The Burning Issue of Cost and the Emerging Role of Financial Analytics. Dan Michelson Chief Executive Officer Strata Decision Technology

Transcription

1 The Burning Issue of Cost and the Emerging Role of Financial Analytics Dan Michelson Chief Executive Officer Strata Decision Technology

2 How in the world are you going to tackle the cost of care and financial analytics in 20 minutes? At the end of the day?! - Jeff Hale, Akron Children s Hospital

3 If the cost of healthcare is the burning platform of our time then making cost data liquid will help put out the fire

4 The Bottom Line for Health Systems Avg. Hospital Overall Operating Margin ~ 2% (1/3 of Hospitals Have Negative Operating Margin) As Bundled Payments/ACOs/ Population Health Take Hold How Effectively You Set and Control Operating and Capital Expenses Across a Service Line/Population (Horizontal) Will Become Mission Critical source: American Hospital Association (AHA) Database, Based on Gross Patient Revenue,

5 I can either take it on the chin now or get knocked out later - CFO, Major Health System

6 The Mix is Shifting High Margin & Outcomes Management % of Insured Covered by Payment Approach Low Revenue Cycle Management

7 The Mix is Shifting Because revenue cycle management maximizes volumebased reimbursement, it will not be helpful to an ACO that creates savings by lowering volume and improving quality Jonathan Weiner, Professor of Health Policy and Mgmt. Johns Hopkins Bloomberg School of Public Health

8 But to make cost data liquid, you need to understand what cost actually is?

9 An Overall Perspective US Healthcare is the World s 5 th Largest Economy The Atlantic 1 of 5 ~ 18% of U.S. GDP is Spent on Healthcare ~ 30% is Wasted

10 U.S. Healthcare: A story of the undeniable interplay between clinical and economic outcomes

11 Three Stories 43-year old with kidney failure 62-year grandmother with a bad hip 8-year old with a bump on his head

12 Three Stories: Story #1 43-year old with kidney failure Reimbursement Drives Utilization

13 The Unmistakable Link Between Payment/Incentives and Utilization Prevalence of Dialysis in the US Medicare Secondary Payor Provision Introduced in (estimate) SOURCE: US Dept. of Health and Human Services - National Kidney and Urologic Diseases Information Clearinghouse (NKUDIC), US Renal Data System (USRDS)

14 The Unmistakable Link Between Payment/Incentives and Utilization Multiple of Increase in Incidence Increase in Prevalence in the US in the Last 40 Years 4x Increase Increase in Prevalence of Diabetes 40x Increase Increase in Prevalence of Dialysis 40x Increase! in # of people in US on Dialysis since introduction of Medicare Secondary Payor Provision in 1972 Prevalence of diabetes only increased 4x during the same time period SOURCE: US Dept. of Health and Human Services - National Kidney and Urologic Diseases Information Clearinghouse (NKUDIC), US Renal Data System (USRDS)

15 Three Stories: Story #2 62-year grandmother with a bad hip Cost Data is Confusing at Best

16 My grandmother started walking five miles a day when she was sixty. She s ninety seven now, and we don t know where the hell she is. - Ellen DeGeneres

17 The Set-Up: 62-year old uninsured grandmother She needs a total hip replacement Her grandson calls 100 hospitals for a price quote The Result: 50% either could not or would not provide a price 50% provided a price Quotes ranged from $11,100 to $125,798 The Twist: His grandma s hip was OK She didn t actually exist The writer was a student conducting research on healthcare costs SOURCE: Price for a New Hip? Many Hospitals Are Stumped, Rosenthal; New York Times, 2/11/13

18 Healthcare Cost Has Become a Consumer Issue

19 Three Stories: Story #3 8-year old with a bump on his head Clinical and Business Intelligence Can/Must Co-Exist

20 8-year old with a bump on his head Situation: Child presents in the ER with a head injury (600,000 times per year in the US) Implemented protocol Scan volume CFO and CMIO team to approach Protocol: Exists, but is not optimized reduced by 50% 700 fewer payers Revenue Next Step: CT Scan children recovered to Risk: Success Rate: Cost: Exposing child unnecessarily to radiation which may lead to early onset of cancer 90% of the time nothing is found $2,000/Scan exposed to radiation Revenue loss of $670,000 for hospital same level as before Higher margin due to lower cost

21 8-year old with a bump on his head Financial Impact (Single Hospital) $3,500,000 $3,000,000 Back to Even in Revenue $2,500,000 $2,000,000 $1,500,000 $1,000,000 Revenue Margin $500,000 $- Pre-Protocol Post- Protocol Post-Negotiation Revenue/margin dip driven by practicing better medicine Revenue recovered through better data/negotiation Net increase in overall margin by driving out cost

22 Pediatric Head Trauma Potential Financial Impact (National) $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 National Estimate for Pediatric Head Trauma $300 Million in Potential Savings 150,000 Fewer CT Scans 150,000 Fewer Children Exposed to Radiation $- Pre-Protocol Post- Protocol

23 Pediatric Head Trauma Mayo Clinic Protocol Guidelines draw on a landmark study published in The Lancet in 2009 Large, Multi-Center Study 42,000 Children at 25 Hospitals SOURCE:

24 Is Medical Malpractice the Villain We Thought it Was?

25 Medical Malpractice and Catastrophic Payouts Premise: Catastrophic medical malpractice payouts, $1 million or greater, greatly influence physicians practice, hospital policy, and discussions of healthcare reform. Study: Reviewed all paid malpractice claims nationwide using the National Practitioner Data Bank over a 7-year period ( ) Source: Journal of Healthcare Quality

26 Medical Malpractice and Catastrophic Payouts are Rare (in billions) $70 $60 $50 $40 $30 $20 $10 $0 Comparison of the Cost $1.4B The Cost of Catastrophic Payouts $60.0B The Cost of Defensive Medicine The notion that frivolous claims are routinely resulting in $100 million payouts is not true. The real problem is that far too many tests and procedures are being performed in the name of defensive medicine, as physicians fear they could be sued if they don t order them. That costs upward of $60 billion a year. It is not the payouts that are bankrupting the system it s the fear of them. Dr. Marty Makary, Associate Professor of Surgery and Health Policy Johns Hopkins University School of Medicine Source: Journal of Healthcare Quality

27 Three Stories: What Do They Tell Us 43-year old with kidney failure 62-year grandmother with a bad hip 8-year old with a bump on his head Reimbursement Drives Behavior in a Big Way Cost is Now a Consumer Issue Clinical and Business Intelligence Can/Must Co-Exist

28 So what?

29 More Cost Information Will Be in the Hands of Consumers (and this is a good thing)

30 More Cost Information Will Be in the Hands of Physicians (and this is a good thing) Study : Intervention: Results: Controlling Costs With Computer- Based Decision Support Leonard S. Feldman, MD; et al JAMA Intern Med. 2013;():1-2. Presented MDs cost information on lab tests at the point of care via computer ~10% reduction in test volume ($400,000+ in savings) Surgical Vampires and Rising Health Care Expenditure: Reducing the Cost of Daily Phlebotomy Elizabeth Stuebing, MD, MPH; Tom Miner, MD Arch Surg. 2011;146(5): A weekly announcement to surgical house staff and attending physicians of dollar amount charged to non-intensive care unit patients for lab services during prior week > 25% reduction in dollars charged/ patient/day for routine blood work

31 More Cost Information Will Be in the Hands of Physicians (and this is a good thing) 80% of physicians feel it is part of their responsibility to control health costs N = 502 Source: The new cost-conscious doctor: Changing America s healthcare landscape; Chuck Farkas, Tim van Biesen. Bain & Co.

32 As Healthcare Goes Horizontal Cost Accounting Will Be Critical NEW Service Line Population Condition Episode OLD Department Entity

33 Better Cost Information Will Be in the Hands of Hospitals/Health Networks (and this is big news) We want to be able to cost across an episode, but then we need to be able to marry what we get paid against that. That s regardless of how we get paid bundled payments or whatever it is. We need to be able to run that against our cost data, and then within that cost data, we need to see what the variability of that cost is. Chad Brisendine Chief Information Officer St. Luke s Univ. Health Network

34 The Re-Introduction of Cost Accounting: Getting to the REAL Cost of Delivering Care Where the market had been Claims data on it s own Combination of Cost/ Claims Data Cost data on it s own Where the market is heading

35 And Analytics Will Link Clinical and Financial Metrics

36 Cost is cool again.and that margin can buy more care (quantity/access) and better care (quality) Making cost data liquid will help put out the fire

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