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Align Patient Outcomes with Financial Data: A Formula for Correlating Cost and Quality

Perficient is a leading information technology consulting firm serving clients throughout

North America.

We help clients implement business-driven technology solutions that integrate business

processes, improve worker productivity, increase customer loyalty and create a more agile

enterprise to better respond to new business opportunities.

About Perficient

• Founded in 1997

• Public, NASDAQ: PRFT

• 2013 revenue ~$373 million

• Major market locations throughout North America• Atlanta, Boston, Charlotte, Chicago, Cincinnati, Columbus,

Dallas, Denver, Detroit, Fairfax, Houston, Indianapolis, Los Angeles, Minneapolis, New York City, Northern California, Oxford (UK), Philadelphia, Southern California, St. Louis, Toronto and Washington, D.C.

• Global delivery centers in China, Europe and India

• >2,200 colleagues

• Dedicated solution practices

• ~85% repeat business rate

• Alliance partnerships with major technology vendors

• Multiple vendor/industry technology and growth awards

Perficient Profile

BUSINESS SOLUTIONSBusiness IntelligenceBusiness Process ManagementCustomer Experience and CRMEnterprise Performance ManagementEnterprise Resource PlanningExperience Design (XD)Management Consulting

TECHNOLOGY SOLUTIONSBusiness Integration/SOACloud ServicesCommerceContent ManagementCustom Application DevelopmentEducationInformation ManagementMobile PlatformsPlatform IntegrationPortal & Social

Our Solutions Expertise

Partnership & Expertise:• Oracle Platinum Partner

• Oracle Certified Education Training Partner

• 12+ year relationship of loyalty and trust

• Hundreds of successful implementations

• Over 200 delivery consultants on-shore and off-shore

• Five pillar practices

Oracle Partnership

ConnectedHealth

Business Intelligenceand Analytics

Interoperabilityand Integration

InformationExchange

RegulatoryCompliance

Solutions & Services

Experts in Consumer-Driven Healthcare Technology

HEALTH PLAN PROVIDER

CONSUMERS

Select Clients

Healthcare PracticeG

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Introductions

Lesli Adams, MPADirector, Oracle Healthcare Business IntelligenceLesli is the Director of Oracle Healthcare Business Intelligence for Perficient. She is a clinical measurement advocate with 17 years of healthcare analytics and business intelligence experience covering for-profit, state, academic and federal healthcare including ambulatory clinic management, comparative effectiveness evaluation, evidence-based medicine, population health and clinical data warehousing. Prior to joining Perficient, Lesli championed activities with Tenet, MD Anderson, The University of Virginia Medical Center and the US Navy.

William BercikDirector of Healthcare, OracleWilliam has over 25 years of experience in the healthcare industry and has specialized in enterprise applications and technology solutions since 1992. He provides specialist product expertise and develops and executes solution strategies for the healthcare market. Prior to joining Oracle, William was a former chief financial officer of a 350 bed acute care hospital.

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Our Speakers

The Cost Crisis in Healthcare

“To put it bluntly, there is an almost complete lack of understanding of how much it costs to deliver patient care.”

– Robert S. Kaplan (Baker Foundation Professor at Harvard Business School)

– Michael E. Porter (Bishop William Lawrence University Professor at Harvard Business School)

The Big Idea: How to Solve the Cost Crisis in Health Care

Harvard Business Review, Sept 2011

Why Now?

“We view this as a game changer….We’ve got all the money we’re ever going to get – we need to manage smarter.”

– Don Riefner, Vice-President, FinanceOracle Open World 2013

Game Changer

• Labor-intensive cost capturing process

• Need for departmental analysis of procedures and cost

• Lack of budgeting by service-line

• Inability to detail traceability all the way back to the episode of care and the charge code

• Automating payor contract management process and analysis

• Executive-level decision reporting impacting key decisions on how to run their business

• Lack of dashboards to service-line management in order to impact day to ay operations

The Challenges We’re Hearing

Healthcare Cost Management: Macro Drivers

• Increased market competition combined with increasing healthcare costs have made understanding product line and market segment costs and profitability essential

• Efficiency will allow insurers to maintain stability in operations and rates

• Increased regulation and oversight will require payers and providers to have a better understanding of cost drivers

• May alter the ways that benefits are funded and delivered

• Complex rules regarding reimbursements

• Shift from “fee for service” payment structures to shared risk has placed increased emphasis on cost and cost control

• Patient profitability at the service line is becoming best practice

Revenue Clinical QualityCost

Provider Operational Analytics

DrugsBlood Products

Corporate Expenses

Administrative Support Utilities

Physician Support

Diagnostic Equipment

Clinical Salaries

Others require analysis to appropriately assign

Some costs are obvious and easy to assign

Direct Costs

Semi-Direct Costs

Indirect Costs

Why Do We Need to Allocate?

Provider

Data is recorded in structures to satisfy statutory requirements

Country

Region

Hospital

Sub account

Account

Department

Line item

FinancialP&Ls

Traditional Financial Statements

P&L by Patient / Clinician

Indirect

Semi Direct

DirectPhysician

ProcedurePatient Interactions

Potentially millions of unique items

Rows of Data

True Profitability

Events

Financial

Events

Operational 

Sub Systems

Key drivers and details are retained

Specialty

Surgeon

Patient

Ward

Procedure

Insurer

ImplantPatientP&Ls

Retained By Dimension

Revenues and expenses are connected strategically

The Patient Level P&L

What Does the Market Want?

Defining a Business Decision Support System (DSS)

EDW• Retrospective and prospective

(planning) view• Merges clinical and financial

information

• Real-time access• Care process and results

orientation

Business Decision Support Systems Clinical Decision Support Systems

• A fully integrated business and clinical repository • Gives executives and managers the tools to:

• Control cost• Improve productivity• Manage change

• Increase quality• Achieve successful clinical outcomes • Plan strategically in an increasingly

competitive and volatile health care environment

Help Answer Critical QuestionsStrategy

Development

Capital Allocation

Revenue Cycle Management

In what services do I make money? Lose money? Why?How do my hospitals services compare across the health system?How can I optimize service location? Should I consolidate services?

What is my profitability across service lines by hospital?Where should I focus my cost reduction initiatives? How do I track success?Why are costs for X service increasing, is it labor, supplies or physician practices? How

can we decrease these costs?Are patient care processes following protocols? Why not? Is it physician or patient

complexity driven?

What impact to my bottom line will a rate change create? Can I afford to sign this managed care contract? What types, how much and where are my denials originating?Are my payors paying correctly? Timely?Can I compare my payors profitability and score them?Am I charging for all the services I am performing?

Operations Improvement

What services should I invest capital? What financial return can I expect?What incremental ancillary capacity will be affected by additional capital purchases?

Decision Support Systems (DSS)

DSS - Key to Enterprise Management Reporting

End UsersExecutive Team

Information

Quality  Management Information

Physician/Clinical Management Information

FinancialInformation

Managed CareInformation

Data Integration(Comprises the processing engine to collect, cleanse,transform, and aggregate data from different sources)

Enterprise Portal(Provides a single, secure and integrated point of access to reports, content, and applications)

Data Aggregation and Storage(Comprises the data repository of historical details and summary  transaction data)

Presentation, Personalization Access / Authorization

Views  Views  Views  Views Views Value Delivered

Business Intelligence(Provides reporting and analytic capabilities across varying levels of granularity and timeliness (e.g., historical, operational, predictive and what‐if analysis)

Infrastructure(Comprises the infrastructure platformto host, maintain and operate the BI solution)

Online Analytical Processing Pre‐Defined Data Cubes Pre‐Defined Reporting

Data Consolidation Historical Data

Data Extraction Data Cleansing Data Loading

Data Sources, Real time data Certain Operational Reports

Data Acquisition(Comprises internal, external, reference,and shared sources of data)

Hardware, Software Network  Operations

ERPCISRevenueCycle

Decision Support

Cost vs. Quality

Top 5 Expensive Conditions Treated

• Septicemia

• Osteoarthritis

• Device, implant or graft complication

• Birth

• Acute myocardial infarction

Source: Healthcare Cost and Utilization Project (HCUP), Agency for Healthcare Research and Quality (AHRQ), Statistical Brief #160, Dec 2013. http://hcup-us.ahrq.gov/reports/infographics/HCUP_MostExpensiveCond2011.jpg

In the Numbers

Average hospital overall operating margin

% of hospitals with a NEGATIVE operating margin

As bundled payments, ACOs, and population health comes into focus

The level of effectiveness in setting and controlling operating and capital expenses for service line and populations will be the mark of survival

2%

33%

American Hospital Association Database www.aha.org/research/reports/tw/chartbook/ch4.shtml

High Performance Costing Expressway

• Faster deployment, lower risk, reduced cost of ownership, scalable and flexible

• Provider effort and clinical evidence for resources used

• Impact day-to-day service line by providing patient level margin

• Enhanced understanding = enhanced planning and forecasting models

• Cost management culture needed to measure cost vs. quality

Perficient Analytics

Oracle Hyperion Profitability & Cost Management

PerficientStandard Interface Files

EPIC

DataWarehouse

Labor

GeneralLedger

High Performance Costing Expressway

• Oracle Hyperion Profitability & Cost Management platform

• Built to leverage the Oracle Enterprise Health Analytics model for continual integration of data for advanced costing subject areas including:

• Service line costing• Pharmacy costing• Surgical costing• Encounter level: cost vs. quality

• Built to leverage Oracle Engineered Systems (Oracle Exadata and Oracle Exalytics)

Enterprise Healthcare Analytics

EMR OBIData Mart

HPCM

EHA

Patient Accounting

Patient Event

Human Resource

General Ledger

Data Flow (Simplified)

Data

Oracle

Perficient

Legend

Use Case - Stages

• Hospital-based clinic – Pediatric visits, well-child w/vaccine or cellulitis• 4 pediatricians, 19 support staff• Forecasted annualized and monthly volumes and capacity for

providers, clinic spaces, and treatment rooms• Synthetic data set as proxy for EMR file, general ledger, labor sub-

ledger and supply sub-ledger

Answering the question..• Every patient is different, why is their cost the same?

Costs for Indirect Supplies and Furniture & Fixture allocated per visitCosts for Indirect Supplies and Furniture & Fixture allocated per visit

Costs (Direct Labor + Direct Fringe) for physicians to patient encounters based on CPT4 992x2; time and motion studyCosts (Direct Labor + Direct Fringe) for physicians to patient encounters based on CPT4 992x2; time and motion study

5

Direct Supply Costs per patient visit (e.g. Vaccines)Direct Supply Costs per patient visit (e.g. Vaccines)

2

Costs for Indirect Labor / Clinical Staff (Semi-Direct Labor + Semi-Direct Fringe)allocated per visitCosts for Indirect Labor / Clinical Staff (Semi-Direct Labor + Semi-Direct Fringe)allocated per visit

3

4

Overhead G&A and Support Services allocated per visitOverhead G&A and Support Services allocated per visit 1

Use Case - Stages

Patient Visit

Overhead G&A

Patient Visit

Overhead Activities - to be allocated Driver Budgeted AmountHR Support Headcount ($1,367,560)Administration Headcount ($3,499,400)IT Devices ($3,986,920)IT / EMR Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($13,000,000)Supply Chain / Inventory Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($4,353,000)Finance Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($2,346,400)Patient Access Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($1,513,960)Perf Improvement/Quality Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($3,063,960)Nursing Management Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($13,754,400)Case Management Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($2,100,480)Provider Relations Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($2,290,480)Records/HIM Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+ OBS+ (Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($1,731,200)Maintenance & Repairs Square Feet ($54,026,000)BME Equipment $ ($21,202,000)Cleaning/Housekeeping Square Feet ($9,726,000)Insurance Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+OBS+(Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($100,738,480)Utilities Square Feet ($100,100,000)Laundry & Linen Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+OBS+(Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($1,437,000)Dietary Visits + (Patient Days) +(Births*3)+(Surgeries*3)+(Lab tests/5)+OBS+(Pharm Doses/5) + (Prescriptions/2) + (Procedures/4) ($5,656,960)

Total Overhead Expenses ($345,894,200)

Overhead G&A and Support Services allocated per visitOverhead G&A and Support Services allocated per visit 1

Indirect Supplies

Patient Visit

Cost Type Supplies Supply Item CPT Each

Indirect Supplies Clinic Supplies Treatment Room Supplies 11042 $ 16.25

Clinic Supplies Bandages & Consumables Each Visit $ 1.50

Clinic Supplies Room Prep Materials Each Visit $ 1.92

Costs for Indirect Supplies and Furniture & Fixture allocated per visitCosts for Indirect Supplies and Furniture & Fixture allocated per visit 2

Semi-Direct Labor

Patient Visit

Cost Type Clinical Staff Annual Salary Fringe

Fully Burdened

SalaryMonthly Labor

+ Fringe

Monthly Visits

(Budget)Indirect Labor + Fringe Per Visit

Indirect Labor + Fringe

RN Doyle $ 45,000 $ 10,800 $ 55,800 RN Gibson $ 45,000 $ 10,800 $ 55,800 RN Howard $ 45,000 $ 10,800 $ 55,800 RN Ignacio $ 45,000 $ 10,800 $ 55,800 NA Jones $ 33,500 $ 8,040 $ 41,540 NA Kilmore $ 33,500 $ 8,040 $ 41,540 NA Limon $ 33,500 $ 8,040 $ 41,540

Cost Type Clinical Staff Annual Salary Fringe

Fully Burdened

SalaryMonthly Labor

+ Fringe

Monthly Visits

(Budget)Indirect Labor + Fringe Per Visit

NA Micheals $ 33,500 $ 8,040 $ 41,540 NA Noman $ 33,500 $ 8,040 $ 41,540 NA Oscar $ 33,500 $ 8,040 $ 41,540 NA Phillips $ 33,500 $ 8,040 $ 41,540 NA Quinn $ 33,500 $ 8,040 $ 41,540 NA Roscoe $ 33,500 $ 8,040 $ 41,540 NA Simmons $ 33,000 $ 7,920 $ 40,920 MA Taylor $ 33,000 $ 7,920 $ 40,920 RN Ukon $ 45,000 $ 10,800 $ 55,800 MA Vikes $ 27,500 $ 6,600 $ 34,100

MA Farmer $ 27,500 $ 6,600 $ 34,100

MA George $ 27,500 $ 6,600 $ 34,100

Totals, 19 Staff $ 837,000 $ 69,750 1,996 $ 34.94

Costs for Indirect Labor / Clinical Staff (Semi-Direct Labor + Semi-Direct Fringe)allocated per visitCosts for Indirect Labor / Clinical Staff (Semi-Direct Labor + Semi-Direct Fringe)allocated per visit

3

Direct Supplies

Patient Visit

Cost Type Supplies Supply Item CPT EachDirect Supplies Vaccines Flu 99460 $ 5.13

Vaccines Pneumo 99470 $ 12.45

Direct Supply Costs per patient visit (e.g. Vaccines)Direct Supply Costs per patient visit (e.g. Vaccines)4

Direct Labor

Patient Visit

Cost Type PhysicianBasic $ /per Visit

992x1Inter $ / per Visit

992x2Inter $ / per Visit

992x3Inter $ / per Visit

992x4Complex $ / per

Visit 992x5Direct Labor Dr. Adams $ 14.33 $ 21.49 $ 28.66 $ 35.82 $ 42.99

Dr. Bishop $ 15.43 $ 23.15 $ 30.86 $ 38.58 $ 46.30 Dr. Crisp $ 14.33 $ 21.49 $ 28.66 $ 35.82 $ 42.99 Dr. Edwards $ 13.78 $ 20.67 $ 27.56 $ 34.45 $ 41.34

Direct Fringe Dr. Adams $ 2.15 $ 3.22 $ 4.30 $ 5.37 $ 6.45 Dr. Bishop $ 2.31 $ 3.47 $ 4.63 $ 5.79 $ 6.94 Dr. Crisp $ 2.15 $ 3.22 $ 4.30 $ 5.37 $ 6.45 Dr. Edwards $ 2.07 $ 3.10 $ 4.13 $ 5.17 $ 6.20

Costs (Direct Labor + Direct Fringe) for physicians to patient encounters based on CPT4 992x2; time and motion studyCosts (Direct Labor + Direct Fringe) for physicians to patient encounters based on CPT4 992x2; time and motion study

5

Time for Action

1. Combine clinical & financial data

2. Use enterprise wide data sets to improve validity

3. Drive to an actionable level of detail

4. Show findings in a highly visual, action-ready format

Cost Management: Overall Analysis

Encounter Detail

1. Evaluate Payment Model Structures

2. Evaluate Performance Levels

3. Partner with Finance/Clinical Operations

4. Start the Conversation

5. Develop a Prototype

6. Implement Capability / Improvements Incrementally

Next Steps

Lesli Adams, MPADirector, Oracle Healthcare Business Intelligencelesli.adams@perficent.com281-435-8473

William BercikDirector of Healthcare, OracleWilliam.bercik@oracle.com312-203-9641

Perficient/Oracle Contacts

Perficient.com

Follow us on Twitter

@PRFT_Oracle@Perficient_HC@lesliadams@teriemc

Out and About

Stop by and see us at Oracle Open World

Booth #2221Sept. 28 – Oct. 2San Francisco, CA

Questions?