“Improving Our Health Care Delivery:

New Appeals and New Ideas”

Innovations in Health Care Delivery

2006 ConferenceSponsored by:

College of Business, University of Cincinnati

Cincinnati Children’s Hospital Medical Center

William P. Pierskalla, Ph.D.Distinguished Professor and Dean Emeritus

UCLA Anderson Graduate School ManagementRonald A. Rosenfeld Professor Emeritus

The Wharton School, University of Pennsylvaniaemail: william.pierskalla@anderson.ucla.edu

Outline of Lecture

• A brief review of the current state of our health care system?

• Second: What the NAE/IOM Report is asking us to do

• Third: What is our job?

The current state of our health care system

We will continue to move to new crises in Health Care Delivery in the United States (as well as in most or all other

developed countries)

• they will begin to surface strongly in the years 2007-2010 (probably in 2007 or 2008) and then they will continue to gain momentum unless war, terrorism or other major events continue to dominate the news.

2006

Why do I believe this?Because they will again become a

major political agenda item

• Costs• Quality • Technology• Access• Aging of Baby Boomers - 2011• Social Security/Medicare Financial

Crises

DRIVEN BY:

Should we be Optimistic or Pessimistic about this?

• More Optimistic: Because OR/MS has answers to many of these problems and the research capabilities to resolve many others.

THIS CONFERENCE IS A PRIME EXAMPLE !A Second Example Is the Recent NAE/IOM REPORT !

• But Somewhat Pessimistic: Because OR/MS might not be at the national table when the crises demand solution and the crises will be attempted to be resolved only politically and/or pseudo-economically. And because there are no present forces evaluating the fantastic growth in medical research and technology.

• HOWEVER, OR/MS will be in the thick of the hands-on work at the institutional level of care delivery

Where are we?

First: the crises areas:

• Costs• Quality • Technology• Access• Aging of Baby Boomers• Social Security/Medicare Financial Crises

COSTS

Each of them is named after one of my medications

• Health Care spending per person in USA increased by 8.2% (total $1.9 trillion or 16% of GDP)

• Who paid: Employees and the Elderly! (Employers?- essentially

no)– Disposable wages

– Co-payments and deductibles

– Insurance premiums

– Medicare premiums and deductibles

YEAR 2004

TOTAL U. S. HEALTH CARE EXPENDITURES IN ACTUAL DOLLARS 1960-2004

y = 1214.7x2 - 19178x + 104759

R2 = 0.9924

0200000400000600000800000

1000000

12000001400000160000018000002000000

YEARS 1960-2004

EXPE

ND

ITU

RES

(in

mill

ions

)

1,877,600

Expenditures

Polynomial where x = 1,…,45 corresponding to 1960,…,2004

Percent Change in Health Care Expenditures 1961-2004

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43Years

Perc

ent C

hang

e

Percent Change Year to Year

Average = 7.98% for 1985-2002

Average = 10.2% for 1961-2002

1960 2002

?

?

?

20101985

Introduction Introduction and implement. and implement. of ProsPaySys.of ProsPaySys.

Hey-Day years of Managed Care

Source: OECD Health Data 2004, 2nd Edition

8.2%

2004

The Causes of Health Cost

Increases• Demographics• Income Level Increases• Insurance• Price Inflation / non Wages• Administrative Expenses• Factor Rents• Technologies

Table 2: Accounting for the Increase in Health Costs 1940-1990

Factor Increase Due To Share of Total

Demographics 14 2 Income 37 5 Spread of Insurance 100 13 Relative Price Change 147 19 Administrative Expense 101 13 Factor Rents 0 0

Total Static Factors 399% 51%Technology 391% 49%

Total Increase 790% 100%

Source: David M. Cutler, “Technology, Health Costs and NIH,” Harvard University and NBER paper presented at the NIH Economics Roundtable on Biomedical Research, October, 1995.

Quality

Five of IOM/NAE Quality Reports• November 1999 (IOM): “To Err Is Human”

– Found that 44,000 to 98,000 Americans die each year as a result of medical errors.• March 2001 (IOM): “Crossing the Quality Chasm: A New Health System

for the 21st Century”– Found that the healthcare system is “plagued by a serious quality gap” and called

for eliminating handwritten clinical information by 2010 and refocusing the healthcare system on treating chronic illnesses.

• October 2002 (IOM): “Leadership by Example: Coordinating Government Roles in Improving Health Care Quality”

– Argued that the federal government should lead the development of clinical standards for measuring care and proposed financial incentives for organizations that improve quality.

• November 2003 (IOM): “Keeping Patients Safe: Transforming the Work Environment of Nurses”

– Identifies solutions to problems in hospital, nursing home, and other health care organization work environments that threaten patient safety through their effect on nursing care.

• In 2005 (NAE and IOM): “Building a Better Delivery System: A New Engineering/Health Care Partnership”

– “Purpose is to forge a new partnership between Systems Engineering,

Operations Research, Management Science and Medicine” to manage

quality, costs and access challenges.

Building a Better Delivery System: A New

Engineering/Health Care Partnership*

A National Academy of Engineering/Institute of Medicine Report

Supported by grants from: National Science Foundation, Robert Wood Johnson

Foundation, and the National Institutes of Health

*Wherever it says “engineering”, it also implies “business information and operations management”.

Study Committee

• W. Dale Compton, PhD, Cochair, Purdue Univ.

• Jerome Grossman, MD, Cochair, Harvard

• Rebecca Bergman, Medtronic

• John Birge, PhD, Univ. of Chicago

• Denis Cortese, MD, Mayo Clinic

• Robert Dittus, PhD, Vanderbilt Univ.

• G. Scott Gazelle, MD, MGH

• Carol Haraden, PhD, IHI

• Richard Migliori, MD, United Resource Networks

• Woodrow Myers, MD, WellPoint

• William Pierskalla, PhD, UCLA

• Stephen Shortell, PhD, UC Berkeley

• Kensall Wise, PhD, Univ. Michigan

• David Woods, PhD, Ohio State Univ.

Project Goals

• Accelerate introduction of engineering ideas and principles to health care delivery

• Identify engineering applications (technologies, tools, and research) that could help significantly improve health care system performance

• Identify factors that facilitate or inhibit the use

and diffusion of these applications

• Identify research and education priorities for a new engineering-medicine partnership

Converging Crises—Safety, Quality, Cost, Access

• Safety failures – 1 million injuries; 98,000+ deaths annually in U.S. from

process/system failures (progress from IHI's 100,000 Lives Campaign)

• Knowledge—Practice Gap– patients receive “best practice” treatment only half of the time

• Waste, Inefficiency, Spiraling Costs– 30 to 40 cents of every health care dollar covers costs of

“overuse, underuse, misuse, duplication, system failures, poor communications and inefficiency” 30% of $1.6 trillion = $480 billion/yr

– Health care costs rising at or close to double digit rates since late 1990s, 3X rate of inflation

• Growing uninsured population ~ estimated 45 million in 2006

• Revenue squeeze on care providersStaff cuts/workforce shortages impact safety, timeliness, access, patient-centeredness

ERRORS

OVERUSE

I’M HAVING SLIGHT STOMACH PAINS

REGULAR OR JUMBO PAINS

REGULAR.

THAT’LL BE AN UPPER GI AND TWO PEPTO BISMOLS.

PULL UP TO THE NEXT WINDOW, PLEASE

PERHAPS IT’S TIME TO RE-EVALUATE HEALTH CARE.

YOU WANT ANAPPENDECTOMY

WITH THAT?

MISUSEBIZARRO BY DAN PIRARO

IT’S A “WIN-WIN” SITUATION! THERE WAS NOTHING WRONG WITH YOUR HUSBAND AFTER ALL SO HE CAN GO HOME IN A WEEK OR SO…..AND I CAN NOW AFFORD TO GO TO EUROPE THIS SUMMER.

INEFFICIENCY

The Broader Political and Economic Environment

The IDS

The Organization

The Care Team

PATIENT

A Patient-Centered Model of the Health Care System

NOT PATIENT CENTERED

Focus for a New Engineering/Health Care Partnership

A Systems Approach to Health Care Delivery

• Use System design, analysis, and control tools & associated research to advance understanding of processes and system interactions and to improve/optimize dimensions of system performance in face of constraints

• Use Information and information/communication technologies and associated research to advance connectivity, information flow, coordination

A Systems Engineering Agenda for Health Care Delivery—Selected Findings

1. Systems-engineering and business tools have improved quality, efficiency, safety, customer-centeredness of processes, products, and services in a wide range of manufacturing, services and high risk industries, including “islands” of health care.

2. Some tools can or have been adapted for limited tactical/localized application to improve performance of discrete health care processes, units, and departments—e.g. concurrent engineering, SPC, queuing theory, modeling/ simulation, human factors, Failure Mode And Effects Analysis (FMEA), Toyota PS, Six Sigma.

A Systems Engineering Agenda for Health Care Delivery—Selected Findings

3. Strategic use of other and more information-intensive tools* in HC has been limited—*i.e., tools from enterprise & supply chain management, financial engineering & risk analysis, and knowledge discovery in databases.

4. Information/communications (IC) systems are critical for taking advantage of the potential of existing and emerging systems-design, -analysis, and -control tools to transform HC; in turn, systems tools will be critical to effective design, deployment and management of IC systems for HC

Systems Engineering Agenda—Recommendations

Actions to promote development, adaptation, and use of systems engineering tools

• 3rd party payers to incentivize tool use

• Expand/coordinate outreach & support

• Educational materials/NLM website

• Increase public/private support for R,D&D

Information/Communications Technology Agenda— Recommendations

1. Design and build NHII/NHIN* for the future—actions to insure an evolving network capable of incorporating WIMS (Wireless

Integrated Microsystems) and other next-generation functionality/technologies.

2. Action to advance standards, interoperability, reduce barriers to implementation

*National Health Information Infrastructure/National Health Information Network

Information/Communications Technology Agenda— Recommendations

3. Actions to Promote Research, Development & Demonstration Priorities

– Controlled Medical Vocabulary

– Master Patient Index– Electronic Health

(Patient) Record– Speech/handwriting/

natural language recognition

– Computerized Physician Order Entry

– Centralized Patient Scheduling in Care Delivery Networks

– Enterprise Decision Support Systems

– Connectivity / Networks– Integration of Disparate

Legacy and New Systems – HIPAA Improvements

Accelerating Change The federal government, in partnership with the private sector,

universities, federal laboratories and state governments, should establish multidisciplinary centers at institutions of higher learning throughout the country to:

• Conduct basic and applied research on systems challenges to healthcare delivery and development/use of:

• Systems engineering tools• Information/communications technologies• Knowledge from other fields

• Demonstrate and diffuse the use of these tools, technologies and knowledge throughout the healthcare delivery system

• Educate and train current/future healthcare, engineering and management professionals and researchers in the science, practices and challenges of systems engineering for healthcare delivery

So What Should OR/MS Be Doing?

• A great deal but far from what could and will hopefully be done in the future.

Much More Research

• Better Data Mining in

Genomics/Proteinomics/

Drugs development

• More Powerful

Optimum- seeking

Nonlinear Algorithms

• Better Decision Analytic

Tools – Stochastic

Branching Processes

• Better Outcomes

Measures

• Integrated Models of the Patient-Centered Supply and Delivery Chains

– In the Home

– In the Outpatient Setting

– In the Hospital

– In Long-term Care

• Best Adaptive Processes to Determine Best Practices for Patient-Centered Care?

• Individual and Organizational Change

Some Examples

Much More Applications

DECISION SUPPORT SYSTEM USE & ISSUES

DECISION SUPPORT SYSTEM SYSTEMS WIDE-SPREAD USE

ISSUES

Operations Management Strategy Yes Medium Don’t know the questions to ask

Demand Forecasting Yes Low Limited Availability—don’t always like the answer

Capacity Planning Yes Low CostLocation Decisions Yes Low Lack of management understanding

Process and Layout Design Yes Consulting Acceptable systems and dataScheduling and Staffing Yes Medium High use by consultantsProductivity Yes Medium Future will require these types of

decisions (therefore systems)

Quality Control Data and Methods No Low-Med Large organizations support these systems

Health Status and Severity Assessment Yes Medium

Quality Assurance Yes HighTotal Quality Management Limited Low-MedPurchaser’s Perspective on Quality Market

ResearchLow Growing through e-health companies

Inventory and Maintenance Yes HighRegional Planning Yes High Government focus

Clinical Decision Support System Use & Issues

Clinical Decision Support System

Systems Widespread Use

Issues

CPOE yes No, but growing

Only in a few advanced health care systems

Diagnostic A few No Still in research mode

Therapeutic A few No Still in research mode

Preventive A few No Still in research mode

Disease management A few No Only in a few large managed care org.s and only a few chronic diseases-also still in research mode

Progressive care None No Not yet even in research

Our Job

Is to bring this “heaven” to the health care delivery system in the United States

This conference will be exploring how to do this task and provide some exciting answers.

Low Hanging Fruit• It's not uncommon that a patient scheduled for surgery

accidentally receives dinner the night before from Dietary, resulting in a delay for surgery, and at least an additional day of stay for the encounter.

• At about 5:00 PM, the attending MD decided that the patient could be transferred to a telemetry bed outside of the ICU (pressure from the backed-up ED, no doubt), but would require additional nursing supervision not normally available on that unit.  Of course, by this time, it was so late in the day that arrangements could not be made for an additional nurse's aid, so the physician reversed the transfer order - he spent at least 1/2 hour to an hour on phone calls in this entire process and so did many others.

• Although CMS provides fairly clear guidance for physician billing for ED visits, the guidelines for facility billing are somewhat ambiguous. Given concerns about OIG audits and penalties for fraud & abuse, you find, almost without exception, that the facility bills for a much lower level of visit than the physicians (indicating a lower acuity level), for the very same patient population, resulting in about $50-$100 in foregone revenues (after adjusting for collections write-offs) per visit.