George Mark Children s House: Providing Holistic Care for Children with Life-Limiting. Comprehensive. Life-Limiting Diagnoses

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1 George Mark Children s House: Providing Holistic Care for Partnering to Provide Children with Life-Limiting Comprehensive Care Diagnoses for Children with May 2012 Life-Limiting Diagnoses

2 George Mark Children s House: Partnering to Provide Comprehensive Care for Children with Life-Limiting Diagnoses Executive Summary George Mark Children s House (GMCH), a fullylicensed and approved medical facility located in Northern California, offers insurers an innovative care model for children with life-limiting diagnoses. The George Mark vision is to make a difference in the lives of these children and to support their families. An increasing number of children manifest chronic complex conditions, accounting for the use of about 40% of pediatric inpatient resources. GMCH is the high-quality, lower-cost option for these children with life-limiting conditions in need of medical transitional, palliative, respite or end-of-life care. George Mark Children s House offers the following benefits to pediatric patients with life-limiting conditions and their insurers: An average savings of 60% in insurance payments, or over $52,000 per stay, compared to the inpatient setting, resulting in potential annual savings of $189.8 million in the Greater Bay Area alone A patient-centered and comprehensive approach yielding high levels of care quality and satisfaction scores of 90% or higher from parents An opportunity for insurers to partner and gain experience working with a positively regarded, state-of-the-art medical facility at the forefront of the growing pediatric palliative care movement in the United States 1

3 I. Introduction About the Project George Mark Children s House, located in the San Francisco Bay Area, bridges hospital and home for children with life-limiting conditions and their families. Beyond offering end-of-life care, GMCH also offers palliative, respite and transitional care for children and their families wishing to smooth the return home from the inpatient setting. As the only freestanding facility of its kind in the state of California, focusing solely on pediatric patients, GMCH fills a critical void in the palliative care landscape. While facilities specializing in adult palliative and children s transitional care exist, as do pediatric palliative care programs within hospitals, GMCH is the facility best suited to addressing the needs of children with life-limiting diagnoses. Commissioned by George Mark Children s House, and supported by a grant from the California HealthCare Foundation, the purpose of this report is to inform Health Plan Administrators about the comprehensive, unique, and cost-effective care provided by the interdisciplinary staff at GMCH. The authors are a team of graduate student researchers from the University of California at Berkeley s Schools of Public Health and Business. Children with life-limiting diagnoses are described as having conditions: for which curative treatment may be feasible but can fail, such as cancer, and/or that have no reasonable hope of cure and that will ultimately be fatal 1 The George Mark Children s House welcomes children and young adults, from birth to 21 years of age, with potentially life-limiting conditions. Young adults over 21 years of age are considered on a case-by-case basis. 2

4 Pediatric cases with chronic complex conditions (CCCs) are rising as a percentage of hospital days and insurer dollars According to a study 2 published in the journal Pediatrics, between 1997 and 2006, patients with one or more chronic complex conditions 3 (CCCs) accounted for a large and growing portion of pediatric bed days, hospital charges, and inpatient deaths in the US. While these cases were only 10% of overall 2006 pediatric admissions, they utilized a disproportionate amount of pediatric hospital resources compared to admissions. For example, during this period, this population accounted for 26.1% of pediatric hospital days, 40.6% of total charges, and 43% of pediatric inpatient deaths were due to CCCs in (See Figure 1.) Figure 1. CCCs account for the use of a disproportionate amount of pediatric inpatient resources compared to admissions 3

5 II. GMCH: Comparable care at a significantly lower cost A viable alternative to the pediatric hospital setting exists, therefore, in freestanding children s palliative care facilities like GMCH, which deliver medical services comparable to the inpatient setting at significantly lower cost. Figure 2. Cost comparison between GMCH and local-area children s hospitals Cost Category Hospital per-day cost * GMCH per-day cost * Savings Room & Board $3,512 $2,000 $1,512 Other Ancillary Services ** $1,912 $0 $1,912 Radiology & Laboratory *** $354 $0 $354 Pharmacy **** $540 $540 $0 Total $6,318 $2,540 $3,778 * Costs paid by insurers to the facility indicated ** While certain ancillary services are included in GMCH s flat rate, some ancillary services available at hospitals are not available at GMCH. Examples of these include physical, sleep, and occupational therapy, as well as sleep laboratory, pediatric rehabilitation, and general patient supplies. Based on the data available, it was not possible to categorize ancillary costs strictly according to those that were utilized at both GMCH and hospitals. As a result, actual ancillary costs at GMCH are expected to be lower than what is shown. *** Radiology & Laboratory procedures are not available on-site at GMCH. **** GMCH sources medication from off-site pharmacies. While this analysis assumes the same pharmacy cost for both settings, studies have shown that medication costs associated with palliative care and hospice are typically lower than in the inpatient setting, suggesting further savings at GMCH. 4,5 4

6 Cost-effectiveness of GMCH model Our analysis of patient insurance data found potential insurer savings of $3,778 per day, or 60%, compared to the inpatient setting. Key drivers of cost savings were found to be: GMCH s all-inclusive per diem rate, which averages 43% lower than the room and board payments made to local-area children s hospitals Lower ancillary charges for patients at GMCH GMCH s administrative cost structure, resulting from leaner staffing and lower total indirect costs relative to hospitals Given an average stay of two weeks 6 at GMCH, the savings per stay to an insurer is $52,892. Based on GMCH s current capacity levels, it can accommodate an additional six patients per month. According to the Children's Hospice and Palliative Care Coalition, there are 28,000 7 children living in the Greater Bay Area in California who are in need of the care offered at GMCH. If six patients, or less than 0.3% of this population, were transferred to GMCH per month, the total annual savings opportunity to commercial payers in Northern California would be $4 million. If, however, the CPCC density level were as high as in the UK, savings would be an additional $189.8 million 8 in the Bay Area alone. In addition, a study 9 reported in Nursing Economics found that radiological testing was significantly less frequent for pediatric patients receiving palliative care. Radiological tests were given, on average, more than twice as often to patients in the control group, resulting in a 40% increase in mean radiologic costs per patient versus the study group. Therefore, the need for cost-effective alternatives like GMCH becomes even more apparent. Description of analytical method 10 Our team analyzed commercial insurance reimbursement data for nine patients who were covered by seven different commercial insurers, and admitted to local children s hospitals between November 2009 and March These patients were then transferred to GMCH after discharge. The mean hospital per-day costs are based on payments made by insurers for the last five hospital days of each stay. 11,12 In the inpatient setting, the last five days tend to be the least costintensive, whereas the first several days after admission are the most cost-intensive. 13,14 As stated, GMCH charges a flat daily rate, which is inclusive of all ancillary services rendered on-site, and is billed simply as Room & Board. We conclude that, for patients deemed by their hospital medical team to be appropriate for transfer, care delivered at GMCH results in significant cost savings. 5

7 II. A comprehensive, high-quality pediatric care model resulting in benefits for patients and insurers Consistent with its philosophy of being a bridge between hospital and home, GMCH offers comprehensive care for the family in a state-ofthe-art, fully-licensed medical facility. While insurance payments are applied directly to the provision of medical services, charitable donations allow GMCH to offer a variety of services and amenities not available at hospitals, including: Care addressing the physical, emotional, psychosocial, and spiritual needs of the entire family Interdisciplinary team of pediatricians, nurses and nursing assistants, social worker, child life specialist, palliative aquatics specialist, and psychologist Facility designed and decorated to provide more of a home-like environment than is characteristic of the acute care setting Private accommodations enabling family members to share living quarters with the patient Palliative aquatics facility Pet-friendly policy Home-cooked meals Direct access from patient rooms to five acres of outdoor garden areas for repose or recreation On-site non-denominational Sanctuary for spiritual observance by members of all faiths Education of parents and caregivers, with the goal of lowering hospital readmissions Continuing education classes for patients and families A recent study of a CPCC in Canada concluded that the palliative care model yields high-quality care as measured by a reduction in the number of subsequent outpatient visits, inpatient days, and emergency room. 15 Similar results would be expected from GMCH, which employs a similar model of care; coupled with the features described above, patients and their families realize further experiential benefits from this unique setting. 6

8 The most appropriate facility for children with life-limiting diagnoses, resulting in high satisfaction levels The universe of facilities available to children with life-limiting conditions includes home (hospice), sub-acute facilities, the acute care setting, and facilities like GMCH. These other facilities are less appropriate for addressing the needs of these children for a variety of reasons. Figure 3. GMCH is the facility best suited to serve the palliative care needs of children with life-limiting diagnoses In contrast, GMCH specializes not only in caring for children with life-limiting diagnoses, but also providing transitional care that is of comparable quality and highly rated. The average transitional care stay at GMCH is two weeks, with the goal of helping patients return home and teaching their parents and caregivers how to manage situations that might otherwise result in an emergency department visit or hospital readmission. A Journal of Nursing Economics article, referenced previously, also concluded that for pediatric patients, care does not vary when a palliative care philosophy is used. 16 Furthermore, as evidenced by parent surveys, families are highly satisfied with the comprehensive experience at GMCH. 17 Parents rate GMCH very favorably on nine dimensions of satisfaction. (See Figure 4.) Figure 4. GMCH parent satisfaction scores At the extreme ends of the level of care spectrum are home hospice and the acute care setting. Home hospice normally provides low-intensity services relative to the other types facilities. The care at hospitals, as we have shown, while the highest level available, can include unnecessary testing in what is already the highestcost environment. Meanwhile, other sub-acute facilities serve children with all types of conditions, including physical rehabilitation, developmental delays, seizures, and brain injuries. They also offer lower levels of care in larger facilities with an average length of stay that can last months or even years. GMCH received a score of 4.95 for overall satisfaction, as measured by responses to the question, Would you recommend GMCH? Compared to other children s hospitals in the area, GMCH is rated more favorably than each of these facilities on similar measures. 18 7

9 A strong positive brand name In addition to the quantifiable benefits of GMCH s service offerings, a partnership with GMCH also provides the opportunity to leverage a strong positive brand. At the time of publication, GMCH had received endorsements from a variety of businesses, political figures, sports organizations, and other nonprofits. Called remarkable by People magazine, and featured in several local newspapers, GMCH also has a five-star rating on Yelp. CPCC growth driven by individuals, not single-payer systems Since the 1982 opening of Helen House in the UK, the first CPCC ever established, more than 60 such centers have opened in 10 different countries, and another 10 facilities are expected to open by Figure 5. Number and geographic dispersion of CPCCs by year By partnering with GMCH, the positive press and community support it enjoys could serve as a balancing force to the negative press regularly directed, if unfairly, at insurance companies. IV. Expected growth of children s palliative care model in the US The Children s Palliative Care model offers compelling value to patients, families, and payers. As the number of these centers grows in the US, aided by changes in the legal and regulatory context, payers who partner early on with CPCCs can innovate in high-quality, cost-saving healthcare delivery and position themselves at the forefront of this growing care movement. Children s palliative care has just begun to take root in the US, with GMCH leading the movement in 2004 as the first freestanding center in the country. Benchmarking against established CPCC models in other countries, we anticipate a sustainable and burgeoning domestic growth trajectory for CPCCs. As shown in Figure 5, 40 centers are now in operation in the UK, with the remaining 22 spread across Germany, Canada, the US, Australia, China, Russia, Sweden, and elsewhere. Perhaps surprisingly, philanthropic support, rather than the presence of a single payer model, has been the key driver behind the growth of CPCCs in other countries. Although CPCCs in these countries operate within a diverse set of national healthcare systems, a common thread is that the majority of houses have a similar ratio of philanthropic giving to reimbursement. Charitable donations typically sustain most CPCCs through their early years, as they work to refine their operations and build awareness within their communities. After this initial 8

10 phase, insurance reimbursement increases as a portion of overall revenues. Therefore, as CPCCs such as GMCH build successful track records, insurers can be assured that through contracts and reimbursement dollars, they are providing high-quality care that is important and appreciated by the communities they serve. CPCC growth in the US is on pace with historical trends abroad While the UK is home to over half of the world s CPCCs, countries with a shorter history of freestanding CPCCs demonstrate a similar growth pattern to that of the UK. Figure 6 shows the growth of CPCCs over time in four countries, starting with the year that the first CPCC opened in each of those countries. 19 Figure 6. Compound annual growth rate of CPCCs in other countries The compound annual growth rate (CAGR) for UK CPCCs since inception is 13.3%. Factoring in the number of currently operating CPCCs and openings expected by 2015, the US CAGR is 19.6%. While these rates simplify nuances in each country s healthcare context, the graph illustrates that growth in the US is on pace with the historical rates in the UK, Germany, and Canada. Growth in the UK, which provides the most historical data, has been characterized by two distinct phases. The first phase, extending years after its first CPCC began operations, demonstrated modest growth. During the second phase, growth accelerated, as new CPCCs benefited from increased familiarity with the children s palliative care concept and best practices passed down from predecessors. Though the number of US CPCCs remains small by comparison to the UK s, a similar growth pattern can be expected for the US. Demographic data suggests that CPCCs will flourish in the US to address the unmet need for children s palliative care. Using the UK as an example, the prevalence of life-limiting illnesses in children, age 0-19 years, is estimated at 32 per 10, Based on UK census data, this rate translates to approximately 46,000 children in the UK with life-limiting illnesses, further corresponding to each UK CPCC serving 1,150 children. If the Greater Bay Area were to reach a comparable penetration rate, that would suggest an additional 23 centers. This comparison highlights the need not only for the services offered by GMCH, but also the need for more facilities like it throughout California and the country. A tremendous opportunity exists for insurers to partner with GMCH to roll out this economically advantageous model of care. 9

11 The changing US landscape will lead to increased demand for CPCCs US CPCCs currently in operation and under development are helping to build a foundation of understanding about children s palliative care, which is reflected in recent policy changes around the country. For instance, included in the Patient Protection and Affordable Care Act is the Concurrent Care for Children requirement 21, a provision that allows children to receive curative and palliative treatment at the same time. This provision is expected to lead to a significant increase in the number of pediatric patients seeking palliative care, and insurers should accordingly expect an increase in demand. Regionally, states like Minnesota, Ohio, and New Jersey are working to streamline processes, enabling CPCCs to obtain certifications or licensing classifications that ease the insurance reimbursement process. In California, AB 667, in effect since 2011, broadened the eligibility criteria for children to transfer from the acute setting to a sub-acute care facility; this change is likely to drive patient volume to CPCCs like GMCH that provide care at the sub-acute level. The end result of these regulatory and policy changes will be lower barriers to the establishment of CPCCs in the US. They also demonstrate increasing awareness of the need for pediatric palliative care, with an increasing emphasis on providing children with more appropriate medical treatment at a lower cost. V. Conclusion GMCH presents a compelling partnership opportunity for insurers. Ultimately, we believe that GMCH offers a better, more satisfying way for insurers to deliver care to children with life-limiting diagnoses. The key drivers of this pediatric palliative care value proposition are: Significantly lower cost, relative to the acute care setting High parent satisfaction levels High quality of care based on outcomes measures We believe these cornerstones build a strong case for continued growth and insurer support of the palliative care model in the US. George Mark Children s House is more than an innovative medical facility leading the growing pediatric palliative care movement in California and the US; it is a special place serving the needs of children and their families. There is no better way to experience its uniqueness than to pay a visit of your own. 10

12 References and Clarifications 1 Fraser et al., Rising National Prevalence of Life-Limiting Conditions in Children in England. Pediatrics, April 2012: Vol.129, No Simon et al., Children With Complex Chronic Conditions in Inpatient Hospital Settings in the United States. Pediatrics, October 2010: Vol. 126, No A Chronic Complex Condition is defined in the study cited above as any medical condition that can be reasonably expected to last at least 12 months (unless death intervenes) and to involve either several different organ systems or 1 system severely enough to require specialty pediatric care and probably some period of hospitalization in a tertiary care center. 4 California Health Care Foundation, When Comparison is the Cure: The Case for Hospital-Based Palliative Care, Morrison et al., Cost Savings Associated With US Palliative Care Consultation Programs, Archives of Internal Medicine, Vol. 168, No Average length of stay data provided by GMCH. 7 Estimate provided by the Children's Hospice and Palliative Care Coalition. 8 Assumes 23 additional centers, based on the UK penetration rate of one center per 1,150 children with lifelimiting conditions, and an estimate of 28,000 children with life-limiting conditions in the Greater Bay Area (see footnote #7); $3,778 in cost savings per day; an average daily census of six patients per facility; and an average length of stay of two weeks. 9 Ward-Smith et al., Where Health Care Dollars are Spent when Pediatric Palliative Care is Provided, Nursing Economics, May-June 2008: Vol. 26, No Analysis conducted by UC Berkeley research team using various sources of insurance data. 11 For each patient, services were categorized into four categories (Room & Board, Pharmacy, Radiology and Laboratory, and Other Ancillary). Operating room costs (e.g., anesthesiology and surgical supplies) were excluded from the analysis. Costs to insurers for all patients were summed to determine a total cost and a percent cost for each category. The paid-to-billed ratio was calculated by dividing all patients financial pay by the total paid for all patients. This paid-to-billed ratio was then applied to the cost of each of the last five days or less of each patient stay to yield a potential per-day GMCH cost. All of the potential GMCH per-day costs were summed and divided by total number of patient days (sum of the last five days or less of all patients) to get the mean potential GMCH perday cost. This mean GMCH per-day cost was redistributed based on the percent breakdown for each category. We then calculated a hospital average cost and integrated all hospitals through a weighted average cost calculation to factor out variances in individual hospital costs. 12 For one of the patients in the study, the hospital was unable to provide data on only the last five days of stay; as a result, data on the entirety of stay was used. The mean cost per day was used for this patient, who had a lengthy stay with no surgical costs. 13 Taheri et al., "Length of Stay Has Minimal Impact on the Cost of Hospital Admission," Journal of the American College of Surgeons, August Carter et al., "How Services and Costs Vary by Day of Stay for Medicare Hospital Stays," Rand Corporation, March Pascuet et al., A comparative cost-minimization analysis of providing paediatric palliative respite care before and after the opening of services at a paediatric hospice, Healthcare Management Forum, Summer Ward-Smith et al., Where Health Care Dollars are Spent when Pediatric Palliative Care is Provided, Nursing Economics, May-June 2008: Vol. 26, No Source: 19 Parent Satisfaction Surveys administered by George Mark Children s House during Source: Most recent publicly available patient satisfaction scores. Children s Hospital of Oakland received a rating of 9.3 for Overall Patient Satisfaction Inpatient Care, from the third quarter of 2010: For Lucille Packard Children s Hospital, 94% of respondents said they were likely to recommend the hospital s inpatient services ; 79% of these were Very Good ratings and 15% were Good. The most recent published responses were from calendar year 2010: For UCSF Benioff Children s Medical Center, 81% of respondents said they would recommend the hospital to friends and family according to the US News and World Report survey, Best Hospitals 2012 : Giving equal weighting to each of these facilities, and converting ratings to a five-point scale yields an average rating of 4.47, compared to GMCH s rating of Primary research from interviews and surveys conducted by UC Berkeley research team. 20 Fraser et al. Rising National Prevalence of Life-Limiting Conditions in Children in England. Pediatrics, April 2012: Vol.129, No Patient Protection and Affordable Care Act, Section 2302, Concurrent Care for Children.

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