Software: Learning From the Big Guys

October 1, 2006

Never heard of business performance management software? Just wait.


In the rapidly changing healthcare arena in which profit margins are razor thin, compliance concerns are multiplying, and reimbursement rates are consistently decreasing, effective management and efficiency are the engines that are driving modern, successful private practices.

Medical groups that recognize this are racing to adopt IT solutions that can help reduce administrative redundancies, eliminate excess paperwork, and improve their quality of patient care. But practice management software and EMRs do have their limits. Most of these tools contain ample features that can automate front- and back-office operations, but they lack the muscle to analyze raw data or help practices focus their business strategies.

Enter business performance management, or BPM.

Now nearly eight years old, BPM refers to a software framework that can organize, automate, and analyze the business methodologies, metrics, processes, and systems that drive individual business performance, according to BPM Magazine. Editor David Blansfield says that BPM is essentially a blueprint for adopting better business management strategies.

“Organizations use BPM to help devise a strategy based on analytical data that tell them what they are doing well and not doing well,” says Blansfield. “Most important, it allows you to be able to align strategic plans to budgets, [devise] incentive plans and goals directly related to your strategy, and make sure that strategy permeates throughout the entire organization so that every individual knows the mantra and pursues that goal.”

Originally developed to improve transparency within large organizations, BPM (also called Corporate Performance Management, or CPM) is primarily used by multinational corporations, financial services firms, insurance companies, and government agencies.

But the capabilities BPM make possible are also applicable to the healthcare arena. For example, it can be used to help providers meet HIPAA regulations and offer higher-quality services at lower prices, states BPM Basics, an online resources center for the BPM market based in Vienna, Va.

The global demand for such software across industries is clear. The IT research firm Gartner Inc. has predicted that the market for BPM software will enjoy a compounded annual growth rate of 9.9 percent through 2009, when it will reach $952 million in new licensing revenue.

No pain, no gain

How much of that growth will be fed by medical groups remains unclear at best. Though physician groups are beginning to take notice of the BPM phenomenon, its application among smaller practices so far is virtually nil. With the software alone starting at roughly $35,000, it’s easy to understand the hesitation.

“In my experience, it’s very difficult for an organization with less than $50 million in revenue to purchase BPM software and get an effective return on investment,” says David Giannetto, director of BPM for the Cohn Consulting Group in Roseland, N.J., and author of an upcoming book on the theory behind BPM, “The Performance Power Grid.”

In addition to the one-time investment in software and servers required to implement a BPM system, Giannetto says that businesses must also factor in annual maintenance fees, which can easily add another 20 percent to their costs. Then there’s the cost and time required to train physicians and their staff to use the system. Finally, BPM systems generally require those who invest in it to hire consultants or even full-time IT staff to code and customize the software to meet the needs of individual businesses. “This stuff doesn’t come out of the box ready to use,” says Giannetto. “This is about managing via pre-set metrics, and you need to have those coded.”

In a recent BPM Magazine survey of mostly large corporations that have implemented BPM systems, half of the respondents said they spent more than $100,000 on software alone. Most firms said it took five months to implement their software, consuming 176 days of finance staff time and 88 days of IT staff time. The survey also suggested that regardless of industry or size, businesses often have trouble projecting implementation costs for BPM software, largely due to the many customized features individual systems require.

Many smaller businesses that still want to reap the benefits of BPM systems attempt to avoid the high cost of hiring IT experts and instead implement the software on their own. That strategy rarely works, says Giannetto.

“You get this technology and you install it, and it’s a blank screen,” he explains. “It doesn’t tell you what drives your performance, and it can’t, because it’s different from one practice to another. Doctors all do the same thing, but they go about it differently. They align with different drug manufacturers, have different approaches to patient care. You need to understand your own business model and plan for strategic growth before you can apply BPM technology.”


Blansfield agrees that properly implementing a new BPM system is critical to its success. “That’s the mistake a lot of companies are making,” he says. “They think they can just buy the software and everything will change. This is more of a cultural initiative.”

So what does it do?

Yet while smaller physician groups continue to be priced out of the BPM market, recent evidence suggests the tide may be shifting. According to Blansfield, several new software vendors have emerged in an effort to bring BPM to the small- and mid-sized business market.

“Smaller healthcare groups are an important new segment for BPM systems and service providers,” he says. “Recently, a few companies identified the smaller firms as potentially attractive, and they are seeking to fine-tune their message for those [who have] between 25 and 500 employees.”

Adaptive Planning is taking this track. The upstart software vendor in Mt. View, Calif., is marketing a hosted on-demand BPM service to companies for a flat annual fee starting at $5,000. Clients who subscribe to its services pay nothing for software or hardware and have access to a full-time team of IT experts who can help with implementation and data analysis. While most of Adaptive Planning’s current clients have revenues of at least $50 million, spokesman Greg Schneider says his company’s services are cost-effective for businesses - including physician groups - of any size.

“In the past, enterprise customers have been able to deploy large-scale business intelligence projects costing hundreds of thousands of dollars for software, and equal amounts for services,” says Schneider. “Mid-market and small companies have been faced with doing it all through Excel or doing without. We offer a BPM solution to everyone who needs budgeting, forecasting, reporting, and analysis.”

BPM systems can also be customized so clients pay only for the software components they need. For example, American Healthways, a rapidly growing disease management firm in Nashville, Tenn., began utilizing Adaptive Planning’s service two years ago for its budgeting and forecasting purposes. Besides experiencing the typical growing pains that accompany any software implementation, the transition was smooth and yielded immediate results, says Ian Miller, American Healthway’s senior director of financial planning and analysis.

“As we grew, we opened more locations and were winning more contracts, so we were using Excel to try to keep everything balanced,” Miller explains. “What was happening is high-level people were spending a disproportionate amount of time looking at the spreadsheets to be sure everything was flowing through.” Miller says that the company’s new BPM capabilities “is like having Excel on steroids. We’re thrilled with the different functions BPM provides us, both in regard to better reports and improved accuracy.”

How BPM can help your practice

Within physician groups, BPM software can be customized to gather all a practice’s financial data, administrative and billing functions, insurance claims activity, and patient care information into a single “dashboard display.” Such capability can give physicians a bird’s eye view of their offices’ different processes and subsequently help them determine how well such processes are working together and where efficiency gaps exist.

“In a doctor’s office, you’ve got the physicians focused on satisfying patients and getting them to come back, and the administrative side interacting with the insurance companies to ensure their claims get paid, but those are two completely different tasks, and people are only concerned with their own jobs,” says Giannetto. “BPM looks across all the processes of your organization and creates a linkage that tells you what you’re doing really right and what you need to do to succeed.”

As new BPM players target smaller businesses, some existing healthcare management software providers are also trying to get their piece of the BPM pie. Vi Shaffer, research vice president for Gartner, notes that some of today’s physician practice management software packages and EMRs already “have some capability to aid in BPM laying dormant or embedded” in their systems. “Most don’t have good simulation technology yet (to run hypothetical budget scenarios or ferret out red flags), but they’re evolving in that direction,” she says.

For example, EMR vendor IDX Systems Corp. - recently acquired by GE Healthcare - already incorporates BPM capabilities within its Web-hosted EMR. Like Adaptive Planning, IDX hosts the software remotely, providing a tech support team to help clients manage and analyze incoming data. Physician groups pay a fee based on a percentage of their annual revenue. “As customers come online, we go onsite, conduct an assessment of their needs, and then help redesign their workflow process based on the data that we’re able to mine,” says Andy Treanor, IDX vice president and general manager of business advantages.

But before you start considering shelling out for yet new software or services, physician groups that already own EMRs should first check with their vendors to determine how flexible their existing software is. “I always look to see what clients already own and see how we can leverage that,” says Giannetto. “They may not have to buy new software.”

Flying solo


In fact, Giannetto says there’s no reason practices can’t implement a BPM business model without purchasing additional software.

“BPM theory, at its core, is really about changing the behavior of the organization,” explains Giannetto. “It’s about understanding that financial performance is merely a result of how effectively you are run. You don’t need a technology to manage this way.”

Start by prioritizing a list of business objectives, such as growing your patient base. Then develop concrete actions that can help you achieve those goals, like implementing aggressive marketing or offering more family-friendly hours. Measure your progress against a set of fixed benchmarks that incorporate your own historical growth rate and the average growth rate of your competitors in the same specialty.

“BPM theory is really at its core about changing the behavior of the organization,” says Giannetto. “What you’re trying to do is break the age-old dilemma where you come to work and put out fires and focus on the angry patient in front of you and never have time to take a look at how the practice is growing. … The fires are not going to go out or go away, but BPM always brings it back around to the bigger picture of what you need to do to grow your business.”

Shelly K. Schwartz is a freelance writer in Maplewood, N.J., who has covered personal finance, technology, and healthcare for 12 years. Her work has appeared on CNN/Money.com, Bankrate.com, and Healthy Family magazine. She can be reached via editor@physicianspractice.com.

This article originally appeared in the October 2006 issue of Physicians Practice.