The REAL Reason Healthcare Costs are Elusive

© 2016 Health CatalystProprietary and Confidential

The REAL Reason Healthcare Costs are ElusiveHealth Catalyst WebinarDan UngerVP Product DevelopmentApril 6, 2016

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© 2016 Health CatalystProprietary and Confidential2

Objectives

1) Understand the different types of “cost” in healthcare

2) Expand on the importance of “cost of care”

3) Sift through the various reasons (legitimate or not) that cost is still an elusive target

4) Identify the biggest hurdle to accurate costing and address critical areas for improved costing


Healthcare Cost in the News

http://www.usnews.com/opinion/blogs/policy-dose/2015/06/12/why-us-health-care-is-so-expensive

http://www.forbes.com/sites/mikepatton/2015/06/29/u-s-health-care-costs-rise-faster-than-inflation/#3ea4926d6ad2

http://http://www.huffingtonpost.com/2013/10/03/health-care-costs-_n_3998425.html

http://www.nytimes.com/2013/12/03/health/as-hospital-costs-soar-single-stitch-tops-500.html?pagewanted=all&_r=0


What exactly is “cost”?

MSRP: $37,045Avg. Sold Price: $35,475*Cost to Produce: $???

* Varies by regional pricing and buyer’s choices and ability to negotiateSource: https://www.truecar.com/prices-new/nissan/leaf-pricing/2016

Charge MasterAllowableCost of Care

2016 Nissan Leaf SV

Healthcare Translation

This is the cost I care about

https://www.truecar.com/prices-new/nissan/leaf-pricing/2016

https://www.truecar.com/prices-new/nissan/leaf-pricing/2016


Poll Question #1

What “cost” do you typically think of when you hear healthcare “cost”? 190 respondents

a) Charge Master (list price…MSRP) – 9%b) Allowable (cost to insurer and/or insured patient) – 34%c) Cost of care (cost incurred by the providers of care) –

53%d) Other – 4%

© 2016 Health CatalystProprietary and Confidential

Nissan Versa

6

Why does “cost” matter?

I want to lease 10,000 cars from you for 3 years I’ll pay you a flat rate of $1,000 per car per monthPrice includes all maintenance, services and repairsIf there are any recalls you will be penalized 2%The price is non-negotiable and you must accept

Source: https://www.truecar.com/prices-new/nissan/

MSRP: $37,045Avg. Sold Price: $35,475Cost to Produce: $???

Nissan Leaf



Nissan 370Z

and… and…

and… and…

https://www.truecar.com/prices-new/nissan/

https://www.truecar.com/prices-new/nissan/


Poll Question #2

What questions do you need answered to make this decision (select any that apply)? 206 respondents

a) How many of each type of car? – 74%b) What is my average cost for each type of car? – 80%c) What are the potential services I might be on the hook for? – 83%d) What are my actual costs for those services? – 93%


Poll Question #2What questions do you need answered to make this decision (select any that apply)?a) How many of each type of car? Patient Stratification (should get this via claims)b) What is my average cost for each type of car? Cost Accountingc) What are the potential services I might be on the hook for? Risk Stratification and Predictive Capabilitiesd) What are my actual costs for those services? Cost Accounting


Wheeeeeeeeeeeeeeeeee!!!!!


Why is “Cost of Care” So Important?

Scenario 1: If providers of care don’t understand their costs, then they can’t assume enough risk to make a difference (hence the reason we are still majority FFS).

Scenario 2: If this is forced on them without those capabilities in place then they will not survive.

Scenario 3: If providers understand, and can take action on, their costs…then we have a fighting chance to change our trajectory.

In summary, providers must be able to take on significant risk…if they don’t then the entire economic framework of population health fails…and they can’t (or shouldn’t)

take on significant risk without understanding the true cost of care at an atomic level.


Bogus Reasons that Costing is Elusive

Not enough data Providers are hiding somethingNot perfect, but EMRs

have LOTS of good data for costing

Nope…I wish that was the case


REAL Reasons that Costing is Elusive

Healthcare is complex Fragmentation


But the #1 Reason that Costing is Elusive is…

Data Governance

UsabilityAvailability

Integrity

“The overall management of the availability, usability, integrity, and security of the data employed in an enterprise. A sound data

governance program includes a governing body or council, a defined set of procedures, and a plan to execute those procedures”

Security

Definition from: http://searchdatamanagement.techtarget.com/definition/data-governance


Why is Data Governance So Important?

Linking

GENERAL LEDGER (COST)

DRIVERS OF COST

This is the key competency for costing


Seems Easy Enough…

Linking

HR/PAYROLL

SUPPLY CHAIN

NOT a technical hurdle…it’s a lack of consistency, usability and

integrity of data across systems


Ways to Address Data Governance Issues

1) Ignore them…you can still get cost data, just not with any degree of accuracy or granularity

2) One off fixes, crosswalks, etc…just be ready to hire an army of people to plug the holes.

3) Put the proper governance structure, processes and people in place…really painful


Where to Start?1) EMR data to General Ledger crosswalk: who in your organization knows which pieces of data from your EMR

and departmental sources align with which cost centers? This might seem simple…but there’s more to it than meets the eye when you start getting into very detailed and precise costing that uses more than just charge data. AVAILABILITY

2) Supply chain: do you have a centralized source of truth for supply chain costs? Are the correct items available in your EMR and easily linked back to accurate supply chain data? Do you have standard units of measurement across your health system so everyone enters the same unit of measurement for drugs for ease of costing and comparative analytics? And the list goes on… INTEGRITY, USABILITY

3) Personnel (including Physicians and other Providers): This is a really difficult one to manage, but necessary if want to have more direct and precise labor costs and link individual efforts to cost and quality outcomes. Make sure you can broadly link employees from your payroll to your EMR and other departmental sources. INTEGRITY, SECURITY, USABILITY

4) Patient: want to get a holistic view of patient and episode costs across your system? Well, you better have an Enterprise Master Patient Index (EMPI)…and preferably an upstream process to address the issue rather than a downstream “fuzzy logic” assignment. Also, start setting up our billing system to have the proper identifier to link back to claims data. INTEGRITY, AVAILABILITY


Poll Question #3

How strong is your organization when it comes to data governance in these areas? 172 respondents

a) Weak – 28%b) Average – 35%c) Strong – 14%d) I have no idea – 23%


I hope you choose the hard road


Q & A