How to effectively utilize health care consultants

While there are many credible reasons for health care providers to hire a consultant, there are just as many bad ones, warns health care attorney Gerald Griffith of Honigman Miller in Detroit.

Beginning with reasons that make sense, Griffith says some providers face alarming trends in finances or other indicators that suggest outside advice is necessary. Likewise, it may be appropriate for providers facing a government or third-party audit to use a consultant to conduct a pre-audit review and gauge the organization’s exposure. Other times, providers may face a new law or regulation that requires outside help.

On the other hand, just because everyone else is hiring a consultant doesn’t mean you have to, Griffith argues. And while it may make sense to hire a consultant to confirm a message that management is trying to convey to the board, it is a mistake to hire a consultant simply as a way to avoid tough decisions or as a delaying tactic.

Hiring a consultant just because the price is right is another mistake, he warns. Organizations that do so are likely to find that free advice on the propriety of their compensation program is followed by a ready-made compensation program the consultant wants to sell them.

Once the decision to hire a consultant is made, here are several principles Griffith says providers should pay close attention to:

  • Picking the right consultant. Consultants have different expertise and can’t be all things to all people, warns Griffith. Management consultants may not be appropriate for evaluation opinion, and compensation consultants can’t help you deal with new privacy regulations. The team that is assembled within the consulting firm also is important, as well as access to senior people in that firm.
  • Defining the objectives and the time frame. Providers must structure a reporting mechanism and determine who will oversee the consultant, Griffith says.

He notes that governing board members have overall responsibility for the operation of the organization and may have a duty of supervision if they have reason to suspect wrongdoing by the consultant. Other times, they may hire a consultant if they suspect wrongdoing on the part of management.

Other groups that must be included in an engagement team include management from appropriate disciplines and in-house counsel, especially when the attorney-client privilege may be required or other legal considerations apply.

  • Using an appropriate fee structure. According to Griffith, there are numerous options for working out the fee structure. While many consultants like the idea of a contingency or percentage of savings, he says that should be avoided if it is a billing or coding consultant.

A fixed fee may be appropriate for a well-defined project, and a daily or monthly rate for a team also may be appropriate. "If you have appropriate timelines in the contract for when each step is to be completed, you can still keep a handle on the costs," he explains. Value billing, which looks at the value being added to the organization, often is the most difficult to quantify.

  • Motivating consultants. It’s important to build in incentives for the consultant to provide services in a timely manner and add expected value. One option is to provide fixed dollar amount rewards for specific defined tasks, deliverables, and goals. "If you tie it to specific tasks rather than revenues generated, it can avoid the consultant placing price of the transaction above other factors," says Griffith.

Discretionary bonuses provide the most flexibility for the client organization, but consultants may be reluctant to enter that arrangement unless it represents a new area of work or geographic opportunity or there is a long-standing relationship with the client, he adds.