10 Mistakes Hospitals Must Avoid When Managing Physician Preferred Item Costs

Transcription

1 10 Mistakes Hospitals Must Avoid When Managing Physician Preferred Item Costs

2 About Strategic Healthcare Services Strategic Healthcare Services (SHS) is a management consulting firm that specializes in profit enhancement and provider intelligence in the area of physician-preferred items. OUR GOAL To enhance financial success of our client s total joint, spine, trauma, and cardiology services lines. To create a partnership between the hospital, the surgeon and the device manufacturer. SHS works with our hospital clients to accumulate and interpret their data at the surgical case level to identify opportunities for increased profit and growth. 2

3 About The Speaker Joseph A. Jackson Brings more than 16 years healthcare experience 10 years of physician-preferred item purchasing and contracting experience in an acute care setting Contact Information: Managing Director Strategic Healthcare Services, LLC Direct: (404) Web: 3

4 Agenda Opportunities and Challenges for Hospital Supply Chain and Finance Leaders State of Healthcare Reimbursement 10 PPI Management Mistakes Operational Pricing Utilization Closing 4

5 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 5

6 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 6

7 Hospital Leaderships Top Supply Chain Identified Barriers To Success Nearly 100% said the lack of I.T. data integration is a problem Half 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 7

8 State of the 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 8

9 10 Mistakes Hospitals Must Avoid When Managing Physician Preferred Item Costs 9

10 Operational Mistakes 1. Using General Ledger financials and summary level surgical case counts to measure and/or monitor PPI cost performance Consistency issues on where dollars are charged For example: Implants and disposables charged to same GL account, different types of implants charged to same GL account, keying errors by staff Need to know the implant utilization and spend by manufacturer, by doctor, by procedure, by component Knowing the specific utilization will drive the implant cost reduction strategy 10

11 Operational Mistakes 2. Assuming your Value Analysis Team is omnipresent Typically functions as a front end evaluation and approval committee vs. a compliance engine Procedural areas are very dynamic and porous Operating Room, Cath Lab, Interventional Radiology Difficult to control PPI point of entry to the hospital 11

12 Operational Mistakes 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 Data integration is a significant challenge for most hospitals High level of data integrity, consistency, and integration must exist between multiple systems to report detailed PPI usage and cost data Including, Charge Master, Item Master, Purchasing, Cost Accounting, and Surgery systems 12

13 Pricing Mistakes 4. Relying on your national GPO to drive and/or present you the best pricing on PPI Recent study estimates GPO s save U.S. hospitals $36 billion per year Only 7% of that savings estimate is PPI Locally negotiated PPI contracts nearly always will drive a better price for a hospital Commitment is key in volume based pricing 13

14 Pricing Mistakes 5. Assuming if you subscribe to a data service you have everything you need to sustain savings Data services receive feeds from purchasing and produce raw data back to the hospital Will not contain specific utilization information Someone at the hospital needs to take that data and reconstruct it around the patient s surgery not the purchase order When the utilization and cost data is compiled and centered around the patient, meaningful trends will emerge 14

15 Pricing Mistakes 6. Focusing only on the front end of a PPI cost reduction project PPI projects are multiple years long, not 90 days High variability in PPI costs and utilization At any given time another hospital has a better price GAO Study Most of the cost reduction effort occurs after new manufacturer contracts are signed 15

16 Utilization Mistakes 7. Assuming projected savings = actual savings The goal is to convert all projected savings into 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 Proactively measure the specific PPI costs and utilization every week, month, and quarter If you are not measuring it, you are not managing it Peter Drucker 16

17 Utilization Mistakes 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 Most hospitals will have hundreds of PPI cases per month with thousands of associated lines of utilization and cost data Hospitals need to hard wire a dedicated human analytical element into the PPI supply chain to ensure corrective action is taken as soon as possible 17

18 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 Successfully managing the relationship and taking corrective action with surgeons and manufacturers is a key element for management Every hour spent in data analysis is time away from looking for the next savings opportunity 18

19 Utilization Mistakes 10. Appointing a person who does not have any experience with PPI products to do the reporting PPI products are not intuitive Difficult to decipher proper vs. improper utilization if the person doesn t understand the product or procedure Prior to engaging a surgeon regarding PPI utilization, the analysis should be unambiguous and solid Relationship with that surgeon depends on it 19

20 Expanding Volume Demands Increased Attention 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 20

21 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 21

22 Thank you for joining SHS for today s discussion on Managing Physician Preferred Item Costs. Open to Questions & Discussion To request a copy of today s presentation please contact: Joe Jackson Direct: (404) [email protected] 22