Managing Cost in the Era of Healthcare Reform
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This document discusses managing healthcare costs in an era of healthcare reform. It includes an agenda for a presentation on the topic with sections on the state of analytics in healthcare, strategic profit and loss statements, use cases, best practices, sample reporting, and a question and answer session. It emphasizes that healthcare transformation requires integrated clinical, financial, administrative, and research data from across healthcare providers as well as analytics. It also notes that a lack of understanding of healthcare costs is a barrier to effective reimbursement approaches and that financial decision support is a top priority for providers.
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Managing Cost in the Era of Healthcare Reform
- 1. Managing Cost in the Era of Healthcare Reform William Bercik JoAnn Fifield May 5, 2015
- 2. 1. State of Analytics in Healthcare 2. Strategic P&L’s 3. Use Cases 4. Best Practices 5. Sample Reporting 6. Q&A Agenda 2
- 3. The Learning Healthcare Organization Meaningful Use Metrics Departmental Claims-based KPI’s Pervasiveness of Analytics Impact on HC Transformation Today Analytics are Vital to Healthcare Transformation Trial & Error Medicine Evidence-based Medicine Value-based Medicine Core Clinical & Operational Systems Enterprise Data Integration Analytic Applications HC Transformation requires much more than just an EMR. It requires integrated clinical, financial, administrative, and research data from across the provider enterprise and analytics. Accountable Care Clinical & Operational Performance Management Comparative Effectiveness Research → New Guidelines Point of Care Decision Support Translational Research 3
- 4. “To put it bluntly, there is an almost complete lack of understanding of how much it costs to deliver patient care.” “The inability to properly measure cost and compare cost with outcomes is at the root of the incentive problem in health care and has severely retarded the shift to more effective reimbursement approaches” – Robert S. Kaplan (Baker Foundation Professor at Harvard Business School) – Michael E. Porter (Bishop William Lawrence University Professor at Harvard Business School) The Big Idea: How to Solve the Cost Crisis in Health Care Harvard Business Review, Sept 2011 4
- 5. Population Health Financial Decision Support Source: CCHIT 2013 5
- 6. Financial Decision Support: Top 5 priorities for providers 6 HIMSS Healthcare Provider Innovation Survey, Jan 2014
- 7. Enterprise Healthcare Analytics Comprehensive, Integrated Healthcare Enterprise Data Management Healthcare Financial Decision Support Suite Analytics Subject Areas Financial Operational Clinical Research Healthcare Financial Decision Support Cost Accounting Financial Modeling •Cohort cost of care •Physician, DRG variance •Service line profitability •Episode of care cost •Contract scenario modeling •Net revenue modeling •Patient volume, utilization trends •Scenario modeling: case mix, volumes •Actual vs budget Budgeting, Flex analysis Labor productivity •Productivity KPIs •Chargeable, non-chargeable activity •Capacity analysis •Nursing and Physicians EMR, ADT Contract Management HRM ERP Management Metadata HierarchyManagement DataDefinitions 7
- 8. Where are you in your journey? •What are your biggest cost management strategies? •What data insights and analytics are you using to drive down cost of care across your system? •How are you using cost of care insights in your population health strategies? •What cost and revenue management capabilities do you need for shared-risk contract negotiations? •Can you determine costs across a bundled episode of care traversing inpatient, outpatient, physician offices and other ambulatory care sites? •How are you using workforce analytics to respond to flex volume demands? 8
- 9. “Humans create more data in just two days than was created in all of history up until the year 2003! ” Erick Schmidt 9
- 10. Patient Days Salaries Assets Case Mix OR Minutes Payor Mix Labor Productivity Physician Profitability Service Line Profitability Capital Budgeting Case Costing Clinical Analytics Daily Metrics What-if Analysis Shared Services Allocations Quality of Care / ACO Reimbursement Analysis Encounter Level Costing M&A Valuation Population Health Payor Mix10
- 11. Revenue $1,600 Direct (350) Semi-Direct (450) Indirect (300) Profit Clustering – Strategic P&L’s DELIVERY PROFIT ($100) Strategic P&Ls Indirect IT/Finance Patients Drugs Laundry Radiology O.R. OVERHEAD Profit-Focused Enterprise (PFE)™ Service Lines Physicians Patient Direct Supplies Patient Drugs Direct Medicine TREATMENTS/CARE Patient Revenues Patient Patient Patient Drugs Drugs Laundry Radiology O.R. Housekeeping Surgery MEDICAL SERVICES Reimbursements % Chgs Per Diem/Admit Detail, DRG Payor Mix Reimbursements (600) 11
- 12. Profit-focused Enterprise (PFE)TM Use Case #1 – Service Line P&L 12 Key Elements Large amounts of detailed data – starting with EMR Actual patient costs captured (supplies, labs, etc) True activity based costing Tangible driver data (Surgery minutes, Hours, Patient days) True waterfall overhead costs Detailed salaries down to the procedure level Applied Physician practice costs Cost by department and service line Value Proposition Bottom up detailed costing - 95% accuracy Ability to bundle costs and test out pricing Aggregation of known costs – less allocation/assumptions Cost per patient per service line by location Detailed comparative analytics Costs • Actual Costs to Cost Pools Drivers • Cost Pools to Functions by Dept. Service Lines • Functions to the charge item (activity code) by Dept.
- 13. RVU’s are NOT a waste of time! Use Case #2 – P&L by Function 13 Key Elements Trusted and historical RVU data Direct connectivity to existing health system Detailed charges captured by procedure Native integration – millions of data intersections Isolate cost of supplies – variance analysis Waterfall the variance Value Proposition Extended analytics to all end users Full integration of data – checked and qualified from the close Automated aggregation Future ability to model more functions/activities Single comprehensive model with reporting True flexed costing model (zero-balanced) RVU’s • Costs to Cost Pool by RVU’s Cost Pools • Cost Pools to Functions by Dept. Charges • Functions to the procedure to Patient
- 14. Time-Driven Activity Based Costing by Procedure Groupings Use Case #3 – Patient P&L 14 Key Elements Collect procedural data Collect time studies by role by location over time Clinical roles isolated Capture acuity by procedures Collect data at the departmental level – closest to patient Value Proposition Target costly procedures Goal is quality and care delivery What if modeling based on clinical provider (Dr. vs. LPN) Comparative staffing models per procedure per location! Comprehensive time line analysis Bottom up detailed costing Charges • Procedure level charges Process Maps • Cost Pools to Functions by Dept. TDABC • Functions to the charge item (activity code) by Dept.
- 16. Master Catalogs Charge Master Billing Cost AllocationCharge Capture AP & AR Inventory Purchasing HR and Payroll Patient Accounting Financial Reporting Pharmacy & Formulary User Definable Extensions Provider Enterprise subject area coverage Data Foundation/Warehouse Consent & Advanced Directives Case Specimen Trial (Clinical Study) Survey Family Incident Parties Individuals / Orgs Patient Encounters Coded Terminologies Service Providers Diagnosis Dx, CP, Problem History Procedures CPT, Med Adm, Pat Edu Observation (Lab Results, Vitals, Assess) Orders SchedulingGroups Facility Payor Substance Claims & Payment (Reimbursement) Related Groups Related Entities Intersection Entities 16
- 19. Reporting 19
- 20. Reporting 20
- 22. 22
- 24. William Bercik JoAnn Fifield Questions?