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Managing Cost in the Era of Healthcare Reform
William Bercik
JoAnn Fifield
May 5, 2015
1. State of Analytics in Healthcare2. Strategic P&L’s 3. Use Cases4. Best Practices5. Sample Reporting6. Q&A
Agenda
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The Learning Healthcare
Organization
Meaningful UseMetrics
DepartmentalClaims-based KPI’s
Pervasiveness of Analytics
Impact on HC Transformation
Today
Analytics are Vital to Healthcare Transformation
Trial & Error Medicine
Evidence-basedMedicine
Value-basedMedicine
Core Clinical & Operational Systems
Enterprise Data Integration
Analytic Applications
HC Transformation requires much more than just an EMR. It requires integrated clinical, financial, administrative, and research data from across the provider enterprise and analytics.
Accountable Care
Clinical & OperationalPerformance Management
Comparative EffectivenessResearch → New Guidelines
Point of CareDecision Support
Translational Research
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“To put it bluntly, there is an almost complete lack of understanding of how much it costs to deliver patient care.”
“The inability to properly measure cost and compare cost with outcomes is at the root of the incentive problem in health care and has severely retarded the shift to more effective reimbursement approaches”
– Robert S. Kaplan (Baker Foundation Professor at Harvard Business School)
– Michael E. Porter (Bishop William Lawrence University Professor at Harvard Business School)
The Big Idea: How to Solve the Cost Crisis in Health CareHarvard Business Review, Sept 2011
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Population Health Financial Decision Support
Source: CCHIT 2013
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Financial Decision Support: Top 5 priorities for providers
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HIMSS Healthcare Provider Innovation Survey, Jan 2014
Enterprise Healthcare Analytics
Comprehensive, Integrated Healthcare
Enterprise Data Management
Healthcare Financial Decision Support SuiteAnalytics Subject Areas
Financial
Operational
Clinical
Research
Healthcare Financial Decision Support
Cost Accounting
Financial Modeling
•Cohort cost of care•Physician, DRG variance•Service line profitability
•Episode of care cost•Contract scenario modeling•Net revenue modeling
•Patient volume, utilization trends•Scenario modeling: case mix, volumes•Actual vs budget
Budgeting, Flex analysis
Labor productivity
•Productivity KPIs•Chargeable, non-chargeable activity•Capacity analysis•Nursing and Physicians
EMR, ADT
Contract Management
HRM
ERP
Management
Metadata
Hie
rarc
hy
Man
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Where are you in your journey?•What are your biggest cost management strategies?
•What data insights and analytics are you using to drive down cost of care across your system?
•How are you using cost of care insights in your population health strategies?
•What cost and revenue management capabilities do you need for shared-risk contract negotiations?
•Can you determine costs across a bundled episode of care traversing inpatient, outpatient, physician offices and other ambulatory care sites?
•How are you using workforce analytics to respond to flex volume demands?
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“Humans create more data in just two days than was created in all of history up until the year 2003! ”
Erick Schmidt
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Patient Days
Salaries
AssetsCase Mix
OR Minutes
Payor Mix
LaborProductivity
Physician Profitability
Service Line Profitability
Capital Budgeting
Case Costing
Clinical Analytics
Daily Metrics
What-if Analysis
Shared Services Allocations
Quality of Care / ACO
Reimbursement Analysis
Encounter Level Costing
M&A Valuation
Population Health
Payor Mix10
Revenue $1,600
Direct (350)
Semi-Direct (450)
Indirect (300)
Profit Clustering – Strategic P&L’s
DELIVERY PROFIT ($100)
Strategic P&Ls
Indirect
IT/Finance
PatientsDrugs
Laundry
Radiology
O.R.
OVERHEAD
Profit-Focused Enterprise (PFE)™
Service Lines Physicians
Patient
Direct Supplies
Patient
Drugs
Direct Medicine
TREATMENTS/CARE
Patient RevenuesPatient
Patient Patient
Drugs DrugsLaundry Radiology
O.R.
Housekeeping Surgery
MEDICAL SERVICES
Reimbursements
% Chgs
Per Diem/Admit Detail, DRG
Payor Mix
Reimbursements (600)
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Profit-focused Enterprise (PFE)TM
Use Case #1 – Service Line P&L
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Key ElementsLarge amounts of detailed data – starting with EMRActual patient costs captured (supplies, labs, etc)True activity based costingTangible driver data (Surgery minutes, Hours, Patient days)True waterfall overhead costsDetailed salaries down to the procedure levelApplied Physician practice costsCost by department and service line
Value PropositionBottom up detailed costing - 95% accuracyAbility to bundle costs and test out pricingAggregation of known costs – less allocation/assumptionsCost per patient per service line by locationDetailed comparative analytics
Costs• Actual Costs to Cost Pools
Drivers• Cost Pools to Functions by
Dept.
Service Lines
• Functions to the charge item (activity code) by Dept.
RVU’s are NOT a waste of time!
Use Case #2 – P&L by Function
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Key ElementsTrusted and historical RVU dataDirect connectivity to existing health systemDetailed charges captured by procedureNative integration – millions of data intersectionsIsolate cost of supplies – variance analysisWaterfall the variance
Value PropositionExtended analytics to all end usersFull integration of data – checked and qualified from the closeAutomated aggregationFuture ability to model more functions/activitiesSingle comprehensive model with reportingTrue flexed costing model (zero-balanced)
RVU’s
• Costs to Cost Pool by RVU’s
Cost Pools
• Cost Pools to Functions by Dept.
Charges
• Functions to the procedure to Patient
Time-Driven Activity Based Costing by Procedure Groupings
Use Case #3 – Patient P&L
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Key ElementsCollect procedural dataCollect time studies by role by location over timeClinical roles isolatedCapture acuity by proceduresCollect data at the departmental level – closest to patient
Value PropositionTarget costly proceduresGoal is quality and care deliveryWhat if modeling based on clinical provider (Dr. vs. LPN)Comparative staffing models per procedure per location!Comprehensive time line analysisBottom up detailed costing
Charges• Procedure level charges
Process Maps
• Cost Pools to Functions by Dept.
TDABC• Functions to the charge item
(activity code) by Dept.
Best Practices
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Master Catalogs
Charge Master
Billing Cost AllocationCharge
Capture
AP & ARInventory
Purchasing
HR and Payroll
Patient Accounting
Financial Reporting
Pharmacy & Formulary
User Definable Extensions
Provider Enterprise subject area coverage
Data Foundation/Warehouse
Consent & Advanced Directives
Case
Specimen
Trial(Clinical Study)
Survey
Family Incident
PartiesIndividuals /
Orgs
Patient
Encounters
Coded Terminologies
Service Providers
DiagnosisDx, CP,
ProblemHistory
Procedures CPT, Med
Adm, Pat Edu
Observation(Lab Results,
Vitals, Assess)
Orders SchedulingGroups
Facility
Payor
Substance
Claims & Payment
(Reimbursement)
Related Groups
Related Entities Intersection
Entities
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Analytical applications
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Analytical applications
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Reporting
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Reporting
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Dashboard Reporting
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WHALE CURVE PROFITABILITY
0500,000
1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0005,000,000
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Profit
05,000,000
10,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,000
Service Lines
Profit
William Bercik JoAnn Fifield
Questions?
