16 May 2013

National Health Advisory

Making ABF clinically meaningful

IHPA ABF National Conference

Reform is not directed at patient interactions...but there are clues on where patient level care and resource data will be impacted...

Making ABF clinically meaningful • PwC IHPA ABF National Conference

In determining the national efficient price, the IHPA must: a) have regard to ensuring reasonable access to public hospital services,

clinical safety and quality

, efficiency and effectiveness and financial sustainability of the public hospital system; b) consider the

actual cost of delivery

public hospital services in as wide a range of hospitals as practicable; of

16 May 2013 3

While at hospital and clinical unit level – more immediate factors are at work, driving urgency for change

• • • • • • The gap between revenue and expenditure growth is widening “Do more with less” Changing demand profile Technology Workforce pressures Clinical variation 850,0

Average net result (revenue - expenditure) 4 metro hospitals

800,0 750,0 700,0 650,0 Making ABF clinically meaningful • PwC IHPA ABF National Conference 600,0 2006 2007 2008 Average Revenue 2009 2010 Average Expenditure 2011 2012 16 May 2013 4

As a result – lots of fantastic effort is placed in performance improvement, making data transparent and designing new models of care

Making ABF clinically meaningful • PwC IHPA ABF National Conference 16 May 2013 5

Develop and prove a concept to bridge these improvement and innovation initiatives with funding reforms and ABF data

• • • • • • Aimed to develop a method that would: Empower and engage with clinical teams to get ‘bottom up’ change in delivery and to support their ideas for improvement Respond to the change in funding methodologies Identify the variation of costs and experience for patients and focus attention Use the enormous data reserves in hospital systems to provide an evidence base for change programs Assess the benefits of improvement initiatives and focus on high impact and high value Develop internal and repeatable capability Making ABF clinically meaningful • PwC IHPA ABF National Conference 16 May 2013 6

1. Map the selected clinical pathway to identifying key drivers of variation in experience or cost

What happens to our patients?

Best practice Diagnostic tests Pharmaceuticals X 6 X 3 Days 3.5

Peer benchmark X 5 X4 5.2

Current (average) x 6 X 7 5.7

Discharge service Day 1 Day 3 Day4 What critical points in the pathway drive different services to be delivered or change the patients outcome or experience?

Making ABF clinically meaningful • PwC IHPA ABF National Conference 16 May 2013 7

2. Then collect the ‘in-scope’ cost data to identify distribution and variation

Cost Making ABF clinically meaningful • PwC IHPA ABF National Conference

Standard deviation:

2.6 Legend:

In scope Out of scope

Encounter variance from the average encounter cost within DRGs ($) L61Z L60A A09A L67B L04C L09A L67A L60B L04A A09B F67A L04B F67B L02A L68Z L02B

100,000 200,000

► $

(100,000) 16 May 2013 8

3. Combining drivers of variation with cost data and units to measure impact

Root cause Unit of Measure Making ABF clinically meaningful • PwC IHPA ABF National Conference 16 May 2013 9

4. Creating ideas for change engages and also provides opportunity to test dependent statements or claims, and their impact on the drivers...

Overall hypothesis Ideas for change Dependent statements There are high rates of overtime and call-backs for medical staff because scheduling of theatre cases does not meet demand requirements Without affecting access

We can reduce costs for target areas

same” By improving rostering and/or scheduling of work the salaries and wages for out of hours surgery cases can be reduced There are potential savings in the cost of transporting non-urgent patients Making ABF clinically meaningful • PwC IHPA ABF National Conference Cost savings can be achieved by reducing ordering patterns of diagnostic tests More senior (higher grade) staff work more overtime in surgical cases Theatre utilisation is not efficient and leads to theatre overruns and therefore overtime The case mix of out of hours surgery patients is not higher than during normal hours Non-urgent patients are transported using Emergency or Unplanned Ambulance services The cost per transport is higher than benchmark Wards with similar case mix or transport requirements have varying transport costs The number of tests per episode in a DRG cohort varies The type of tests in a DRG cohort varies Test patterns do not match evidenced based care or clinical protocols 16 May 2013 10

5. Simulate the effect of the ideas on the drivers on the patient pathway – determining those ideas that have high impact

Melbourne Health Impact of cost driv er sensitiv ities on cost buckets and DRGs

Sensitivity adjustments (Index of 100): 91

Improve Invest

104 95 103 90 95 95 Base Less: Out cost $000s of scope $000s Modelled cost $000s Testing $000s Physical $000s Referral $000s Complexity $000s Impact by driver Avoidable Outpatient Ambulatory $000s $000s admissions $000s # Description Impact by cost bucket

1 2 3 4 5 6 7 8 9 10 11 12 13 14 Allied Health CCU Emergency HITH ICU Imaging Medical - surgery Medical - non-surgery Nursing Pathology Pharmacy Theatre Other Procedural Other

Total

Making ABF clinically meaningful • PwC IHPA ABF National Conference 255 14 216 27 362 466 460 2,221 16,118 1,210 2,421 923 13 -

24,706

- (8) (144) (123) (188) (937) (189) (1,141) (1) -

(2,923) 205 14 206 19 218 343 425 2,033 15,182 1,020 1,280 826 12 - 21,783

(0) - (0) - - (12) - - (956) (55) (58) (37) - - 0 - 0 - - 7 - - 425 8 10 7 - -

(1,118) 457

(0) - (0) - - (7) - - (228) (20) (13) (8) - - 0 - 0 - - 9 - - 455 27 35 22 - -

(276) 549

(0) (0) (13) (607) (51) (38) (25) (0) - (0) - - (5) - - (531) (20) (19) (12) - - - - - - - (12) - - (683) (41) (45) (21) - -

(735) (588) (801)

16 May 2013 11

What does this achieve?

• An assessment of clinical costing data and its appropriateness and engaging clinicians in improvement ideas • Identify those areas of variation that result from clinical discretion and are meaningful to the clinical pathway • Focus attention on those ideas that will generate high value, high impact benefits In one DRG of ‘low’ clinical variability, we found cost variations that represented ~6% of total ‘within range’ expenditure: replicated for the whole service line this is ~ $1.3m in productivity (> 5.5% total expenditure).

Making ABF clinically meaningful • PwC IHPA ABF National Conference

The most addressable through clinical decision making Costs are mostly fixed Costs are mostly variable

16 May 2013 12

Data must systematically improve to make ABF even more meaningful

• In the absence of full eMR capability or workforce–patient interactions, the costing system is likely to be the single most valuable data repository in most hospitals • The outputs from costing systems and data structures should be consistently developed to take advantage of the enormous untapped potential of the data they contain, one example being “Intermediate Products” Making ABF clinically meaningful • PwC IHPA ABF National Conference 16 May 2013 13

Understanding the data output is to understand the clinical workflow

Intermediate product level data can represent that workflow and some of the patient experience Pre admis sion clinic Perioperative prep Theatre & surgery Recovery Transfer to ward Post op consultation (Specialist & AH) Post operative medication ELoS = 1-2 days

Episode Number Date of Service

12345-1 1/01/2012 12345-1 12345-1 1/01/2012 1/01/2012 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 12345-1 1/01/2012 1/01/2012 1/01/2012 1/01/2012 1/01/2012 1/01/2012 1/01/2012 2/01/2012 2/01/2012 2/01/2012 2/01/2012 2/01/2012 2/01/2012 2/01/2012 2/01/2012 Making ABF clinically meaningful • PwC IHPA ABF National Conference

Hospital Department

Pre Admission Clinic Anaesthetics Operating Theatres Operating Theatres Operating Theatres Operating Theatres Orthopaedics Prosthesis Pharmacy Pharmacy Ward 5S1 Gen Surg Ward 5S1 Gen Surg Ward 5S2 Gen Surg Pharmacy Pharmacy Catering Orthopaedics Allied Health Physio

Intermediate Product

Pre Adm_ Visit Gen Aneas Pre_Op Op Post_Op OP_GS_3 Orth_Surg_Team1 Plastx_Hip_03245 Pharm_Peth_pn1.1

Pharm_Panadol Morning_Shift Afternoon_Shift Evening_Shift Pharm_Asprin Pharm_Panadol Cater_5S2_meal Orth_Cons_Team1 Physio_N

Quantity

1 1

Time (mins)

48 75 258 150 1 398 1 1 1 345 360 600 1 1 1 1 1

Indirect Cost

$8 $12 $28 $54 $32 $15 $97 $20 $1 $1 $50 $55 $102 $1 $1 $3 $35 $12

Direct Cost

$45 $158 $520 $735 $645 $176 $2,345 $4,500 $5 $3 $260 $285 $512 $3 $3 $21 $110 $42

Total Cost

$53 $170 $548 $789 $677 $191 $2,442 $4,520 $6 $4 $310 $340 $614 $4 $4 $24 $145 $54 16 May 2013 14

The role of costing

• • • • Get out of the basement Costing and clinical service delivery are on the same team Focus attention on those areas of high value and disprove the claims Don’t produce reports – drive and support improvement PwC 16 May 2013