Designing a Cost Model that is CJR Ready

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Designing a Cost Model

that is CJR ReadyJune 15, 2016

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ONE OF THE SCARIEST PLACES ON EARTH?

The Impact Zone is where the swell of rising energy becomes

a breaking wave.

Based upon “Impact Zone Decisions: What the Surf Zone taught me about Decision Making!”, by Dawid Mocke

3Images: Lucas Gilman, ESPN.com

OPTION #1: DON’T CATCH THE WAVEYou could try to paddle and get

yourself over or around the Impact Zone…

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OPTION #2: CATCH THE WAVEThere are many

advantages to riding the wave.

Images: Lucas Gilman, ESPN.com

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INDECISION = DISASTERDon’t wait too long, or the wave will ride you!


Comprehensive Care for Joint Replacement (CJR) Model

› CJR is the Wave› Why CJR?› What does CJR cost?› Building a Cost Model› Benefits of Analysis› Operational Changes› Summary› Q&A

Riding The Wave:


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Currently being tested in 67 MSAs – Started April 1st

Hospital can either earn a reward or have to repay Medicare for spending above established target

Incentive for hospitals to work with other providers› Coordinated care› Reduce avoidable readmissions and complications› Control costs


CJR is the wave…what lurks within?

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CJR Hospitals will receive separate episode target prices for MS-DRG 469 and 470

Target price provided each year› Discount over expected episode spending› Blend of historical hospital-specific and regional spending

w/ regional component increasing over time› Incentives of 5% increasing to 20% bonus or penalty› Adjusted for Quality component


CJR is the wave… what lurks within?

999999

Hip and Knee Replacements most common inpatient surgery for Medicare beneficiaries

Huge variation in quality and cost:

› Rate of complications up to three times higher in some facilities

› Total expenditure ranges from $16,500 to $33,000

Result - incentivize the coordination of care for the episode


Why CJR?

Quality

Cost

Best of the Best

$25,565 (39% post discharge)average cost per episode

Inpatient Hospital Stay: $13,193Skilled Nursing Facility: $5,034Inpatient Rehabilitation Facility: $1,568Home Health Agency: $2,123Physician: $1,675Hospital Readmissions: $1,155Outpatient: $604Durable Medical Equipment: $122Other: $91


What does the average CJR Episode cost? (National Breakdown)

90-Day Episode

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Building a Cost Model

To understand the financial impact of decisions› Operational/Process

› Purchasing/Contract Management› Clinical

To make informed conclusions on the wisdom of those decisions via

› Conversations with medical and non-medical staff› Data driven comparisons between financial impact and

› patient outcomes› patient, physician, and employee satisfaction


Cost Model: Why bother? It can be painful!

Know Your Chart of Accounts›Categorize into Cost Buckets that contain similar types of resources

› Salaries, Wages, Benefits› Contract Services› Supplies

›Which types of expenses are fixed, which are variable?›Are there underlying issues with your Chart of Accounts?

› Do you need more/fewer accounts?› Is it well organized?› Are processes built and are they being followed?


Cost Model: Getting Started

Medical SuppliesDrugs

ImplantsOther

Know Your Departments

Categorize into Direct (Clinical-Care) or Indirect (Non-Clinical Care)Further Categorize into Functional Groups:›Diagnostic›Med/Surg›Pharmacy

Should some departments be combined for a better matching of Resource Consumption?›What resources are being shared across departments?›How well managed is Home vs. Worked vs. Paid Employee Hours?›Apply Reclassifications where necessary




Know Your Operations

Determine appropriate drivers for your Costs

Operating Room Med/Surg Pharmacy Radiology


HUMAN RESOURCES





SWB Supplies Equipment Other

Operating Room




Operating Room


SWB Supplies Equipment Other





Procedure 1 Procedure 2 Procedure 3 Procedure 5Procedure 4

SWB

Once configuration is complete, and a good costing software in place, this should be the easiest step.Speed of this step will depend on the amount of data being processed (size of hospital, time range, etc) and the individual costing solution used

Cost Model: Run Your Model


Processing…


Develop a consistent process to perform this task.The process should include trace all of the below back to your General Ledger:

› Total Expenses› Gross Revenues

› Net Revenues

An acceptable variance for your will depend on your facility and personal comfort level.Reconciliation items – known variances

› Understand these variances!

Cost Model: Validate

Little or no variance

Variance < 1% (timing differences)

Variance < 3% (timing, modeling differences)


Reasonableness TestsReview with managers and staff for better understandingAdjust as appropriate based on new information

Cost Model: Review, Refine, Repeat

Continuous

Improvement


Benefits of Analysis

PhysicianRoom &

Board Implants

Surgery - PACU -

Anesthesia Radiology Lab PharmacyCardio -

Respiratory ER PT/OT Grand TotalPhysician 1 1,024 6,219 2,402 31 138 397 93 9 224 10,537Physician 2 1,340 5,362 2,536 78 167 363 117 0 265 10,229Physician 3 1,368 5,411 2,659 138 302 510 209 0 323 10,919Physician 4 1,062 5,247 2,538 78 186 511 119 0 207 9,949Physician 5 1,201 5,121 2,501 31 125 375 71 0 250 9,676Physician 6 1,418 5,657 2,696 35 141 403 95 10 325 10,780Physician 7 1,900 5,539 2,962 68 170 437 143 0 413 11,632

Average 1,330 5,508 2,613 66 176 428 121 3 287 10,532

* Note that the above data is for illustration purposes only and does not represent any JHMH actual data.

Department Charge Code Units Direct Fixed Cost Direct Variable Cost Indirect Fixed Cost Indirect Variable Cost3101000 - R&B M/S 4TH FLR 2 694.37 0.00 894 31 3101220 - TEL 4TH FLR 1 107.49 0.00 138 5 4000896 - HANDPCE/HIGH FLW TIP 1 2.19 18.63 18 0 4000897 - CEMENT MIXING BOWL 1 3.06 26.05 25 1 4001063 - BLADE- SURG STERILE 1 10.29 87.55 84 2 4001404 - OR 1ST HR 1 56.53 480.88 459 12 4001405 - OR 15MIN 3 42.39 360.56 344 9 4010406 - PWR KNEE DRILL 1 14.41 122.57 117 3 4428365 - IV .9% SOD/CLOR IRRG 1 0.31 2.66 3 0

410 - PACU 4106211 - RECOVERY ROOM 1 HOUR 1 70.63 0.00 63 3 4115021 - CANNULA NASAL W/CO2 1 1.42 0.00 1 0 4115049 - TRAY SPINAL 1 8.66 0.00 6 0 4115067 - REG. ANES. 1ST HOUR 1 71.64 0.00 48 1 4115068 - REG ANES Q/15 MINS. 3 53.73 0.00 36 1

415 - RADIOLOGY 4157356 - XR KNEE 1-2 VIEWS LT 1 18.97 0.00 23 1 4301284 - GLUCOSE - BEDSIDE 9 15.38 0.00 11 0 4302021 - HEMATOCRIT 2 15.67 0.00 12 0 4302024 - HEMOGLOBIN 2 15.67 0.00 12 0 4306857 - VENIPUNCTURE 2 4.99 0.00 4 0 4400058 - ZOFRAN 2MG/ML 8 42.48 0.00 42 1 4400069 - TRANEXA 1000MG/10ML 10 26.86 0.00 27 1 4400263 - DIPRIVAN 200MG/20ML 20 7.02 0.00 7 0 4400273 - EPHEDRINE 50MG/ML 1 11.68 0.00 12 0 4420003 - DVT CALF CUFF 1 0.00 0.00 2 0 4421169 - LS LF PRIMARY PLUMST 1 0.00 0.00 1 0 4421291 - SOD CHL .9% 500ML 1 0.00 0.00 0 0 4422000 - EXTENSION SET 18" 1 0.00 0.00 0 0 4427032 - TRAY FOLEY IC 1 0.00 0.00 4 0 4428155 - BLANKET, BAIR HUGGER 1 0.00 0.00 2 0

453 - CARDIOPULMONARY/RESPIRATO 4537015 - INCENTIVE SPIROMETER 1 6.04 0.00 5 0 4652498 - PT INITIAL EVALUATIO 1 63.44 0.00 51 2 4654010 - PT EXERCISE I 1/4 HR 3 54.77 0.00 44 2 4657066 - MOBILITY CURRENT STA 1 0.20 0.00 0 0 4657072 - MOBILITY GOAL STATUS 1 0.20 0.00 0 0 4657080 - MOBILITY D/C STATUS 1 0.20 0.00 0 0 4658010 - PT GAIT TRN I 1/4 HR 3 48.67 0.00 39 2

465 - PHYSICAL THERAPY

310 - MED SURG 4TH FL

401 - Surgery

411 - ANESTHESIOLOGY

430 - PATHOLOGY LAB

440 - PHARMACY

442 - CENTRAL SUPPLY


*Note that the above data is for illustration purposes only and does not represent any JHMH actual data.







401 - Surgery


430 - PATHOLOGY LAB

440 - PHARMACY



Department Charge Code Units Direct Fixed Cost Direct Variable Cost Indirect Fixed Cost Indirect Variable Cost3101000 - R&B M/S 4TH FLR 2 694.37 0.00 894 31 3101220 - TEL 4TH FLR 1 107.49 0.00 138 5









401 - Surgery


430 - PATHOLOGY LAB

440 - PHARMACY



4115021 - CANNULA NASAL W/CO2 1 1.42 0.00 1 0 4115049 - TRAY SPINAL 1 8.66 0.00 6 0 4115067 - REG. ANES. 1ST HOUR 1 71.64 0.00 48 1 4115068 - REG ANES Q/15 MINS. 3 53.73 0.00 36 1









401 - Surgery


430 - PATHOLOGY LAB

440 - PHARMACY



4306857 - VENIPUNCTURE 2 4.99 0.00 4 0 4400058 - ZOFRAN 2MG/ML 8 42.48 0.00 42 1 4400069 - TRANEXA 1000MG/10ML 10 26.86 0.00 27 1 4400263 - DIPRIVAN 200MG/20ML 20 7.02 0.00 7 0 4400273 - EPHEDRINE 50MG/ML 1 11.68 0.00 12 0

430 - PATHOLOGY LAB

440 - PHARMACY



Contract Negotiation › Dip your toes in the water early to test› Start with 1 payer first to get a feel for if you’re ready

Vendor Negotiation› Help your vendors to see the reality

Physician Scorecard› Help your physicians to reduce cost variation

And More…› Pricing Transparency› MD Save

Make changes based on cost model results


Whether your hospital is zoned for CJR or not, now is the right time to prepare for CJR. Might as well ride the wave and reap the rewards rather than delay and drown in penalties.

Summary


CJR Final Rule: https://innovation.cms.gov/Files/fact-sheet/cjr-providerfs-finalrule.pdfCoach Potato Cost Model: https://www.linkedin.com/pulse/healthier-hospital-costing-6-steps-get-your-service-off-scanlon-cma?trk=prof-postCost Correlation Conundrum: https://www.linkedin.com/pulse/understanding-your-hospitals-costs-cure-cost-christie-scanlon-cma?trk=prof-postImpact Zone: https://www.linkedin.com/pulse/impact-zone-decisions-what-surf-taught-me-decision-making-dawid-mockeBecker spine article: http://www.beckersspine.com/orthopedic-spine-practices-improving-profits/item/30556-cjr-bundles-to-pay-25k-per-episode-8-statistics-on-cost-breakdown.htmlAgilum Healthcare Intelligence: http://www.agilum.com/Jack Hughston Memorial Hospital: http://www.hughston.com/Angela Hadzega’s LinkedIn: https://www.linkedin.com/in/angelahadzegaChristie Scanlon’s LinkedIn: https://www.linkedin.com/in/christie-scanlon-cma-507a571a

Links…

Questions?

Christie ScanlonHealthcare Cost Consultant

Scanlon Enterprises, [email protected]

843-364-6948

Angela HadzegaChief Financial OfficerJack Hughston Memorial [email protected]

The choice is yours….

Designing a Cost Model that is CJR Ready

Healthcare

Transcript of Designing a Cost Model that is CJR Ready