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The Concept of Valuein Mental Health Services

Discussion with the NJ Mental Health Planning CouncilTom Pyle, January 9, 2013www.psychodyssey.net

PsychOdyssey

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The Family Experience

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From our last meeting…

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“…Investors…”

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“…Business Models...”

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BizSpeak: “Investments” ?…

ROI1. (n.) The French word for “king.” 2. Abbr. for return on investment, a way to measure the benefit of an investment. Photographer: Adam Frans van der Meulen/Getty Images

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In other words…

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Value in Mental Health Services

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What is the Problem? (Kaplan & Porter, 2011)

“…almost complete lack of understanding of how much it

costs to deliver patient care, much less how those costs compare with

the outcomes achieved.”Robert Kaplan & Michael Porter

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What is the Goal?

Access? Availability? Equity? Cost containment?

VALUE for the Consumer

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Value: Definition (Oxford English Dictionary)

The regard that something is held to deserve; the importance, worth, or usefulness of something: your support is of great value

the material or monetary worth of something

the worth of something compared to the price paid or asked for it

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Value in Health Care

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Value: A Calculation (Porter, 2010)

Value = ❑❑

𝑂𝑢𝑡𝑐𝑜𝑚𝑒𝑠𝐶𝑜𝑠𝑡𝑠

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Outcomes (Porter, 2010)

Multidimensional By steps… Over time…

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Outcomes Measures Hierarchy (Porter, 2010)

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Challenges of Health Care Costing (Porter, 2010)

Complex delivery Many resources Each with different capabilities and costs

Fragmented delivery “Idiosyncratic” (i.e., “Individualized”) Highly customized “job shop”

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Costs: How To Measure? (Kaplan & Porter, 2011)

Track the… sequence and duration

0f the… clinical and administrative processes

used by the… individual patient

Time-Driven Activity-Based Costing (TDABC)

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Time-Driven Activity-Based Costing(Kaplan & Porter, 2011)

Patient Jones’ outpatient visit…Provider Tasks Time Rate CostAdministrator

Check-in, register, document payment

18 minutes (0.3 hours)

Nurse Take temp, weigh, take BP, prep

24 minutes (0.4 hours)

Doctor Direct exam, consultation

9 minutes (.15 hours)

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Time-Driven Activity-Based Costing(Kaplan & Porter, 2011)

𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 𝐴𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑎𝑏𝑙𝑒𝑡𝑜𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑜𝑓 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖

Capacity Cost Rate for Resourcei =

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TDABC(Kaplan & Porter, 2011)

𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 𝐴𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑎𝑏𝑙𝑒𝑡𝑜𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑜𝑓 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖

Capacity Cost Rate for Resourcei =Salary (nurse) $65,000Supervision cost $9,000Occupancy (9 m2 x $1200/m2/yr)

$10,800

Tech & support $2,560Annual nurse cost $87,360Monthly nurse cost $7,280

❶

❶

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TDABC(Kaplan & Porter, 2011)

𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 𝐴𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑎𝑏𝑙𝑒𝑡𝑜𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑜𝑓 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖

Capacity Cost Rate for Resourcei =Salary (nurse) $65,000Supervision cost $9,000Occupancy (9 m2 x $1200/m2/yr)

$10,800

Tech & support $2,560Annual nurse cost $87,360Monthly nurse cost $7,280

Start with 365 daysLess: w/e, vac’t’n, holidays, sick, etc.

141 days

Available 224 days/yr

Available days (a)

18.7 days/mo

Start with 7.5 hours/day

Less: breaks, meetings, etc.

1.5 hours

Available hours (b)

6.0 hours/day

Total Capacity (a x b)

~112 hrs/mo

❷

❷

❶

❶

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TDABC(Kaplan & Porter, 2011)

𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 𝐴𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑎𝑏𝑙𝑒𝑡𝑜𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑜𝑓 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖

Capacity Cost Rate for Resourcei =Salary (nurse) $65,000Supervision cost $9,000Occupancy (9 m2 x $1200/m2/yr)

$10,800

Tech & support $2,560Annual nurse cost $87,360Monthly nurse cost $7,280

Start with 365 daysLess: w/e, vac’t’n, holidays, sick, etc.

141 days

Available 224 days/yr

Available days (a)

18.7 days/mo

Start with 7.5 hours/day

Less: breaks, meetings, etc.

1.5 hours

Available hours (b)

6.0 hours/day

Total Capacity (a x b)

~112 hrs/mo

Nurse’s Capacity Cost Rate = $7,280 -:- 112 hrs = $65/hr

❸

❸

❷

❷

❶

❶

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TDABC(Kaplan & Porter, 2011)

Patient Jones’ outpatient visit…Provider Tasks Time Rate CostAdministrator

Check-in, register, document payment

18 minutes (0.3 hours)

Nurse Take temp, weigh, take BP, prep

24 minutes (0.4 hours)

$65/hr

Doctor Direct exam, consultation

9 minutes (.15 hours)

❸

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TDABC(Kaplan & Porter, 2011)

Patient Jones’ outpatient visit…Provider Tasks Time Rate CostAdministrator

Check-in, register, document payment

18 minutes (0.3 hours)

$45/hr $13.50

Nurse Take temp, weigh, take BP, prep

24 minutes (0.4 hours)

$65/hr $26.00

Doctor Direct exam, consultation

9 minutes (.15 hours)

$300/hr $45.00

$84.50

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Value Measurement (Porter, 2010)

What is the proper unit?

All services and activities that jointly determine success in meeting a set of consumer needs.

“Integrated practice units”

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Value Measurement, 2 (Porter, 2010)

Separately for each condition…with other conditions “risk adjusted”.

Not separately by department or billing unit

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Care Needs in Mental Health…Integrated Care Resource Center (2013)

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Care Problem in Mental Health…Integrated Care Resource Center (2013)

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Limits of the System…(Unutzer, 2011)

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The Experience in Washington…(Unutzer, 2011)

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Costing: The Whole Process (Kaplan & Porter, 2011)

1. Select the condition

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Costing: The Whole Process (Kaplan & Porter, 2011)

1. Select the condition2. Define the care delivery value

chain (CDVC)

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2. Care Delivery Value Chain (Kaplan & Norton, 2011)

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2. Care Delivery Value Chain (Kaplan & Norton, 2011)

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1. Select the condition2. Define the care delivery value

chain (CDVC)3. Map each activity

Costing: The Whole Process (Kaplan & Porter, 2011)

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3. Map the Process (Kaplan & Porter, 2011)

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1. Select the condition2. Define the care delivery value

chain (CDVC)3. Map each activity4. Obtain time estimates

Costing: The Whole Process (Kaplan & Porter, 2011)

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1. Select the condition2. Define the care delivery value

chain (CDVC)3. Map each activity4. Obtain time estimates5. Estimate resource supply cost

Costing: The Whole Process (Kaplan & Porter, 2011)

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1. Select the condition2. Define the care delivery value

chain (CDVC)3. Map each activity4. Obtain time estimates5. Estimate resource supply cost6. Estimate resource capacity;

calculate capacity cost rate

Costing: The Whole Process (Kaplan & Porter, 2011)

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5. Capacity Cost Rate(Kaplan & Porter, 2011)

𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 𝐴𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑎𝑏𝑙𝑒𝑡𝑜𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑜𝑓 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑖

Capacity Cost Rate for Resourcei =Salary (nurse) $65,000Supervision cost $9,000Occupancy (9 m2 x $1200/m2/yr)

$10,800

Tech & support $2,560Annual nurse cost $87,360Monthly nurse cost $7,280

Start with 365 daysLess: w/e, vac’t’n, holidays, sick, etc.

141 days

Available 224 days/yr

Available days (a)

18.7 days/mo

Start with 7.5 hours/day

Less: breaks, meetings, etc.

1.5 hours

Available hours (b)

6.0 hours/day

Total Capacity (a x b)

~112 hrs/mo

Nurse’s Capacity Cost Rate = $7,280 -:- 112 hrs = $65/hr

❸

❸

❷

❷

❶

❶

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1. Select the condition2. Define the care delivery value

chain (CDVC)3. Map each activity4. Obtain time estimates5. Estimate resource supply cost6. Estimate resource capacity;

calculate capacity cost rate7. Calculate total cost

Costing: The Whole Process (Kaplan & Porter, 2011)

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6 Strategic Objectives (Porter, 2012)

1. Organize system around patient2. Measure outcomes and costs 3. Pay in “bundles”4. Affiliate better (less all-service

stand-alone)5. Expand beyond narrow geographies6. Build IT, but not for a broken

system

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Obj. 1: Organize around patient…(Porter,2012)

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… Throughout Continuum of Care (Porter, 2012)

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Obj. 2: Measure…the whole chain… (Porter, 2012)

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…and up and down the hierarchy (Porter, 2012)

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Obj. 3: Pay in bundles(Porter, 2012)

NB

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Obj. 4: Affiliate better (Porter, 2012)

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Obj. 5: Expand… (Porter, 2012)

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Obj. 6: Build IT (Porter, 2012)

…but not for an unreconstructed delivery system!

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Implications for Government (Porter, 2012)

Establish universal measurement and reporting

Shift reimbursement systems bundled Medicare to lead…

Remove obstacles to integration Stark Laws limiting referrals (“conflict of interest”)? Separate payments to hospitals and doctors? Illegal to hire a doctor as an employee?

Open competition Encourage patient responsibility Set standards and mandate EMR adoption

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Application to Mental HealthCHALLENGES…

Medical model Localization (120

agencies) Reimbursement rates Political barriers Length of

“continuum” Individualization Scaling State v. Federal Excessive

dehospitalization Funding limits

OPPORTUNITIES…

PsyR model Wellness focus Recovery ideal PACT team model Behavioral Health

Homes Hospital consolidation Funding limits …

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References

Integrated Care Resource Center. (2013). Exploring Medicaid Health Homes: The Collaboration Care Model: An approach for integrating physical and mental health in Medicaid Health Homes [Webinar]. Washington, DC: Integrated Care Resource Center, Center for Medicare and Medicaid Serviceso.

Kaplan, R. S., & Porter, M. E. (2011). How to solve the cost crisis in health care. [Article]. Harvard Business Review, 89(9), 46-64.

Porter, M. E. (2010). What is value in health care? New England Journal of Medicine, 363(26), 2477-2481. doi: doi:10.1056/NEJMp1011024

Pyle, T. H. (2012). Value: A better measure for health care and mental health services. Unpublished paper.

Unutzer, J. (2011). Collaborative care: Integrating physical and mental health care in medicaid health homes [Presentation as part of webinar]. Seattle, WA, Univeristy of Washington. http://uwaims.org/overview-integrated.html

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YouTube: Porter on Health Care Big Think: http://bigthink.com/ideas/14761

Porter & Kaplan interviewed by HBR (9 mins): http://www.youtube.com/watch?v=Y7HMHiv7xRg

Lecture at Center for Public Policy (90 mins): http://youtu.be/Z3fKyWydweo