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Overview Issues: Analysis: Recommendations: Rising Healthcare Costs

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Presentation on theme: "Overview Issues: Analysis: Recommendations: Rising Healthcare Costs"— Presentation transcript:

1 Boston Children’s Hospital Enterprise Costing Workgroup Meeting April 6, 2013

2 Overview Issues: Analysis: Recommendations: Rising Healthcare Costs
Unprofitable Pricing Methods Process Inefficiency Analysis: Time-Driven Activity-Based Costing (TDABC) Approach Recommendations: Bundled Payment Physician Bonus Model

3 BCH Financial Position
Historically has reported higher costs against competitors The largest provider to low-income families, with 30% patients covered by Medicaid Treats 90% of the most critical and complex pediatric cases in Massachusetts Resulting Key Issue: Rising Healthcare Costs Patient Attrition Lapse in Medicaid contract with New Hampshire Blue Cross Blue Shield Contract Renegotiation

4 BCBS-MA: Alternative Quality Contract
Medical Expense Trend Comparison for AQC Enrollees and Non-AQC Enrollees

5 Payment Methods Characteristic Historical Capitation
Fee for Service (FFS) Bundled Payment What is the time period of the payment? Prorated payment per month for a year Paid post service completion Monthly payments with occasional budget reconciliation Which providers and services are bundled? Physician, hospital, and PRN services related to a specific person (often capitated separately) No Bundling Physician, hospital, and PRN services related to a budgeted payment for a specific treatment, specific health event, or chronic condition Are performance or outcome measures present? Sometimes No Yes Is risk-adjustment included? Who accepts the risk? Provider accepts financial risk Payer primarily accepts financial risk Provider bears short-term risk Payor bears long-term risk What drives physician action? Volume and Access Management Volume Efficiency and quality (if paired with performance)

6 3-Step Implementation Plan for Bundled Payment at BCH
Bundled Payment for Acute Care Bundled Payment for Acute Care and Post Acute Care Bundled Payment for Post Acute Care Phase 1 Phase 2 Phase 3 Specific treatments are bundled Ex. Clubfoot cast Specific health events are bundled Ex. Appendicitis Chronic conditions are bundled Ex. Type 1 Diabetes

7 BCH Cost Analysis Cost Analysis Method Ratio of Cost to Charges (RCC)
Relative Value Unit (RVU) Time Driven Activity Based Costing (TDABC) Description RCC approach assume costs are proportional to charges RVU measures the amount of resources consumed to provide a service. Then allocates the RVU weight to labor Bottom-up approach to costing that estimates costs based on time used for services Benefits Easy to calculate; simple proportion demonstrating relationship Takes into account indirect and direct costs; considers complexity of services provided Better cost allocation; easily breaks down costs to identify service line problems; allows charges to be more reflective of costs Drawbacks RCC measures cost to charge ratio, not cost to reimbursement ratio Allocation methodologies tend to be imprecise during practice Takes tremendous effort to implement and launch this costing system; requires constant re-evaluation Accuracy Good Better Best

8 Department of Plastic and Oral Surgery (DPOS) Worksheet
Personnel Process Time (minutes) Diagnosis Surgeon ASR RN CA Plagiocephaly 18 8 23 5 Neoplasm Skin Excision 22 55.5 20 Craniosynostosis 40 10.5 10 Determination of Capacity Cost Annual Cost per person $522,720.00 $89,700.00 $134,550.00 $71,760.00 Clinical minutes available per year 87120 89700 Capacity cost rate ($ per minute) $6.00 $1.00 $1.50 $0.80 Medical Diagnosis Cost per patient visit Surgeon ASR RN CA Total Cost Charge Average Reimbursement TDABC PROFIT RCC COST RCC PROFIT Plagiocephaly $108.00 $8.00 $34.50 $4.00 $154.50 $350.00 $224.00 $69.50 $210.00 $14.00 Neoplasm Skin Excision $132.00 $55.50 $30.00 $221.50 $2.50 Craniosynostosis $240.00 $10.50 $293.00 $(69.00)

9 Department of Orthopaedic Surgery: Cast Room Worksheet
Personnel Orthopedic Surgeon Plaster/ Cast Technician Ambulatory Service Representative Determination of Capacity Cost Annual Cost per person $693,000 $83,160 $62,370.00 Available minutes per year $99,000 Capacity cost rate ($ per minute) $7.00 $1.00 $0.75 Personnel Process Time (minutes) Procedure Minutes Long leg cast, cotton padding 0.25 60.00 0.00 Long leg cast, Gore-tex padding 11.00 Petrie long leg cast 103.50 Clubfoot cast (hospital; initial visit) 13.00 17.00 Clubfoot cast (hospital; replacement visit) 22.00 Clubfoot cast (hospital; final visit) 8.00 Cost per procedure Surgeon ASR RN Total Cost Charge Average Reimbursement TDABC PROFIT RVU COST RVU PROFIT Long leg cast, cotton padding $1.75 $60.00 $- $61.75 $523.00 $366.10 $304.35 $135.67 $230.43 Long leg cast, Gore-tex padding $8.25 $70.00 $584.00 $408.80 $338.80 $141.77 $267.03 Petrie long leg cast $103.50 $105.25 $181.00 $126.70 $21.45 $112.98 $13.72 Clubfoot cast (hospital), full cycle $546.00 $135.00 $681.00 $975.00 $682.50 $1.50 $225.42 $457.08 Clubfoot cast (Foundation), full cycle $715.00 $500.50 $(180.50) $393.25 $107.25

10 Impact of the TDABC Approach
With better costing measures, BCH can determine more accurate and fair prices for services Prices reflect acuity Negotiate better bundled payments Easily identifies profit margins and losses for each service lines

11 Recommendations for BCH’s Four Key Issues and the Resulting Organizational Outcomes
Issue # Rising Healthcare Costs Issue # Unprofitable Pricing Methods Issue # Process Inefficiency Issue # Patient Attrition Recommendations Short term: Bundled payment for acute care Long term: Bundled payment for post acute care Time-Driven Activity-Based Costing (TDABC) Approach Standardized Clinical Assessment and Management Plans (SCAMPS) Contain costs Implement accurate costing Streamline processes BCH Outcomes Cost containment Cost avoidance Enhanced quality Population health Identify profit margin and loss for each service line Accurate and acuity sensitive cost data Eliminate waste Improve process Improve entire patient care cycle Improved revenues Better utilization of resources Increase in number of patients

12 Physician Bonus Model Bonus Calculation
Based on the Program for Patient Safety and Quality (PPSQ) Bonus Calculation Safety Effectiveness Efficiency Timeliness Patient-Centeredness Equitability 1 2 3 4 5 6 Total Bonus Distribution Amount Percentage of PPSQ Measures Achieved Number of Physicians for the specific treatment

13 Evaluation of Aggregate Physician Bonus Payment
𝝌1 = Bundled Payment 𝝌2 = Fee for Service 𝝌1 𝝌0

14 Evaluation of Physician Bonus by Treatment
Quality threshold (Best Practices) Global budget line Bonus adjustment for unpreventable adverse event No bonus earned Number of PPSQ Measures Achieved Falling Cost

15 Demonstrating Value to the Patient:
Porter’s Value Chain Service Delivery Pre-Service Point-of-Service Save time and money Attending a hospital solely focused on children and their families Medicaid patients would receive care they otherwise would not have received Increased quality of care Receive care from providers competing on quality and evidence based practices Value Driven Innovation More timely and efficient care Accessibility to high quality network of care Quality of Life Increased emotional well-being Less school and work days missed Post-Service Demonstrating Value to the Patient: Visual Display Display PPSQ results within each department Technology Internet Web-based Tools Software Systems Communication Explanation of Quality Care

16 Questions

17 Appendix

18 Exhibit A: Program for Patient Safety and Quality at BCH
Adverse events Central line infections in Intensive Care Units Timeliness: Emergency Department Length of Stay Effectiveness: Pain Management Diabetes Care Lung Function in Patients with Cystic Fibrosis Asthma Care Efficiency: Length of Stay and Readmission Rate Equitability: Equitable nursing care Patient-Centeredness: Inpatient satisfaction Outpatient satisfaction

19 Exhibit B: SCAMPS Example

20 Exhibit B: SCAMPS Example

21 Exhibit B: SCAMPS Example

22 Exhibit B:Standardized Clinical Assessment and Management Plans (SCAMPS)
Reduces diversity of patient assessment Systematic approach to clinical assessments and management algorithm Allowing better management of care Improving patient care delivery Determines how effective current clinical processes and practices are Ease transition towards health management interventions Reduce unnecessary resource utilization .

23 Exhibit C: Method for Measuring SCAMPS Shortfalls
The costs associated with any failure to meet the standardized care levels determined by SCAMPS will be calculated based on the TDABC approach. Current BCH examples: No shows within the DPOS Miscommunications when transferring patients from the Emergency Department

24 Exhibit D:DPOS Cost Analysis Breakdown

25 Exhibit E: Severity of Illness Index
Acute and Post-Acute care bundled payments adjust for case-mix severity of illness in different patient populations Severity of Illness Index is a generic (not disease-specific) four-level index (increasing severity from level 1 to level 4) determined from the values of seven dimensions related to a patient's burden of illness. These dimensions are: Stage of the principal diagnosis, Complications of the principal condition, Concurrent interacting conditions that affect the hospital course, Dependency on hospital staff, Extent of non-operating room life support procedures, Rate of response to therapy or rate of recovery, Resolution of acute symptoms/signs. It is not what is done to the patient that drives the Severity of Illness Index, but what the patient actually looks like. The signs and symptoms of the patient's principal and secondary diagnoses, as well as the rate of response to therapy contribute most heavily to Severity of Illness coding.

26 Exhibit F: What Constitutes an Unpreventable, Adverse Event?
According the World Health Organization, an adverse event is defined as an injury related to medical management and not due to the complications of a disease. According to Boston Children’s Hospital, an adverse event is defined as something that unintended that happens in a hospital which causes either harm or the risk of harm to patients. Examples of unpreventable adverse events: Drug reaction in a patient with no history of prior drug reaction Side effect of chemotherapy in a patient who must endure the chemotherapy in order to be cured of cancer

27 Exhibit G: Outcomes of the Value-Based Competition Plan on Patient Value
Key Issues Issue # Rising Healthcare Costs Issue # Unprofitable Pricing Methods Issue # Process Inefficiency Issue # Patient Attrition Recommendations Short term: Bundled payment for specific treatment Long term: Bundled payment for chronic condition Time-Driven Activity-Based Costing (TDABC) Approach Standardized Clinical Assessment and Management Plans (SCAMPS) Contain costs Implement accurate costing Streamline processes Outcomes on Patient Value Patient receives more outcome driven care centered around the full cycle of care Patient saves time and money as only the necessary medical services are performed 1. Potential to reduce charges for services, saving the patient money Better quality of care Improves quality of life for both the child and the parent less school and work days missed) Improved emotional well-being along the continuum of care Potential to receive innovative care by physicians exposed to a larger case mix Receive care from providers competing on quality and evidence-based practices

28 Exhibit H: Calculation of Bundled Payment for a Specific Treatment
60% 10% 30% 100% Payment = Hospital Physician Bonus

29 References Alternative Quality Contract (AQC)
Blue Cross Blue Shield of Massachusetts. (2010). Blue Cross Blue Shield of Massachusetts The Alternative QUALITY Contract. Retrieved from: Children's Hospital Boston Joins the Alternative Quality Contract (2012). Blue Cross Blue Shield of Massachusetts. Retrieved from: Hennrikus. W., Waters. P., Bae. D.,Virk.S., and Shah. A. (2012). Inside the Value Revolution at Children’s Hospital Boston: Time-Driven Activity-Based Costing in Orthopaedic Surgery. The Harvard Orthopaedic Journal. Vol.14 Massachusetts Payment Reform Model: Results and Lessons, Massachusetts. Retrieved from: Massachusetts Medical Society (2009) Overview of Alternative Payment Models. Retrieved from: Song. Z., Safran. D., Landon.B., Day. M., and Chernew. M. (2012). The 'Alternative Quality Contract,' Based on a Global Budget, Lowered Medical Spending and Improved Quality. Health Affairs. Retrieved from: Weisman. R. (2012). Children’s, Blue Cross deal curbs payments. The Boston Globe. Retrieved from:

30 References Bundled Payment
Bebinger.M. (January 24, 2012) Children’s Hospital Signs On To Global Payment Strategy Common Health Reform and Reality. Retrieved from: Global Payment Case Study. Retrieved from: Spoerl. B., (May 01, 2012). Massachusetts to Take Up Global Payment Legislation in the Coming Weeks. Retrieved from:http://www.beckershospitalreview.com/racs-/-icd-9-/-icd-10/massachusetts-to-take-up-global-payment-legislation-in-the-coming-weeks.html Overland. D. (2012). Harvard Pilgrim reaches global payment deal with Partners HealthCare. FierceHealthPayer. Retrieved from: Massachusetts Law Reform Controlling Health Care Costs in Massachusetts with a Global Spending Target (2012). The journal of the American medical association. 308, (12). Retrieved from: – Galewitz. P. (2009). Can 'bundled' payments help slash health costs? Kaiser Health News Retrieved from: Glass. K., Pieper. L. , & Berlin. M. (1999). Incentive-Based Physician Compensation Models. J Ambulatory Care Manage, 22(3), 36–46. Retrieved from: GOODNOUGH and Sack (2011). Massachusetts Tries to Rein In Its Health Costs. The New York Times. Retrieved from:

31 References Physician Bonus Model Formulas Health Affairs Blog (August 13th, 2012) The Release of Massachusetts Health Reform 2.0. Retrieved from: Herman. B. (April 03, 2012). Major Lessons from CMS' Bundled Payment ACE Demonstration. Retrieved from: Patel. P., (November 01, 2012) Successfully Implementing Bundled Payment Models. Retrieved from:http://www.hhnmag.com/hhnmag/HHNDaily/HHNDailyDisplay.dhtml?id=   SCAMPS Coakley. M., (2011). Examination of Health Care Cost Trends and Cost Drivers. Massachusetts Attorney. Retrieved from: Rathod. R., Farias. M., Friedman. K., Graham. D., Fulton. D., Newburger. J., Colan. S., & Lock. J. (2010) A Novel Approach to Gathering and Acting on Relevant Clinical. Congenit Heart Dis. 2010; 5: 343–353 SEVERITY OF ILLNESS  Severity of Illness with DRGs: Impact on Prospective Payment AHA RESEARCH SYNTHESIS REPORT Retrieved from:


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