Healthcare Reform Hospital Perspective

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1 Healthcare Reform Hospital Perspective Susan DeVore President and CEO, Premier, Inc. March 8,

2 The end of an illusion 2

3 Current landscape for healthcare reform 3

4 Specific policies require a paradigm shift and delivery system change Value-based purchasing Accountable Care Organizations Bundled payments Non-payment for preventable readmissions Non-payment for infections and HACs Transparency initiatives Drive to tack waste, fraud and abuse 4 4

5 Helping hospitals prepare for high-value healthcare Population total value Systemic improvement Process Improvement 5

6 HQID proves P4P incents dramatic and sustained improvement Evidence-based Care Improvements Avg. improvement from 4Q03 to 2Q09 in all clinical areas (23 quarters) 54.3% 100% 90% 80% CMS/Premier HQID Project Participants Appropriate Care Score: Trend of Quarterly Median (5th Decile) by Clinical Focus Area October 1, June 30, 2009 (Year 1, 2, 3, and 4 Final Data; Year 5 and 6 Preliminary) Clinical Area Improvement (percentage points) AMI 25.3% CABG 59.8% Pneumonia 66.6% Heart Failure 56.1% Hip & Knee 64.7% Appropriate Care Score 70% 60% 50% 40% 30% 20% 10% 0% AMI CABG PN HF Hip and Knee SCIP Stroke 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 Clinical Focus Area 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 6 6

7 Taking value further by creating systemic improvement Total Inpatient Cost per Case Mix Adjusted Discharge Evidence-Based Care Performance % All or Nothing Hospital Level Risk Adjusted Mortality (O/E Ratio) Composite Harm Index (30 measures) Global Composite Perception Score (HCAHPS Top Box Global Measures Composite Score) 7

8 Lives saved, dollars saved 157 QUEST participants show remarkable results Dollars Saved Lives Saved Additional Patients Receiving Evidence-Based Care Dollars Saved (in $1000s) $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 $1,035,959 Lives Saved 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, ,649 Additional Pts Receiving All Care 50,000 40,000 30,000 20,000 10, ,

9 QUEST participants compared to non-participants: Mortality trends QUEST Participants 365 Non-participants (4-quarter moving averages) Mortality O/E Ratio q3 2006q4 2007q1 2007q2 2007q3 2007q4 2008q1 2008q2 2008q3 2008q4 2009q1 2009q2 58% of QUEST hospitals in the top performance threshold 9

10 QUEST participants compared to non-participants: Evidence-based care trends 86% of QUEST hospitals in the top performance threshold 10

11 QUEST participants compared to non-participants: Cost of care trends 61% of QUEST hospitals in the top performance threshold 11

12 Our efficiency measure (cost of care) and components 12

13 Data pinpoints opportunities in HACs Costs / Case (Arithmetic) Population = Elective Hip / Knee Total Cases 2,179 Arithmetic Costs (dollars) $14,726 Mean Patient Age (years) 69.6 Arithmetic LOS (days) 4.1 Mean Distance Traveled (miles) 5.1 Mean Comorbid Conditions 8.6 Population Cases Actual Best Practice Variance Savings Potential All Patients 2,179 $15,298 $14,726 $572 $1,246,388 No Avoidable Complications 1,962 $14,726 $14,726 $0 $0 Avoidable Complications 217 $20,476 $14,726 $5,750 $1,247,750 10% of patients accounted for ALL excess costs Real data complied by assigning potentially avoidable complications to elective hip / knee population Source: Premier Database

14 The costs of avoidable hospital acquired conditions: Where does the money go? Specific Complications Cases Actual Best Practice Variance Potential Savings Infection - Bacterial 26 $33,395 $14,726 $18,669 $485,394 Pneumonits - Due to solids / liquids 11 $50,118 $14,726 $35,392 $389,312 Hypotension 34 $25,266 $14,726 $10,540 $358,360 Pleurisy 8 $51,871 $14,726 $37,145 $297,160 Disorder Pancreas 4 $88,815 $14,726 $74,089 $296,356 Infection Intestinal 2 $131,878 $14,726 $117,152 $234,304 Complications of Procedures 47 $17,706 $14,726 $2,980 $140,060 Pneumonia 27 $19,500 $14,726 $4,774 $128,898 Acute Renal Failure 21 $19,778 $14,726 $5,052 $106,092 Acute Myocardial Infarction 9 $25,302 $14,726 $10,576 $95,184 Obstruction intestinal 13 $21,862 $14,726 $7,136 $92,768 Kidney / urethral Disorder 23 $18,237 $14,726 $3,511 $80,753 Hemorrhage GI 8 $23,634 $14,726 $8,908 $71,264 Septicemia 5 $27,803 $14,726 $13,077 $65,385 Pneumonia - Other Org 2 $44,432 $14,726 $29,706 $59, Source: Premier Database

15 Targeting waste in QUEST 1. Staffing productivity 2. Staffing - premium dollar utilization 3. Unnecessary testing/hospitalizations 4. Hospital Acquired Conditions/Infections 5. Non-standardization of high value items, such as implants 6. Pharmacy utilization - antibiotic selection 7. Throughput (ICU and ED) 8. High LOS 9. Readmissions 10. Time to implement contracts 11. Medication Errors 12. Contract non-compliance 15

16 Big savings potential associated with eliminating waste and overuse Unexplained variation in the intensity of med/surg services. Potential annual savings: $600 billion Misuse of drugs and treatments resulting in preventable adverse effects. Potential annual savings: $52.2 billion Overuse of non-urgent ED care. Potential annual savings: $21.4 billion Underuse of appropriate medications, such as generic hypertensives, asthma controllers Potential annual savings: $5.5 billion Overuse of antibiotics for respiratory infections Potential annual savings: $1.1 billion Source: NQF report Waste Not Want Not, July

17 Targeting harm in QUEST Great variations, hence best opportunities for improvement Cases per thousand C.diff Return to OR DVT Post op respiratory failure Perineal laceration Staph UTIs Hospital acquired injury Mediastinitis following CABG Postop metabolic derangements Anesthesia complications Central line infections Maternal blood transfusions Infection following ortho procedures Postop wound dehiscence Birth trauma > 2500 grams Infection following bariatric surgery 17

18 QUEST Harm Trends compared to nonparticipants Normalized Harm Composite Trends QUEST Hospitals 250 NonQUEST Hospitals q2 2008q3 2008q4 2009q1 2009q2 18

19 Patient experience: global perceptions measure composite score (Top Box + Would Recommend) % 90.00% 80.00% 70.00% Distribution of HCAHPS Top Box Global Measures Composite Score QUEST Hospital Compare Facilities 3Q06-2Q07 Top Quartile Threshold: 72% Mean: 68% Std. Dev: 6.2% N = % 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

20 Continuing on the journey: Triple aims of accountable care Harm reduction Infection prevention Mortality rates Evidence-based care Improved satisfaction Better, earlier, preventive care Improved Quality Coverage expansion Improved coordination Delivery system integration More accountability Improved Access Accountable Care Total medical costs Total Rx costs Admissions/1000 Readmission rate Efficiency measures Reduced waste, duplication Reduced Costs 20

21 The ACO model brings all the pieces together Builds patient centric systems of care Improves quality and cost for delivery system components Coordinates care across participating providers Uses IT, data and reimbursement to optimize results Builds payer partnerships & accepts accountability for the total cost of care Assesses and manages population health risk Reimbursed based on savings & quality value 21

22 Thank you Questions? Comments? 22

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