Clinical Integration Track

Transcription

1 Clinical Integration Track Solving the Conundrum: Physician Preference Items (PPI) 10 Mistakes Hospitals Must Avoid When Managing Physician Preferred Item Cost Presenter: Joseph A. Jackson Managing Director Strategic Healthcare Services, LLC

2 Agenda Opportunities and Challenges for Hospital Supply Chain and Finance Leaders State of Healthcare Reimbursement 10 PPI Management Mistakes Operational Pricing Utilization Closing

3 Hospital Leaderships Top Supply Chain Priorities To Reduce Supply Chain Costs Focus on price and utilization of product Even with lowest price, if utilization is inappropriate, the costs will remain too high. Focus on PPI: 95% recognize that PPI influences operating costs Over 90% indicated the following tactics are critical to success Physician engagement on utilization and costs Utilizing supply chain analytical tools Mining and integrating supply chain data Source: AHRMM White Paper 3

4 Managing Your Implant Spend Overall Supply Spend Negotiable Commodities 37% Physician Preferred Items (PPI) 43% Pharmacy 20% PPI represents over 40% of overall supply spend of a typical hospital Implant costs are the vast majority of PPI 4

5 Hospital Leaderships Top Supply Chain Identified Barriers To Success Nearly 100% said the lack of data integration is a problem 50% said they don t have the right metrics in place to measure performance Reason: Do not have the dedicated resources or processes in place to obtain the information Source: AHRMM White Paper 5

6 State of Healthcare Reimbursement "Hospitals will be in danger of eroding profits as they straddle two types of reimbursement systems: the current model, which incentivizes healthcare providers to use more services, and new models that emphasize value - Moody s Medicare s Comprehensive Care for Joint Replacements Program Bundled payments for hip and knee replacements will be mandatory on January 1, 2016 for hospitals located in 75 metropolitan areas No additional money is flowing into the reimbursement side of the equation for hospitals 6

7 10 Mistakes Hospitals Must Avoid When Managing Physician Preferred Item Costs 7

8 Operational Mistakes 1. Using General Ledger financials and summary level surgical case counts to measure and/or monitor PPI cost performance Knowing the specific utilization will drive the implant cost reduction strategy 2. Assuming your Value Analysis Team is omnipresent Typically functions as a front end evaluation and approval committee vs. a compliance engine 3. Assuming Decision Support s PPI utilization and cost data is complete and specific Decision Support can only work with the data they receive from the various internal systems 8

9 Pricing Mistakes 4. Relying on your national GPO to drive and/or present you the best pricing on PPI Locally negotiated PPI contracts nearly always will drive a better price for the hospital 5. Assuming if you subscribe to a data service you have everything you need to sustain savings Someone at the hospital needs to take that data and reconstruct it around the patient s surgery not the purchase order 6. Focusing only on the front end of a PPI cost reduction project Most of the cost reduction effort occurs after new manufacturer contracts are signed 9

10 Utilization Mistakes 7. Assuming projected savings = actual savings As utilization shifts, savings will erode The key is to see the utilization shift as it happens so corrective action can be taken quickly 8. Not dedicating a specific person to PPI price & utilization reporting Small changes in a surgeon s utilization can have a large financial impact over time These changes are often invisible 10

11 Utilization Mistakes 9. Tasking a Director or Manager in the Supply Chain department with the reporting effort Directors and Managers shouldn t spend time in the minutia of data analysis Resource should cut through large datasets to deliver succinct recommendations to management 10. Appointing a person who does not have any experience with PPI products to do the reporting Prior to engaging a surgeon regarding PPI utilization, the analysis should be unambiguous and solid Relationship with that surgeon depends on it 11

12 Recap: Operational, Pricing, Utilization Challenges Operational: 1. Financial statements are too summary level to measure PPI 2. The Value Analysis Team can t be everywhere 3. Decision Support can t work miracles Pricing: 4. Healthcare is a local business especially with PPI contracts 5. Subscribe to a data service? Who is analyzing the data feed? 6. Surgeon support and pricing are important but the task is not complete Utilization: 7. Mission was to get a person to the moon and get them back managing PPI is also a two step goal price and utilization 8. PPI utilization changes quickly someone needs to be tracking 9. Management makes decisions analytical work is done elsewhere 10. When engaging a surgeon the accuracy of your PPI analysis is critical 12

13 Expanding Volume and Decreasing Reimbursement The number of joint replacement surgeries has doubled since 1997 Joint implant list prices have tripled since 1998 Pew Research: 10,000 people per day turn 65 Medicare s CCJR Program begins January 1, 2016 Managed Care/Commercial reimbursement bucket is shrinking 13

14 Summary PPI cost reduction requires a two pronged strategy Price Control Continuous Utilization Management Managing PPI costs is similar to the iceberg analogy What you can t see will hurt you Above the waterline is the price Below the waterline is the utilization Unchecked utilization shifts will quickly erode savings, unless continuously monitored 14

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