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

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Presentation on theme: "Boston Children’s Hospital Enterprise Costing Workgroup Meeting April 6, 2013 1."— Presentation transcript:

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

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

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 3

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

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? SometimesNoYes Is risk-adjustment included? No Yes 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) 5

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 6

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 GoodBetterBest 7

8 Department of Plastic and Oral Surgery (DPOS) Worksheet Personnel Process Time (minutes) DiagnosisSurgeonASRRNCA Plagiocephaly Neoplasm Skin Excision Craniosynostosis Determination of Capacity Cost Annual Cost per person $522, $89, $134, $71, Clinical minutes available per year Capacity cost rate ($ per minute) $6.00 $1.00 $1.50 $0.80 Medical Diagnosis Cost per patient visitSurgeonASRRNCA Total CostCharge Average Reimbursement TDABC PROFIT RCC COST RCC PROFIT Plagiocephaly $ $8.00 $34.50 $4.00 $ $ $ $69.50 $ $14.00 Neoplasm Skin Excision $ $55.50 $30.00 $4.00 $ $ $ $2.50 $ $14.00 Craniosynostosis $ $10.50 $34.50 $8.00 $ $ $ $(69.00) $ $

9 Department of Orthopaedic Surgery: Cast Room Worksheet Cost per procedureSurgeonASRRNTotal CostCharge Average Reimbursement TDABC PROFIT RVU COST RVU PROFIT Long leg cast, cotton padding $1.75 $60.00 $- $61.75 $ $ $ $ $ Long leg cast, Gore-tex padding $1.75 $60.00 $8.25 $70.00 $ $ $ $ $ Petrie long leg cast $1.75 $ $- $ $ $ $21.45 $ $13.72 Clubfoot cast (hospital), full cycle $ $ $- $ $ $ $1.50 $ $ Clubfoot cast (Foundation), full cycle $ $ $- $ $ $ $(180.50) $ $ PersonnelOrthopedic SurgeonPlaster/ Cast TechnicianAmbulatory Service Representative Determination of Capacity Cost Annual Cost per person$693,000$83,160 $62, Available minutes per year$99,000$83,160 Capacity cost rate ($ per minute) $7.00 $1.00 $0.75 Personnel Process Time (minutes) ProcedureMinutes Long leg cast, cotton padding Long leg cast, Gore-tex padding Petrie long leg cast Clubfoot cast (hospital; initial visit) Clubfoot cast (hospital; replacement visit) Clubfoot cast (hospital; final visit)

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 10

11 Key Issues Issue #1 Rising Healthcare Costs Issue #2 Unprofitable Pricing Methods Issue #3 Process Inefficiency Issue #4 Patient Attrition Recommendations 1.Short term: Bundled payment for acute care 2.Long term: Bundled payment for post acute care Time-Driven Activity- Based Costing (TDABC) Approach Standardized Clinical Assessment and Management Plans (SCAMPS) 1.Contain costs 2.Implement accurate costing 3.Streamline processes BCH Outcomes 1.Cost containment 2.Cost avoidance 3.Enhanced quality 4.Population health 1.Identify profit margin and loss for each service line 2.Accurate and acuity sensitive cost data 1.Eliminate waste 2.Improve process 3. Improve entire patient care cycle 1.Improved revenues 2.Better utilization of resources 3.Increase in number of patients Recommendations for BCH’s Four Key Issues and the Resulting Organizational Outcomes 11

12 Physician Bonus Model Based on the Program for Patient Safety and Quality (PPSQ) Bonus Calculation SafetyEffectivenessEfficiencyTimeliness Patient- Centeredness Equitability Percentage of PPSQ Measures Achieved Number of Physicians for the specific treatment Total Bonus Distribution Amount 12

13 Evaluation of Aggregate Physician Bonus Payment 1 = Bundled Payment 2 = Fee for Service 13

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

15 Porter’s Value Chain Service Delivery Pre-ServicePoint-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 15

16 Questions 16

17 Appendix 17

18 Exhibit A: Program for Patient Safety and Quality at BCH Safety: 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 18

19 Exhibit B: SCAMPS Example 19

20 Exhibit B: SCAMPS Example 20

21 Exhibit B: SCAMPS Example 21

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. 22

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 23

24 Exhibit D:DPOS Cost Analysis Breakdown 24

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. 25

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 26

27 Key Issues Issue #1 Rising Healthcare Costs Issue #2 Unprofitable Pricing Methods Issue #3 Process Inefficiency Issue #4 Patient Attrition Recommendations 1.Short term: Bundled payment for specific treatment 2.Long term: Bundled payment for chronic condition Time-Driven Activity- Based Costing (TDABC) Approach Standardized Clinical Assessment and Management Plans (SCAMPS) 1.Contain costs 2.Implement accurate costing 3.Streamline processes Outcomes on Patient Value 1. Patient receives more outcome driven care centered around the full cycle of care 2.Patient saves time and money as only the necessary medical services are performed 1. Potential to reduce charges for services, saving the patient money 1.Better quality of care 2.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 1.Potential to receive innovative care by physicians exposed to a larger case mix 2.Receive care from providers competing on quality and evidence-based practices Exhibit G: Outcomes of the Value-Based Competition Plan on Patient Value 27

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

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: CONTENTID=28047 Children's Hospital Boston Joins the Alternative Quality Contract (2012). Blue Cross Blue Shield of Massachusetts. Retrieved from: releases/2012/ htmlhttp://www.bluecrossma.com/visitor/newsroom/press- releases/2012/ html 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: CONTENTID= CONTENTID=28047 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: Alternative-Quality-Contract.aspxhttp://mobile.commonwealthfund.org/Publications/In-the-Literature/2012/Jul/The- Alternative-Quality-Contract.aspx Weisman. R. (2012). Children’s, Blue Cross deal curbs payments. The Boston Globe. Retrieved from: increase-from-blue-cross-this-year/mraRWoC99jqOI5suyQ8IZI/story.html 29

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: hospital-signs-on-to-global-payment-strategy 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.htmlhttp://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: global-payment-deal-partners-healthcare/ http://www.fiercehealthpayer.com/story/harvard-pilgrim-reaches- global-payment-deal-partners-healthcare/ 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: 3.p36-46.pdf 3.p36-46.pdf GOODNOUGH and Sack (2011). Massachusetts Tries to Rein In Its Health Costs. The New York Times. Retrieved from: health-care-cost.html?pagewanted=all&_r=0http://www.nytimes.com/2011/10/18/us/massachusetts-tries-to-rein-in-its- health-care-cost.html?pagewanted=all&_r=0 30

31 References Physician Bonus Model Formulas Health Affairs Blog (August 13th, 2012) The Release of Massachusetts Health Reform 2.0. Retrieved from: Release of Massachusetts Health Reform 2.0http://healthaffairs.org/blog/2012/08/13/the-release-of-massachusetts-health-reform-2-0/ Herman. B. (April 03, 2012). Major Lessons from CMS' Bundled Payment ACE Demonstration. Retrieved from: lessons-from-cms-bundled-payment-ace-demonstration.htmlhttp://www.beckershospitalreview.com/hospital-physician-relationships/2-major- lessons-from-cms-bundled-payment-ace-demonstration.html 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: 31


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