare family medicine, general internal medicine, and general pediatrics with nonprimary care clinical departments at their schools. RESULTS: Of the 83 (64%) deans who responded, 82% reported their school had departments or divisions of family medicine, general internal medicine, and general pediatrics. Deans rated general internal medicine and general pediatrics higher than nonprimary care faculty on clinical expertise and productivity (p < .001) and family medicine equivalent to nonprimary care faculty. Deans rated all three primary care faculties superior to nonprimary care faculty for teaching skills (p < .001) and programs (p < .05), but lower than nonprimary care disciplines for research productivity (p < .01) and revenues (p < .001). They rated family medicine and general pediatrics lower for research skills (p < .001), but 73% of deans stated research was equally important for primary care and nonprimary care departments. Deans considered overall financial resources to be equivalent for primary care and nonprimary care departments, but 77% of deans felt primary care departments or divisions needed financial support from the medical school to survive. Most deans attempted to strengthen primary care by changing the curriculum to promote primary care and by providing financial support. CONCLUSIONS: Deans ranked primary care faculty high on clinical and teaching measures. Although they considered research to be an important activity for primary care faculty, they evaluated it low relative to nonprimary care departments.     

Aligning academic and clinical missions through an integrated funds-flow allocation process.

Although much has been written about implementing mission-based management tools to help facilitate managing the primary academic missions at academic medical centers, there is surprisingly little written on standardized methodologies to align financial support across the academic and clinical missions. However, professional fee reimbursement has not kept pace with costs, and this, combined with potential decreases in research funding associated with the reductions in National Institutes of Health funding, creates additional financial challenges for academic clinical departments that do not share in technical fee reimbursement. As an integrated academic health system, the University of Pennsylvania School of Medicine and Health System recently took the opportunity to broadly restructure funds-flow opportunities, so as to help align the strategic goals across all of the clinical department activities.     

Implementing the logic model for measuring the value of faculty affairs activities.

In today's environment of increasing accountability in higher education and health care, it is critical that administrative units of a medical school demonstrate the added value of their activities to the school's mission and that these units discriminate those activities that demonstrate the most return on investment. This is particularly important for administrative units whose activities may not be considered essential to the basic functioning of the medical school. For example, admissions would likely be considered an essential administrative unit that the medical school cannot do without, while faculty development might be considered nonessential. Effective measurement systems serve two purposes. They guide decision making throughout the organization and they serve as a basis for evaluating performance. This article describes use of the program logic model to measure the contribution of faculty affairs and development offices to the recruitment, retention, and development of a medical school's teaching faculty, an outcome central to the mission of the medical school. The process of developing and rewarding faculty for teaching is used to illustrate the application of this method in linking activities of faculty affairs and development offices to outcomes that are of importance to the medical school.     

Impact of a compliance program for billing on internal medicine faculty's documentation practices and productivity.

PURPOSE: Academic health centers and faculty practice plans have implemented programs to comply with Office of Inspector General (OIG) billing regulations. This study measured the impact of such a program on physicians' billing practices, faculty productivity, and operating revenues. METHOD: A prospective two-year study of departmental billing activities was carried out in 1997-98 and 1998-99 in the department of internal medicine at the Saint Louis University School of Medicine and its faculty practice plan. Compliance with inpatient evaluation and management (E/M) coding and Health Care Financing Administration (HCFA) billing was evaluated by an independent staff of experts. Beginning in 1998-99, the department provided detailed monthly reports of and education in billing and compliance performance to divisional managers and individual faculty. RESULTS: Inpatient admission profiles, practice patterns, and payer mixes of the faculty practice plan and department did not differ during the study. The gross collection rates for the practice and the department rose by 7.3% and 9.5%, respectively, and all divisions increased in their gross collection rates in 1998-99. All but one division increased E/M services in 1998-99 (range -4% to +151%). All divisions decreased their rates of unbillable E/M services in 1998-99. The two divisions with the highest unbillable rates in 1997-98 (gastroenterology and cardiology) significantly reduced their unbillable service rates in 1998-99 (-7.74% and -7.17%, respectively). Medical oncology and geriatrics recorded the greatest reductions in 1998-99 (-63% and -52%, respectively). All but two divisions increased the percentages of complex inpatient E/M services in 1998-99 (average = +27.4%), with commensurate reductions in less complex visits (p < 0.05), and there was an inverse correlation (R = -0.85; p < 0.01) between the relative increases in the division's inpatient encounters and the service complexity charged. A modest inverse correlation (R = -0.50; p < 0.05) existed between the reduction of relative percentages in divisions' unbillable rates (averaging -34%) and the increase in their gross collection rates (averaging + 31%). CONCLUSION: Implementation of a billing compliance program at the departmental level enhances physician productivity and billing compliance for inpatient E/M services, potentially increasing departmental revenues while reducing the institutional risk of an OIG audit.     

Collaboration and peer review in medical schools' strategic planning.

The management of medical schools has never been so difficult, but can be facilitated by using a well-developed, broadly accepted strategic plan. While the concept of strategic planning has been reasonably well accepted by both faculty and leaders at most medical schools, using the strategic plan to allocate resources has proved to be a challenge. Achieving "buy-in" by all parties involved can help meet this challenge and can be critical to the success of strategic planning and management. The authors describe the collaborative planning process that the University of Wisconsin Medical School used to develop its 1998-2000 strategic plan. This unique effort culminated in using a peer-review process--similar to that used by the National Institutes of Health (NIH)--and developing criteria to select a limited number of program priorities. This selection occurred after a school-wide process to solicit strategic program proposals had taken place. Over 130 faculty from most departments throughout the school helped develop and revise the strategic plan. There was frequent communication and engagement with faculty at all levels, which was important in gaining the faculty's acceptance and, indeed, endorsement of the process and its outcomes. Because the process was effective in achieving consensus about the school's strategic priorities, it enabled the school to reach a firmer end-point and implementation plan than had been possible with the previous strategic plan. It also identified important weaknesses in some areas of the medical school; the resulting attention to those areas will help strengthen the school. Finally, the process moved much more swiftly than the previous effort. The authors recommend that such an approach be used by other medical schools, and be carried out before a school implements mission-aligned budgeting and management of its fiscal resources.