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Calculating Financial Outcomes for Hospital Palliative Care. Kathleen Kerr Senior Analyst Faculty, UCSF PCLC University of California, San Francisco Steven Pantilat, MD Associate Professor of Clinical Medicine Director, Palliative Care Program and

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calculating financial outcomes for hospital palliative care

Calculating Financial Outcomes for Hospital Palliative Care

Kathleen Kerr

Senior Analyst

Faculty, UCSF PCLC

University of California, San Francisco

Steven Pantilat, MD

Associate Professor of Clinical Medicine

Director, Palliative Care Program and

Palliative Care Leadership Center (PCLC)

University of California, San Francisco

palliative care
Palliative Care

“…comprehensive, interdisciplinary care, focusing primarily on promoting quality of life for patients living with a [serious, chronic, or] terminal illness and for their families… assuring physical comfort [and] psychosocial support. [It is provided simultaneously with all other appropriate medical treatments]”

Billings, J Pall Med, 1999;1:73-81

what palliative care teams do
What Palliative Care Teams Do
  • Symptom management
  • Communication
    • clarify or change goals of care
    • conduct family meetings
  • Discharge planning
  • Advance care planning
  • Spiritual support
  • Psychosocial support

what kinds of patients do pc teams see
What Kinds of Patients do PC Teams See?
  • CHF, 3rd admission in a year
  • Breast cancer and malignant pleural effusion
  • Brain metastases
  • Dementia and aspiration pneumonia
  • New diagnosis of idiopathic pulmonary fibrosis
  • Cirrhosis and 3rd admission for altered mental status

a distinct population
A Distinct Population
  • Severe, chronic often terminal illnesses
    • Deaths and live discharges
  • Resource utilization
    • High costs per case
    • Longer lengths of stay
    • More admissions
  • Payer mix
    • More Medicare (case rate payments)

evident at state level
Evident at State Level

Payer Mix for Adults Discharged from California Acute Care Facilities in 2004

“Target population” = patients discharged alive who were assigned to one of the 25 most common DRGs for patients who died in the hospital.

and at individual hospitals
… And at Individual Hospitals

200-bed California community hospital

medicare profitability and los
Medicare Profitability and LOS

High costs and high proportion of Medicare cases mean many mortality cases and many target population cases result in financial losses

UCSF Medicare deaths FY 2006

how palliative care can help
How Palliative Care Can Help
  • Reduced ICU utilization
    • Shorter LOS in ICUs
    • More transfers out of, fewer into, ICUs
    • More admissions directly to PC (vs. to ICU)
  • Lower inpatient daily costs
    • Reduced utilization of labs, radiology, pharmacy, blood
  • Better care coordination, more hospice
  • Reduced readmissions

analysis process
Analysis Process
  • Identify changes/differences in resource utilization that can be attributed to PC
  • Assign value to those changes/differences
  • Calculate net benefits

calculation challenges
Calculation Challenges
  • Savings from cost avoidance, not revenue generation
    • Need to define “what would have happened” had PC team not become involved
  • Most complex, sickest patients, and a relatively small proportion of hospital population, so comparisons can be difficult
  • Extensive costs in the period before PC involvement often means good result is smaller loss, not loss to profit

measuring changes in costs
Measuring Changes in Costs
  • By days
    • Before and after PC
    • PC vs non-PC
      • Costs & LOS
  • By admission
    • Typically only used if PC service responsible for entirety/majority of hospital stay
      • Generally NOT appropriate for consultations or late transfers to a PC unit
  • By patient
    • Resource utilization over a defined period of time (i.e., the last six months of life)

which costs to measure

Total Costs


Those costs that do not vary directly with

the volume of patient services provided.

Over a specified period these costs would be

incurred regardless of volume. As shown

below, fixed costs have two components.


Costs that vary directly and proportionately

with the volume of patient services provided.

These expenses may fluctuate day to day

and would not be incurred if no services

were used. As shown below, variable

costs have two components.


Costs that can be traced

to or identified with a

specific product or service

but that do not vary with


Examples: supervisory

personnel, equipment.


Costs that cannot be

specifically traced to an

individual department and

do not vary with volume.

These costs are allocated to all departments.

Examples: utilities, hospital administration.


Costs that can be traced to

a specific product or service.

These costs increase or decrease according to the volume of services provided.

Examples: nursing care, supplies.


The costs or expenses that

cannot be specifically traced to an individual patient but that do vary with volume.

Examples: social services,

medical records.

Which Costs to Measure?

which cases to use
Which Cases to Use?

Do you want to include:

  • Patient discharged or dies on day of consult (PC LOS = 0)
  • Patient seen intermittently thru discharge
  • Patient signs off service

tallying the before costs
Tallying the “Before” Costs
  • Need date of PC consult/transfer
  • Data on costs (or charges) per day by category (room and care, pharmacy etc.)
  • Decide which “before” days to count
    • All?
    • Exclude first two (high-cost surgeries), or back out peri-operative costs?
    • Only use day immediately prior to consult/transfer?

after costs
“After” Costs

Can compare:

  • All “before” to all “after”
  • Or subset of “before” to all “after”
  • Or can limit number of “after” days
    • Difficulty of forecasting what would have happened beyond a certain point, say 5 days
  • May exclude day of consult or transfer (transitional day)

simple before and after comparison
Simple Before and After Comparison

Average Variable Cost per Day Before and After UCSF PCS Consult

pc vs non pc comparison
PC vs. non-PC Comparison

Possible variables to use in defining a comparison group:

  • DRG or APR-DRG (APRs include severity-of-illness and risk-of-mortality indices)
  • Major illness type (e.g., metastatic cancer)
  • Number of co-morbidities and/or complications
  • Number of organ systems involved
  • Age (perhaps 10-year cohorts)
  • Attending or clinical service
  • Disposition (e.g., death)

pc vs non pc cost comparison
PC vs. non-PC Cost Comparison

Decide on Comparison Period

  • Entire stay
  • Entire “after” period
  • A portion of the stay, i.e. last 3-5 days
    • Common to align with average LOS on PC service

vcu case control study
VCU Case Control Study

60% cost reduction for patients in PCU

Smith TJ, Coyne P, Cassel B, Penberthy L, Hopson A, Hager MA. A high-volume specialist palliative care unit and team may reduce in-hospital end-of-life care costs. J Palliat Med. 2003 Oct;6(5):699-705.

ucsf subsequent day control group
UCSF Subsequent Day Control Group

Average daily variable costs , pts who died who were referred to PCS within 1 day of admission compared to control group of low-utilization patients who also died

ucsf last 3 days of stay pcs deaths vs others
UCSF Last 3 Days of Stay PCS Deaths vs. Others

Average Daily Variable Costs

how ucsf uses pc vs non pc calculations
How UCSF uses PC vs. non-PC Calculations

Savings for first day on service:

Difference between average “before” daily cost and average “after” daily cost

Savings for subsequent days:

Difference between control group average daily cost and PC “after” daily cost

a different approach for deaths
A Different Approach for Deaths

Savings for first day on service:

Difference between actual cost of day prior to consultation or transfer and actual cost of day after consultation

Savings for subsequent days:

Difference between average daily cost of final three days of stay for non-PC patients who died and average daily cost for final three “after” PC days

los savings
LOS Savings
  • More difficult than per-day savings estimates
  • Most patients have a substantial pre- PC stay
  • Analysis begins at time of referral to PC
  • If avg. pre-PC LOS is 14 days, your question is

“Once we reach the 2-week mark, what is the difference in LOS for the two groups from that point until discharge?”

  • Matching to comparable pts critical
  • Consider variation in referral patterns by service or clinical condition

the value of saved days
The Value of Saved Days
  • Consider limiting to case rate payers
  • Program could be credited with:
    • Avg. variable costs for “after” PC day x number of saved days, or
    • Avg. total costs for “after” PC day x number of saved days, or
    • Total up saved days; divide by hospital ALOS; multiply by avg. profit per case

savings per patient
Savings per Patient

Will PC intervention change resource utilization down the road?

  • Avoid admissions entirely
  • Change goals and costs of subsequent admissions (i.e. direct admit to PC vs. ICU)

kaiser permanente rct inpatient pc
Kaiser Permanente RCT Inpatient PC
  • 512 pts followed for 6 months
  • No differences in survival between cases and controls
  • PC pts had:
    • Significantly fewer ICU stays (p = 0.04)
    • Significantly longer hospice LOS’s (p = 0.01)
    • Significantly lower costs for hospital readmissions (p =0.001)

Conner D, McGrady K, Richardson R, Beane J, Venohr I, Gade G. 2005. “Outcomes from a randomized control trial of an inpatient palliative care service.” The Permanente Journal 9 (4); 7 (

variables that influence financial performance
Variables that Influence Financial Performance
  • Baseline resource utilization
  • Capture rate
  • Service case mix
  • Influence on care
  • Quality of service
  • Level of institutional support

pc financial analysis do s and don t
PC Financial Analysis Do’s and Don’t


    • Create clinical team-administration partnership
    • Present financial outcomes in context of operational, clinical, & satisfaction outcome data


  • Analyze and present data prematurely
  • Quibble

conclusions and questions
Conclusions and Questions
  • Most PC services can show adequate if not excellent financial outcomes
  • This is not why you have a palliative care service, but how you get, grow and sustain one