Digital Rx

When leaders of the Detroit Medical Center launched a major financial turnaround two years ago, they saw that they had a big money problem. Here’s how the DMC is using digital remedies to treat its fiscal condition.


Two years ago, the Detroit Medical Center was forced to confront its own mortality.


Life-threatening conditions are a fact of life at the DMC — a St. Elsewhere-like operation that epitomizes big-city institutional medicine, a place where the demand for care constantly threatens to exceed the supply. Occupying a cluster of high-rise buildings just north of downtown Detroit, its main campus sits in a neighborhood that turns forbidding after dusk. It houses an emergency room that’s busy enough to tax the collective cool of the cast of ER. This ER, in fact, handles 80,000 patients a year, and staffers there see as many as a dozen gunshot wounds a night. The Detroit Police Department even maintains a small station nearby.

The DMC is not without resources. It is the largest private employer in the city and one of the largest employers in southeast Michigan, with more than 13,000 employees in seven hospitals, two nursing centers, and more than 100 outpatient clinics. It is home to one of the world’s top intensive-care units and to the highly regarded Barbara Ann Karmanos Cancer Institute. The downtown facility, which is affiliated with Wayne State University, is the largest single-campus medical school in the United States. All told, the DMC takes in about $1.6 billion in revenue annually.

But in the late 1990s, the DMC’s financial health took a turn for the worse. A nonprofit entity created in 1985 to help a group of downtown hospitals share resources, the DMC began generating modest deficits in the mid-1990s. Then, in 1998, losses soared to $100 million. The hospital lost another $100 million in 1999.

“We had no problem attracting people who had been shot,” says Dr. Don Ragan, 56, a professor of radiation oncology who is now chief information officer at the DMC. “We had a corner on the Medicaid market in Detroit.” More than 8% of the DMC’s gross revenue was uncollectible: It represented services delivered to poor, uninsured patients or to patients for whom the DMC did not have adequate insurance information. Skyrocketing costs only made matters worse.

The DMC’s board of directors got nervous and called in turnaround consultants from the Hunter Group, who advised the board to dismiss most of the organization’s top executives. A new regime was installed, with Ragan serving as CIO and Dr. Arthur Porter, a radiation oncologist, serving as chief executive. The new team received a simple but daunting mission: to find millions of dollars in operating efficiencies without sacrificing quality of care. The result (which DMC employees call, simply, “the turnaround”) entailed closing one of the dmc’s hospitals and cutting 3,500 jobs across the organization.

Yet one area where Porter and Ragan did not cut back was information technology. Indeed, they decided to expand the role that new technologies play at the hospital. “At a time when money is so short, how can we afford to invest so much in all this fancy, newfangled technology?” Ragan asks, before answering his own question: “How can we afford not to? If we continue to deliver medical care as it was delivered 10 years ago, we’re going to go broke.”


The DMC turnaround — one of the largest transformations of its kind in U.S. health-care history — embraces a wide range of financial and technological innovations. And while digital technology is only part of the broader picture, it has enabled the dmc to improve everything from the way doctors deliver care to the way the hospital markets itself. From the start, DMC leaders set their course by two counterintuitive ideas: that spending money on beefed-up information systems would help bring costs to heel, and that doctors — on the whole, an extremely change-averse constituency — would eagerly embrace those systems.

“You can’t run any organization in the 21st century and be afraid of technology,” says Porter, 44, a native of Sierra Leone who has worked at the hospital since 1991. “We had to eat, sleep, and breathe technology if we wanted to understand how it could help us transform the DMC.”

An Information Transfusion

Tapping away at a keyboard, Dr. David Bouwman demonstrates the breadth of information that he can now access from any part of the DMC or from home — or from the road. He pulls up the record of a 66-year-old patient who has breast cancer. A timeline indicates when she has had mammograms, and when Bouwman clicks on each date, a copy of the report from that day’s test appears onscreen.

Bouwman is using the DMC’s unified clinical-information system. Built at a cost of more than $100 million, the system runs on software that was developed by Cerner Corp. By digitizing and bringing together a vast array of medical records, the Cerner system has helped the hospital not only iron out inefficiencies but also achieve improvements in care.

“What’s wonderful about this system is that I can track my own data over the course of years,” says Bouwman, 55, a surgeon affiliated with the DMC. “Am I being aggressive enough when it comes to saving breasts? Am I doing too many mastectomies versus lumpectomies? I can also compare my profile with the profiles of other doctors in my peer group.”

The move to digital records makes it easier for more than one doctor to treat the same patient: Physicians no longer need to copy paper records and then pass them back and forth between each other. That improves patient care, since it reduces the chance that one doctor won’t know how another doctor is treating a patient. And it gives the hospital’s bottom line a boost as well. “In the paper world, one patient’s medical record may have to be signed by 10 physicians,” says Dr. James Selwa, 44, a practicing neurologist who is the DMC’s medical director for information services. “And you can’t bill the patient until that’s been done.” The hospital’s accounts-receivable picture has already brightened, with the average bill-collection period dropping from more than 100 days to a low of 80 days.


The clinical-information system also helps doctors overcome the constraints of time and space. They now have much faster access to test results, especially over the weekend. (In a paper-based system, test results that arrive late on a Friday often don’t get distributed until the following Monday.) And theoretically, at least, doctors can give their counterparts in a foreign country instant access to the medical records of a DMC patient who is there on vacation.

Another element of the Cerner system allows the hospital to archive digitized MRIs and CT scans. “It’s much easier to run a radiology department where images never get put on sheets of film,” Ragan explains. Digital imaging saves money — film and film processing are both hugely expensive — and it saves time. “We’re shaving half a day to a full day off the time that it used to take before a physician could see the result of a scan,” says Ragan.

The Cerner system is not limited to the simple exchange of data. Doctors can use it to write prescriptions — thereby avoiding the age-old medical problem of indecipherable handwriting — or to order and track tests. Here again, savings go hand in hand with innovation. In the predigital days, whenever paper results from a test failed to show up quickly enough, doctors would often simply reorder the test: They had no way of knowing, in a timely fashion, whether the results had been lost or whether the test had never been done in the first place. “That makes costs go up, and it causes the patient to stay in the hospital longer,” Ragan says. “Everything that we do with technology has an element of driving out unnecessary costs.”

Ragan is something of a demon when it comes to using information technology to gain efficiencies. Before taking on his current assignment, he had been CIO at the Karmanos Cancer Institute, and he had also started a medical-software company while simultaneously heading up the DMC’s radiation-oncology department. “I spent 20 years at the DMC casting stones, being a thorn in the side of the IS [information-services] department,” Ragan laughs. “So Dr. Porter said, ‘Why don’t you see if you can do any better?’ It’s fun. I like a challenge.”

New (Digital) Therapies

Other physicians at the DMC are welcoming the challenge of launching their own experiments with technology. In one test that Bouwman is helping to conduct, surgical residents at the hospital are using Palm IIIxe handheld computers to keep track of the patients they’re responsible for. “It’s not unusual to have a team of 5 or 6 residents who are responsible for the patients of 25 different doctors,” Bouwman says. “For each resident, that could mean seeing 40 patients spread across 10 floors and five buildings.”

Previously, residents would typically print out lists of their patients and then manually copy, in shorthand, each patient’s test results onto the printout. “Now you export the list of your patients to your Palm, with the room number for each patient and with lab results from the last 24 or 72 hours,” Bouwman says.


Bouwman hopes that within the next year, residents and doctors alike will be using the Palm devices to access patient histories, to order tests and procedures, and to receive notice of potential problems. “I imagine these things saying, ‘Hey, turkey, this patient is allergic to penicillin,’ or, ‘This patient’s blood pressure is 10% higher today, and you’ve ordered an additional antihypertensive,’ ” he says.

Bouwman and the rest of the DMC’s tech-savvy doctors are investigating dozens of other ways to use new devices, along with the clinical-information system, to streamline the practice of medicine. DMC neurosurgeons, for example, are testing some of the latest computer-guided surgical systems. And the emergency room at Huron Valley-Sinai Hospital is now installing a digital status board, which will let doctors, nurses, and administrators access up-to-the-minute information about patients in various treatment bays. Because it will be linked to the hospital’s main information system, it won’t require staffers to update it manually, as the current whiteboard-and-marker setup does.

“These days, we try to stimulate those kinds of projects rather than suppress them,” says Ragan. He and other DMC leaders have sought to infuse the hospital’s medical corps with a spirit of openness and exploration. That’s why, when the turnaround got under way, one of Ragan’s first moves was to crack open the hospital’s network. Before last year, security fears had kept the DMC from allowing physicians to access the hospital’s systems from outside its walls. Doctors couldn’t even perform tasks as basic as using the DMC’s email system from home. “We haven’t opened up security totally,” says Ragan. “But now, with appropriate authentication, any physician can get into the system from anywhere in the world.”

Already, more than one-quarter of the DMC’s 3,000 doctors are using the clinical-information system remotely, and a much larger number of doctors use the system every day within its various facilities. “We don’t coerce people into using it — at least not right now,” says James Selwa with a slight smile. “We’re rolling out wave after wave of enhancements to the system, along with enticements to physicians. A year from now, using it won’t be optional. There will be no way to order a test or a prescription other than by doing it on the computer. But you need to get more than half of all users on board before you require it — or else they’ll rebel.”

Bouwman doesn’t worry much about rebellion among his colleagues. “My underlying supposition is that docs hate paper,” he says. “It’s the main weapon of bureaucracy. Technology can support the art and science of medicine, and it can help us support the business of medicine — which we acknowledge we have to do.”

Vital Signs Improving

Arthur Porter stands over his laptop, punches away at the keys, and calls up slides that illustrate the DMC’s financial transformation. “August 2000 was our first profitable month, and September was profitable too,” he says. “We will cross the end of the year at almost 2% profit, which is unheard of. This is the first time in DMC history when we’ve been on budget at this time of year.” Thanks to new systems that allow the DMC to collect more-accurate insurance information from patients, the uncollectible portion of its gross revenue has gone from 8.3% in 1999 down to 6.8% in 2000. Losses have shrunk from more than $100 million in 1999 to just $8 million in 2000. And Porter predicts that the DMC will actually make $44 million in 2001.


Porter’s office looks across the street to Orchestra Hall, home of the Detroit Symphony Orchestra — another nonprofit organization that recently engineered a turnaround. Porter notes that both organizations have had to sharpen their marketing strategies in response to shifting demographics and increasing competitiveness. “You’ve got to spend money to make money,” he says. “And we have long been drastically underspending on attracting new patients to the DMC.”

And not just any new patients: The DMC’s financial woes originated, in part, from its failure to serve a more lucrative clientele. “The problem,” says Ragan, “was attracting the people who needed a bypass operation or who were going to deliver a baby” — in other words, insured patients who were undergoing profitable procedures. While DMC leaders have no intention of abandoning uninsured patients, they hope to lure more middle- and upper-income residents of Detroit, many of whom still see the DMC as a health-care provider of last resort.

The Internet is playing a central role in helping the hospital reach those people. Already, for example, the DMC has rolled out a Web portal for patients that offers general health information, online appointment scheduling, online billing, and help with finding a general practitioner or specialist at the hospital (or anywhere in the world). Says Ragan: “The patient portal will help us accentuate the relationship between patients and doctors — since, as we all know, patients invariably love their doctor but hate the hospital.”

On the cost side of the ledger, meanwhile, the turnaround has already wrought significant changes in how the DMC does business. One of the first steps that DMC leaders took back in 1999 was to outsource the hospital’s entire information-services function. A 10-year, $1 billion arrangement with Compuware Corp., a software-and-services provider based in Farmington Hills, Michigan, and CareTech Solutions Inc., a Compuware spin-off that focuses on the health-care industry, has cut overhead and enhanced managerial flexibility.

As part of the contract, all 300 staffers in the DMC’s IS department took jobs with one of the two outsourcing vendors. Those whose skills were no longer relevant to the DMC — specialists in programming certain legacy systems, for example — went to Compuware, where they now work with other clients. But the DMC still has access to employees who have mission-critical skills. “When we need an Oracle programmer or a PeopleSoft programmer, we can just go to Compuware and pull one off the bench,” Ragan says. (The DMC also took a 30% equity stake in CareTech.)

These days, Ragan spends his time overseeing new technology initiatives, such as moving the medical-transcription process online, or trying to extract further savings from his IT budget. Over the past year, he and his team, working with colleagues from Compuware and CareTech, have cut it expenses by $25 million — no small feat, given how much the DMC has come to rely on information technology.


“The digital revolution in health care is long overdue,” says Ragan. “Of course, it’s impossible to make that revolution happen all at once, so we pick things that will make us more cost-effective, or let us ratchet up the level of care even higher. The biggest advantage that we have is being able to draw on ideas and creativity throughout the institution. That’s been the revolution here.”

Scott Kirsner ( is a contributing editor to Fast Company. Visit the Detroit Medical Center on the Web (

Sidebar: Ask Your Doctors

When it comes to “buying” change, the average doctor is a pretty tough customer. So how did leaders at the Detroit Medical Center persuade its medical staff to start using the Cerner clinical-information system? Here are a few tips from the DMC formulary.

Money buys mind share. Early on, when planning for the Cerner system began, DMC administrators formed a Physician Leadership Team. But they didn’t ask doctors to donate time to the project. After all, surgeon David Bouwman notes with a laugh, most physicians are too capitalistic for that. Instead, the DMC paid PLT members for 20% to 50% of their time in exchange for their help in developing the system.

Want buy-in? Ask for input. The next step was to get PLT members thinking about what they might want from the system: Which features would help them actually deliver care? Which ones didn’t they envision using very often? “You need to listen to your users,” says Don Ragan, chief information officer. “You can’t tell them to do anything. But if they feel that they’re designing the system themselves, then why would they reject it?”

The best feedback loop never stops. While the DMC has cut the number of doctors who may serve on the PLT, the team still meets every Monday and Thursday afternoon. And a separate Physician Advisory Team, which includes about 40 doctors, meets less frequently to hear about future plans. “They give us feedback, and they relay new stuff to people in their departments,” says James Selwa, medical director for information services.