cost, acuity and quality in your future colorado mgma september 12, 2014

Copyright 2013. Medical Group Management Association® (MGMA®). All rights reserved.

Cost, Acuity and Quality in your future

Colorado MGMASeptember 12, 2014

Owen Dahl, MBA, FACHE, LSSMBB


Objectives

• To review the cost factors of the medical practice

• To identify concepts for acuity in determining staffing and resource utilization

• To review concepts of quality

• To put it all together


Patient Types and Delivery Options

Diagnosis and Treatment

Specific Treatment

Chronic Care

Wellness/prevention

4Copyright 2013. Medical Group Management Association® (MGMA®). All rights reserved.

Definition of Quality

• IOM• "The degree to which health services for

individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.“

• How care is provided should reflect appropriate use of the most current knowledge about scientific, clinical, technical, interpersonal, manual, cognitive, and organizational managements of health care.

See handout for more information on IOM


Quality

• Error rates• 180,000 deaths annually caused by medical error• 30% of acute care patients and 20% of chronically ill

patients receive care that is contraindicated

• Over treatment• Experts – 20 to30% of medical treatments are unnecessary• 16% of hysterectomies and 17% of coronary angiograms

done annually are unnecessary

• Under treatment• 50% of patients receive recommended preventative care• Depression - 59% of patients are not treated, 19% receive

ineffective treatmentwww.qualityforum.org – National Quality Foundation web site

http://www.qalityforum.org/


The importance of quality perspectives

• The Patient’s view of quality• Was I able to get an appointment at the appropriate

time?• Was I greeted at the clinic as though I were a guest?• Was the waiting time appropriate?• Was the nurse or medical assistant interested in my

concerns?• Did the doctor take time with me?• Was the doctor friendly and did he/she answer all of

my questions and discuss my care with me?• Was the environment friendly, considerate and clean?


The importance of quality perspectives

• The Health Care Professional’s view of quality• Was the process of the patient’s care provided

according to the highest standards of evidence based medicine?

• Were the appropriate protocols and guidelines for diagnosis and treatment followed?

• Were the expected outcomes for the patient’s condition achieved?


Evidence Based Medicine

• “Conscientious, explicit and judicious use of the current best evidence in making decisions about the care of individual patients”*• Who• How• When• Prejudicial perspective in all• Conflict of interest

*D.L. Shackett, et al, “Evidence-based Medicine: What it is and What itIsn’t” (editorial) British Medical Journal, 312, no. 7023 (1996): 71-72


EBM & Guidelines

• Issues – why• Escalating health costs• Inequality in access• Variation in accepted clinical practices

• Purpose – goals• To provide stronger scientific foundation for

clinical work• To achieve consistency, efficiency,

effectiveness, quality, and safety in all aspects of medical care


Healthcare Effectiveness Data and Information Set - HEDIS

• HEDIS is a tool used by more than 90 percent of America's health plans to measure performance on important dimensions of care and service.

• Altogether, HEDIS consists of 80 measures across 5 domains of care. Because so many plans collect HEDIS data, and because the measures are so specifically defined, HEDIS makes it possible to compare the performance of health plans on an "apples-to-apples" basis.

• Health plans also use HEDIS results themselves to see where they need to focus their improvement efforts.


HEDIS - timelines

• Basic Access• % of families that experience difficulties in

obtaining care, by reason

• Getting Appointments• % of persons who report they can get an

appointment for routine care as soon as they wanted (always, usually, sometimes/never)

• Waiting time• OP/clinic visits: average time spent waiting before

being seen by doctor• Office visits: average time spent waiting before

being seen by a doctor


Patient Cycle Time

Mean Median

Dr. B 49.5 47

Dr. Ch 59.4 55

Dr. Cr 68.6 60

Dr. D 51.1 40

Dr. F 63 63

Dr. P 66.7 56

Dr. R 40.1 40

Check In

Triage

Provider

Post visit

Check Out

Practice Median = 55 minutes


Analysis of Value Add Time

Check In

3 – 3.6

Triage7 – 8.4

Provider10

Follow up3 – 3.6

Check Out3 – 3.6

Median Cycle Time = 55 Minutes

Total Value Add Time = 29.2 +Motion time of 6 Total time in office = 35 Minutes

What happens the other 20?

More importantly what happensduring the 29.2 that could beredesigned to remove WASTE

Review of patient ValueAdd time during a routinevisit to the practice

PFD – calculated at +20%• P = personal• F = fatigue• D = delay


Time Analysis

• 36 patients per hour (6 - 10 minute slots for 6 providers)

• Check in • 3 minutes +20% PFD = 3.6 minutes

• Triage• 7 minutes + 20% PFD = 8.4 minutes

• Follow up – same as check in

• Check out – same as check out


Staffing requirements

• Check in• 3.6 * 36 = 129.6 minutes/60 = 2.16 FTE’s

• Triage• 8.4 * 36 = 302.4 minutes/60 = 5.04 FTE’s

• Follow up• 3.6 * 36 = 129.6 minutes/60 = 2.16 FTE’s

• Check out• Same for check in

7.2 FTE’s


Careful when discussing costs

• Global = payer costs• Vs.

• Practice = daily costs of operation


Physician Payment Reform

• National Commission on Physician Payment Reform, March 2013• Transition from FFS in next 5 years

• Payers – eliminate stand alone FFS• Transition to payment based on quality and value• Re-calibrate FFS to change behavior toward

quality and cost effectiveness, penalize behavior for over use or mis-use of service


Alternative Methods of Payment

Fee for Service(FFS)

FFS + SharedSavings

EpisodePayment

PartialComprehensiveCare Payment

+ P4P

ComprehensiveCare (Global

Payment)

Capitation


Different Payment Systems Solve Different Cost/Quality Problems

Episode payments

Examples:Hip fracture

Labor & delivery

Comprehensive care pay

Examples:COPDCHF

Comprehensive care pay

+Episode payment

Examples:Heart disease

Back pain

Fee for service

Examples:Simple injuriesImmunizations

Strep throat

High

High

Low

Low

Size/Variation in Frequency of Episodes Per Condition

Amount/VariationOf CostPerEpisode

www.paymentreform.org


Risk Assessment

• Physicians• Age

• Market

• Accept or manage payments

LOW HIGH

TOLERANCE CONTINUUM


Care/Treatment Plans• “A plan for the medical care of a particular patient”

• Goal - Keep patients healthy, use cost effective approaches to treatment and management, especially on chronic care patients

• Based on evidence

• Interdisciplinary

• Guide to decision making and resource utilization

• Key for episodic or bundle payment options

• Practice registry - Start with one key indicator and develop model, determine patient compliance, effectives, and cost benefit


Assumptions2,500 patients and 6, 250 visits / year

10,188 Total RVU and 5,780 wRVU / MGMA data

50% Medicare - 4 visits / year50% other - 1.5 visits / year

240 work days, 8 hour day = 1,920 office hours / yearSchedule patient visits 6.5 hours / day26 patients / day4 patients / hourOne new patient / work day25 established patients / day

Established patients scheduled - 15 min visits; new pts – 30 min


How to calculate cost

Total expenses for period of time

divided by number of patients seen

in the same time period, e.g., one year.

$365,761 / 6250 = $58.52


Financial StatementOverall Practice Activity

Annual % Income Per Visit Cost Category

All Sources Income $579,794 100.0% $ 92.77

Expenses

Bank charge $ 1,011 0.2% $ 0.16 V/I

Billing service $ 16,368 2.8% $ 2.62 V/I

Contributions $ 183 0.0% $ 0.03 V/I

Depreciation $ 8,410 1.5% $ 1.35 F

Dues & Sub $ 2,893 0.5% $ 0.46 V/I

Ins - Bus & Mal $ 12,400 2.1% $ 1.98 F

Ins - Employee $ 16,255 2.8% $ 2.60 V/D

Lab/outside dx $ 30,548 5.3% $ 4.89 V/D

Legal & Acct $ 6,131 1.1% $ 0.98 V/I

Marketing $ 9,055 1.6% $ 1.45 V/I

Med supplies $ 33,618 5.8% $ 5.38 V/D

Ofc exp $ 17,912 3.1% $ 2.87 V/I

Payroll $136,094 23.5% $ 21.78 V/D

Payroll tax $ 10,581 1.8% $ 1.69 V/D

Rent $ 55,491 9.6% $ 8.88 F

Rep & Maint $ 1,123 0.2% $ 0.18 V/I

Taxes $ 1,337 0.2% $ 0.21 V/I

Telephone $ 6,299 1.1% $ 1.01 F

Training $ 53 0.0% $ 0.01 V/D

Total $365,761 63.1% $ 58.52

Net income $214,033 36.9% $ 34.25


Costs

Fixed costs

• Costs that tend to remain constant regardless of changes in the volume of business

Variable costs

• Costs that tend to vary in total as business activity varies

Direct costs

• Costs that are directly related to services provided

Indirect costs

• Costs that are necessary but do not relate directly to services provided


Overall Practice Activity FVDI Annual % Income Per Visit Cost Category

All Sources Income $579,794 100.0% $ 92.77

Fixed Indirect DirectExpenses

Bank charge $ 1,011 0.2% $ 0.16 V/I $ 1,011

Billing service $ 16,368 2.8% $ 2.62 V/I $16,368

Contributions $ 183 0.0% $ 0.03 V/I $ 183

Depreciation $ 8,410 1.5% $ 1.35 F $ 8,410

Dues & Sub $ 2,893 0.5% $ 0.46 V/I $ 2,893

Ins - Bus & Mal $ 12,400 2.1% $ 1.98 F $12,400

Ins - Employee $ 16,255 2.8% $ 2.60 V/D $ 16,255

Lab/outside dx $ 30,548 5.3% $ 4.89 V/D $ 30,548

Legal & Acct $ 6,131 1.1% $ 0.98 V/I $ 6,131

Marketing $ 9,055 1.6% $ 1.45 V/I $ 9,055

Med supplies $ 33,618 5.8% $ 5.38 V/D $ 33,618

Ofc exp $ 17,912 3.1% $ 2.87 V/I $17,912

Payroll $136,094 23.5% $ 21.78 V/D $136,094

Payroll tax $ 10,581 1.8% $ 1.69 V/D $ 10,581

Rent $ 55,491 9.6% $ 8.88 F $55,491

Rep & Maint $ 1,123 0.2% $ 0.18 V/I $ 1,123

Taxes $ 1,337 0.2% $ 0.21 V/I $ 1,337

Telephone $ 6,299 1.1% $ 1.01 F $ 6,299

Training $ 53 0.0% $ 0.01 V/D $ 53

Total $365,761 63.1% $ 58.52 $82,600 $56,013 $227,149

13.22 8.96 36.34

Net income $214,033 36.9% $ 34.25 22.6% 15.3% 62.1%


Costs Graph

$82,600

$283,161

COST

Visits

Fixed costs

Variable Costs


Overhead

• Is the doctor overhead? A cost?

• Overhead is your cost of doing business.• Is it too much in your practice?

• Is it just right?

Measure by determining if you are getting the most out of your cost, the most from your staffing, etc.


Background lookItem $$$

Total cost $ 365,761 Total revenue $ 579,794

Cost per visit (6,250) $ 58.52

Cost per hour (1,920 hours) $ 190.50

Average cost per patient / hour $ 47.63

Revenue per hour $ 301.98

Cost per RVU $ 35.90

Cost per wRVU $ 63.28


Cost per visit$58.52 Total Cost Per visit

$ 365,761 6,250

visits

Staff cost $ 136,094 $ 20.87

Facility cost $ 56,614 $ 8.68

Supply cost $ 51,530 $ 7.90

Depreciation $ 8,410 $ 1.29

Communication $ 6,299 $ 0.97

Physician $ 214,033 $ 32.83


Cost per hour$190.50 Total Cost Per Hour

$ 365,761 1,920

Staff cost $ 136,094 $ 70.88


Supply cost $ 51,530 $ 26.84



Physician* $ 214,033 $ 111.48 *Could include all hours worked and divide into total income (bottom line) to determine the “cost”


Cost per visit / hour

$47.63 Total Cost Per visit/hour$ 365,761 6.5 per day

Staff cost $ 136,094 $ 10.66


Supply cost $ 51,530 $ 4.04



Physician $ 214,033 $ 16.74

Cost per hour

25 Established Pts / day X 6 hrs = 4.2 per hour $ 45.36

1 New Pt / day $ 95.25


Cost per RVU and wRVU$35.90 / w $63.28 Total Cost Per RVU Per wRVU

$ 365,761 10,188 5,780

Staff cost $ 136,094 $ 8.44 $ 14.87

Facility cost $ 56,614 $ 3.52 $ 6.20

Supply cost$ 51,530

$ 3.20 $ 5.63

Depreciation $ 8,410 $ 0.54 $ 0.95

Communication $ 6,299 $ 0.39 $ 0.70

Physician $ 214,033 $ 13.25 $ 23.35


Break Even Analysis

Break evenRevenue per visit $ 92.77 Total expenses $ 365,761.00 Expenses per day $ 1,524.00 Need to see to BE 16.43


Tests and procedures in the office

• Identify costs associated with this department

• Staff, supplies = variable

• Equipment and space = fixed

• If possible, identify based on top 5 – 10 procedures done

• Consider using RVU and apply all overhead to these processes as an option

• Question: Return on investment = meeting expectations?


Hospital activity• Carve out MA and most other clinic support

• Retain billing costs

• Key factor is time associated with visits

• Consider the use of RVU

• Questions:• Is the time to walk/drive back and forth factored in and

does this service bring value to the practice?

• Real question of cost benefit related to time: remember $190.50 is the total cost per hour (slide 21)

• Is this a marketing effort or a direct financial return?


Cost savings• Watch overtime (V)

• Staff well, hold people accountable (V)

• Benefits – cost-sharing, capped plans (V)

• Telecommunications cost – consolidate, eliminate (F/V)

• Malpractice – don’t be over-insured, attend training (F)

• Supplies – review systems, protocols (V)

• Shopping online (V)

• Your own printing and desktop publishing (V)

• Space utilization – are you in the right location (F)


Four categories of quality costs

1. Prevention – incurred to prevent defects• Training

2. Appraisal – incurred for monitoring and inspection• Quality control and audits

3. Internal failure – incurred when a defect is found before service provided

• Re-work

4. External failure – incurred for providing service to customer

• Warranty, loss of goodwill, other talking, choosing a competitor, law suits


Cost of Quality Report

• Costs by category for the current and prior period

• Percent change from prior period

• Current period budget

• Percent change from budget


Quality through prevention

• A change in philosophy where detection is no longer the goal

• Change in focus that takes place upstream on the process

• A change in responsibility, quality is NOW everyone’s responsibility

• A change in attitude, good enough is not good enough anymore

• Continuous improvements designed to keep the practice competitive


Quality through inspection

• Inefficient and costly

• Asks “who is the final inspector”

• Has a confused responsibility

• Is symptom oriented

• Includes neglected improvements


Scenarios

Scenario 1

Patient has Type II

Diabetes and is treated in

the office

Scenario 2

Patient has complications

Scenario 3

Payments are global


Scenario 1 – FFS UncomplicatedPhysician Only

Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total99213 $ 73.00 $ 73.00 $ 73.00 $ 73.00 $ 292.00

HbA1c - 83036 $ 13.34 $ 13.34 $ 13.34 $ 13.34 $ 53.36

Draw 36415 $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 12.00

Total $ 89.34 $ 89.34 $ 89.34 $ 89.34 $ 357.36

CostsOffice (lab out) $ 53.63 $ 53.63 $ 53.63 $ 53.63 $ 214.52

Lab (assume) $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 20.00

Total $ 234.52

Income $ 30.72 $ 30.72 $ 30.72 $ 30.72 $ 122.84


Scenario 2- FFS ComplicatedPhysician Only

Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total99213 $ 73.00 $ 73.00 $ 73.00 $ 73.00 $ 292.00 HbA1c - 83036 $ 13.34 $ 13.34 $ 13.34 $ 13.34 $ 53.36 Draw 36415 $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 12.00 Total $ 357.36 Cost $ 234.52Hospital (4 days)99222 $ 135.03 $ 135.03 $ 270.06 99231 (* 2) $ 38.23 $ 38.23 $ 76.46 99238 $ 71.03 $ 71.03 $ 142.06 Four day stay $ 282.52 $ 282.52 $ 565.04 Total $ 526.81 $ 526.81 $ 1,053.62 Cost – 8 days $ 429.04Emergency 99283 $ 60.05 $ 60.05 $ 60.05 $ 60.05 $ 240.20 Cost – 4 visits $214.52Total Revenue ($357.36+$1,053.62+240.20) $ 1,651.18 Total costs (234.52+$429.04+214.52) $ 878.08Income $ 773.10


Scenario 3Global Payment – No FFS

Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 TotalTotal scenario 1 $ 357.36

Total scenario 2 $ 1,651.18

Global Payment $ 200.00 $ 200.00 $ 200.00 $ 200.00 $ 800.00


Scenario 3 – add the hospital

• Patient with ICD-9 diagnosis of: 250.12, Diabetes type II with ketoacidosis

• DRG w MCC = Medicare reimbursement of $8,124

• Average cost for emergency room visit = $2,168

• Therefore two hospitalizations and four emergency room visits means the annualized cost addition is: $24,920


Scenario 3Global Payment – No FFS

Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 TotalTotal scenario 1 $ 357.36 Total scenario 2 $ 1,162.60 Total scenario 3 $ 24,920.00

Global Payment $ 200.00 $ 200.00 $ 200.00 $ 200.00 $ 800.00

Add hospitalOption 1 Option 2

Global Payment $26,000 $21,000 +50%

Physician Only

$26,082.60


Knee Surgery 2012 Charge Payment % total GR %

Anesthesia $5,902.00 $3,498.00 12.0% 59.3%Orthopedic surgeon $5,115.00 $2,124.13 7.3% 41.5%

PA Assistant

Hospital $56,944.50 $19,452.66 66.7% 34.2%

PT $3,295.00 $2,292.79 7.9% 69.6%

Pharmacy $1,125.51 $1,125.51 3.9% 100.0%

DME $1,737.78 $294.99 1.0% 17.0%

Primary care $190.00 $85.22 0.3% 44.9%

X-ray $46.00 $34.50 0.1% 75.0%

Lab $325.00 $243.43 0.8% 74.9%

Total $74,680.79 $29,151.23 100.0% 39.0%


Hip Surgery 2013 Charge Payment % total GR %

Anesthesia $6,336.00 $3,546.50 10.2% 56.0%Orthopedic surgeon $9,224.00 $1,813.81 5.2% 19.7%

PA Assistant $9,224.00 $290.21 0.8% 3.1%

Hospital $44,523.07 $28,632.82 82.0% 64.3%

PT $00.00 $00.00 0.0% 0.0%

Pharmacy $273.92 $230.52 0.7% 84.2%

DME $58.00 $18.51 0.1% 31.9%

Primary care $215.00 $83.92 0.2% 39.0%

X-ray $241.00 $102.50 0.3% 42.5%

Lab $372.00 $218.36 0.6% 58.7%

Total $70,466.99 $34,937.15 100.0% 49.6%


The Quality vs. Cost Question

• 2014 – understand your costs• Meaningful use• Exchanges• ICD-10

• 2015 – VBP • Not meet PQRS = -1.5%; add value modifier adjustment = +

another 1.0%

• 2016 – • Presidential election

• 2017 -

• 2018 – SGR, Maximum penalties begin


What triggers you to action?

• Crisis

• Money

• Desire to improve

• What is your trigger point to move forward with a quality program?


Conclusion

• Episodic, bundled or capitation will be part of our future

• Know what your COSTS are

• Know the components of each cost category

• Prepare for the future NOW

• Control the right costs

• Seek to improve operations

• Patient first, profit will follow


53

Contact Information

Owen J. [email protected]

Check out my new blog:http://blog.owendahlconsulting.com

cost, acuity and quality in your future colorado mgma september 12, 2014

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