SEPAC October 21, 2014 Philadelphia, PA. Health Care Today: How Supply Chain Can Lead Julie Blatnik, BSN, CNOR

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1 SEPAC October 21, 2014 Philadelphia, PA Health Care Today: How Supply Chain Can Lead Julie Blatnik, BSN, CNOR

2 Health Policy Hospital Readmission Reduction Program Accountable Care Organizations Hospital Value-based Purchasing Program Bundled Payments for Care Improvement Initiative New payment and delivery programs link hospital payment to performance Providers will face increased pressure to control costs and meet quality and performance measures Industry will face increased pricing pressure and greater demands for clinical and economic evidence of product value Source: Avalere Health LLC,

3 CMS Penalties Readmission Reduction: 2013: 2,225 facilities affected $280 Million 2014: 2,610 facilities affected $428 Million Pennsylvania 5 th highest 126 hospitals = 72% facilities affected New Jersey #1 highest 65 hospitals = 98% facilities affected

4 Estimates of $85B-$255B can be realized by eliminating unnecessary care and improving quality*. Health systems are investing in services to help them achieve the clinical, quality and financial improvements required to shift from FFS to value-based reimbursement *Source: McKinsey CARES engagement

5 Waste Transport Defect Example: Transferring patients, supplies, tools etc. Inventory Example: Errors Example: Not having right supplies, stocking too much (expirations etc.) Overproduction Motion Example: Processing a patient before there is availability downstream Example: Layout, location of items Over Processing Examples: Repeat of tests, asking patient same question repeatedly Waiting Example: Waiting for test results, appointment*, bed etc. Source: *Toussaint, J., Gerard, R.A., & Adams, E. (2010). On the mend. Cambridge, MA: Lean Enterprise Institute (pg. 65). 5

6 Value In Health Care VALUE = Outcomes¹ Cost Outcomes, are inherently condition-specific and multidimensional. For any medical condition, no single outcome captures the results of care. Cost, refers to the total costs of the full cycle of care for the patient's medical condition, not the cost of individual services. To reduce cost, the best approach is often to spend more on some services to reduce the need for others. ¹ Defined by Michael Porter HBR: Blumenthal, Stremikis September 17, 12

7 Improving the patient experience of care (including quality and satisfaction) Improving the health of populations Reducing the per capita cost of healthcare Source: 7

8 New Value Equation Clinical Improvement + Economic Viability + Patient Satisfaction = Health Status Improvement

9 How Supply Chain Can Lead 9

10 Key Steps to Strategic Supply Chain Management Build relationships Align with physicians Practice evidence based medicine Focus on clinical integration Automate the supply chain Adopt standards Enhance value analysis Think LEAN Source: H & HN Gatefold: Strategic Supply Chain Management, Research by Lee Ann Jarousse 10

11 Playbook GOALS: To obtain a WIN : WIN relationship Value Beyond Price Strengthen MD Relationships 1. Educate them and Arm them with Data 2. Integrate their knowledge and discuss Clinical Attributes 3. Ongoing monitoring and Real time decision support Too many hospitals presume that physician satisfaction and cost savings are mutually exclusive outcomes. Source: Advisory Board: The New Playbook for Clinical Supply Savings

12 Looking at Metrics Financial Clinical Operational Clinical Financial Operational 12

13 MIS Rates What is already known on this topic For many surgical procedures large randomized control trials and Cochrane reviews have established the superior outcomes of minimally invasive surgery for candidate patients, including reduced rates of surgical site infections, decreased pain, and shorter hospitalizations Despite superior outcomes, hospitals may only offer and surgeons may only perform open surgery, and many patients who are candidates for minimally invasive surgery will undergo open surgery The magnitude of variation in use of minimally invasive surgery as a disparity in healthcare in the United States has not been well described. ¹ ¹BMJ 2014;349:g4198 doi: /bmj.g4198 (Published 8 July 2014) Page 1

14 Typical Hospital Analysis Regional Median (N=116)* Hospital A Hospital B Hospital C Hospital D Hospital E Hospital F Hospital G Hospital H Hospital I Hospital J Hospital K Colectomy Complication Rate 28.79% 27.36% 13.53% 22.06% 41.11% 30.19% 40.00% 36.96% 43.90% 50.00% 20.59% 25.00% Colectomy Median Cost $16,706 $18,240 $14,006 $15,532 $14,795 $10,161 $19,400 $14,170 $15,632 $19,965 $15,515 $14,919 Colectomy Median LOS 8.0 Days 8.0 Days 7.0 Days 7.0 Days 8.0 Days 7.0 Days 11.0 Days 7.5 Days 10.0 Days 9.0 Days 7.5 Days 7.5 Days Colectomy Open Rate 70.82% 63.18% 57.14% 58.82% 56.67% 81.13% 92.73% 45.65% 92.68% 85.19% 61.76% 35.71% Colectomy Readmission Rate 15.03% 18.91% 10.53% 5.88% 15.56% 11.32% 12.73% 19.57% 24.39% 14.81% 5.88% 7.14% *Hospitals with 20+ volume Regional Median (N=44)* Hospital A Hospital B Hospital C Hospital D Hospital E Hospital F Hospital G Hospital H Hospital I Hospital J Hospital K Lung Complication Rate 31.58% 46.39% 23.21% 23.53% 25.00% 65.00% 50.00% 20.00% 50.00% 40.00% 57.14% 60.00% Lung Median Cost $15,848 $19,502 $12,350 $14,812 $25,378 $21,000 $20,154 $19,329 $13,306 $17,008 $14,932 $20,412 Lung Median LOS 5.8 Days 7.0 Days 4.0 Days 7.0 Days 12.5 Days 11.5 Days 6.0 Days 10.5 Days 10.0 Days 5.0 Days 9.0 Days 10.0 Days Lung Open Rate 50.00% 35.05% 67.86% 94.12% 50.00% 80.00% 50.00% 10.00% % % 42.86% 40.00% Lung Readmission Rate 10.36% 12.37% 10.71% 0.00% 12.50% 5.00% 0.00% 10.00% 0.00% 20.00% 0.00% 20.00% *Hospitals with 20+ volume in Florida Regional Median (N=53)* Hospital A Hospital B Hospital C Hospital D Hospital E Hospital F Hospital G Hospital H Hospital I Hospital J Hospital K Complication Rate 9.09% 6.15% 2.94% 0.00% 0.00% 0.00% 12.50% 11.11% 7.69% 40.00% 7.69% 16.67% Hysterectomy Median Cost $7,211 $7,364 $6,386 $4,554 $5,747 $5,666 $8,467 $6,542 $4,817 $9,412 $7,262 $4,713 Hysterectomy Median LOS 2.0 Days 3.0 Days 2.0 Days 1.0 Days 2.0 Days 1.0 Days 1.5 Days 2.0 Days 1.0 Days 1.0 Days 2.0 Days 2.0 Days Hysterectomy Open Rate 48.33% 42.05% 82.35% 75.00% 85.00% 64.00% 0.00% 22.22% 30.77% 40.00% 46.15% 83.33% Readmission Rate 4.55% 3.59% 2.94% 0.00% 0.00% 0.00% 12.50% 0.00% 0.00% 0.00% 0.00% 0.00% *Hospitals with 20+ volume

15 Data Challenges Multi-Specialty Physician Practice EMR Rx Platform Billing System Hospital EMR 1 EMR 2 ADT Billing Rx Platform Surgical Platform Supply Platform Integrated Delivery Care Data Aggregation Staging MD Notes Lab Results Nursing Notes Diagnosis codes Physiologic Data Procedure codes Billing data Supply usage Patient history Demographic info Outpatient visits

16 Unadjusted Variable Cost Benchmark- National $16,000 Each bar represents one hospital $14,000 $12,000 $10,000 $8,000 $6,000 Each hospital performed 30 or more hysterectomies in CY12 Total # of hospitals: 362 Unadjusted Cost range from $14,111 to $1,292, with Median=$4,019. Average Unadjusted Hysterectomy Cost for Sample Hospital: $5, percentile among 364 hospitals nationwide $4,000 $2,000 $0

17 Identification Of The Opportunities Higher Quality Cost by quality matrix for hysterectomy at target hospital LAP/TOTAL LAP/SUB $14,000 $12,000 ROBOT/SUB ROBOT/LAVH ROBOT/TOTAL LAVH OPEN/TOTAL VAH LAP OPEN ROBOT VAH OPEN/SUB $10,000 $8,000 Hysterectomy Cost By Hospital National Sample $6,000 Lower Cost $4,000 Target Hospital Cost Savings Opportunity $2,000 $0 Target Hospital 17

18 Summary Statistics Analytic Profile of Sample Hospital Sample Hospital Profile 730 Hysterectomy performed in 2012 Average all payer reimbursement: $6,927 (Medicare Traditional: $6,024) 610 qualified Hysterectomy for benchmark analysis 61 surgeons performed at least 1 hysterectomy. 19 surgeons performed at least 12 hysterectomy in 2012 Financial Outcome- Average Procedure Cost Metrics Hospital X S. Atla. National Average Hysterectomy Cost $5,114 $3,800 $4,045 Average Inpatient Cost $5,387 $3,934 $4,311 Average Outpatient Cost $4,816 $3,709 $3,793 Average OPEN Cost $4,941 $3,685 $4,058 Average LAP Cost $5,013 $3,563 $3,885 Average Robotic Cost $5,642 $4,800 $4,776 Analytical Synthesis Major Cost Categories Surgery Cost (Avg.): $3,291 Anesthesia Cost (Avg.): $489 LAB Cost (Avg.): $273 Primary Cost Driver Anesthesia Cost: 2.67 times higher than national avg. LAB Cost: 5 times higher than national avg. High cost in robotic surgery Clinical and Operational Benchmark Metrics Hospital X S. Atla. National Inpatient Rate 48.8% 40.4% 52.4% Readmission Rate 1.9% 2.6% 2.6% Complication Rate 11.0% 9.73% 9.1% Average LOS 2.66 Days 2.24 Days 2.06 Days Robotic Assisted Rate 27% 26% 27% Average OR Time 2.74 hrs. 2.58hrs 3.18 hrs. Surgeons with highest volume (After excluding complicated cases) Surgeon ID # of Hysterectomy Average Cost A 65 $4,481 B 63 $4,763 C 39 $4,883 D 27 $5,825 E 24 $5,069 F 21 $4,453 G 21 $4,078 H 16 $5,889 Clinical Process Improvement

19 Supply Chain Take Ownership Be the Voice of Opportunity Be part of the Solution

20 Achieving Success Success takes time, it is a journey, not a destination 20

21 Thank you!

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