Answer Happy

By what percentage would patient volume and capacity
utilization change if ClearEyes cut in half of the patients who
complete intake but fail to show up for surgery? If the clinic
could increase customer yield as described above, would it need to
add any staff or room capacity? If so, how much?
explain
ROY SHAPIRO PAUL MORRISON ClearEyes Cataracts Clinic In the fall of 2015, Dr. Julia Connors was thinking about whether to expand her business, ClearEyes Cataracts Clinic, and, if so, how. After some consideration, Connors decided to share some of her ideas with Nieves Morales, one of her best employees and one whose judgment she trusted. She received this response from Morales: "Dr. Connors, I do not believe that will work. Expanding the clinic that way, with extra hours and more days for all of us, will just make a huge problem. I really think that all the good we have accomplished here will be in serious danger." With that, Morales turned and walked away. Connors stood near the reception desk of her clinic feeling surprised, puzzled, and worried. Connors had founded the Boston-area clinic in 2012 in the predominantly Latino neighborhood of East Boston and had been the CEO and sole proprietor ever since. Creating, owning, and running her own company had fulfilled a lifelong ambition. By the end of its first year of operations, the clinic was on sound financial footing, and it had become quite profitable since then. Initially, Connors had grown the business by building awareness about cataracts and interest in her clinic through advertising on local radio stations and in free local papers. She did not believe that most of her target audience used the Internet very often, and considered television advertising too expensive. Her own advertising strategy, plus word of mouth and referrals by local ophthalmologists, generated about as much demand as she could handle. Connors spent $48,000 on this advertising in 2014, down from $62,000 in 2012. She asked patients how they had heard about ClearEyes, but most of the respondents were either unsure or named multiple sources. In fact, some of these sources were media that Connors had never used, so she stopped trying to collect this information. Connors believed that there was an opportunity to grow her company, but did not know to how to do it. Should she expand the number of rooms of her clinic, and if so, by how many? Should she increase the clinic's hours? Should she try some combination of both? It seemed to her that apart from a larger facility or being open for more hours each week, there ought to be a way for her to turn more of the potential patients who called in into actual served patients, which a friend of hers described as
Cataracts and Procedures to Fix Them A cataract is a progressive deterioration in the corneal lens within the eye that makes the normally transparent lens cloudy. If not treated, this condition can lead to blindness, as light entering the eye is blocked from passing through the lens to the retina's light-sensing cells at the back of the eye. Aging is the most common cause of cataracts; it has been estimated that about 50% of the population at 80 years of age would either have some degree of lens cloudiness or had already had surgery. Other risk factors for cataracts included obesity, diabetes, smoking, and exposure to ultraviolet rays. There were several ways to carry out the cataract procedure, but the most common one used in 2015 was phacoemulsification (phaco). In this procedure, the doctor makes a tiny incision in the eye and inserts a small wand. The tip of this wand breaks up the cloudy lens into tiny pieces, using ultrasound, and then vacuums out the pieces. An artificial monofocal intraocular lens (IOL) is folded up, inserted through the incision, and unfolded into position. The procedure can also be used to insert a lens to correct astigmatism. Typically, no sutures are needed to close the tiny incision, and the entire operation takes 10 to 15 minutes. Local anesthesia numbs the eye, and patients receive a mild hypnotic to help them relax and stay still. There is no need for elaborate preoperative preparation. Patients can go home after the operation, but are not allowed to drive immediately afterward. Most people experience some degree of improved eyesight immediately. This improvement continues until the eye is fully healed, usually within a month. Although many patients have cataracts in both eyes, they are advised to treat only one eye at a time. The Cataract Surgery Market In 2014, approximately three million cataract operations were performed in the United States. Although new equipment and techniques were constantly being developed and tested, cataract surgery was a straightforward, fairly mature procedure with a low rate of failure and medical complications. There was considerable competition for cataract patients because the procedure had many attractive characteristics to the provider organizations. First, it was recognized as a "medical necessity" and was therefore reimbursed by Medicare and by medical insurance companies, although some people paid for the procedure as an out-of-pocket expense. In 2013, prices for most monofocal IOL procedures ranged from $1,500 to $3,500; the average price was about $2,188.¹ The diagnosis of cataracts was relatively quick and easy, and misdiagnosis was rare. The surgery was done on an outpatient basis. Compared with many other specialized medical offices, cataract clinics were relatively simple operations to maintain: Facilities that supported extensive patient care before or after the procedure were not needed; the operating room needed only inexpensive equipment; and malpractice insurance was relatively low because there were rarely complications or failures. Connors believed that there were several reasons that the market for cataract surgery would continue to grow strongly. First, baby boomers, who were born between 1946 and 1964, were becoming senior citizens, and cataracts were attributable primarily to aging. Second, immigration to the United States continued to bring millions of people into the American health care system. Many
lens, ClearEyes explained the need to do so and gave the caller the names and contact information for two facilities that it recommended. Each day, the receptionist sent lists of these callers to the facilities and tracked how many returned later as patients to ClearEyes, which took her about ten minutes a day. It was illegal for ClearEyes to offer or receive "referral fees" for other facilities, but ClearEyes let the facilities know that it tracked its own yield from referrals and had stopped referring patients to some due to low yield. A week prior to the scheduled intake appointment, PSRS mailed medical and insurance forms to the patients and then called them three to four days ahead of the appointment with a reminder. Mailing took one minute per patient and calling took two minutes. About 72% of patients showed up, although 40% of them rescheduled once before finally getting to the clinic; rescheduling took an additional two minutes on average. After the receptionist checked people in (taking about two minutes per patient), a PSR on intake took twenty minutes on average, though this time varied depending on the patient. Intake consisted of discussing the procedure, answering any questions, eliciting more medical history, taking a payment from cash patients (to be returned if the patient failed to show up for the procedure) and completing insurance paperwork for those who were paying in whole or in part through private health insurance or Medicare. In 2013, 74% of the clinic's patients used insurance and 26% paid cash. During intake, the surgery was also scheduled. The clinic preferred to complete the insurance forms and mail them, but some patients did not have all the required information or wanted to mail the envelope themselves. Although cash patients generated less paperwork at this point, they usually had more questions about the clinic and the procedure and about whether they would get their money back under certain conditions: if they did not have cataracts; if they changed their mind and did not want to do the procedure; or if they were dissatisfied afterward. Cash patients could be scheduled for surgery relatively soon, usually within a month. Insurance patients had to wait for the insurance company to authorize the exam, which typically took about six weeks. In those cases, surgery was scheduled farther in the future, in order to account for this delay. PSRS called three days prior to surgery (this took two minutes) for a reminder if the clinic had been told that authorization had come through, or to inquire if the clinic had heard nothing. Again, about 40% of all patients rescheduled, which required another two minutes on the phone. ClearEyes required that each patient be accompanied by an adult who could take the patient home from the clinic after surgery, as they would be visually impaired. On the day of the surgery, the process of checking in with the receptionist (which included confirming patient identity, payment information, and contact information) took two minutes on average. Approximately 70% of insurance patients and 53% of cash patients showed up for their surgery. Connors had struggled to reduce this no-show rate, which played havoc with any close scheduling of the clinic's medical operations. With the high percentage of patients paying through insurance rather than cash, and the deep reluctance of cash-paying patients to make any non-refundable deposit toward the operation's expenses (the great majority of whom were lower-income), she could not easily create any effective deposit forfeit system. In an effort to understand the no-show problem, Connors asked the PSRS to carry out a telephone survey of people who had called and made an appointment for intake but did not show up, and also for people who had completed intake but not shown up for surgery, in order to find out the main reasons behind this trend. Quite a few people refused to talk. However, Connor was able to collect the information shown in Exhibits 3a and 3b.
After brainstorming with her staff, Connors and her staff jointly developed, tested, and refined a set of questions during the reminder conversation designed to determine the probability that a patient would appear on the day of surgery. Over time, her staff had learned to listen carefully and then shrewdly score each conversation as good, probable, or weak. The clinic overscheduled to compensate for each day's mix of probable and weak appointments. The procedure was working effectively enough so that the staff surgeon and Connors, who also operated as needed, was rarely idle; patients seldom waited more than an hour beyond their scheduled arrival time. The PSRS and the receptionist had stocks of We're so sorry! baskets of wine, gourmet coffee, and chocolate, which they handed out to patients who were thus delayed. Connors felt that her PSRS varied in their ability to get patients to attend intake appointments and then to arrive subsequently for surgery. She had also noticed that some of them "went off script," but was not sure this was a bad thing as the most common "offender" was Gabriela Herrera, who seemed to have more patients showing up than anyone else did despite working the same number of hours. Connors also believed that some PSRS asked more questions than did others. Because all calls and intake interviews recorded which PSR attended to these tasks, Connors discovered that rates of no- show patients differed by PSR, as shown in Exhibit 3c. She wondered what Gabriela was doing better. The actual medical procedure began when one of three technicians brought a patient to one of three surgery rooms, where the patient was "prepped" for surgery. This took 10 minutes, on average. The staff surgeon (or Connors, who operated 672 times in 2013) would enter, introduce herself, and carry out the operation. After she was done, she was able to tell virtually all of the patients that everything was looking good. She would then proceed to the next patient. The surgeon's time in the room averaged 12 minutes, but the clinic scheduled 15. Once out of the room, the surgeon took an additional five minutes to change gowns, wash up, and record the surgery. The technician applied eye bandaging and walked the patient back to the waiting area, which took five minutes. Between surgeries, a cleaning employee took three minutes to prepare the rooms for the next medical use. It also took three minutes to prepare between follow-up visits in the examining rooms, as indicated in Exhibit 2. See Exhibit 4 for a representative two-hour block of scheduling. If the technician judged that the patient was feeling well or calm, she seated the patient in the waiting room among others who were awaiting surgery. If the patient seemed distressed or disgruntled in any way, the patient and anyone with them were seated in another area. Patients and any friends or family members with them were asked to wait for 30 minutes, after which they were allowed to leave after a PSR helped them to sign the paperwork indicating that the operation was complete, schedule the patient's return the next day, and remind them of the steps for postoperative care. This took about four minutes. The next day, patients returned for a checkup on the progress of the healing, which took one minute of conferring with the receptionist. It then took a technician ten minutes, on average, to walk the patient to one of two examining rooms, check the eye, clean or bandage it as necessary, walk them back to the receptionist, and schedule the next follow-up appointment. The examining rooms were also cleaned for three minutes following the checkup. For surgeries that took place on Saturdays, a single technician handled these tasks (checkup and cleaning) on Sundays. Three weeks after the operation, a technician repeated this process in eight minutes (without any need to schedule another visit). About 21% of patients did not return for the three-week check. In rare cases patients called afterward, complaining about some aspect of healing or their vision. In these instances, ClearEyes asked them to come in to see what problem there might be, if any.
ClearEyes Personnel ClearEyes paid all employees a salary and incurred tax and benefit costs that averaged 28% of salary. PSRS and the receptionist were paid salaries of $38,000 per year, on average. Technicians were paid $48,000 and the cleaning employee was paid $31,000. Connors set these levels at the top quartile in the Boston area (75% of employees with this job description received less). She paid the surgeon a salary of $200,000 plus $40 for each operation, and benefits calculated on the surgeon's entire income. Connors compensated her PSRS, receptionist (who also handled billing paperwork and collection phone calls), technicians, and cleaner more than the norm for what these positions usually were paid in the greater Boston area. She believed that this compensation contributed to very low turnover among her staff, good morale, and deft management of patient interactions. The staff was comfortable with each other and knowledgeable about ClearEyes and their tasks. Through training, long experience, and a positive attitude toward her employees, Connors had developed a steady workforce that she could trust to handle practically any patient interaction. Over time she had received quite a few emails, telephone messages, and handwritten notes from patients who gushed about how nice the staff had been and that the way staff had treated patients and family had calmed patients about "having their eyeballs cut open." She knew that most of the staff appreciated the regular, normal hours of a full-time position with good pay and benefits, both of which were often difficult to find. Connors also allowed the staff to interview job candidates and have some influence over her hiring decisions. She believed that this approach had worked out well for existing staff and for those who had been hired, so she made the practice permanent. She also asked them for anonymous peer feedback for annual performance reviews and had found the results to be generally thoughtful, accurate, and useful. She believed that awareness of these reviews had helped performance. Numerous staff members had told Connors that if anyone left, or if she planned to expand, they had friends or relatives who were quite interested in applying for positions. The employees scheduled their own weekend coverage, breaks, and holidays. For example, PSRS arranged their own weekend reminder calls for mid-week appointments. Connors had taken particular care interviewing for her staff surgeon and was pleased with Dr. Regina Zinicola, whom she hired in 2012 as the volume of procedures had picked up. Connors had administered the Myers-Briggs and another longer, test to Zinicola. The results indicated that Zinicola was strongly introverted, which was fairly unusual in a surgeon. She disliked making conversation with strangers, going to new places, talking about herself, or, worst of all, discussing money. Connors and the rest of the staff had good enough bedside manners so that Zinicola's introversion could go unnoticed, while her strong work ethic could contribute to overall productivity. Connors decided that she could be ideal; indeed, Zinicola turned out to be just what Connors, the doctor, had ordered. Other Expenses ClearEyes contracted with a building cleaning and maintenance company, which cost $36,000 per year. In 2014, facilities expenses were $90,238. After she purchased the building, Connors had invested $650,185 to create the clinic infrastructure, apart from the medical equipment costs. An examination room could be created and equipped for $42,000, and a surgical room for $93,000. Intake rooms could be created for $30,000. Connors used an accounting and payroll service that cost $90,000 annually, most of which went to an accountant who also provided her with business and personal tax services. Only a small percentage of patients ever threatened or carried out legal actions, but Connors kept a lawyer on retainer and made occasional small settlements for a total of $280,969. The chairs
with screens in the waiting room cost $1,100 each. The clinic had miscellaneous expenses of $80,420. As the owner, she did not draw a formal salary but maintained a personal account that she could draw on. Her accountant calculated depreciation to be $160,000 per year. See Exhibit 5 for a list of revenues and expenses. Expanding the Clinic Connors was considering three expansion options, but understood that each presented major obstacles. She believed that, within limits, the clinic could fill whatever extra capacity she created in her current location. Her first option was to expand clinic hours to include Mondays and add an additional two hours to the working day. This was the option to which Nieves Morales had objected. A second option was to maintain the current clinic hours, but increase the physical size of the clinic. This proposition would be difficult and expensive. The short list of actions required to do this included the following: moving her tenant out; rehabbing the space; getting permission from the City of Boston to do the work; and investing in furnishings, telecommunications, HVAC, and equipment. This expansion would also disrupt operations in her current space. Her experience with renovation and additions in the current building proved that they could be more expensive and take much longer than initially planned. She might have to close the clinic for at least a month, maybe longer. All in all, she believed that extending the clinic's hours was the best option. In either case, Connors did not want Dr. Zinicola to work more hours. Even if Connors expanded the clinic, it would not have enough work for another full-time surgeon, and she had mixed feelings about hiring a part-time surgeon. However, she believed that she could find either an older surgeon who wished to be semi-retired, or a surgeon with young children who would welcome a part-time job. Connors did not like her third option: to expand at a new site within the greater Boston area. She was already in the clinic as much as possible during operating hours and did not want to spend more hours at work. She carried out surgeries herself and pitched in as needed. Patients and/or their family members often insisted on speaking with "a doctor" before or after surgery, and Connors felt that Dr. Zinicola would rarely be able to evince the calm and calming bedside manner these conversations frequently required. Many patients and families were also pleased to speak with the owner and "boss" of the clinic, particularly if they were upset or worried. Beyond these duties, she was always busy with the decisions, tasks, emergencies, communications, meetings with vendors and sales people, data analysis, personnel management, and chores that any owner of a small, busy company had to handle. She did not believe that she could duplicate her current success in a building elsewhere. It bothered Connors that so many people called with an interest in the clinic and that there was, she was sure, a clear medical need for cataract surgery, but she still ended up serving less than half of them. She wondered whether there could be any way to increase the percentage of people who followed through on their initial call through to intake, and the percentage that proceeded to surgery after intake. Was this a cultural or linguistic issue, a problem with her personnel, something about the clinic building, a marketing issue, a production problem, or a quality issue? Was it just an inescapable part of serving a relatively poor population? It was frustrating. She wondered if she even could handle more patients without the expansion in hours or clinic size that she dreaded. As Connors stood at the reception desk, thinking about her exchange with Nieves, she visualized the walls being torn out, the electrical work, the construction dust, the conversations with contractors about unexpected problems, expenses, and delays, and hated the thought of it. She was jolted back to
Exhibit 1 ClearEyes Clinic Facility Layout Intake ClearEyes Clinic Facility Intake Telephone Waiting Room Restrooms Exam Exam Surg Surg Corridor Supplies Surg Offices, Break Room
Exhibit 2 ClearEyes Process Flow, Demand, Capacity, Utilization Task, Annual Demand, and Job Titles Minutes Demand Receptionist PSR Initial patient call 7 14,345 100,415 22% defect after this point Mail paperwork 1 11,189 11,189 Call to remind 11,189 22,378 40% reschedule call 4,476 8,952 28% no-show after this point Check in at clinic 8,056 16,112 Intake 8,056 161,120 74% insured, 26% cash Reminder call 8,056 16,112 40% reschedule call 3,222 6,444 30% of insured no-show, 47% of cash check in at clinic 5,283 10,566 Prep for surgery 5,283 Surgery, Cleanup, Record 5,283 (Staff surgeon 4,611; Connors 672 ops) Bandage, walk to waiting 5,283 Room cleaning 5,283 PSR checks patient out 5,283 21,132 First (next-day) follow-up 5,283 4,226 Tuesday-Saturday room clean (80%) Sunday room clean (20%) 1,057 3-week follow-up 4,174 21% no-show after first follow-up 3-week room clean 4,174 Total annual minutes task time/job title: 26,678 1 347,742 4 # workers by job title 2 Intake rooms 2 Examining rooms 3 Surgical rooms Staff surgeon completes (5,283-672) = 4,611 operations per year; Connors completes 672 NN 2 2 2 20 2 2 2 10 20 5 3 4 10 3 3 8 3 Technician 52,830 26,415 52,830 3,171 33,392 168,638 3 Staff Surg 92,220 92,220 1 Connors Cleaner 13,440 13,440 1 15,849 12,678 12,522 41,049 1
Exhibit 3a Survey Responses on No-shows for Intake Reasons after call: Costs reasonable but don't have funds 89 Costs too much 61 Afraid of eye operation, pain, recovery 32 24 Afraid might not improve much Afraid of INS 22 Family members oppose it 12 Not a real problem 8 Will try a home remedy first 6 Other 14 Total responses: 268 Exhibit 3b Survey Responses on No-shows for Surgery Reasons after intake: Lack of funds, need the deposit returned 45 Problems getting ride to and from clinic 38 Plan to do it in the future 22 20 Bad day for unrelated pain, medical problems Afraid of eye operation, pain, recovery 18 Called to work unexpectedly 8 Forgot appointment 7 Other Total responses: Exhibit 3c No-show Percentages by PSR PSR Name: Camila Colon Nieves Morales Filipa Avelino Gabriela Herrera 11 169 Intake 32 17 27 12 33% 23% 12% 9% 8% 4% 3% 2% 5% 27% 22% 13% 12% 11% 5% 4% 7% Surgery 45 32 38 23
Exhibit 4 Surgery Rooms and Staff Scheduling Exam Room Start End Time Staff Surgery 1 9:00 9:10 10 Tech 1 Surgery 1 9:10 9:25 15 Surgeon Records 9:25 9:30 5 Surgeon Surgery 1 9:25 9:30 5 Tech 1 Surgery 1 9:30 9:33 3 Cleaner Surgery 2 9:20 9:30 10 Tech 2 Surgery 2 9:30 9:45 15 Surgeon Records 9:45 9:50 5 Surgeon Surgery 2 9:45 9:50 5 Tech 2 Surgery 2 9:50 9:53 3 Cleaner Surgery 1 9:40 9:50 10 Tech 1 Surgery 1 9:50 10:05 15 Surgeon Records 10:05 10:10 5 Surgeon Surgery 1 10:05 10:10 5 Tech 1 Surgery 1 10:10 10:13 3 Cleaner Surgery 2 10:00 10:10 10 Tech 2 Surgery 2 10:10 10:25 15 Surgeon Records 10:25 10:30 5 Surgeon Surgery 2 10:25 10:30 5 Tech 2 Surgery 2 10:30 10:33 3 Cleaner Surgery 1 10:20 10:30 10 Tech 1 Surgery 1 10:30 10:45 15 Surgeon Records 10:45 10:50 5 Surgeon Surgery 1 10:45 10:50 5 Tech 1 Surgery 1 10:50 10:53 3 Cleaner
Exhibit 5 Revenues and Expenses Procedures per year: Revenues: $1,338 net revenue per procedure Costs Wages Direct Variable Cost per procedure Surgeon $200,000+ $40/operation 1 Receptionist @ $38,000 4 PSRS @ $38,000 3 Technicians @ $48,000 1 Cleaner @ $31,000 at 28% of labor costs Benefits Other Costs Advertising Facility cost net of rent Cleaning and maintenance Other facility: insurance, IT, various Legal Miscellaneous Accounting Depreciation $480 5,283 $7,068,654 $2,535,840 $384,440 $38,000 $152,000 $144,000 $31,000 $209,843 $48,000 $36,000 $36,000 $90,238 $280,969 $80,420 $90,000 $160,000