How Not to Cut Health Care Costs

Transcription

1 How Not to Cut Health Care Costs Featuring Robert S. Kaplan, Professor at HBS, and Derek Haas, Project Director and Fellow at HBS, authors of How Not to Cut Health Care Costs NOVEMBER 5, 2014 Sponsored by Medtronic.

2 Questions? To ask a question click on the question icon in the lower-right corner of your screen. OCTOBER 17, 2012

3 Presentation Download Link Click on the double links icon here to download the presentation materials. OCTOBER 17, 2012

4 Respond to a Poll Click on the Show Polls in the lowerright corner of your screen OCTOBER 17, 2012

5 Respond to a Poll Then click on Take Poll NOVEMBER 5, 2014

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7 How Not to Cut Health Care Costs Today s Speakers Robert S. Kaplan, Marvin Bower Professor of Leadership Development, Emeritus, Harvard Business School Derek Haas, Project Director and Fellow, Harvard Business School, and a founder of Avant-garde Health NOVEMBER 5, #HBRwebinar

8 How Not to Cut Health Care Costs The missteps that keep us paying too much for treatment November 5, 2014

9 Agenda Article Context How Not to Cut Health Care Costs How to Improve Value of Care Delivery 9

10 Health care providers have historically enjoyed strong price and revenue growth Consumer Price Index All Urban Consumers in the U.S. (Current Series) (Prices in indexed to 100 for each series) Growth Rate % Hospital and related services % All items Note: The prices for hospital and related services represent the sum of the amounts paid by insurers and consumers as opposed to the amounts billed; series are based on annual as opposed to monthly values Source: Bureau of Labor Statistics 10

11 Health care providers are now under tremendous pressure to manage costs Tougher Insurers/Payers Limiting rate increases Low Cost/Low Priced Alternatives (e.g. walk inclinics) New Health Insurance Plan Designs Make consumers more price sensitive New Reimbursement Approaches Global and bundled payments 11

12 We have broad experience observing cost management initiatives Project Experience Over last 5 years worked with over 50 health care providers to help them better measure and manage their costs External Analysis Analyzed cost reduction initiatives at over 100 other provider organizations 12

13 Agenda Article Context How Not to Cut Health Care Costs How to Improve Value of Care Delivery 13

14 5 common cost reduction mistakes #1 #2 #3 #4 #5 Cutting back on support staff Underinvesting in space and equipment Focusing narrowly on procurement prices Maximizing patient throughput Failing to benchmark and standardize 14

15 Mistake #1: Cutting back on support staff Due to viewing costs at the line item level 15

16 Mistake #1: Cutting back on support staff Instead analyze & manage costs across activities for a treatment Initial consultation Minutes Cost/ *Total minute MD X 1 Y RN X 2 Y CA X 3 Y ASR X 4 Y $ Surgical procedure MD X 1 Y Anes. X 2 Y RN X 3 Y Tech X 4 Y OR X 5 Y $ Follow up or post operative visit MD X 1 Y RN X 2 Y CA X 3 Y ASR X 4 Y Source: Meg Abbott, MD & John Meara, MD Boston Children s Hospital $

17 Mistake #1: Cutting back on support staff Large variation in cost rates across types of staff members Data are illustrative Surgeon Physician Assistant RN X Ray Tech Scribe Office Assistant Total Clinical Costs $546,400 $120,000 $100,000 $64,000 $51,000 $61,000 Personnel Capacity (minutes) 91,086 89,086 89,086 89,086 89,086 89,086 Personnel Capacity Cost Rate $6.00 $1.35 $1.12 $0.72 $0.57 $

18 Mistake #2: Underinvesting in space and equipment Large productivity differences exist between providers Number of Joint Replacements Performed per Day per Surgeon with Similar Cut to Close Times Number of Operating Rooms (OR) Used per Day by Ortho Surgeons in Joint Replacement Program ORs 45% 1 OR 55% 2 0 Surgeon A Surgeon B Surgeon C 18

19 Mistake #2: Underinvesting in space and equipment Space & equipment costs are much lower than personnel costs Operating Room Cost per Minute of Time Data are illustrative Personnel Equipment Space Shoulder surgery at Hospital A $20/min $.25/min $.55/min Cardiac surgery at Hospital B $20/min $1.30/min $.40/min Knee surgery at Hospital C $25/min $.25/min $.35/min 19

20 Mistake #3: Focusing narrowly on procurement prices Indexed Bone Cement Cost per Knee Replacement for U.S. Hospitals in 2014 Joint Replacement Program - 17x Ratio of 90 th to 10 th Percentile Organization in Cost 1 90 th percentile 75 th percentile Median 25 th percentile 10 th percentile Supply Expense: Function of Price per Unit, Quantity Used, and Product Type 20

21 Mistake #4: Maximizing patient throughput Options for Starting Dialysis Patient Starts Optimally Peritoneal (at home) Fistula Graft Less than 50% of patients today start optimally or Patient Starts Sub-Optimally Via a catheter Source: Wikipedia Note: Some patients are able to receive a pre emptive kidney transplant and do not need dialysis 21

22 Mistake #5 Failing to benchmark and standardize Schön Klinik analyzed knee replacements at two hospitals Schön Klinik is the 5 th largest private hospital group in Germany Orthopedics is its largest specialty (~1/3 of its care) Provides orthopedic care in 5 acute care hospitals and 4 rehab clinics In 2010 facing cost pressure, Schön began cost and outcomes analysis for knee replacements looking at both acute and rehab care at below hospitals Neustadt München Harlaching Located along Baltic Has dedicated orthopedic facilities About 1,100 total knee replacements (TKR)/year (6 th highest volume in Germany) Located in Munich Began as part of a university hospital system About 200 TKR/year 22

23 Analysis revealed comparable outcomes, but a large difference in cost between the hospitals 23

24 Poll: Which mistakes have you seen provider organizations make? #1 #2 #3 #4 #5 Cutting back on support staff Underinvesting in space and equipment Focusing narrowly on procurement prices Maximizing patient throughput Failing to benchmark and standardize 24

25 Agenda Article Context How Not to Cut Health Care Costs How to Improve Value of Care Delivery 25

26 Value-based health care delivery The central goal in health care must be value for patients, not access, volume, convenience, quality, or cost containment Value = Health outcomes Costs of delivering the outcomes The Value approach requires that we measure two fundamental parameters: 1. Outcomes: the full set of patient health outcomes over the care cycle 2. Costs: the total costs of resources used to care for a patient s condition over the care cycle 26

27 Time-Driven Activity-Based Costing (TDABC) Process-Steps: All the administrative and clinical process-steps used over a patient s complete cycle of care for a medical condition Resources: Personnel, equipment, consumable medicines and supplies used at each process step Time Estimates: The personnel and equipment time used at each process step for that patient 27

28 How not to make the 5 common cost reduction mistakes Common Mistakes 1 Cutting back on support staff 2 Underinvesting in space and equipment 3 Focusing narrowly on procurement prices 4 Maximizing patient throughput 5 Failing to benchmark and standardize Successful Strategies Enable people to work at the top of their license Invest in capital to allow high skilled personnel to be fully utilized Examine supply spend holistically Optimize care over the full treatment cycle Measure outcomes and costs to ID and drive adoption of best practices 28

29 Working with us Provider Cost Management Knee & Hip Replacement Program Other Medical Areas Value Measurement for Health Care Course Experts in provider cost management initiatives Offering a program for hospitals and physicians to improve the value of their care for joint replacements beginning February 2015 that builds on work with 30+ organizations in 2014 Work underway in over two dozen other medical areas, including chronic and primary care Course on measuring costs & outcomes, as well as bundled payments led by Kaplan and Porter Dec , Contact Derek Haas dhaas@hbs.edu 29

30 Questions? To ask a question click on the question icon in the lower-right corner of your screen. OCTOBER 17, #HBRwebinar

31 Thank you for joining us! This presentation was made possible by the generous support of Medtronic. Learn more at NOVEMBER 5, 2014 Sponsored by Medtronic.

32 Join us for our next webinar! Register for Workforce Analytics of the Future: Using Predictive Analytics to Forecast Talent Needs with John Boudreau, professor at USC s Marshall School of Business Register here: NOVEMBER 5, 2014