Bridging Finance and Operations through Performance Improvement Project Portfolios

Maria Lee, PhD, MBA, Director, Healthcare Performance Improvement February 21, 2013

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Objectives

Understand how to build a balanced project portfolio that addresses improving quality and reducing cost

Discern the nature of the partnership between finance and improvement teams to build and refine project financial impact

Explore the use management systems that include monitoring of financial metrics and operational metrics that affect financial outcomes

A hospital bed is a parked taxi with the meter running

Groucho Marx

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KP Numbers

8 regions serving 9 states and the

District of Columbia 8.9 million members

(as of 2/11)

15,000 physicians 164,000 employees (including 45,000

nurses)

37 medical centers (with hospitals)

454 medical offices (ambulatory care

buildings)

Revenue $47.9 billion (2011)

Net Income $1.6 billion (2011)

KP Regional Entities Kaiser Foundation

Health Plans (KFHP)

Pre-paid health plans and insurance

Not-for-profit

Infrastructure for Kaiser Foundation Hospitals

Tax-exempt shelter for the for-profit medical groups

Permanente Medical Groups

(PMG) Physician-owned organizations, provide medical care for Kaiser

Foundation Health Plan members

For-profit partnerships

Funded by Kaiser Foundation Health Plans

Kaiser Foundation Hospitals (KFH)

Operate medical centers

Not-for-profit

Funded by Kaiser Foundation Health Plans

Provide infrastructure and facilities that benefit the for-

profit medical groups

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The Vindication of Soft Gains Cash is King, but…

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Strategy: End-to-End Process redesign and management

avoid problem shifting, de facto focus on patient

Improvement that enhances capacity is Queen

Speed, Standardized and Simplified Processes

HCR puts additional burden in health systems

higher demand with limited additional revenue

KP is well positioned to perform end-to-end process redesign and management

More (financial) Incentives for Improvement

Higher client satisfaction leads to loyalty and more members

Higher capacity leads to being able to take on additional members

Higher quality leads to more reimbursement

Higher margin per member (doing more/the same for less) leads to increased cash flow

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KP Value Compass

Cash is King

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Engaging Finance to Build Supply Chain Portfolios

Process A The Executive Leadership sets expectations for Finance to identify biggest opportunities for cost reduction and/or increased revenue

Finance seeks support from Performance Improvement to develop a prioritized financial portfolio

The Executive Leadership sponsors prioritized portfolio and enables participation of departments in portfolio execution

Finance, Departments and Performance Improvement execute financial portfolio

Finance validates financial portfolio results and assesses budget impact

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CASE STUDY 1 Medical Office Supply Chain Waste Reduction

Rapid Improvement Event

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Results

50% reduction in re-stocking time of main stock room in each facility –staff affected: materials management

78% reduction in re-stocking time of floor stock rooms –staff affected: nurses and medical assistants

Special processing reduced by 70% -staff affected: nurses, medical assistants, physicians, materials management, finance

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How did we do

it?

Rapid Improvement Event (RIE) Characteristics

Focused, intense, targeted process– remove steps/waste, standardize process, improve handoffs

3-5 days in duration (typically)

Changes are identified and implemented during the RIE week

Standard work is identified and action plan agreements for next steps are finalized and agreed to by all parties

Representative group of staff dedicated to the event

Sponsors attend daily report outs on progress, issues and results

Empowerment with accountability

RIE Objectives:

• Conduct Waste Walks/Observations of admission & discharge processes

• Map current state process

• Identify waste and opportunities to streamline and standardize processes

• Identify process triggers and handoffs

• Multidisciplinary participation leading to better collaboration across the continuum (communication barrier busting)

• Implement Tests of Change

• Identify a portfolio of projects to continue improvements with Just Do It, PDSAs and PI Projects

RIE Course Overview - timeline

Assessment Phase

Planning Phase

Rapid Improvement

Event (3-5 days)

Follow Up

Modules/ Education as

needed

Go/No Go Decision for

RIE

Alternatives or Discontinue improvement

No

YesGo/No Go

Decision for RIE

Alternatives or Discontinue improvement

Yes

No

8 Weeks Out

6 Weeks Out

4 Weeks out 2 Weeks out

Event Week

Post Event

30 days, 60 days

and

90 days

Ambulatory Supply Management RIE DELIVERABLES

Monday Tuesday Wednesday Thursday Friday

Training and Waste Walks

Waste Walk and Current State Map

Opportunities and tests Test Changes Standard Work

and Planning

Getting started training on PI tools and language Waste Walk Observations – • Family Medicine LP • Modules A, B, C, D • First floor supply rm • 3rd floor supply rm • Materials Mgmt restocking process Attendees: 18 Disciplines: MD’s, DA/ADA, MA, LVN, RN, Admin, Finance, Driver, Storeroom clerk, MMD Mgrs, PI, Sponsors

Waste Walk observations- • Barcelona Warehouse Map current state process

Begin identification of improvement opportunities. Attendees: 16 Disciplines: MD’s, DA/ADA, MA, LVN, RN, Finance, Pcare Leader, Driver, MM Mgrs, Decision Support, PI

Identify Opportunities and Identify system triggers Prioritize (impact and effort matrix) and bucket the work – • Just do its! • tests of change • projects (future)

PDSA and Just do its started Attendees: 14 Disciplines: MD’s, DA/ADA, MA, LVN, RN, Finance, Pcare Leader, Driver, MM Mgrs, Decision Support, PI

Just do its and PDSA’s conducted • supply rooms standardized • Feeder cart • items deleted with MD rapproval • build new stock list

Report out on status of tests

Attendees: 16 Disciplines: MD’s, DA/ADA, MA, LVN, RN, Finance, Pcare Leader, Driver, MM Mgrs, Decision Support, PI , Sponsors

Agree on new standard work flows • documentation of change plan and manager oversight • Next steps identified, who what when

Timeline for improvements Attendees: 14 Disciplines: MD’s, DA/ADA, MA, LVN, RN, Finance, Pcare Leader, Driver, MM Mgrs, Decision Support, PI , Sponsors

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Overproduction Producing too much or

too soon

Transportation Any conveyance

of supplies or patients is waste

Inventory Any more than the minimum to get the

job done

Waiting Waiting to be seen,

waiting for information

Process Variability Lack of consistency

Defects/Rework Any repair or rework

Motion Any motion of the

worker that does not add value

Intellect Any failure to fully utilize the time and talents of people

The 8 Types of Waste

Day 1— Waste Walk Observations

Day 2—Process Mapping & Identifying Waste

Day 2 —Prioritizing Opportunities by Impact/Effort Matrix and bucketing the work –Just do its, PDSAs, projects

Days 3, 4 —Conducting PDSAs

GROUP A Team 1— Line Item Reduction of items

from Cart List and MSR list moved to stock list

Team 2 –Inventory lists posted in all locations and build feeder cart by eliminating 1st floor supply rm

GROUP B Team 3 – Exam Room Standardization;

declutter, approval from MD’s

Team 4— Exam room restock trigger- min max inventory implementation

TEAM GOALS:

Streamline lists = reduce costs Identify what is truly needed in exam rooms Improve workflow, expired items and

preventing hoarding Improve customer satisfaction

…. removing unecessary inventory; approval from MD’s and supply feeder cart concept implemented

Exam room – min max inventory mgmt tested and exam rooms standardized

Day 5 – standard work and planning next steps

Day 5—Draft Standard Work Protocol

Step #

Major Steps Details and Safety Considerations

Work Flow, Picture, Time Grid

1 Once a week, assigned staff member obtains feeder cart from assigned location

2 Staff member takes cart around 3rd floor. In each exam room, staff member opens double cabinet, looking right to left and up and down, identifying items that are at or below the minimum level.

3 Staff member gathers items currently at minimum level from cart and replenishes items to the maximum level from feeder cart. Staff member rotates stock from back to front.

5 If there is not enough material on the feeder cart, bring the feeder cart to the stock room, replenish the feeder cart and then complete replenishment of exam rooms

6 Staff member repeats above steps with drawers below cabinet and under bed.

7 Staff member de-clutters room and removes items stocked above maximum level

8 Staff fills out Incident Report (available from feeder cart) if he/she notices under-stocked, over-stocked or non-moving items, mismatches with standard configuration, expired items

Standard Work Process: Exam Room Replenishment with Feeder Cart Owner: Department Administrator or designee Performed By: Staff by Assignment Process Duration: 1 h Standard Work Purpose: Replenish exam room inventory supply Triggers: Supply in exam room hits minimum level Process Measures:

•Number of expired items •Number of times exam rooms are overstocked •Number of times exam rooms are out of stock •Number of items with no turns after one month •Number of mismatches between what is pictured as stadard configuration and what is in room

Weekly Standard Work:

Process B The Executive Leadership sets expectations for all departments to improve their cost structure and/or increase revenue

The Executive Leadership sets expectations for all departments to partner with Finance to generate financial estimates to aid in prioritization of efforts

The Executive Leadership sets expectations for Finance to support departments

Departments contact Performance Improvement for support in project execution

Departments execute projects

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Capacity is Queen

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Engaging Finance to build End-to-End Cycle of Care Portfolios

End-to-End Patient Journey

Taking a System’s approach means that a large complex system is optimized by taking into account interactions among parts rather than optimizing individual parts

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ED Observation Unit

Medical/Surgical Inpatient

Home or SNF

OR Ambulatory OR

Primary Care

Urgent Care

ICU

Acute or Surgical Ambulatory

Finance Role in Improvement Process End-to-End Approach

Benefits of the financial analysis • Understand the financial implications and cost drivers • Align costs with the smart goals • Validate portfolio alignment with strategic goals • Determine data needs, source & cost methodology

What should be included in the financial impact? • Determine cost linked to clinical metrics • Baseline cost • Estimated cost savings • Categorize cost saving by dark green and light green dollars

Different Costing Methods

Actual Cost

Costing Approaches

Methodology Advantage Disadvantage

Average Costing (Direct Cost)

• Simple average • Department cost divided by volume

• Calculation is simple and quick • No specialized system or knowledge

• Excluded overhead • Understates true costs

Standard Costing

• Costs are developed for each product or service • Based on historical expenses.

• Cost are assigned to each product • Spreads indirect costs

• Does not reflect the actual cost but the expected cost

Activity Based Costing (ABC)

• Costs based on the resources patient consumes

• Patient/Disease focus • Identifies non value adding steps

• Time consuming • Costly

How to Identify Dark Green vs. Light Green Dollars

Reduction in ALOS Less inpatient days • Increased bed capacity

• Closing unit • Reduced staff

Lower misuse of antibiotics

Less prescriptions • Increased staff productivity

• Reduced drug cost

Standardize Care Plan

Standardize lab orders for pneumonia diagnosis

• Less number of labs or cost of delayed diagnosis

• Retire lab machine • Lower Supply cost

Lower rate of readmission

Less admissions & lower inpatient days

• Increase bed capacity

• Eliminate lack of reimbursement

Light Green Dollars Improvements that reduce costs but cannot be removed from the budget

Dark Green Dollars Improvements that translate into dollars removed from the budget

CASE STUDY 2 End-to-End Pneumonia Improvement

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Portfolio Patient Population Target: Pneumonia

DRG in top 25% of costs

High volume diagnosis in ambulatory and hospital settings

Average length of stay > 3 days

In top 5 DRGs for readmissions

KP

Pneumonia PI Portfolio Goals

Reduce waste across pneumonia continuum

Decrease PN operating costs by 10% = $1.24 M

Improve clinical outcomes, including PN prevention

Reduce outpatient PN visits for patients 65+

Reduce hospital admissions for patients 65+

Reduce PN average length of stay by 0.5 day

Reduce PN readmissions by 10%

KP

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Building a Portfolio: Pneumonia

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Pt is OK Pt gets worse

multiple

Pt calls KP

Pt goes to Urgent Care

Pt goes to ED

Pt goes to MOB

Pt gets admitted Pt gets transferred Pt gets dischargedPt gets better Pt goes Home-self care

Pt goes home-HH

Pt goes to SNF

Lab Dx Imaging

MD NursePharmacy

Nurse

Lab Dx Imaging

MD NursePharmacyResp

Therapy

Outpatient Teams Focus Inpatient Teams Focus

Phase I : Input Related Waste

(High Risk Patients Not Vaccinated)

Phase I : Discharge Process

Waste

Phase II

Phase II

Phase II

Phase II

KP

In-Patient Results

Standardized discharge process • Initially targeted PN patients • Expanded to all discharges on pilot unit by staff request • Reduced average length of stay by 0.6 day

Impact on readmissions • Data collection period too brief and pilot numbers too

small to be evaluated • Readmission rate to be reviewed after spread

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Out-Patient Results

Standardized Pneumovax process with in-reach and out-reach to 65+ members

67% improvement in immunization rate

Reduced 65+ visit rate by 21.5%

Avoided 6 PN admissions

KP

Oversight and Monitoring Dashboard Example

2011 Cases & Costs

Primary Care 800 30% $208,800

Performance Improvement

UrgiCare 250 9% $65,250

Emergency 350 13% $157,500

Sample Pneumonia Dashboard Inpatient 5.2 alos 1,300 48% $6,895,200

Total Patients 2,700 100% $7,326,750

PHASE I * 2011 Savings

Goal 2011 YTD

2012 GOAL 2012 YTD JAN FEB MAR APR MAY

Outpt PN Visits Per 1,000 (65+) $7,700

3.5 10% 3.2 3.6 3.8 3.5 3.3 3.3 Pneumovax Rate 65% 70% 73% 70% 71% 71% 72% 72% Avoided Costs Due to Lower Visit Rate $9,020 # PN ED visits (65+)

$77,112

120 10% 86 12 18 14 10 8 % PN Admits from ED 80% 10% 63% 77% 70% 72% 68% 66%

Avoided Costs Due to Lower Admit Rate $227,934

Inpt Admissions - Pneumonia

$43,344 600 10% 510 63 75 69 54 47

Inpt PN readmits (count) 82 28 2 4 6 3 2 Inpt PN readmit Rate(%) 7.0% 10% 5.5% 3.4% 6.1% 8.0% 4.7% 4.3% ALOS PN pts

$510,000 5.3 0.5 Day 5.8 5.4 6.0 5.5 5.7 5.6

ALOS PN 6.3 0.5 Day 6.6 6.0 6.3 5.2 6.6 9.0 AV Med Surg PN Cost/Discharge $612,000

* Costs are hypothetical and do not reflect actual performance.

Pneumonia Phase I Spread

Outpatient Spread

Inpatient Spread

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Create Outpatient/ Urgent Care

Standard Work –Q2 2012

Create OP/UC Spread Guide –Q2

2012 Spread to initial 2 MOBs –Q3 2012

Spread to all 15 MOBs –Q4 12 – Q2

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Create Inpatient Standard Work –Q2

2012

Create Inpatient Spread Guide –Q2

2012 Spread to all Units–

Q3 – Q4 2012

Spread to additional medical center Units–Q4 12

– Q1 13

KP

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Sequencing Portfolio: Phase II Teams

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Pt is OK Pt gets worse

multiple

Pt calls KP

Pt goes to Urgent Care

Pt goes to ED

Pt goes to MOB

Pt gets admitted Pt gets transferred Pt gets dischargedPt gets better Pt goes Home-self care

Pt goes home-HH

Pt goes to SNF

Lab Dx Imaging

MD NursePharmacy

Nurse

Lab Dx Imaging

MD NursePharmacyResp

Therapy

Outpatient Team Focus Inpatient Team Focus

PN HH Care Management

Inpt PN Care Management

Standardize ED to Inpt

Admit Criteria

Standardize PN Ambulatory

Care Management

KP

Phase II Objectives Improving End to End Pneumonia Care – Phase II

TEAM Objective

Medical Center Emergency Department Team

Reduce variation in the ED pneumonia admission criteria.

Ambulatory Team Reduce variation in the ambulatory care management of pneumonia patients.

Medical Center In Patient Team Reduce variation in the ambulation of pneumonia patients.

Home Health Team Reduce variation in the care of home health pneumonia patients.

Process C The Executive Leadership partners with Finance and Performance Improvement to prioritize patient populations that represent highest costs

Develop Portfolio of projects for selected target population

Finance and Performance Improvement estimate financial opportunity

Performance Improvement Teams Execute Portfolio

Finance validates financial results and assesses budget impact

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Conclusions

Engagement of Finance in Performance Improvement enables alignment of work with strategic goals of the organization

Invariably at KP, behind every successful partnership between Finance and operational and clinical improvement, there is a very strong commitment from the Executive Leadership to prioritize portfolios with projected financial impact as an input and to enable Finance as a key member of improvement teams

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THANK YOU!!

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