Transcript Derek Haas - HCCA | Health Care Conference Aruba

Value-Based Health Care Delivery
Health Care Conference Aruba
June 2, 2015
Derek Haas, Project Director for Value-Based Health Care Delivery at
Harvard Business School and CEO of Avant-garde Health
Disclosures
Avant-garde Health
Copyright © Harvard Business School and Derek Haas, 2015
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Agenda
• How Not to Cut Health Care Costs
• Value-Based Health Care Delivery
• Reimbursement/Payment
Copyright © Harvard Business School and Derek Haas, 2015
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3
5 common cost reduction mistakes
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5 common cost reduction mistakes
#1
Cutting back on support staff
#2
Underinvesting in space and equipment
#3
Focusing narrowly on procurement prices
#4
Maximizing patient throughput
#5
Failing to benchmark and standardize
Copyright © Harvard Business School and Derek Haas, 2015
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Mistake #1: Cutting back on support staff
Large variation in cost rates across types of staff members
Data are illustrative
Surgeon
Physician
Assistant
RN
$546,400
$120,000
$100,000
Personnel Capacity (minutes)
91,086
89,086
89,086
89,086
89,086
89,086
Personnel Capacity Cost Rate
$6.00
$1.35
$1.12
$0.72
$0.57
$0.68
Total Clinical Costs
Copyright © Harvard Business School and Derek Haas, 2015
X-Ray
Tech
Scribe
Office
Assistant
$64,000 $51,000 $61,000
Do not reproduce without written permission
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Mistake #2: Underinvesting in space and equipment
Space & equipment costs are much lower than personnel costs
Operating Room Cost per Minute of Time
Data are illustrative
Personnel
Equipment
Space
Shoulder surgery
at Hospital A
$20/min
$.25/min
$.55/min
Cardiac surgery
at Hospital B
$20/min
$1.30/min
$.40/min
Knee surgery
at Hospital C
$25/min
$.25/min
$.35/min
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Mistake #3: Focusing narrowly on procurement prices
Indexed Bone Cement Cost per Knee Replacement for U.S.
Hospitals in 2014 Joint Replacement Program
4.00
90th percentile
3.50
3.00
2.50
2.00
17x Ratio of 90th to
10th Percentile
Organization in Cost
75th percentile
1.50
Median
25th percentile
10th percentile
1.00
0.50
-
1
Supply Expense: Function of Price per Unit, Quantity Used, and Product Type
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Mistake #4: Maximizing patient throughput
Options for Starting Dialysis
Patient Starts Optimally
Peritoneal (at home)
Fistula
Less than 50% of
Graft
patients today start
optimally
or
Patient Starts Sub-Optimally
Via a catheter
Source: Wikipedia
Note: Some patients are able to receive a pre-emptive kidney transplant and do not need dialysis
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Mistake #4: Maximizing patient throughput
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Mistake #5 Failing to benchmark and standardize
Schön Klinik analyzed knee replacements at two hospitals
• Schön Klinik is the 5th largest private hospital group in Germany
• Orthopedics is its largest specialty (~1/3 of its care)
• Provides orthopedic care in 5 acute care hospitals and 4 rehab clinics
• In 2010 facing cost pressure, Schön began cost and outcomes analysis for
knee replacements looking at both acute and rehab care at below hospitals
Neustadt
• Located along Baltic
• Has dedicated
orthopedic facilities
• About 1,100 total knee
replacements
(TKR)/year (6th highest
volume in Germany)
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München Harlaching
• Located in Munich
• Began as part of a
university hospital
system
• About 200 TKR/year
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Agenda
• How Not to Cut Health Care Costs
• Value-Based Health Care Delivery
• Reimbursement/Payment
Copyright © Harvard Business School and Derek Haas, 2015
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Value-based health care delivery (VBHC)
The central goal in health care must be value for patients, not
access, volume, convenience, quality, or cost containment
Health outcomes
Value =
Costs of delivering the outcomes
The “unit of analysis” for VBHC is the complete cycle of
care for treating a patient’s medical condition.
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Creating a Value-Based Health Care Delivery System
The Strategic Agenda
1. Re-organize Care into Integrated Practice Units (IPUs) around
Patient Medical Conditions
− For primary and preventive care, IPUs serve distinct patient
segments
2. Measure Outcomes and Costs for Every Patient
3. Move to Bundled Payments for Care Cycles
4. Integrate Multi-site Care Delivery Systems
5. Expand Geographic Reach In Areas of Excellence
6. Build an Enabling Information Technology Platform
M. Porter and T. Lee, “The Strategy that will Fix Health Care,” Harvard Business
Review (October 2013)
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Measuring Outcomes (M. Porter)
Survival
Tier
1
Health Status
Achieved
or Retained
Tier
2
Process of
Recovery
Tier
3
Sustainability
of Health
Degree of health/recovery
Mortality
Achieved clinical status
Achieved functional status
Time to recovery and return to normal activities
Time to care completion
and recovery
Disutility of the care or treatment process (e.g., diagnostic
errors and ineffective care, treatment-related discomfort,
complications, or adverse effects, treatment errors and their
consequences in terms of additional treatment)
Care-related pain/discomfort
Complications
Sustainability of health /recovery and nature of
recurrences
Long-term clinical status
Long-term consequences of therapy (e.g., careinduced illnesses)
Long-term consequences
of therapy
Reintervention/Readmission
Long-term functional status
Source: NEJM Dec 2010
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The Outcome Measures Hierarchy for Prostate Cancer
Survival
Degree of recovery / health
• 5 year survival rate
• Continence (1 year)
• Erectile function (1 year)
• Other quality of life
Time to recovery or return to normal
activities
•
•
•
•
Time to diagnosis
Time to treatment
Length of inpatient stay
Time to return to work
Disutility of care or treatment process (e.g.,
treatment-related discomfort, complications,
adverse effects, diagnostic errors, treatment
errors)
•
•
•
•
Bleeding
Thrombosis
Short-term continence (1 week, 3 months)
Short-term erectile function (3 months)
Sustainability of recovery or health
over time
Long-term consequences of therapy
(e.g., care-induced illnesses)
Copyright © Harvard Business School and Derek Haas, 2015
• Biochemical recurrence
• Metastatic progression
• Radiation-induced complications of intestine, bladder,
bones, skin
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Hoag Orthopedic Institute publishes an annual Outcomes
Book. This book is HOI’s entire marketing program.
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Time-Driven Activity-Based Costing (TDABC)
1
Determine
the Care
Process
• What activities are performed over the care
cycle for a medical condition?
• Who is performing each activity?
• How long does each activity take?
2
Calculate
Cost Rates
3
Account for
Consumables
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• What is the cost per unit of time for each type
of personnel?
• What materials, supplies, and drugs are
consumed during the care cycle?
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An acute medical condition’s complete cycle of care
Patient
problem:
Knee pain
Surgical
Pre-op
consult testing and
evaluation
Copyright © Harvard Business School and Derek Haas, 2015
Initial
MD visit
Treatment:
medications, diet, exercise
Inpatient
Surgical
post-op Disprep
care charge
Operation
Rehab
Recommend
surgery
Followup visit
Measure
Outcomes
and Costs
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TDABC Step 1: Clinical and administrative teams work
collaboratively to identify:
•
Process-Steps: All the
administrative and clinical
process-steps used over
a patient’s complete cycle
of care for a medical
condition
•
Resources: personnel,
equipment, consumable
medicines and supplies –
used at each process
step
•
Time Estimates: The
personnel and equipment
time used at each
process step for that
patient
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TDABC Step 2: Financial personnel calculate each
resource’s Capacity Cost Rate
• Costs: All the costs (salary, fringe benefits, occupancy, support resources)
associated with having that person (or piece of equipment) available to
treat patients
• Capacity: The capacity (time) that each resource (personnel, equipment)
has available for treating and caring for patients
• Capacity Cost Rate = Resource Cost/ Resource Capacity
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Calculate the Capacity Cost Rates (CCR)
Data are illustrative
Surgeon
Physician
Assistant
RN
$546,400
$120,000
$100,000
Personnel Capacity (minutes)
91,086
89,086
89,086
89,086
89,086
89,086
Personnel Capacity Cost Rate
$6.00
$1.35
$1.12
$0.72
$0.57
$0.68
Total Clinical Costs
Copyright © Harvard Business School and Derek Haas, 2015
X-Ray
Tech
Scribe
Office
Assistant
$64,000 $51,000 $61,000
Do not reproduce without written permission
22
Compute total patient care costs by multiplying resource capacity cost
rate by process times & summing across each patient’s cycle of care
Minutes
Cost/
minute
*Total
MD
X1
Y1
136.13
RN
X2
Y2
68.04
CA
X3
Y3
6.17
ASR
X4
Y4
15.74
Initial consultation
$266.08
Surgical procedure
MD
X1
Y1
584.99
Anes.
X2
Y2
603.89
RN
X3
Y3
136.29
Tech
X4
Y4
97.82
OR
X5
Y5
329.16
$1752.15
Follow-up or post-operative visit
MD
X1
Y1
55.19
RN
X2
Y2
13.61
CA
X3
Y3
3.09
ASR
X4
Y4
1.77
$73.66
Source: Meg Abbott, MD & John Meara, MD Boston Children’s Hospital
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Surgery costs across patients by type of clinician
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The financial opportunity from using best practices to
improve: Joint Replacement Program
Total Personnel and Consumable Costs
Percentage Savings
Improvement
TKA
THA
90th to 75th
15%
14%
75th to 50th
8%
16%
50th to 25th
13%
13%
25th to 10th
12%
12%
Moving to next bracket produces an annual savings of > $1 million for an
organization performing 800 TJRs
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Strong results from 2014 Joint Replacement Program
Joint Replacement Program Participants
Rating of Experience
80%
70%
Organization A: Developed a new
implant management system that
lowered cost/patient by $1,500
96% Rate
Experience as
Excellent or Good
68%
Examples of Year 1 Results
60%
Organization B: Increased
percentage of patients being
discharged home from 60% to 90%
50%
40%
30%
29%
Organization C: Reduced rate of
readmissions from 4.2% to 2.2%
20%
10%
0%
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4%
0%
0%
Organization D: Changed mix of
cement types saving $170/patient
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Cost measurement & management project areas
Episodic Care
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Anticoagulation
Bariatric surgery
Bone marrow transplants
Cervical spine surgery
Child birth and pregnancy
Colonoscopies and EGDs
Heart valve replacements and repairs
Head and neck cancers
Hysterectomies
Interventional radiology
Mastectomies
Joint replacements
Neurosurgical procedures
Observation patients
Prostate cancer surgeries and radiation
treatments
Rotator cuff repairs
Tonsils & adenoids
Copyright © Harvard Business School and Derek Haas, 2015
Chronic and Primary Care
• Chronic kidney disease
• Care transitions/preventing
readmissions
• Congestive heart failure
• Diabetes
• Frail elderly
• Palliative care
• Primary and psychiatric care for
patients with intellectual
disabilities
Ancillary and Indirect
• Radiology
• Billing
• Pharmacy
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How not to make the 5 common cost reduction mistakes
Common Mistakes
Successful Strategies
1 Cutting back on support staff
Enable people to work at the top of
their license
2 Underinvesting in space and
equipment
Invest in capital to allow high skilled
personnel to be fully utilized
3 Focusing narrowly on
procurement prices
Examine supply spend holistically
4 Maximizing patient throughput
Optimize care over the full treatment
cycle
5 Failing to benchmark and
standardize
Measure outcomes and costs to ID
and drive adoption of best practices
Copyright © Harvard Business School and Derek Haas, 2015
Do not reproduce without written permission
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Agenda
• How Not to Cut Health Care Costs
• Value-Based Health Care Delivery
• Reimbursement/Payment
Copyright © Harvard Business School and Derek Haas, 2015
Do not reproduce without written permission
29
Bundled payments
Definition:
A single payment that provides a positive margin above the costs incurred by
efficient and effective providers for treating a patient with a specific medical
condition across a full cycle of care. The payment is contingent upon achieving good
patient outcomes, with both the payment and outcome targets risk-stratified by the
complexity of a provider group’s patient population.
Patient
problem:
Knee pain
Surgical
consult
Pre-op
testing and
evaluation
Copyright © Harvard Business School and Derek Haas, 2015
Initial
MD visit
Surgical
prep
Treatment:
medications, diet, exercise
Inpatient
post-op
Operation care
Discharge
Rehab
Recommend
surgery
Followup visit
Measure
Outcomes
and Costs
Do not reproduce without written permission
30
Bundled payment reimbursement
• Fosters integrated care delivery (Integrated Practice
Units) for specific medical conditions
• Payment aligned with areas the provider can control
• Promotes provider accountability for the quality of care at
the medical condition level
• Creates strong incentives to improve value and reduce
avoidable complications
Aligns reimbursement with value creation while allowing
payers, not providers, to assume the risks inherent in a patient
population
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31
Joint Replacements in County of Stockholm
Swedish Health System
• Single payer (supplemented by self-pay out-of-pocket
payments)
• Complete patient choice about where to seek care
Global Provider Budgets
• Hospitals reimbursed on prospective patient volumes and
mix
• Hospital payments not linked to quality, outcomes or cost
• Salaried physicians
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New bundled payment introduced for total joint
replacements
• Fixed fee to cover physician fees, all other personnel
costs, occupancy in hospital, drugs, tests, other supplies
• Risk adjustment: Low risk surgeries (ASA 1 and 2, ~80%
of all patients) would be reimbursed under the bundle.
Surgeries on ASA 3 and 4 patients remained under the
previous system
• Warranty or guarantee for two year cycle of care
(extended to 5 years if complication within 2 years)
• Exclude care for non joint-replacement conditions; hip
dislocation
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Patient waiting time decreased and costs decreased
• In one year, % of patients waiting at least 90 days for
treatment declined from 33% to 13%.
• Average pre-operative sick leave decreased from 50 days
(2008) to 39 days (2009)
• Surgery queue disappeared by 2011
• Per-procedure cost for joint replacements had declined by
17% in 2011 compared to 2008.
• Complication rate dropped from 6.3% to < 4%.
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