Cost, Acuity and Quality in your future Colorado MGMA September 12, 2014

1. Cost, Acuity and Quality in your futureColorado MGMASeptember 12, 2014 Owen Dahl, MBA, FACHE, LSSMBB

2. Objectives • To review the cost factors of the medical practice • To identify concepts for acuity in determining staffing and resource utilization • To review concepts of quality • To put it all together

3. Patient Types and Delivery Options

4. Definition of Quality • IOM • "The degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.“ • How care is provided should reflect appropriate use of the most current knowledge about scientific, clinical, technical, interpersonal, manual, cognitive, and organizational managements of health care. See handout for more information on IOM

5. Quality • Error rates • 180,000 deaths annually caused by medical error • 30% of acute care patients and 20% of chronically ill patients receive care that is contraindicated • Over treatment • Experts – 20 to30% of medical treatments are unnecessary • 16% of hysterectomies and 17% of coronary angiograms done annually are unnecessary • Under treatment • 50% of patients receive recommended preventative care • Depression - 59% of patients are not treated, 19% receive ineffective treatment www.qualityforum.org– National Quality Foundation web site

6. The importance of quality perspectives • The Patient’s view of quality • Was I able to get an appointment at the appropriate time? • Was I greeted at the clinic as though I were a guest? • Was the waiting time appropriate? • Was the nurse or medical assistant interested in my concerns? • Did the doctor take time with me? • Was the doctor friendly and did he/she answer all of my questions and discuss my care with me? • Was the environment friendly, considerate and clean?

7. The importance of quality perspectives • The Health Care Professional’s view of quality • Was the process of the patient’s care provided according to the highest standards of evidence based medicine? • Were the appropriate protocols and guidelines for diagnosis and treatment followed? • Were the expected outcomes for the patient’s condition achieved?

8. Evidence Based Medicine • “Conscientious, explicit and judicious use of the current best evidence in making decisions about the care of individual patients”* • Who • How • When • Prejudicial perspective in all • Conflict of interest *D.L. Shackett, et al, “Evidence-based Medicine: What it is and What it Isn’t” (editorial) British Medical Journal, 312, no. 7023 (1996): 71-72

9. EBM & Guidelines • Issues – why • Escalating health costs • Inequality in access • Variation in accepted clinical practices • Purpose – goals • To provide stronger scientific foundation for clinical work • To achieve consistency, efficiency, effectiveness, quality, and safety in all aspects of medical care

10. Healthcare Effectiveness Data and Information Set - HEDIS • HEDIS is a tool used by more than 90 percent of America's health plans to measure performance on important dimensions of care and service. • Altogether, HEDIS consists of 80 measures across 5 domains of care. Because so many plans collect HEDIS data, and because the measures are so specifically defined, HEDIS makes it possible to compare the performance of health plans on an "apples-to-apples" basis. • Health plans also use HEDIS results themselves to see where they need to focus their improvement efforts.

11. HEDIS - timelines • Basic Access • % of families that experience difficulties in obtaining care, by reason • Getting Appointments • % of persons who report they can get an appointment for routine care as soon as they wanted (always, usually, sometimes/never) • Waiting time • OP/clinic visits: average time spent waiting before being seen by doctor • Office visits: average time spent waiting before being seen by a doctor

12. Patient Cycle Time Check In Triage Provider Post visit Check Out Practice Median = 55 minutes

13. Analysis of Value Add Time Check In 3 – 3.6 Review of patient Value Add time during a routine visit to the practice Median Cycle Time = 55 Minutes Total Value Add Time = 29.2 + Motion time of 6 Total time in office = 35 Minutes What happens the other 20? More importantly what happens during the 29.2 that could be redesigned to remove WASTE Triage 7 – 8.4 Provider 10 • PFD – calculated at +20% • P = personal • F = fatigue • D = delay Follow up 3 – 3.6 Check Out 3 – 3.6

14. Time Analysis • 36 patients per hour (6 - 10 minute slots for 6 providers) • Check in • 3 minutes +20% PFD = 3.6 minutes • Triage • 7 minutes + 20% PFD = 8.4 minutes • Follow up – same as check in • Check out – same as check out

15. Staffing requirements • Check in • 3.6 * 36 = 129.6 minutes/60 = 2.16 FTE’s • Triage • 8.4 * 36 = 302.4 minutes/60 = 5.04 FTE’s • Follow up • 3.6 * 36 = 129.6 minutes/60 = 2.16 FTE’s • Check out • Same for check in 7.2 FTE’s

16. Careful when discussing costs • Global = payer costs • Vs. • Practice = daily costs of operation

17. Physician Payment Reform • National Commission on Physician Payment Reform, March 2013 • Transition from FFS in next 5 years • Payers – eliminate stand alone FFS • Transition to payment based on quality and value • Re-calibrate FFS to change behavior toward quality and cost effectiveness, penalize behavior for over use or mis-use of service

18. Alternative Methods of Payment Fee for Service (FFS) FFS + Shared Savings Episode Payment Partial Comprehensive Care Payment + P4P Comprehensive Care (Global Payment) Capitation

19. Different Payment Systems Solve Different Cost/Quality Problems High Episode payments Examples: Hip fracture Labor & delivery Comprehensive care pay + Episode payment Examples: Heart disease Back pain Amount/ Variation Of Cost Per Episode Fee for service Examples: Simple injuries Immunizations Strep throat Comprehensive care pay Examples: COPD CHF Low Low High Size/Variation in Frequency of Episodes Per Condition www.paymentreform.org

20. Risk Assessment • Physicians • Age • Market • Accept or manage payments TOLERANCE CONTINUUM LOW HIGH

21. Care/Treatment Plans • “A plan for the medical care of a particular patient” • Goal - Keep patients healthy, use cost effective approaches to treatment and management, especially on chronic care patients • Based on evidence • Interdisciplinary • Guide to decision making and resource utilization • Key for episodic or bundle payment options • Practice registry - Start with one key indicator and develop model, determine patient compliance, effectives, and cost benefit

22. Assumptions

23. How to calculate cost Total expenses for period of time divided by number of patients seen in the same time period, e.g., one year. $365,761 / 6250 = $58.52

24. Financial Statement

25. Costs

27. Costs Graph $283,161 C O S T Variable Costs $82,600 Fixed costs Visits

28. Overhead • Is the doctor overhead? A cost? • Overhead is your cost of doing business. • Is it too much in your practice? • Is it just right? Measure by determining if you are getting the most out of your cost, the most from your staffing, etc.

29. Background look

30. Cost per visit

31. Cost per hour *Could include all hours worked and divide into total income (bottom line) to determine the “cost”

32. Cost per visit / hour

33. Cost per RVU and wRVU

34. Break Even Analysis

35. Tests and procedures in the office • Identify costs associated with this department • Staff, supplies = variable • Equipment and space = fixed • If possible, identify based on top 5 – 10 procedures done • Consider using RVU and apply all overhead to these processes as an option • Question: Return on investment = meeting expectations?

36. Hospital activity • Carve out MA and most other clinic support • Retain billing costs • Key factor is time associated with visits • Consider the use of RVU • Questions: • Is the time to walk/drive back and forth factored in and does this service bring value to the practice? • Real question of cost benefit related to time: remember $190.50 is the total cost per hour (slide 21) • Is this a marketing effort or a direct financial return?

37. Cost savings • Watch overtime (V) • Staff well, hold people accountable (V) • Benefits – cost-sharing, capped plans (V) • Telecommunications cost – consolidate, eliminate (F/V) • Malpractice – don’t be over-insured, attend training (F) • Supplies – review systems, protocols (V) • Shopping online (V) • Your own printing and desktop publishing (V) • Space utilization – are you in the right location (F)

38. Four categories of quality costs • Prevention – incurred to prevent defects • Training • Appraisal – incurred for monitoring and inspection • Quality control and audits • Internal failure – incurred when a defect is found before service provided • Re-work • External failure – incurred for providing service to customer • Warranty, loss of goodwill, other talking, choosing a competitor, law suits

39. Cost of Quality Report • Costs by category for the current and prior period • Percent change from prior period • Current period budget • Percent change from budget

40. Quality through prevention • A change in philosophy where detection is no longer the goal • Change in focus that takes place upstream on the process • A change in responsibility, quality is NOW everyone’s responsibility • A change in attitude, good enough is not good enough anymore • Continuous improvements designed to keep the practice competitive

41. Quality through inspection • Inefficient and costly • Asks “who is the final inspector” • Has a confused responsibility • Is symptom oriented • Includes neglected improvements

42. Scenarios

43. Scenario 1 – FFS UncomplicatedPhysician Only

44. Scenario 2- FFS ComplicatedPhysician Only

45. Scenario 3Global Payment – No FFS

46. Scenario 3 – add the hospital • Patient with ICD-9 diagnosis of: 250.12, Diabetes type II with ketoacidosis • DRG w MCC = Medicare reimbursement of $8,124 • Average cost for emergency room visit = $2,168 • Therefore two hospitalizations and four emergency room visits means the annualized cost addition is: $24,920

47. Scenario 3Global Payment – No FFS $26,082.60 Physician Only

48. Knee Surgery 2012

49. Hip Surgery 2013

50. The Quality vs. Cost Question • 2014 – understand your costs • Meaningful use • Exchanges • ICD-10 • 2015 – VBP • Not meet PQRS = -1.5%; add value modifier adjustment = + another 1.0% • 2016 – • Presidential election • 2017 - • 2018 – SGR, Maximum penalties begin