kent giles improving the bottom line 4044837000 sdi 10 2010

Improving the Bottom Line

Kent Giles, MPPM

© 2008 Computer Sciences Corporation

Agenda

• Healthcare Imperatives

• Margin Improvement as a Strategic Imperative

• A Margin Improvement Success Story

• Sage Advice and Scar Tissue

• Q&A

Healthcare Imperatives


Challenges Under Healthcare Reform

• We have by far the most expensive health system in the world. – The U.S. spent about $2.2 trillion on health care in 2007; $1 trillion

more than what was spent in 1997, – $4.4 billion projected for 2018– U.S. spends 50 percent more per person than the average developed

country with worse results in many areas– U.S. spends more on health care than housing or food.– Since 2000, health insurance premiums have almost doubled – Health care premiums have grown three times faster than wages. – Families annual premiums are over $12,000, when it was $6,000 a

decade ago

• Just last month, a survey found over half of all Americans, insured and uninsured, cut back on health care due to cost.

• If rapid health cost growth persists, the Congressional Budget Office estimates that by 2025, 25 percent of our economic output will be tied up in the health system, limiting other investments and priorities.


Hospital Financial Condition

• Hospital charges represent about a third of total health care spending or $718 billion altogether.

• Hospital charges are more that what's spent on doctors, drugs, nursing homes or any other category of care.

• A recent Thomson Reuters analysis concludes "that about 50 percent of U.S. hospitals are losing money, and that total net margins for U.S. hospitals declined last year.

• The worst-performing hospitals had net margins of negative 7%, while the best performing hospitals' net margins topped 4.5%.


Price Elasticity of Demand for Hospital Services

As cost increases, purchases decrease beyond a certain point. In 2009 we saw a decline in hospital services purchased due to costs.


Conclusions

• Existing healthcare cost controls have failed to adequately reduce healthcare inflation

• Current levels of Healthcare inflation can not be sustained

• The current political process and special interests eliminate many of the tools used by other countries to manage healthcare inflation (National Supply Chain pricing, evidence based medicine, efficient use of technology, common HIT, defensive medicine)

• Providers are historically the target for cost reduction in the US System (DRGs, APCs, Managed Care, Capitation, ACO)

• We have reached the point of price/cost inelasticity in the US Health System

• It is likely that hospitals will have to reduce their cost per procedure by 30% or more in order to remain viable by 2020.

• To make these significant changes, hospitals will have to re-engineer healthcare delivery rather than merely seeking to “tweak” current processes

Margin Improvement as a Strategic Imperative


Comparison of MIP to “Turn Around”Comparison of Margin Improvement vs. Classic Turn Around Methodology

Evaluation Criteria: MIP Turn Around

Timing

Used proactively before financial threat emerges and while leadership is in tact; turn over is low; outside expertise is used to provide objectivity and supplement expertise

Used reactively after losses threaten survival; generally leadership is replaced or terminated; turn around management is brought in; focus is short term; long term results are sometimes hurt by large scale RIF

Buyer CEO Board or Authority

Leadership Impact C-levels rewarded for foresight and vision C-levels fired

Message to Staff

We are proactive ly addressing our major issues; Leadership is capable; we have a positive future; this will remain a great place to work; top performers are attracted

We have failed and many of us will lose our jobs; morale is low; recruiting position is damaged; “don’t work here, there is no commitment to employees”; our future is in question; top performers leave for greener pastures

Message to MDs

Leadership is progressive and responsible; this is an opportunity to improve our practice and partner

Leadership failed and was not competent; Turn around leadership only cares about money

Results

Positive Operating Margin; best practices implemented; improved patient service; improved or maintained recruiting position; enhanced reputation for leadership and institution; positive place to work

Rapid deployment of RIFs; leadership terminations; benchmarking w/o reason to justify cost cutting; rapid reactionary style of management; negative place to work; top talent exits; long term harm to reputation occurs

MIP vs. Traditional Turn around Approaches


Candidates for Margin Improvement• Proactive leadership that values good stewardship and cares about retention and a positive organizational culture

• Strategic focused organizations that recognize the realities of:– Increasing demand – Need for greater efficiency– Impact of declining reimbursement – Increasing costs / Unsustainable Healthcare Inflation– Internal efforts not delivered sufficient results

• Leadership that is willing to hold people accountable for results

• Leadership that wants to leave a positive legacy and understands that quality and cost effectiveness trend together

Candidates for Margin Improvement

Margin Improvement Success Story


UHS

• Today, UHS is an AMC located in the Southeast U.S.:– General Med/Surg Beds: 402 – Special Care Beds: 159 – Total Employees: 4,816 – Total Discharges: 29,081 – Total Patient Days: 176,224 – Total Patient Revenue: $1,908,045,160 – 55% of payer mix was Medicaid or Self Pay

• In 2006, UHS had one year of positive operating margin in 5 years

• Prior management by a professional hospital management firm– Prior Labor RIF that left scars– Recruiting issues for medical and clinical staff

• In 2006, hired new visionary CEO

• Elected to take the MIP approach with outside help


Implement InitiativesImplement Initiatives

Evaluate, Measure, RefineEvaluate, Measure, Refine

Quantification and Assignment of Road Map Initiatives

Quantification and Assignment of Road Map Initiatives

Prioritize Target Areas

Prioritize Target Areas

TrackingTracking

Phase IIRoad Map

Development 4 weeks

‘Qu

ick

Hit

s’

‘Qu

ick

Hit

s’

Phase IIIValidate, Design,

Implement16 months

Phase ICase for Change

Construct4 - 6 weeks

Benchmarks &

Assessments

Benchmarks &

Assessments

3 YrFinancial Forecast

(UHS)

3 YrFinancial Forecast

(UHS)

DraftCharter

MIP Roadmap Overview


MIP Roadmap Overview

Emergency Dept

Access & Flow Case Management

Patient Flow

Peri-operativeImprovement

Other Areas

Nursing Services

Administration Services

Supply Chain

Other Services

Pharmaceuticals

Medical/Surgical

RevenueEnhancement

Contracts

Rate Adjustment

Revenue Cycle

PracticeImprovement

Service Line Continuum

Access

Productivity

Volume Growth

Specialty Services

Primary Care

Out Referral Capture

Length of Stay

Operational Improvements

Referral Management

340 B

Medical MallIndigent Care

Road Map

Initiatives and Workflows


MIP Organizational Structure

• Work Groups are being established to collaboratively complete the Road Map

• Work Groups will report to MIP

• In addition to defining and maintaining accountability for the initiatives, each work group will:

Coordinate implementationtiming

Integrate organizational requirements

Create planning roadmaps Determineexpected value

Access &Flow

OperationalImprovement

SupplyChain

RevenueCycle

Other TBDIndigent

CareVolume Growth

PracticeImprovement

Revenue Enhancement

MIP Steering Committee


UHS Desired Outcomes of the MIP Activities… How Are We Doing?

Desired Outcome of MIP: • Increase market presence and stature (i.e. the leading tertiary/quaternary

referral center in the state)• Achieve a 5%+ operating margin• Improve operational efficiency and financial performance• Increase ability to invest in the future (e.g. capital investments)• Enhance educational & research mission• Unify UHS Hospitals and clinical practices into an integrated clinical

system • Change Culture• 18 month goal was to reach $68 million in margin improvement


The UHS Path to Success…

18

Patient Access and Flow


• Appropriate patient aggregation

• Patient placement algorithms

• Electronic Centralized Bed control process

• Real time bed display

• Bed availability (by sex, etc)

• Bed control accountability

• Early Discharge Planning

• Hospitalist program

• ER admission procedures

• Coordinated admission Scheduling (Elective surgeries/procedures)

• Management plan for the predictable “variability”

• Dedicated Admission nurse

• Patient Flow coordinator

• ADT criteria

• Appropriate level of care (i.e.. outpatient, telemetry)

• Assigned accountability for managing care to target d/c or LOS goals

• Target d/c or LOS dates

• Long stay SWAT team

• Family involvement

• Agreements with external facilities

• Discharge appointment times

• Home care, long term care facilities arranged or home assessment performed by Social Work Dept.

• Weekend support services

• Family and home care services available

• Transportation

• Timely communication

• Housekeeping TAT

• Discharge prescriptions ready prior to discharge

• Funding for expensive medications identified

Pre-Admission AdmissionCase

ManagementDischarge Planning

Discharge

Bes

t P

ract

ice

2007 Patient Flow (Before)

Current Practice

In Progress – Needs Support

New Opportunity

Critical Analysis: Patient Access and Flow


• ER admission procedures

• Coordinated admission Scheduling (Elective surgeries/procedures)

• Management plan for the predictable “variability”

• Dedicated Admission nurse

• Patient Flow coordinator

• Appropriate patient aggregation

• Patient placement algorithms

• Electronic Centralized Bed control process

• Real time bed display

• Bed availability (by sex, etc)

• Bed control accountability

• Early Discharge Planning

• Hospitalist program

• ADT criteria

• Appropriate level of care (i.e.. outpatient, telemetry)

• Assigned accountability for managing care to target d/c or LOS goals

• Target d/c or LOS dates

• Long stay SWAT team

• Family involvement

• Agreements with external facilities

• Discharge appointment times

• Home care, long term care facilities arranged or home assessment performed by Social Work Dept.

• Weekend support services

• Family and home care services available

• Transportation

• Timely communication

• Housekeeping TAT

• Discharge prescriptions ready prior to discharge

• Funding for expensive medications identified

2008 Patient Flow (After)

Pre-Admission AdmissionCase

ManagementDischarge Planning

Discharge

Bes

t P

ract

ice

Current Practice


New Opportunity

Critical Analysis: Patient Access and Flow

21

Perioperative Services


• Surgeon office surgery scheduling

• One stop scheduling for surgery and PAT

• Pre-certification verification

• Staggered release times

• Case order optimizing throughput

• Preference card accuracy (MD input necessary)

• Advance notification for special requests, implants

• Hours of operation correlating to needs of the population

• Expand telephone screening

• Surgeon office access to PAT scheduling

• Electronic access for H&P & consents for all surgeons/physicians

• PAT informs patients of arrival times

• Parallel Processes

• Team Process identification Role/responsibilities

• Service line staffing

• Equipment & Supply inventory responsive to case needs

• Standardization

– Efficient instrument trays

– Streamline set up process


• Pre-anesthesia Area

• Critical paths for pre & post op care by procedure

2007 Key Peri-operative Care Events (Before)

Surgery SchedulingPre-Admission

TestingDay of Surgery OR Readiness

Bes

t P

ract

ice

Current Practice


New Opportunity


• Surgeon office surgery scheduling

• One stop scheduling for surgery and PAT

• Pre-certification verification

• Staggered release times

• Case order optimizing throughput

• Preference card accuracy (MD input necessary)

• Advance notification for special requests, implants

• Hours of operation correlating to needs of the population

• Expand telephone screening

• Surgeon office access to PAT scheduling

• Electronic access for H&P & consents for all surgeons/physicians

• PAT informs patients of arrival times


• Team Process identification Role/responsibilities

• Service line staffing

• Equipment & Supply inventory responsive to case needs

• Standardization

– Efficient instrument trays

– Streamline set up process


• Pre-anesthesia Area

• Critical paths for pre & post op care by procedure

2008 Key Peri-operative Care Events (After)

Surgery SchedulingPre-Admission

TestingDay of Surgery OR Readiness

Bes

t P

ract

ice

Current Practice

In Progress

New Opportunity

Perioperative Service: Best Practices Review

24

Supply Chain


Supply Chain Management Strategy (Before)

• Value Analysis Program and staffing

• Effective product review and evaluation committees

• Selection and sourcing protocol (RFI, RFP, etc.) and enabling technologies

• External “Technology Assessment Group”

• Staff training and education

• Contract manager position

• Define contract management process flow and policies and procedures

• Contract and supplier data integrity

• Inclusion of Clinical Purchased Services

• Formal contracts for non-GPO related purchases

• Vendor credentialing & compliance monitoring

• Consolidate purchasing to one department

• Define Procurement process flow

• Establish departmental consistency and reliability

• Reduce excess inventory and next-day deliveries

• Implement an electronic requisitioning system

• Re-define buyers’ responsibilities

Current Practice


New Opportunity

Selection & Sourcing

Contract & Supplier

Management

Procurement (Purchasing &

Price Management)

Receiving & Distribution

Inventory Management

Information Management

• Maintain consistent delivery schedule

• Define receiving and distribution process flow

• Streamline receiving process

• Efficient use of space for receiving, distribution, and storage

• Explore Just-In-Time and Low/Best-Unit-of-Measure programs

• Optimize primary distributor offerings

• Define inventory management process flow

• Identify specific sourcing and stocking criteria

• Point of use inventory management system

• Re-design storage techniques and housekeeping practices

• Create and maintain item master file

• Item master control program

• Centralize supply chain information management processes

• MMIS


Supply Chain Management Strategy(After 9 months of 15 month project)

• Value Analysis Program and staffing

• Effective product review and evaluation committees

• Selection and sourcing protocol (RFI, RFP, etc.) and enabling technologies

• External “Technology Assessment Group”

• Staff training and education

• Contract manager position

• Define contract management process flow and policies and procedures

• Contract and supplier data integrity

• Inclusion of Clinical Purchased Services

• Formal contracts for non-GPO related purchases

• Vendor credentialing & compliance monitoring

• Consolidate purchasing to one department

• Define Procurement process flow

• Establish departmental consistency and reliability

• Reduce excess inventory and next-day deliveries

• Implement an electronic requisitioning system

• Re-define buyers’ responsibilities

Current Practice


New Opportunity

Selection & Sourcing

Contract & Supplier

Management

Procurement (Purchasing &

Price Management)

Receiving & Distribution

Inventory Management

Information Management

• Maintain consistent delivery schedule

• Define receiving and distribution process flow

• Streamline receiving process

• Efficient use of space for receiving, distribution, and storage

• Explore Just-In-Time and Low/Best-Unit-of-Measure programs

• Optimize primary distributor offerings

• Define inventory management process flow

• Identify specific sourcing and stocking criteria

• Point of use inventory management system

• Re-design storage techniques and housekeeping practices

• Create and maintain item master file

• Item master control program

• Centralize supply chain information management processes

• MMIS


MIP Financial Tracking

MIP InitiativeMIP Goal for Annual

Financial ImprovementRealized Savings To Date

(Jul FY 2007- August, 2009)

Operational Improvement $20,000,000$4,908,139

(Adult - $3,787,057)(Peds - $1,121,082)

Supply Chain $8,000,000 $10,200,000

Revenue Cycle $ 6,000,000 $125,400,000

Revenue Enhancement $10,000,000 $4,083,333

Volume Growth

$19,696,471 $3,523,784

Indigent Care $2,000,000 $1,800,000

Critical Access Hospitals $2,000,000 $4,200,000

Total $67,696,471 $154,115,256

28

Sage Advice and Scar Tissue


Lessons Learned

• MIP success requires a “hands on” CEO and Leadership Team– Weekly status reports– Monthly Steering Committee Meetings– Responsibility for key initiatives owned by C-Levels– Accountability must be measured and reinforced– Outside expertise, objectivity and resourcing is critical

• A clear case for change must be developed and communicated– Be clear as to why the effort is needed and the benefits– Everyone from board room to boiler room needs to understand

• Focus on best practice– Benchmarking should only be used to identify areas of focus, not absolutes– Implement best practices to improve quality of care and services– “The right intervention in the right place at the right time for the right person”

• Tracking projects via a Project Management function is critical– A PMO is helpful but a tracking data base is essential– Track initiative, project and results in one place with timelines– Weekly reports by initiative and overall MIP Program are needed– One C-Level must own each major initiative

30

Questions and Answers


Contact:

Kent Giles

404-483-7000 (cell)

770-509-0557 (office)

personal email:

[email protected]

kent giles improving the bottom line 4044837000 sdi 10 2010

Documents

doubled health care

rapid health cost growth

total health care spending

health insurance premiums

us health systemit

expensive health system

cost reduction

managed care