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Funds Flow: How’s It Going?

March 15, 2024

To the YSM Community:

In July 2023, we introduced a new funds flow model between the Yale New Haven Health System (YNHHS) and Yale School of Medicine (YSM).

To recap the elements of our new model, I share this excerpt from the March 28, 2023 Beyond Sterling Hall, with tenses updated: “In the new model, clinical departments are paid for clinical work based on either a ‘dollar per Relative Value Unit (RVU)’ model or a staffing model. An RVU, developed by the Centers for Medicare and Medicaid Services, is the generally accepted measure of the value for clinical services or procedures, and is commonly benchmarked by clinical specialty. In the “dollar per RVU” model, the payment rate is based on well-established national benchmarks for faculty salaries divided by benchmarks for median RVUs, multiplied by the number of RVUs the clinicians in a department generate. The model provides support for structural deficits, departmental overhead such as staffing costs, and deficits related to start-up in a formulaic way based on well-defined national benchmarks. For “hospital-based” departments (e.g. Anesthesiology, Emergency Medicine), the formula is based on staffing requirements and national benchmarks for hours or shifts per clinician. Hospital-based departments can garner additional funds through incentives for achieving pre-determined goals. Purchased services such as medical directorships, support for graduate medical education, and call coverage still flow directly from YNHHS to departments.”

Many of our peers have adopted this type of formulaic approach to funds flow and have found that aligning incentives between the school and health system results in increased revenues to both. We are seeing the same pattern. Through January 2024, RVUs are up 10.4 percent from prior year and about 3 percent over budget cross YSM clinical departments, whereas clinical effort is up 6.4 percent. In other words, for the individual clinician RVUs increased 3.8 percent per person. Support for the academic mission is projected to increase 8.3 percent. For YNHHS, revenues are up 9.8 percent compared to the prior year through January.

In this transition year, we are tracking the results of our old and new funds flow models simultaneously. This has allowed us to learn where we need to tweak the model and departments how to manage differently. Chairs and department business leaders meet with finance team members weekly to review issues.

While the clinical department margin increased 11.4 percent on average, the impact of funds flow on individual departments has varied, with 12 departments experiencing an increase in margin compared to the legacy funds flow model and ten experiencing a decrease as of the end of January. This is not unexpected, and we are using this transition year to troubleshoot. In five departments clinicians see fewer patients (as measured by RVUs) than average compared to their academic peers and four of our departments are at or below the 40th percentile. We are working to understand and address barriers to seeing patients in those departments. Some departments learned the sensitivity of the model to over- or under-budgeting clinical volumes, and we will revise the model to reduce this sensitivity. In rare cases, we have identified a section that may have been in the RVU model but should have been in a staffing model, or vice versa. In such cases, we are honing the review process through the Funds Flow Implementation Advisory Team (FF-IAT). We will refine the model as we continue to learn and as we adapt to anticipated changes, such as movement from RVU-based to value-based reimbursement.

Changing from a funds flow model in which the health system covered departmental deficits to one that rewards seeing patients, providing high quality care, and working efficiently incentivizes us to work together to ensure patient access and to optimize clinical operations. It also creates discomfort–perhaps even the five stages of grief*–as we work through the process of learning how to solve problems together and in different ways. For individual departments, the new model may require shifts in funds flow within departments. The work ahead requires prioritization; engagement of chairs, faculty, and staff; making sure we have the “right people on the bus;” and constant communication. The alternative is to blame others and settle for mediocrity.

Providing better care to more patients cannot be about asking our already hard-working clinicians to work harder. Rather we must remove roadblocks and allow clinicians to focus on caring for patients. Upcoming innovations such as “ambient digital scribing” using Abridge should reduce screen time, while Access 365 will enable more quality time with patients.

So, how’s it going? The answer is “not bad.” We are making a significant change, and while that naturally causes anxiety, there have not been any major surprises. Our teams are working hard together with grace to remove obstacles and to make sure that the funds flow system can provide sustained support for all our academic missions in the years to come.

With gratitude,

Nancy J. Brown, MD

Jean and David W. Wallace Dean of Medicine

C.N.H. Long Professor of Internal Medicine

*Kübler-Ross, E. (1969). On Death and Dying. New York, The Macmillan Company.