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1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Page 1: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

1

A cost-effectiveness framework for profiling hospital efficiency

Justin Timbie

AcademyHealth Annual Research Meeting

June 5, 2007

Walt Disney World “Dolphin”

Page 2: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Acknowledgements

Sharon-Lise Normand1,2

Joe Newhouse1

Meredith Rosenthal3

1Department of Health Care Policy, Harvard Medical School2Department of Biostatistics, Harvard School of Public

Health3Department of Health Policy & Management, Harvard

School of Public Health

Page 3: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Context

• Interest in efficiency measurement following growth of P4P.– 42% of commercial HMOs use cost information

(Rosenthal, 2005)

• DRA of 2005 requires Medicare to implement value based purchasing for hospital services by FY’09.– Efficiency measures to be included in FY’10-11.

• Measuring appropriateness and efficiency are both challenges.

Page 4: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Examples of efficiency metrics

• Dartmouth Atlas: population-based efficiency:– Medicare spending (last 2 years of life)– Resource inputs: beds, physician FTE inputs – Utilization: hospital/ICU days, physician visits

• Leapfrog Group: risk-adjusted LOS, readmission rates within 14 days.

• National Quality Forum: focusing on LOS and readmission.

• Medicare: MEDPAC considering publicly reporting hospital readmission rates.

Page 5: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Measurement challenges

• Defining efficiency: Focus on payment or resource use (LOS, readmission rates, RVUs).

– DRG-based payment makes hospital efficiency profiling different.

– Limited ability to measure inpatient resource use.

• Duration of efficiency, quality measurement.

– Longer duration is desired.

– Causes attribution difficulties (PAC providers).

• Weighting of cost vs. quality.

– Binary (threshold) scoring approaches weight domains equally.

– Measuring performance continuously allows tradeoffs.

Page 6: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Study design

• Objective: Compare efficiency of hospital care following acute myocardial infarction (AMI).

• Motivation: Channeling patients to high-value hospitals for specific conditions.

• Outcomes: In-hospital survival, hospital costs. • Data source: Massachusetts all payer data.

– 69 hospitals (11,259 patients) in FY’03.

Efficiency = Health benefit relative to cost

Page 7: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Methods - Cost measurement

• Used total hospital charges and global cost-to-charge ratios. – Costs derived from charge data remove price

variation.– Use of global cost-to-charge ratios may confound

estimates due to differential markup across revenue centers.

• Used in-hospital outcomes, although 30-day outcomes are preferred.

• Lacking post-acute care costs, costs of procedures.

Page 8: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Methods - Estimation

• Link inter-hospital transfers to create inpatient “episodes.”

• Estimate “predicted” outcomes.– Fit hierarchical models.– Condition on hospital-specific effect, risk factors.

• Estimate “expected” outcomes.– Condition on population mean effect, risk factors.

Page 9: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Methods - Combining measures

• Incremental outcomes:

ΔEi = Predicted survivali – Expected survivaliΔCi = Predicted costi – Expected costi

• Incremental Net Health Benefits (INHB):

• Estimate P(INHB > 0)• Identify efficient hospitals using relative or absolute

threshold.

INHBi = ΔEi – ΔCi/

where = WTP/ΔE = $5M/Life saved

Page 10: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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15000 20000 25000 30000 35000

87

88

89

90

91

92

93

94

Standardized Cost (Dollars)

Sta

nd

ard

ize

d S

urv

iva

l (%

)

91.34

17,846

Results – Threshold Scoring

Standardized Cost (dollars)

Sta

nd

ard

ized

Su

rviv

al (

%)

15,000 20,000 25,000 30,000 35,000

88

9

0

9

2

94

)YY,YP(Y (C)(C)(S)(S)

)YY,YP(Y (C)(C)(S)(S)

Page 11: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

1115000 20000 25000 30000 35000

87

88

89

90

91

92

93

94

Standardized Cost (Dollars)

Sta

nd

ard

ize

d S

urv

iva

l (%

)

91.34

17,846

Results - Cost-effectiveness

Standardized Cost (dollars)

Sta

nd

ard

ized

Su

rviv

al (

%)

15,000 20,000 25,000 30,000 35,000

88

9

0

9

2

94

Page 12: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

12

Sensitivity of INHB estimates to 0

.00

.20

.40

.60

.81

.0

Willingness to Pay (Million $/Life Saved)

P(I

NH

B >

0)

0 1 2 3 4 5

Willingness to Pay Threshold

(Million $/Life Saved)

0 1 2 3 4 5

P (

INH

B >

0)

0.0

0.2

0.4

0.6

0.8

1

.0

0

λi

ii

ΔCΔEP0INHBP

Page 13: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Summary

• Proposed an economic approach to measuring efficiency using a composite measure.

• Theoretically strong and objective weighting mechanism.

• Results will differ from threshold model due to ability to incorporate tradeoffs.

• Difficult to agree on single WTP value.– LY and QALY measures of benefit are more

promising.

Page 14: 1 A cost-effectiveness framework for profiling hospital efficiency Justin Timbie AcademyHealth Annual Research Meeting June 5, 2007 Walt Disney World “Dolphin”

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Future work

• Longitudinal analysis.• Inclusion of AMI process measures, quality of

life.• Developing willingness to pay values that reflect

multiple outputs (benefits).• Refining cost measure to include RVUs.• Exploring a composite measure of hospital

efficiency.