Priority Setting in Health Care: Creating SustainableValue Through the Use of PBMA

Kim Kerrone, CMA Vancouver Island Health Authority

Overview

• The challenge of managing financial resources in health care

• A framework used by VIHA and other health care organizations to set priorities

• Critical success factors

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The Challenge • Rapid growth of health care expenditures • Sustainability • Setting priorities and allocating resources in the

face of almost unlimited demand • Competing priorities

The Challenge • Health care is the largest expenditure in all the

provinces’ budgets • Unfunded liability • No established link between the payments into,

and the benefits received from, health care

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The Imperative

Source: CIHI, “National Health Expenditure Trends, 1975 – 2012”

6

Source: CIHI, “National Health Expenditure Trends, 1975 – 2012”

The Imperative

7

Source: CIHI, “National Health Expenditure Trends, 1975 – 2012”

The Imperative

8

Source: CIHI, “National Health Expenditure Trends, 1975 – 2012”

The Imperative

9

7.7%

3.6%

1.1%

4.5%

8.8%

6.8%

6.8%

5.4%

6.3%

5.9%

2.7%

3.4%

1.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

Annual MOH Grant Increase %

The Imperative

The Challenge

• Canadian health care system part of our culture • Have vastly expanded services beyond Canada

Health Act – Broader definition of health

• More than just balancing supply and demand

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Physicians

Collective Agreements

Gov’t Policy

The Challenge - Balancing the different forces

The Challenge • Lack of good cost accounting systems • “We know how much we spent but we don’t know

what it cost”

Options

• Cross the board cuts – Everyone takes a 2% reduction

• Government directives • Scoop departmental surpluses • Program Budgeting and Marginal Analysis (PBMA)

Examining Options

• Key objective of Health Authority is to address the health care needs of the population within a fixed budget

• If “need” can be redefined as “ability to benefit” or “get value” then the objective can be restated to maximize benefits from a given budget

PBMA Framework

• Provides a forum for decision makers to weigh evidence from numerous sources

• Use knowledge and data to determine priority areas for expansion

• Identify where these resources might come from

Greater emphasis placed on examining current mix of services to improve the benefit to the population overall

PBMA Framework

• Basic premise of Program Budgeting: – Important to know how resources are currently being

used before thinking about change • Basic premise of Marginal Analysis:

– To have more of some services it is necessary to take resources from others

– If don’t accept this, no need to set priorities – Just keep adding services

PBMA Framework • Opportunity Cost

– Any choice you make regarding scarce resources involves giving up another choice

More surgery

OR

Obstetrics

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Marginal Benefits and Marginal Costs

Ben

efits

or C

osts

Effort or Expenditure

Marginal cost

Marginal benefit

OPTIMUM mc<mb mb<mc

mc = mb

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PBMA Framework

• Candidates for service expansion should be those activities which have the greatest capacity to benefit

• Candidates for service reduction should be those activities which provide the least (or even no) benefit given the resources spent need to be able to capture savings small reduction in services may not result in

staff reduction

PBMA Framework

1. What resources are available in total? 2. In what ways are these resources currently spent? 3. What are the main candidates for more resources and

what would be there effectiveness? 4. Are there any areas of care which could be provided to

the same level of effectiveness but with less resources, so releasing those resources could fund candidates from (3)?

5. Are there areas of care which, despite being effective, should receive less resources because a proposal from (3) is more effective per $ spent?

PBMA Framework STEPS 1. Portfolios identify service growth opportunities 2. Portfolios identify efficiency/productivity opportunities 3. Determine criteria for ranking 4. Rank Options 5. Validity check 6. Recommendations

Resource Reallocation

Holistic approach to

resource management

Practical ideas

Organizational readiness

CRITERIA Increased

Access Improved

Integration Sustaina

bility Health Gain

PreventionPromotion

Ease of Implementation

TOTAL SCORE

#1 16

#2 15

#3 12

#4 10

Ranking Opportunities

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What about disinvestment?

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Disinvestment Framework STEP 1

Map Expenditures, Determine Objectives

Evaluate Net Worth

Strategic Assessment

STEP 2 Identify Disinvestment Options and Risks

Benchmarking

Clinical Variation

Clinical Pathway Assessment

Marginal Analysis

STEP 3 Form Assessment Committee

Oversight Committee

Clinicians

Data Analysts

Managers

Outcome Comparisons

Outcome Studies

Best Practices

Evaluative & Assessment Approaches

Source: Mitton, C., Schmidt, D., Bryan, S., Peacock., S., Campbell, D., “The development of a disinvestment framework”.

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Disinvestment Framework STEP 4

Determine Criteria and Rank Options

STEP 5 Develop Implementation Plan

STEP 6 Conduct Disinvestment

STEP 7 Assess Disinvestment Outcomes

STEP 8 Implement Post-Disinvestment Plan

Assessment Committee

Oversight Committee

Ranked Options

Released Resources Meet Budgetary

Needs Re-Investment

Source: Mitton, C., Schmidt, D., Bryan, S., Peacock., S., Campbell, D., “The development of a disinvestment framework”.

PBMA Critical Success Factors • Creating the environment for change

– Senior level buy-in – Top Down combined with Bottom Up

• Removing barriers between departments/ programs

• Exert panel/committee – Need to identify criteria on which decisions will be

made • Data

– Can be most difficult • Be Relentless

PBMA Experience

• Move to 24 hour surgical unit • Home care clinics • Standardization of surgical supplies • Community rehab • Staff mix • Joint replacement care path

Real Results

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Joint Replacement Care Path Example Before

=$13,200++/case

5% re-admission rate

Community

Illustrative costs

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Joint Replacement Care Path Example After

=$11,200+/case

Illustrative costs

Max 100 days dx to surgery

Pre-hab 4 day LOS Post-rehab <1%

readmission rate

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• $2,000+/case Cost Savings

•++ Patient Satisfaction

Joint Replacement Care Path Example

Barriers “off the table” ideas • Hospital closures • Sunk costs

No Staff Layoffs • Collective agreements • Consistent messages

Inertia • Difficulty getting momentum • Perceived inequities

Conclusions

• Health care budgets will continue to be challenged • Will not have perfect information to make

decisions • PBMA is a tool that can facilitate decision making

– Provides a framework for organizing information – Increases transparency – Strong executive leadership needed to ensure

conformity with fair process

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