Upload
nirmala-last
View
388
Download
1
Embed Size (px)
DESCRIPTION
Citation preview
Research and analysis by Avalere Health
Adopting Technological Innovation in Hospitals: Who Pays and Who Benefits?
Research and analysis by Avalere Health
Advances in medicine, while costly, have substantially improved health outcomes and quality of care…
Source: Luce, B.R., et al. (2006). The Return on Investment in Health Care: From 1980 to 2000. Value in Health, 9(3), 146-156.
Chart 1: Return per Incremental Dollar Spent on Health Care
$1.10$1.55$1.49
$4.80
Heart attack Type 2 diabetes Stroke Breast cancer
Research and analysis by Avalere Health
…though many new technologies are costly for hospitals.
Item Base Equipment Cost Extras
Implantable cardioverter defibrillator (ICD)
$20,000 to $35,000 Variable
Basic minimally-invasive surgery suite
$100,000 to $500,000 Variable cost per case for disposables (e.g., surgical instruments) depending on type of procedure
Image-guided surgery system for ENT procedures
$100,000 to $175,000 $50 to $400 per case for disposables
Intraoperative MRI for neurosurgery
$1.5 million to $5.3 million Variable, but substantial, for constructing MRI-safe operating room space
Sources: Sg2 cited in: Gardner, E. (2006). Making the Cut. Modern Healthcare, 36(7), 50-56. Meier, B. (2005, August 2). As Their Use Soars, Heart Implants Raise Questions. New York Times, www.nytimes.com.
Chart 2: Sample Costs of Adopting Innovative Technology
Research and analysis by Avalere Health
Medicare has dedicated payment mechanisms for new technology…
Source: MedPAC. (March 2003). Payment for New Technologies in Medicare’s Prospective Payment Systems. Report to the Congress: Medicare Payment Policy. Washington, D.C.
Chart 3: Hospital Inpatient and Outpatient New Clinical Technology Payment Mechanisms
Inpatient Add-on Payments
Outpatient Pass-through Payments
Outpatient New Technology APCsMedical Devices Drugs and Biologicals
Eligible new technologies
Represent a new procedure or are an input to an existing DRG
Are an input to an existing service
Are an input to an existingservice
Represent a new service
Criteria for payment Clinical benefit, newness and cost
Clinical benefit, newness and cost
Newness and cost Newness
Basis for payment Additional costs of treating a case using the new technology
Cost of the new technology
Cost of the new technology
Cost of providing the service
Payment 50% of the additional costs, capped at 50% of the estimated cost of the new technology
100% of reported costs minus device costs already built into the base payment rate
106% of average sales price (ASP)
Midpoint of the payment range for the new technology APC group
Payment financing New expenditures Budget neutral Budget neutral New expenditures
Research and analysis by Avalere Health
…though few new clinical technologies actually have been approved for inpatient add-on payments.
* Excludes revision of one 2004 approval.** Excludes one application which was withdrawn prior to CMS decision.
Source: Avalere Health analysis of Hospital Inpatient Prospective Payment System Final Rules.
Chart 4: New Clinical Technology Add-on Payment Decisions, 2003 to Present
1
2 2
1
3
1
8
6
11
2003 2004 2005* 2006 2007**
Approved Denied
No
. o
f A
dd
-on
Pa
yme
nt
Ap
plic
atio
ns
Research and analysis by Avalere Health
Medical Records, $1.3
Lab tests, $1.6
Drugs, $2.0
Nursing time, $7.1
Length of stay, $19.3
Drugs, $6.2
Radiology, $1.7Lab tests, $1.1
Transcriptions, $0.9Chart pulls, $0.8
Private Payers, $15.8
Medicare, $11.7
Medicaid (federal), $6.1
State and local, $4.2Out-of-pocket spending, $2.0Other, $2.0
Widespread use of EHR systems can realize significant savings for the system as a whole…
* The authors’ analysis focuses on electronic medical record systems (EMR-S), defined to include EMR, clinical decision support, a central data repository, and computerized physician order entry (CPOE).
Source: Girosi, F., Meili, R., and Scoville, R. (2005). Extrapolating Evidence of Health Information Technology Savings and Costs. Santa Monica, CA: RAND Corporation.
Chart 5: Estimated Average Annual Savings from Widespread Use of EMR-S* by Source and Recipient of Savings, in Billions
Inpatient savings
Outpatient savings
Source Recipient
Total Savings, $41.8 Billion
Research and analysis by Avalere Health
…though many hospitals will need help getting to full health IT implementation.
Note: Based on 903 community hospitals with complete information.
Source: American Hospital Association. (2005). Forward Momentum: Hospital Use of Information Technology. Washington, D.C.
Chart 6: Distribution of Hospitals by Level of Health IT Use
High10%
Getting started36%
Low27%
Moderate27%
Research and analysis by Avalere Health
Hospitals with high Medicare case loads are less likely to adopt health IT…
Source: Fonkych, K., and Taylor, R. (2005). The State and Pattern of Health Information Technology Adoption. Santa Monica: RAND Corporation.
Chart 7: Health IT Adoption in Hospitals by Share of Medicare Patients
12%
19%
27%
35%
24%
41%
Share of Medicaredischarges is more than
50%
Share of Medicaredischarges is less than
50%
Radiology PACSBasic EMRCPOE
Research and analysis by Avalere Health
…as are smaller hospitals.
Source: American Hospital Association. (2005). Forward Momentum: Hospital Use of Information Technology. Washington, D.C.
Chart 8: Level of IT Use by Hospital Size
48%
23%11% 7%
19%
27%
34%
31%
19%
10%18%
31%
45%
61%
6% 7% 12% 13% 13%
66%
<50 beds 50-99 beds 100-299 beds 300-499 beds 500+ beds
HighModerateLowGetting started
Research and analysis by Avalere Health
Growth in hospitals’ Medicare costs has exceeded Medicare’s update in recent years…
Source: MedPAC. (June 2006). Acute Inpatient Services. A Data Book: Healthcare Spending and the Medicare Program. Washington, D.C.
Chart 9: Cumulative Percent Change in Medicare Acute Inpatient PPS Costs per Case and Operating Update, 1994-2004
21.3
17.4
14.010.9
7.36.15.6 5.6
2.03.5
31.8
24.3
17.0
2.9
8.0
0.4-2.1-3.2-2.6
-1.4
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Update Medicare costs per discharge
Research and analysis by Avalere Health
…intensifying financial barriers to hospital adoption of health IT.
Source: American Hospital Association. (2005). Forward Momentum: Hospital Use of Information Technology. Washington, D.C.
Chart 10: Percent of Hospitals Indicating Initial Costs of Health IT Are a Barrier
43%
51%
53%
62%
73%
49%
43%
41%
33%
23%
94%
94%
95%
96%
92%500+ beds
300-499 beds
100-299 beds
50-99 beds
<50 beds
Significant barrier Somewhat of a barrier
Research and analysis by Avalere Health
Clinical and information technology do not have a dedicated category in the hospital market basket.
Source: CMS. Quarterly Index Levels in the CMS Prospective Payment System (IPPS) Hospital 2002 Input Price Index using Global Insight Inc. Forecast Assumptions by Expense Category: 1990-2016. http://www.cms.hhs.gov .
Chart 11: Cost Categories, Weights and Price Proxies for the Hospital Market Basket
Expense Category Weight Price/Wage VariableCompensation Wages 48.171 ECI- Hospital Workers (Civilian)
Benefits 11.822 ECI- Hospital Workers (Civilian)
Professional Fees Professional Fees 5.510 ECI- Compensation Prof. & Tech. (Private) Utilities Electricity 0.669 PPI - Commercial Electric Power
Fuel, Oil, Coal, etc 0.206 PPI - Commercial Natural Gas
Water & Sewerage 0.376 CPI - Water & Sewage
Prof. Liability Insurance Malpractice 1.589 CMS - Prof. Liability Premiums All Other Products Drugs 5.855 PPI - Prescription Drugs
Food-Direct Purchase 1.664 PPI - Processed Foods
Food-Away From Home 1.180 CPI - Food Away From Home
Chemicals 2.096 PPI - Industrial Chemicals
Medical Instruments 1.932 PPI - Medical Instruments & Equipment
Photo Supplies 0.183 PPI - Photo Supplies
Rubber & Plastics 2.004 PPI - Rubber & Plastic Prod.
Paper Products 1.905 PPI - Convert. Paper & Paperboard
Apparel 0.394 PPI - Apparel
Machinery & Equipment 0.565 PPI - Machinery & Equipment
Miscellaneous Products 2.558 PPI - Finished Goods Less Food and Energy
All Other Services Telephone 0.458 CPI - Telephone Services Postage 1.300 CPI - Postage
All Other: Labor Intensive 4.228 ECI - Service Occupations (Private)
All Other: Non-labor Intensive 5.335 CPI - All Items (Urban)
Research and analysis by Avalere Health
Market basket projection error has led to payment updates that fall short of actual market basket increases.
Source: AHA analysis of Federal Registers volumes 67-69, CMS market basket data and Global Insights, Inc., projections.
Chart 12: Medicare Market Basket Projected vs. Actual, 1998-2005
-0.2% -0.3%
-3.8%
-1.1%
-1.9%-1.6%
-2.1%-2.7%
2.4%2.9%
3.4% 3.5% 3.4% 3.3%2.5%
3.6%3.9% 3.8%
4.1%
2.7%
3.3%2.9%
3.0%
4.1%1998 1999 2000 2001 2002 2003 2004 2005
Cumulative Projection Difference Market Basket Projection for IPPS Rates Actual Market Basket