WHA Improvement ForumFor November

“Building the Business Case for Quality”

Tom Kaster

Courtesy Reminders: •Please place your phones on MUTE unless you are speaking (or use *6 on your keypad) •Please do not take calls and place the phone on HOLD during the presentation. 1

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Improvement Forum Topics The Value Equation IOM Cost of Quality IHI Building the Case for Quality The Financial Impact of Quality HANYS Regulatory Pressures for Improved

Quality

The Value Equation

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Increase Quality = Increase ValueDecrease Cost = Increase Value

Increase Quality and Decrease Cost = Accelerated Increase in Value

Institute of Medicine (IOM): Cost of Poor-Quality of Care in Lives and

Dollars

The scope of poor quality of care (3 forms)– Overuse: Provide unneeded care– Underuse: Fail to provide needed care– Misuse: Make a mistake and cause harm

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IOM: Overuse

Overuse occurs when a drug or treatment is given without medical justification.

– Examples includes:• Treating people with antibiotics for simple infections• Failing to follow effective options that cost less or

cause fewer side effects

– Avoiding overuse can decrease cost

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Overuse ExamplesBoth examples can have a negative impact to the patients and to costs:

• Prescription overuse– Prescribing antibiotics for a viral illness– Using brand name when generics are available

• MRI overuse– When use appropriate MRI’s are valuable– Often MRI’s do not change the treatments

prescribed or a patients outcome.

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IOM: UnderuseUnderuse is when doctors or hospitals neglect to give patients medically necessary care or to follow proven health care practices

– Examples include:• Failure to give beta-blocking drugs to people having

heart attacks• People receiving necessary preventative care like

mammograms or vaccinations

– Avoiding underuse improves quality

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Consequences of Underuse

• As many as 91,000 Americans die each year because they do not receive evidence-based care for chronics conditions like HBP, diabetes and heart disease

• Billions of dollars a year are spent reacting to the consequences of underuse

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IOM: MisuseMisuse occurs when a patient does not fully benefit from a treatment because of a preventable problem, or when a patient is harmed by a treatment.

– Some examples include:• Prescribing a drug that a patient is allergic to• The appropriate care protocol is not given resulting in

patient harm

– Avoiding misuse improves quality

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Consequences of Misuse

• Billions of dollars a year are spent on helping patients recover from health care harm

• Conservatively between 44,000 and 98,000 people die annually from preventable errors

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Building the Business Case

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Obstacles to Building a Business Case for Quality

• The complexity of healthcare • The fragmentation of payer types • Lack of reliable performance indicators that correlate

QI to cost savings• The perception that waste elimination will negatively

effect patient care• The perception that increased efficiencies may

reduce FTE’s

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Preparing Yourself to Talk the Talk

1. Learn and Understand Healthcare Financial Terms and Payer Dynamics

2. Develop methodologies to measure the financial impact of improvement (ROI etc…)

3. Understand the importance of connecting financial impacts to gain management support

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Dark Green vs. Light Green MoneyLight Green Money Dark Green Money

Efficiencies and cost savings gained through improvement efforts that do not have a direct impact on the bottom line, but intuitively result in positive outcomes.

Efficiencies and cost savings gained through improvement efforts that do have a direct impact on the bottom line as well as produce positive outcomes.

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Examples of Light Green • Organize equipment and supplies room to reduce hunting and

searching time• Streamline workflow to increase efficiencies• Enable care givers more time at the bedside to meet patient

needs • Reduces patient harm from falls, pressure ulcers• Make work more enjoyable and experience less attrition• Improves patient experience • Improves HCAHPS scores

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Light Green to Dark GreenMay 2, 2012 (San Francisco, California)—

• Blood-product management plan put together by the Virginia Cardiac Surgery Quality Initiative (VCSQI) helped optimize the process and lowered the overall use of transfusions, cutting related mortality by half.

• Savings of $50 million statewide over two years

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http://www.medscape.com/viewarticle/763272

Light Green to Dark Green A house-wide hourly rounding initiative…

…Requires the improvement of overall efficiencies:• Nurses spend their time in more value added activities at the

bedside… Which is shown to improve patient and family satisfaction on

HCAHPS scores … Which will positively effect Value Based Purchasing factors

• Reduce Harm by lessoning Falls and Pressure Ulcers... Which will reduce average length of stay for our Medicare

patients • Decrease overall medication doses per stay

… Which in turn will improve profit margins for fixed payment patients

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IHI: Examples of Dark Green Savings

Areas of Focus Effort and TargetSupplies and Medication Reduce supplies needed by X% by

reducing the number of adverse events and complications

Purchased Services (Agency) Fees

Reduce agency fees by XX% due to improved predictability in demand and improved staff morale that results from the change

Overtime Reduce overtime by XX% due to improved predictability in demand on staff from fewer adverse events and complications

FTE Reduction from Attrition

Reduce FTE Salary and wages by X% by not replacing staff following attrition, if improved work processes permit

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IHI: Equations to Measure Quality in Dark Green Dollars

• Total Wages per Admission

• Total Medication Cost per Admission

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IHI: Total Wages per Admission Equation

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Total wages per admission

(Average wage per hour)

(Worked hours per patient day)

(Patient days per admission)

IHI: Total Wages per Admission Equation

Average wage per hour:• Cost associated with recruiting and training

new staff for vacant positions• Increased cost associated with contract labor

to fill vacancies • Premium overtime pay

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IHI: Total Wages per Admission Equation

Worked hours per patient day:• Inappropriate ICU staff time due to discharge delays

to other units• Excess budgeted hours due to uneven staffing needs

due to poor scheduling of surgeries with disregards to workflow

• Excess budgeted hours due to poor prediction of demand

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IHI: Total Wages per Admission Equation

Patient days per admission: • Excess patient day due to delays in discharge and

poor coordination of the process• Excess patient days due to lack of setting and

executing daily goals for the patient, family and care team

• Excess patient days associated with and adverse event or complication

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IHI: Total Medication Cost per Admission Equation

Average cost per dose:• Excess cost of brand names when generic are

available• Excess cost associated with failure to make a timely

switch in Med Administration mode (IV to Oral)• Excess cost associated with overuse of expensive

meds when less expensive alternatives are available

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IHI: Total Medication Cost per Admission Equation

Number of doses per admission:• Excess cost associated with failure to stop

medications appropriately (continuing preventative antibiotic use longer than 24 hours after surgery)

• The medication cost associated with treating an adverse events

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IHI: Tying Equations to Dollars

Reduction in overall SSI:– Patient days per admissions: Decreased– Number of doses per admission: Decreased– Average length of stay: Decreased

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The Financial Impact of Quality

• Medicare Fixed Payments (DRG’s)• Privately Insured• Uninsured• Regulatory

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Medicare Fixed Payments--Diagnosis Related Groups (DRG)

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The Financial Impact of Quality

Consequences of Low Quality

• Medicare Fixed Payments--Diagnosis Related Groups (DRG)– Falls / PUP / CAUTI / Falls– Efficiencies / Increase Length of Stay / Increase of

Rx Cost

• Increased financial deficit• Increased harm to patient

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The Financial Impact of Quality: Privately Insured

Consequences of Low Quality • Privately Insured

– Falls / PUP / CAUTI / Falls– Efficiencies / Increase Length of Stay / Increase of Rx

Cost

• Increased financial revenues– Eventual lower negotiated reimbursements– Eventual pressures to adjust or change payment models

• Increased harm to patient

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The Financial Impact of Quality: Uninsured

Consequences of Low Quality

• Uninsured– Falls / PUP / CAUTI / Falls– Efficiencies / Increase Length of Stay / Increase of

Rx Cost• Increase financial burden on patients • Increased likelihood of unpaid claims• Increase charitable care • Increased physical and or financial harm to patient

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Federal Pressures to Improve Quality(do not pertain to CAH’s)

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• Hospital-specific historical quality performance compared to national performance standards

• Dynamic programs that change each year– Measures and domains (additions/deletions)– Performance standards (moving target)

• Increased financial exposure each year (max exposure shown below)

Slide provided by the Hospital Association of New York State

Takeaways• Improving quality and / or reducing cost increases value to the

patient• Financial and Quality leaders can drive huge improvement and

cost reductions by teaming up and learning each other’s world• As data becomes more available, so will the ability to tie ROI to

quality • No matter what the industry, improving value and reducing

cost equates to long term sustainability• Even if a quality improvement project does not impact the

bottom line it may still be the right thing to do

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Next Month

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December – Strategies for Improving Efficiencies and Reducing Waste

Resources• Institute for health improvement– Increasing

Efficiency and Enhancing Value in Health Care• Institute of Medicine: Overuse, Underuse and

Misuse of Medical Care• Blood Use Article:

www.medscape.com/viewarticle/763272• Hospital Association of New York State -

Regulatory Pressures to Improve Quality

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Thank You!Questions

Please complete 3 question survey when closing webinar window.

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