Hospital Leadership Forum: Preventing Hospital-Acquired Infections

June 25, 2008

The Business Casefor Quality and Infection

Prevention

Massachusetts Coalition for the Prevention of Medical Errors

Leadership ForumScott Hamlin, CFO

Cincinnati Children’s Hospital Medical Center

June 25, 2008

Page 3

Presentation Objectives• Brief Profile of

Cincinnati Children’s• Is There Truly A

Business Case for Quality?– Is this just a

Cincinnati event?– Demonstration of

improved results through a focus on Quality

• Introduce concept of asset maximization and the Revenue Sweet Spot

Page 4

Cincinnati Children’s Brief Profile• One of the nation’s largest Children’s Hospitals

• Located in smaller greater-metropolitan area (~2 million)

• Our program development strategy:– Unique, highly specialized programs that require high

investment costs to operationalize– Deliver compelling program results that stimulate and

maintain sufficient volumes (market share) from very broad geographies to justify the investment and generate a reasonable return

• Extreme dependence on out-of-area referrals– Nearly half of inpatient revenues o/s the PSA service area– Virtually all inpatient and surgical growth

Page 5

Why Quality as the Focus of Operating Strategies & Business Model?

• Survival Dependant on Referrals from Large Market Geographies

• Referring Sources/Patients must Perceive High Value– Better Results (medical outcomes/experience)

for given cost– Cost (a more affordable price) for comparable

results

• Quality and CI Address Both Components (Results & Costs) of “Value Equation”

Page 6

Is Cincinnati’s Thought-process Unique

to Its Circumstances and Market Strategy?

“Clinical Quality Initiatives Have Positive Long-Term Impact on Hospital Bond Ratings” – Moody’s US Public Finance Special Report, Jan 2008

• Quality agenda translates into improved ratings:– Greater market share– Operate more efficiently– Better rates from commercial payers– Better financial performance

• Two key facets of quality strategy:– Improve evidence-based clinical outcomes– Improve patient safety

Page 7

So How Might This Thought-process Apply In Other Hospital

Settings? • Before tackling this question directly,

let’s look at our experiences through a few select case studies:– Improved outcomes and error elimination:

• Preventable hospital acquired infections

– Better revenue production from improved utilization of scarce and/or expensive resources:• Discharge planning • Evidenced-based care

Page 8

SSI & VAP InitiativesImproved Medical Outcomes & Error

Elimination• Clinical initiatives to reduce Surgical Site

Infections (SSI) & Ventilator Associated Pneumonia (VAP) that our patients acquired in our hospital

• Just 3 years ago our rates were about equal to the national averages: – SSI rate = About 1 out of every 100 children receiving

surgery– VAP rate = About 4 out of every 100 children placed on a

vent

• Our own data suggested that maybe 20% or more of kids in the ICU who acquired a VAP or other serious infection might be expected to die

Page 9

SSI & VAP InitiativesImproved Medical Outcomes & Error

Elimination• Interventions aimed at reducing SSI & VAP

rates were developed from published best practices and our own observations and thoughts

• What was achieved: – SSI rate was reduced by 60%; meaning 50 fewer

kids suffered a preventable infection– VAP rate was reduced 90%; meaning 70 fewer

kids suffered pneumonia while fighting to recover in our ICU

• MORE IMPORTANTLY an estimated 12-15 children which may have previously been expected to die annually as a result of such infections would, instead, return home!!

Page 10

SSI & VAP InitiativesImproved Medical Outcomes & Error

EliminationNothing compares to the human impact of this effort

& nothing is even remotely as important; but there is still more:

• We reduced the costs to the health care system (costs that we were responsible for creating) by $10.8 million

• And we reclaimed 3 beds per year that were previously dedicated to infections we caused and could now be dedicated to the unique program development that is our core strategy– Each bed we construct has an estimated cost of $3 million

of capital investment and staff training that we avoided• Pretty nice return - HUMAN impact, first and

foremost, and economically as a secondary confirmation that doing the right thing is almost always financially rewarding

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Discharge Planning More effective utilization of scarce resources

• Discharge Planning– 4 yrs ago > 30% of all discharges occurred

within 4 hrs of meeting discharge criteria

– Pts medically cleared to go home sat in beds and occupied nursing staff solely because of failed planning, communication & coordination

– Today, nearly 80% are achieving discharge within 4 hours

• Reclaim 4 beds/yr and associated staff by simply improving dysfunctional discharge planning process

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Discharge Planning More effective utilization of scarce resources

• Evidenced Based Care– 5 yrs ago admissions and ER utilization from 4

common conditions (asthma, bronchiolitis, common diarrhea and high fever) accounted for 7,500 patient days/yr

• Faculty/Nurses suspected that a large % of these patients did not need hospitalization and another sizeable % did not need to stay in the hospital as long as our experience

– Problem attacked by teaming with community pediatricians and local payors to develop evidenced based treatment guidelines and pathways, defined order sets and admission/discharge criteria aimed at best results with fewest resources consumed

Page 13

Discharge Planning More effective utilization of scarce resources

• Evidenced Based Care – results

– Today admissions for these common illnesses have dropped 30%; inpatient days have dropped 50% and lengths of stay by more than 25%

– Payors have saved $9 million in hospital billings each year and share a portion of that with the community doctors that absorbed most of the care while working with families

– And 10 beds were reclaimed per year and associated nurse staff is freed for more appropriate care and program growth

Page 14

Major Issue For Management Teams“BCQ Skepticism”

• Quality Improvement is….. Good for payors, bad for providers

• Consider what a CEO or CFO might observe in the Cincinnati case study results:– SSI/VAP: Reduced billings & inpatient (IP) days – Discharge Planning: Reduced billings & IP days– Evidenced Based Care – Reduced billings & IP

days

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Improved Outcomes and Error Reduction - Maximizing Asset

Production• For the moment put aside the most compelling issues of

pursing quality related to our sacred responsibilities as Fiduciaries to protect human lives.

• For the moment put aside our community and social responsibilities to curtail this endless building to expand more and more bed capacity.

• Even, for the moment put aside our understanding that the market we live in is increasingly asking each of our hospitals to differentiate and justify its services on some basis of outcomes or costs.

• Be completely fiscally focused and consider only the impact we have seen from hospital acquired infections and sloppy discharge planning from a pure maximization of revenue production from available assets perspective.

Page 16

Maximizing Asset Production –Revenue Production Associated with

SSI

SSI Patient vs. Matched No-SSI PatientAverage Daily Charges

$0

$10,000

$20,000

$30,000

$40,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Day

Av

era

ge

Da

ily

Ch

arg

es

SSI Match

Pre-SSI Infection

Day of Surgery

Post-SSI Infection

Low Revenue ProductionRevenue Sweet Spot

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90 Day Revenue Production CycleWhen 6 Patients Develop an SSI

Bed Cycle For SSI PatientsAverage LOS for Surgery Patients With Infection = 15 Days

Total Revenue Produced in 90 Day Cycle = $622,000

$0

$10,000

$20,000

$30,000

$40,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90

Day

Da

ily C

ha

rge

s

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Same 90 Day Cycle of Revenue Production If No Patients Acquire SSI (18 patient potential)

Bed Cycle For Non-SSI PatientsAverage LOS for Surgery Patients Without Infection = 4.4 Days

Total Revenue Produced in 90 Day Cycle = $892,000Annualized Incremental Revenue = $1,080,000

$0

$10,000

$20,000

$30,000

$40,0000 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90

Day

Da

ily C

ha

rge

s

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Apply the Concept of Maximizing Asset Production (i.e., the Revenue Sweet Spot) to Evidenced Based Care Case

Study• First recognize the standard,

predictable profile of revenue generated per day:– Profile for Common Cases -

• Gastroenteritis• Bronchiolitis

– Profile for Tertiary Cases - • Bone Marrow Transplant (BMT)• ECMO (Extracorporeal Membrane Oxygenation)

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GastroenteritisProfile of Charges by Day

$0

$2,000

$4,000

$6,000

1 2 3 4 5 6 7 8 9 10

Page 21

BronchiolitisProfile of Charges by Day

$0

$1,000

$2,000

$3,000

1 2 3 4 5 6 7 8 9

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Bone Marrow TransplantProfile of Charges by Day

$0

$2,000

$4,000

$6,000

$8,000

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86

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ECMOProfile of Charges by Day

$0

$5,000

$10,000

$15,000

$20,000

$25,000

1 5 9 13 17 21 25 29 33 37 41 45

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Maximizing Asset Production –Benefits of Redirecting Asset Production

to Tertiary Program Development

$0

$2,000

$4,000

$6,000

$8,000

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89

Bone Marrow Transplant PatientTotal Revenue Generated

to Day 90 = $252,000

Bronchiolitis Patients Total Revenue Generated to Day

90 = $63,000

Page 25

So Why Pursue Quality & HAI Prevention?

• The Business Case for HAI Prevention:• Product Differentiation• Improves value of services to patients & payers• Minimizes (or offers an alternative to)

investment in capital assets to expand capacity• Revenues from treating HAI has compromised

or negative margins • Empowers and enables increasingly scarce

human assets to work at the highest level of production and performance on “value-add” activities

– The Most Important Case:• It saves children’s lives and allows trustees and

management to be the ultimate steward’s of community trust!