Objectives 11/12/2012

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1 Boosting the Value of Lab Testing in the Shared Accountability Organization: How We Are Meeting the Cost vs. Quality Challenge at Intermountain Healthcare November 7, 2012 Stephen Mikkelsen, MS, MT(ASCP) Laboratory Services Operations Director Objectives 1. Understand how process improvement complements a Shared Accountability Organization (SAO) philosophy 2. Understand how process improvement drives decision making 3. Understand how process improvement methods have reduced patient s costs, while improving quality, patient safety, and improving outcomes 1

2 Current Debt and Unfunded Federal Obligations by Category ($ Trillions) Utah Medicaid Social Security Total National Debt Medicare Source: Office of Management and Budget, May, 2011 Source: Initial Analysis of Federal Health Reform Legislation. Utah Department of Health. March 30, Available online at Source: Fiscal Year 2011 Budget Summary. Governor s Office of Planning and Budget. May Available online at 2

3 p1 Commercial Health Insurance Premiums Financial Doom Cycle Commercial insurance becomes less affordable Increasing commercial insurance costs Higher numbers of Medicaid and uninsured Medicaid and uninsured payments fall further behind costs 3

4 Slide 5 p1 pcjmott, 09/12/2011

5 The SAO Story in 3 statements Shared Accountability Organization accepts responsibility for the quality, cost, and overall care of a defined population. Accountability is Shared amongst hospitals, physicians, patients, payers, and suppliers. 1. The healthcare system is fatally flawed 2. Unwarranted variation is the biggest problem 3. Our belief is, that if we support physicians in providing high quality, evidence-base care (High Value) we will both increase quality and provide care in a financially sustainable manner. 4

6 Distribution of Savings Targets CPI + 1% Total Savings Needed (Net) $400M Assign to Efficiency (30%) -120M Remaining from Utilization $280M 20% system-wide functions: $56M 60% Clinical Programs and Services: $168M Clinical Services: $25M 20% local initiatives: $56M 5

7 Challenges Cultural Change We have been successful because of our culture Still, we face structural barriers to moving forward Our definitions of success must change Managing Timing / Transitions Transitioning our financial model Transitioning our care delivery Likely to take it in steps: FFS Per Case Capitation Our Vision for Managing Utilization Clinical Programs and Services Identify/establish system standards for: Testing, Referral, & Treatment Provide implementation support/consultation Manage inventory of system and local initiatives Monitor implementation and performance to standards including measuring cost of utilization 6

8 Lean Journey of the Lab Services at Intermountain Healthcare Initial Lean implementation in 2007 with the opening of a Central Laboratory to provide diagnostic testing support to 20 hospitals and 140 clinics Looked at specimen flow and an automated line Developed a courier service Forced decision making (e.g. microbiology) 2009 Opened 2 more hospitals and 40+ clinics Created a Laboratory Executive Team (LET) Created and adopted Decision Rights Models Implemented Lean design into lab remodels Lean Intermountain Quality Solutions (IQS): Flow Cytometry TQ Immuno Prep Ammonium Chloride Goal: Reduce supply cost waste Savings: $13+ per 2800 patients Total Savings: $37K Molecular (Workflow redesign) Goal: Rethink remodel necessity Budgeted for remodel of space. Challenged to free up space by eliminating unnecessary equipment and processes, thus rendering prior plan to remodel at a bid cost of $26K Total Savings: $26K Chemistry Intraoperative PTH Reduce wait time for intraoperative PTH testing with surgery. Reducing the transport time of samples to the lab resulted in savings for patients that was $35K per year ($21K in patient charges; $14K in variable and fixed costs). Total Savings: $35K (per year) 7

9 Laboratory System Standardization Operational Efficiencies Centralized esoteric testing Standardization, when successfully implemented and effectively maintained in a health care system, can result in major advantages. These include reducing alternatives, providing consistency, promoting compliance and offering an inherent standardization procedure with implicit savings. Ultimately, the goal is to establish processes that will best meet the patients needs. We want processes that are safe, efficient and cost effective. Established leadership training program for future staffing Centralized project oversight and funding Centralized capital equipment acquisition Centralized supply purchasing System CAP accreditation 8

10 Operational Efficiencies Communications/Event Reporting Standardized equipment and testing procedures On-line standard operating procedures Platform replacement planning Decision making/problem solving Practice councils Development teams Lab Executive Team Financial Efficiencies Opened a Central Supply Chain Warehouse Eliminated the middle man (saving $60M) Reduced number of vendors Better negotiation position Better equipment pricing (saved $7M) Better supply pricing (volume discounts) Resultant lower cost per test Lower pricing passed on to patients Drive testing to facility with lowest cost per test LET reviews financial metrics monthly 9

11 Quality Improvement Electronic Data Warehouse (EDW) Medical necessity Turnaround times Critical Value calling Corrected report Lab Charge Practice team Billing compliance Charge Description Master Charge codes Lab management, compliance, Lab Information Systems, Patient Accounting Services, Revenue Integrity involvement Transparency Staffing Best Practices (SBP) Implemented a standard, system-wide benchmarking approach to identify cost improvement opportunities (includes internal and external data) Developed system-wide staffing standards Identify standard: Hours/RVU Constant vs. variable Conversion factors Used benchmarking reports to provide data that supports the development of cost improvement goals (i.e., specific dollar targets) Open review of proficiency testing and inspection results (identify vulnerabilities and best practices) 10

12 Based upon SBP, the most efficient lab was identified and became the benchmark Reduced FT FTEs through attrition 17 positions Eliminated unnecessary management positions Eliminated staff when redundant operations were centralized Eliminated staff through Lean lab redesign 11

13 Blood Utilization Decreased Blood Costs Corporate Board goal to reduce blood usage Paradigm change to transfusing more blood Working with Surgical Services Developed computerized tracking system Physicians required to justify blood usage Monitored by their peers Improved patient safety by reducing transfusion associated risks Decreased reactions Decreased sensitization Decreased number of patients receiving two units 5.5% of patients received one unit Decreased transfusion threshold to Hct <22% Standardized blood services Reduced BPDs Savings: $417K annually 12

14 Savings Realized Reduction in system total cost per test (CPT) Saved $3.1M (Target $12.20 CPT, Actual $11.73 CPT) Converted Central Lab (CL) from competing Cost Center to a Service Center Sent testing to most cost effective site: Avg CL CPT = $8.43, other hospitals CPT varied from $10.83 $26.86 Efficiencies gained through automation, volumes, and expertise (e.g., flow cytometry and molecular testing) Waste elimination focus (Lean) Staffing reductions Decreased blood utilization Supply Chain Organization (SCO) paradigm changes Management Things We Are Doing Well Centrally managing capital equipment dollars Using Decision Rights to manage test menu creep Including Operations Officers in decision making (LET) Including Clinical Program Medical Directors in standardizing order sets Including suppliers in the SAO 13

15 Management Things We Could Have Done Better (or that your lab should avoid) Finishing the race alive is the goal. Winning is the dream. Maintain current costing study to know your total costs Embraced blood utilization paradigm earlier Elimination of political turf Contract negotiations left to the SCO/Legal There is no more time left for timidity. 14

16 QUESTIONS? 15

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