Transcript Document

A Crash Course in Cost Accounting
Eric Kretzer
Vice President of Product Management
Strata Decision Technology
Today’s Topics
•
•
•
•
The Cost Problem- Key Industry Factors
A Case Study at Mission Health
Advanced Cost Accounting
Cost Improvement
A major shift…
HIGH
MOM
MARGIN &
OUTCOMES
MANAGEMENT
% OF INSURED
COVERED BY
PAYMENT
APPROACH
RCM
REVENUE CYCLE
MANAGEMENT
LOW
2012
2013
2014
2015
©2014 Strata Decision Technology
$330M
$220M
$100M
$1B
$150M
$200M
$300M
$40M
©2014 Strata Decision Technology
“I can either take it on the chin now…
or get knocked out later”
- CFO, Major Health System
©2014 Strata Decision Technology
A JOB ENGINE SPUTTERS
AS HOSPITALS CUT STAFF
Paul Davidson and Barbara Hansen
October 13, 2013
“So far this year, the health care sector
has announced 41,085 layoffs”
©2014 Strata Decision Technology
The limitation…
what comes after the cut?
© 2014 Strata Decision Technology
The Medical Breakthrough
Nobody’s Talking About
September 12, 2013
Toby Cosgrove
CEO and President at Cleveland Clinic
The latest medical breakthrough hasn’t gotten much press, but it’s changing medicine even as we
speak. It’s the dawning realization that healthcare is not about how many patients you can see,
how many tests and procedures you can order, or how much you can charge for these things.
The breakthrough is the understanding that healthcare is a value proposition, which means getting
patients the right care, at the right time, in the right place. It’s a matter of focusing on outcomes
and cost, so that more Americans will start getting what they pay for in healthcare dollars.
Value-based care focuses on two targets: outcomes and cost. Until recently, providers pursued
these goals separately, with doctors concentrating on outcomes and the administrators trying to
control costs. Value-based care does something different. It works to bring these targets into
alignment. The caregivers in a value-based provider work with cost-experts as a team to
simultaneously improve outcomes and lower expenses.
Providers who make the transition early will be rewarded.
©2014 Strata Decision Technology
Cost Has Becomes a Central Focus for Providers
2013 HIMSS Healthcare Provider Innovation Survey
©2014 Strata Decision Technology
Poll Question for Attendees:
How many physicians out of 10 agree that it is some or all of
their responsibility to help bring healthcare costs under control?
with the following statement?
a)
b)
c)
d)
e)
1
2
4
6
8
Linking Clinical and Financial Outcomes Will be Critical
©2014 Strata Decision Technology
Today…in Michigan
“The absence of accurate cost information in
health care is nothing short of astounding”
Cost is Cool Again…
“The existing systems are wholly inadequate”
“Health care organizations are flying blind in
deciding how to improve processes and
redesign care”
as you need to know
your costs in order to
“Understanding true costs will finally allow
cliniciansdrive
to work with
administrators to
value
improve the value of care”
©2014 Strata Decision Technology
The Re-Introduction of Cost Accounting:
Getting to the REAL Cost of Delivering Care
1
Where the
market
had been…
Claims
data on
its own
2
3
Combination
of Cost/
Claims Data
4
5
Cost
data on
its own
Where the
market is
heading…
©2014 Strata Decision Technology
“10 Reasons Hospitals are Shifting
to Advanced Cost Accounting”
The Top10
Reasons
Hospitals are
Shifting
to Advanced
Cost
Accounting
©2014 Strata Decision Technology
“10 Reasons Hospitals are Shifting
to Advanced Cost Accounting”
10. To Understand True Margins
9. To Identify Opportunities to Reduce Cost
8. To Understand Total Cost of Care from
Both Inpatient and Outpatient Costs
7. To Bring Together Financial and Clinical
5. To Integrate Cost Accounting with
Overall Financial Management
4. To Understand How to Price Right
3. To Run Costing Quickly and More
Often
Outcomes Data
2. To Improve Accuracy of Costing Data
6. To Integrate with Organization’s EHR,
1. To Make Cost Data More Actionable
ERP and EDW
via Executive and/or Operational
Dashboards
Source: Becker’s Hospital Review, 4-1-2014
©2014 Strata Decision Technology
Topics
•
•
•
•
The Cost Problem- Key Industry Factors
A Case Study at Mission Health
Advanced Cost Accounting
Cost Improvement
The Mission Health Footprint
18
Truven Top 15 Health Systems for
3 Consecutive Years
Why Advanced Cost Accounting?
Support Mission’s “BIG(GER) Aim”:
Achieving the DESIRED OUTCOME…
 WITHOUT – Harm
 WITHOUT – Waste (COST)
 WITH – an Exceptional Patient Experience
Support Mission’s Strategic Pillars
Position Mission as the safest, highest quality, exceptional experience
provider at the lowest cost
Prepare to manage populations – capability to assume risk by 2016
Grow, Grow, Grow!
Achieve Medicare break-even operating performance (cost)
20
The Need to Make the Data Available… System-Wide
Angel
Medical
Center
Transylvania
Health
MMA
Physician
Practices
The
McDowell
Hospital
Blue Ridge
Regional
21
Mission
Hospital
Mission Health
Cost Analytics
Highlands
Cashiers
Hospital
Project Overview
• Step down RVU based costing methodology incorporated
• Initial go-live for Mission Hospital only
• Monthly data loads were replaced with weekly data loads
• Additional clinical data fields incorporated
Costing processing time reduced from 14 hours
in legacy system to 10 minutes
Phase II – Expand to the System
Angel
Medical
Center
Transylvania
Health
MMA
Physician
Practices
The
McDowell
Hospital
Blue Ridge
Regional
23
Mission
Hospital
Mission Health
Cost Analytics
Highlands
Cashiers
Hospital
Mission’s Results
• Production of service line, payor, and physician based financial
statements
• Support of Value Stream Mapping teams to produce data validated
cost savings from clinical re-design efforts
• Contract Analytics in support of recent managed care contract
negotiations
• Support of recently proposed State House Bill 834 aimed to promote
pricing transparency
• As costing process is completed, site specific comparative data
across Mission Health
Case Study: Behavioral Health
• Highlight: Behavioral Health capacity significantly increased in
the Adolescent unit.
• Discussion within Value Stream Mapping team resulted in 3month pilot program
• Focus on closer relationship with floating Behavioral Health
clinician and physician in order to decrease Length of Stay
(LOS) and to reduce capacity constraints if possible
Case Study: Behavioral Health Cont.
• An $800 direct cost per case savings occurred on 27 patient
encounters.
• Therefore, approximately $22K in savings by incorporating a BH
clinician, interaction between clinician & the physician, physician
rounds twice per day, etc. for better discharge turnaround.
• On average, each adolescent was being discharged 1.7 days earlier
than in in previous month which is a savings on Room and Board
costs (mostly labor as well as any pharmaceuticals, labs,
diagnostics, etc that would be ordered in such a time period.)
Payor Contract Modeling and Analytics
• Highlight: Advanced analytics provided in new platform
enabled multiple iterations for recent negotiations with
primary managed care payor.
• Multiple scenarios could be modeled and made comparative
within the system without having to save each one separately.
• End product resulted in our ability to protect our net
reimbursement position and arm our executive
representatives with timely data.
Leveraging Cost Data for Pricing Transparency
• Newly introduced NC House Bill 834 requires quarterly
publication to satisfy pricing transparency for consumers
• Bill requirements include:
• Average charge and reimbursement for top IP DRGS
• Average charge and reimbursement for certain ambulatory surgical
procedures
• Average charge and reimbursement for certain diagnostic imaging
procedures
• Highlight: Mission is now positioned to leverage cost accounting
system to satisfy requirement with minimal effort.
Topics
•
•
•
•
The Cost Problem- Key Industry Factors
A Case Study at Mission Health
Advanced Cost Accounting
Cost Improvement
Poll Question: Do you currently use Cost Accounting
at your organization?
1) Yes
2) No
Poll Question: Do you currently use Cost Accounting
effectively at your organization?
1) Yes
2) No
Traditional Decision Support
FEATURES:
•
User
unfriendly
•
Incredibly slow
•
Data is not
integrated
•
Data is not
used
•
System has low
utilization
©2014 Strata Decision Technology
POLL QUESTION FOR ATTENDEES:
How often do you update your
cost information ?
a)
b)
c)
d)
e)
f)
Annually/quarterly
Monthly
Weekly
Daily
We don’t
Don’t know
Advanced Decision Support: Results
Time to Run Costing
(in Minutes)
2880
720
540
11
Traditional Advanced
Cost
Cost
Accounting Accounting
10
Traditional Advanced
Cost
Cost
Accounting Accounting
2
Traditional Advanced
Cost
Cost
Accounting Accounting
98% Increase in Efficiency
©2014 Strata Decision Technology
Making The Vision Reality…Enterprise Profitability
©2014 Strata Decision Technology
Costing Process
Clinical & Financial
EHR
ERP
EDW
Decision
Support
©2014 Strata Decision Technology
Allocate Overhead Expenses
DIRECT METHOD
SEQUENTIAL/STEP-DOWN METHOD
SIMULTANEOUS/RECIPROCAL METHOD
Increasing accuracy of costing results
©2014 Strata Decision Technology
What costing methodology should I use?
1)
2)
3)
4)
5)
6)
7)
8)
9)
RCC
RVU
Standard Cost
Percentage Markup
Supply-based (Acquisition Cost)
Costs as Cost to Charge Ratio
Activity Based Costing (ABC)
Time Driven Activity Based Costing (TDABC)
Don’t Really Know
©2014 Strata Decision Technology
Cost Accounting is Not One Thing (e.g. TD-ABC)
It’s Many Things
RELATIVE VALUE UNIT
(RVU)
ACCURATE
FLEXIBLE
TDABC
IDENTIFIES EFFICIENCY
BASED COST SAVINGS
COVERS MOST COST
TYPES
REQUIRES SOME
MAINTENANCE
SUPPLY/INVOICE
BASED
VERY ACCURATE
TRACKS PREFERENCES
VERY LABOR INTENSIVE
TIMELY TRENDING OF
COSTS
TO IMPLEMENT
APPLICABLE TO LABOR
REQUIRES ADDITIONAL
INTEGRATION
ONLY
% MARKUPS
ALLOWS ACCURATE
COSTING OF BUNDLED
SUPPLIES
ABC
EASY TO UNDERSTAND
IN CLINICAL SETTINGS
COMPLEX TO
IMPLEMENT
FOR SUPPLIES ONLY
RCC
EASY TO UNDERSTAND
& MAINTAIN
DEPENDENT ON
ACCURACY OF CHARGES
AND MARKUP SCHEDULE
ASSUMES COSTS ARE
PROPORTIONAL TO
CHARGES
OUTDATED
©2014 Strata Decision Technology
Private & Confidential
38
Cost Accounting… it REALLY Matters
Allocation Methods – RCC v. RVU
DRG 470 – Major Joint Replacement
Variable Labor
Variable Supplies
Total Cost
(Cost per Unit)
(Cost per Unit)
(Cost per Unit)
Qty
Unit Charge
RCC
RVU
RCC
RVU
RCC
RVU + SC
% Change
3
$2,318
$1,253.12
$105.00
$1,002.50
$1,876.95
$2,255.62
$1,981.95
-12.13%
2786093 Ovrcc Surg. Supp. Suture
8
$24
$8.61
$1.52
$4.74
$11.14
$13.35
$12.66
-5.17%
2786259 Ovrcc Supp. Patient Care General
4
$60
$21.33
$5.20
$15.78
$16.52
$37.11
$21.72
-41.47%
2786150 Ovrcc Urology Supply NIMP
1
$34
$7.82
$4.29
$3.83
$4.52
$11.65
$8.81
-24.38%
120
$170
$25.00
$32.00
$108.21
$95.20
$133.21
$127.20
-4.51%
5801550 Chest 2 Views
1
$280
$79.50
$104.39
$2.70
$3.52
$82.20
$107.91
31.28%
5806757 Pelvis 1 or 2 Views
1
$227
$69.45
$97.24
$6.50
$6.85
$75.95
$104.09
37.05%
4
$2,192
$542.00
$652.00
$250.00
$357.00
$792.00
$1,009.00
27.40%
600-3010 Surgery General
2794246 Ovrcc Implant Ortho
2695393 OR LEVEL 3 per minute
600-3512 Radiology Diagnostic
600-2220 Surgical Specialties
117
Room Charge & Medical Supplies
600-3710 Pharmacy
14041
Adj TISS Xfer Headfachand 10.1
30
$23
$5.93
$6.52
$4.51
$6.25
$10.44
$12.77
22.32%
26538
Fluticasone-Salmeterol 250-50 MCG Dose DSDV
3
$100
$26.34
$8.20
$5.53
$29.72
$31.87
$37.92
18.98%
9492
Ceftriaxone 1 Gram 50 ML PGBK
1
$135
$35.50
$10.51
$13.14
$38.91
$48.64
$49.42
1.60%
Total Cost
$13,926
$14,872
©2014 Strata Decision Technology
Every patient is different …
so why is their cost the same?
Traditional Data Elements
GENERAL LEDGER
& PAYROLL
D
PRACTICE MANAGEMENT
PATIENT ACCOUNTING &
MEDICAL RECORDS
OR SUPPLIES/IMPLANT
COSTS FROM SURGICAL
SYSTEMS
E
C
I
S
I
O
N
S
U
P
P
O
R
T
©2014 Strata Decision Technology
Cost Accounting… it REALLY Matters
Allocation Methods – RCC v. RVU +Acquisition Cost
Layering in Actual Supply
Cost for high cost items
DRG 470 – Major Joint Replacement
Variable Labor
Variable Supplies
Total Cost
(Cost per Unit)
(Cost per Unit)
(Cost per Unit)
Qty
Unit Charge
RCC
RVU
RCC
SC
RCC
RVU+SC
% Change
600-3010 Surgery General
2794246
Ovrcc Implant Ortho
3
$2,318
$1,253.12
$105
$1,002.50
$2,504.20
$2,255.62
$2,609.22
14.35%
2786093
Ovrcc Surg. Supp. Suture
8
$24
$8.61
$1.52
$4.74
$52.00
$13.35
$53.52
300.90%
2786259
Ovrcc Supp. Patient Care General
4
$60
$21.33
$5.20
$15.78
$16.52
$37.11
$21.72
-41.47%
2786150
Ovrcc Urology Supply NIMP
1
$34
$7.82
$4.29
$3.83
$8.52
$11.65
$12.81
9.96%
2695393
OR LEVEL 3 per minute
120
$170
$25.00
$32.00
$108.21
$95.20
$133.21
$127.20
-4.51%
600-3512 Radiology Diagnostic
5801550
Chest 2 Views
1
$280
$79.50
$104.39
$2.70
$3.52
$82.20
$107.91
31.28%
5806757
Pelvis 1 or 2 Views
1
$227
$69.45
$97.24
$6.50
$6.85
$75.95
$104.09
37.05%
4
$2,192
$542.00
$652.00
$250.00
$357.00
$792.00
$1,009.00
27.40%
600-2220 Surgical Specialties
117
Room Charge & Medical Supplies
600-3710 Pharmacy
14041
Adj TISS Xfer Headfachand 10.1
30
$23
$5.93
$6.52
$4.51
$8.50
$10.44
$15.02
43.87%
26538
Fluticasone-Salmeterol 250-50 MCG Dose DSDV
3
$100
$26.34
$8.20
$5.53
$37.50
$31.87
$45.70
43.40%
9492
Ceftriaxone 1 Gram 50 ML PGBK
1
$135
$35.50
$10.51
$13.14
$45.00
$48.64
$55.51
14.12%
Total Cost
$13,926
$17,092
©2014 Strata Decision Technology
Cost Accounting… it REALLY Matters
DOLLARS
($)
ADVANCED
COSTING
$17,092
-1,803
$1,362
$13,296
RCC
©2014 Strata Decision Technology
∆$3,166
FIXED
PAYMENT
$15,288
Today’s Topics
•
•
•
•
The Cost Problem- Key Industry Factors
A Case Study at Mission Health
Advanced Cost Accounting
Cost Improvement
©2014 Strata Decision Technology
Set a Target and Create a Path to Achieve It
Cost Per Case Goals and Performance
$12,000
FY17 Unmanaged
$11,700
Net Expense Per CMI-Adjusted Equivalent Admission
$11,424
$11,500
Net Expense Per CMI-Adjusted Equivalent Discharge
$11,155
$10,892
$11,000
$10,635
$10,500
FY11 Budget
$10,140
$10,000
$10,385
25%
$9,760
$9,563
$9,366
$9,500
$9,169
$8,972
$9,000
Estimated CPI Inflation
$8,500
Goal Cost Per Case
$8,000
FY11
FY12
FY13
Unexpected 2% decline in surgical
volume + increase in observation
cases creates need for cost
accelerated FY16
FY14targets to beFY15
FY17 Goal
$8,775
FY17
©2014 Strata Decision Technology
Create Teams and Set Targets
Key Measure: Cost per CMI Adjusted Equivalent Admission
Net Expense
CMI Adjusted Equivalent Admission
“Flexed Staff”
Productivity
30-38%
Supplies/Drug
Cost
16%
Length of
Stay
Service
Utilization
Level of
Care
Supply
Utilization
Other OP
Revenue
4-5%
“Fixed” Staff &
Costs
Equipment &
IT
Purchased
Services
10-16%
4-6%
9-10%
Benefits &
Compensation
Energy Efficiency
Depreciation
13-17%
2-3%
9-10%
Grow Volume
Improve CMI
Increase CMI
Other Op Revenue
Fixed Cost per Patient
Variable Cost per Patient
See more
complex pts
Increased IP
Volume
Increase OP
volume
Patient
Throughput
$15-20M
©2014 Strata Decision Technology
Brainstorm, Validate, then Operationalize Savings
There is no silver bullet…
everything has to be on the table
ELIMINATE
VARIATION in
Care
STREAMLINE
Systems &
Structures
PURPOSEBUILT
Org Structure
LEVERAGE
• Defining roles
TECHNOLOGY
to fill distinct
for productivity purpose
LEAN OUT
MGT
Structure
STAFF to
Demand
FLEX
to Volume
• Adjust staffing
levels to
fluctuations in
volume
• Match staffing
levels to
volume levels
• Match skill
level to skill
needs
• Create ‘flow’
within a
directors span
of functions
• Bring
functions
together than
work together
often
• Automate
routine work
• Automate
processes
with rules
based
technology
• Identify and
eliminate
duplicative
processes
• Defining goals
for roles
• Using data to
drive
accountability
for results
• Benefits
• PTO days
• Capital
Budget/
Depreciation
• Insurance/
re-insurance
• Outsourced
Services
• Consulting
Services
• Duplicate IT
systems
• Supply Chain
• Implants
• Physician
preference
items
• High cost
drugs
• Duplicate
Imaging
studies
• High cost
labs as inpt
• End of life
care
©2014 Strata Decision Technology
Call to Action:
Leverage Data to Drive Action
©2014 Strata Decision Technology
Key Takeaways
• The key market factors driving hospitals and health systems to
shift toward Advanced Cost Accounting
• The difference between margin and outcome management and
revenue cycle management
• The various approaches that industry leaders are taking to bend
the cost curve
• The importance of knowing accurate, true costs and margins for
episodes of care, service lines, and populations
©2014 Strata Decision Technology
CONTACT INFO:
E-mail:
[email protected]