Week 3

My third week here at the Banner Medical Group Corporate Office was fantastic. I thought it would not be as good as my other weeks because my mentor was busy for a large portion of my time at the office. However, as a result of his time away from me, I got to do some of the work that actual financial analysts do. I was given access to the information listing the level of productivity of physicians, measured in relative value units and information regarding their compensation as a result of their efficiency. For each service, a payment formula contains three RVUs, one for physician work, one for practice expense, and one for malpractice expense. On average, the proportion of costs for Medicare are 52%, 44% and 4%, respectively. The three RVUs for a given service are each multiplied by a unique geographic practice cost index, referred to as the GPCI adjustment. The GPCI adjustment has been implemented to account for differences in wages and overhead costs across regions of the country. The sum of the three geographically weighted RVU values is then multiplied by the Medicare conversion factor to obtain a final price. Historically, a private group of 29 (mostly specialist) physicians—the American Medical Association's Specialty Society Relative Value Scale Update Committee (RUC)—have largely determined Medicare's RVU physician work values. For every relative value unit that these doctors produce over the median, they receive a certain amount of money based on their specialty. Someone had made a mistake and listed some of the doctors’ productivity incorrectly, resulting in Banner Medical Group paying these doctors the wrong amounts. My job was to comb through over one hundred thousand lines of data and determine the reason behind this incorrect measurement. Initially, this process was painstaking and meticulous, but I later discovered a more efficient method of analyzing this data.

First, I exported the data to Microsoft Excel. Next, I wrote a function using a vlookup, which essentially lets you export a data point from one set of data to another set of data. One set of data had the accurate relative value unit number, and the other had the inaccurate number that Banner Medical Group used. Unfortunately, despite spending 15 hours looking at the data, I couldn’t come to any real concrete cause for the inaccurate measurements of RVUs.

Week 2

My second week was great and far more hands on than my first week. I began by sitting down with my mentor and learning about Banner Medical Group’s income statements and determining how to cut costs for the month of March in order to meet the budget. I learned a lot about the source of Banner’s revenue and its many inefficiencies. Insurance groups such as Blue Cross Blue Shield and Medicare negotiate contracts with the hospital so that they only have to pay a fraction of what they are billed. We hear every day how healthcare costs and insurance premiums are rising and how America is by far the most overpriced country when it comes to paying the price of being healthy. What we don’t hear, though, is the story behind all of it. The current medical billing process is highly outdated and puts large nonprofit hospitals at a disadvantage. The laws restricting these organizations allows insurance companies and customers to manipulate hospitals’ lack of freedom to get more money from them. Hospitals see an average of 10% reimbursement for the services that they provide. Medical care in America is the most expensive of any first world country, but this is partially as a result of hospitals increasing prices with the expectation that they will only receive a small portion of what they bill.

Later I learned about the specific quality metrics that Banner looks for in order to implement a system of quality based medical care. These break down into customer metrics, or how satisfied the customer is and operating metrics or how healthy the customers are after visiting the hospital. The most important of these are the likelihood of the patient to recommend the hospital to others and the patient readmission rate. Banner has implemented specific action plans in order to encourage its employees to meet a high criteria for both of these metrics. Unfortunately, when I tried to determine what specific actions were taken, I could not find them anywhere on the web. Moreover, I do not yet have access to the Banner intranet where this information can be found, but I promise to tell you as soon as I can.

I learned a lot this week, and I’m excited to learn much more. Finance is very new to me, but I already love it. I’m excited to see where it takes me in the years to come.  

Week 1

I had an awesome first week at the Banner Medical Group Corporate Office! The first thing I learned: finance is really complicated! Banner is huge corporation grossing over 1 billion dollars in revenue every month and employing over 40,000 people. Things are slower at the beginning of the year here, for most of the budgeting and management occurs towards the end of the year. However, I’m still learning a lot about the medical industry. This week, I learned about the accrual based accounting model, as opposed to the cash model that most people are familiar with.

My mentor told me that under the accrual basis of accounting, revenues are reported on the income statement when they are earned, and expenses are matched with the related revenues and/or are reported when the expense occurs, not when the cash is paid. The result of accrual accounting is an income statement that better measures the profitability of a company during a specific time period.

This first time my mentor explained this to me, I was more confused than I had ever been in my life, but he later elaborated, essentially telling me that it was just a more accurate way for  accounting for expenses by taking count of expenses when they made and subtracting them later when the expense is actually processed.

I also learned about the process of taking on a new doctor. Physicians produce large amounts of revenue, up to millions of dollars. However, they also have many expenses. They need medical assistants, nurses, technicians, and equipment. On top of this, financial analysts in the medical industry need to account for the physician's productivity. Variations in their productivity make the process of budgeting a hospital system especially difficult. In order to simplify this process, the financial managers at Banner have found a way to quantify a doctor’s productivity. They account for tangible values, such as the number of patients that a doctor visits in a day, a specific doctor’s specialty, and how often these patients return. Then, they simplify this value into a number that they call a relative value unit (RVU). Then, hospitals project the doctor’s productivity to determine how efficient they will be. Typically they become progressively more productive for 5 years. After this process, the management knows how long it will take for this doctor to become profitable and whether to hire her.

Manu Vegunta

Hi there! My name is Manu Vegunta, and I am excited to begin my adventure blogging about my senior research project. Seniors at BASIS Scottsdale spend their last trimester interning a researching a world issue, concluding their journeys with a final presentation in May.

My project will be about the shift of the medical industry from reimbursing hospitals from value based medical care to volume based medical care. This means that doctors are being incentivized  to spend more time with individual patients. The nuances of this process lead me to the question: how does the shifting medical finance industry impact the allocation and appropriations of funds in this industry? To answer this question, I will interning with the CFO of Banner Medical Group, Mr. Chad Cornell. We will analyze the impact of the changing medical industry upon doctors.  I will explore the specific changes made by the hospital’s management system in order to create profits, assuming I am granted access to this information. The changes that I know of are incentives for longer but fewer hospital visits, so that patients have more speedy recoveries and spend less time being ill. I will also find out how effective these changes are to see if hospital visits are decreasing specifically at Banner hospitals.

Before further discussing my blog, I will talk about my interests. I come from a family of doctors. My mom is a doctor. My dad is a doctor. My sister is a doctor. Everyone in my life assumed I would want to be a doctor; until recently, I did as well. I spent the summers after both my sophomore and junior years partaking in research internships with a radiation oncologist at Banner Desert. I had a lot of fun, but recently, I discovered my interest for finance while shadowing at the Hedge Fund, Northern Trust. I thought that a research project in the field of medical finance would provide a happy marriage between finance and medicine. I have no idea which field I would like to pursue for my career. I am determined to build upon my experiences at both of these internships. I can’t wait to begin my research project and explore the vast world of finance.

Every week I will be blogging here about my adventures at Banner Medical Groups corporate office in Mesa with Chad Cornell. If you are interested in some other projects about similar subjects, check out my groupmates’ blogs on this page.