UCSF Finance 101Improvement Community of Practice &Value Improvement Teams Amy Shlossman, Claudia Hermann, Kim Berry, Jahan Fahimi, Catherine Lau, Sarah Imershein

Objectives Provide broad overview of UCSF Financial Organizational Structure

Understand key financial vocabulary:

• Direct Cost

• Indirect Cost

• Contribution Margin

• Net Revenue

• Medicare DRG vs. Fee for service

Articulate how payer mix affects financial outcomes

Understand value based healthcare and how to calculate a ROI

Be able to access financial data sources – Finance Dept / The Cube, SvcDash, tag.bio

UCSF Finance 101

Value Based Healthcare MissionTo improve the value of healthcare delivered at UCSF

This is achieved by reducing waste and lowering health care costs while maintaining or improving health

UCSF Finance 101

VALUE =OUTCOMES

COST

Value EquationComplexities of a practical value calculator:

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VALUE =

weighted ∑ (mortality + + recovery processes + sustainability of

health + patient satisfaction – adverse effects)

direct costs + indirect costs + programmatic costs

patient reportedoutcome measures

- Patient- Payer- Hospital/ACO

Financial Organizational Structure

UCSF Finance 101

UCSF Health(Medical Center)

UCSF SchoolOf Medicine(Campus)Cost Centers

Charge StringsFunds Flow

Physician Faculty Practices

Pro Fees

Facility Charges

wRVUs

Net IncomeNet Revenue – Total Cost“What we are paid minus

all costs, including keeping the lights on”

Total CostDirect + Indirect

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Direct CostCosts we have

direct control over

Indirect CostCost not directly tied

to services; infrastructure costs

Net Revenue What UCSF is reimbursed

Generally ~ 25% of Gross Revenue

Gross RevenueFacility charges; what UCSF charges for services;

what shows up on an itemized hospital bill

Contribution MarginNet Revenue – Direct Cost

“What we are paid minus what costs we have direct control over”

Direct versus Indirect

Direct Cost

• Inpatient Room and Board

• Supplies

• Imaging

• Drugs + Administration

• OR costs

• Labs

Indirect Cost

• Sterile Processing

• Social Work

• Rent

• Utilities

• Graduate Medical Education and School of Medicine Agreements

• Caring Wisely Program

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Cost Centers with Direct and Indirect Cost

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OR

Direct Cost Indirect CostCost Center Total Cost

Periop/OR/PACU

Clinical Labs & Path Labs

Room and Board

• Sterile Processing• Water• Equipment

• OR Nurses• Techs

• Equipment• Reagents• Lab Supplies• Lab techs

• Nursing ratios • Beds• Capital costs of room

Revenue - Payer Mix

UCSF Finance 101

37%

31%

31%1%

FY18 IP Gross Revenue - Payor Mix

COMMERCIAL MEDI-CAL MEDICARE OTHER

51%24%

24%1%

FY18 IP Net Revenue - Payor Mix

COMMERCIAL MEDI-CAL MEDICARE OTHER

LOS Definitions

UCSF Finance 101

ED Obs Inpatient

OR Obs Inpatient

OR

ED LOSClinical / Operational Hospital LOS

EPSI Inpatient LOS

InpatientInptOR

Clinical / Operational Hospital LOS

EPSI Inpatient LOS

EPSI Inpatient LOS

Clinical / Operational Hospital LOS

ORHospital Outpatient Surgery with same day discharge

• Clinical LOS = 0• EPSI LOS = 1

Revenue – Payment Models Fee-for-Service (FFS) – traditional reimbursement for services rendered; now

very little of UCSF Health revenue

Case Rates – contract agreements with commercial payers for care of certain diagnoses

MS-DRG – Diagnostic Related Group – Federal Medicare system of paying one price for a specific diagnosis, adjusted for region and cases w/ or w/o major comorbid conditions (MCCs)

ACOs – Shared cost savings for participation in network of providers and specialties; population health approach with rewards for keeping people healthy; UCSF Canopy Health

Capitation – per capita, or ‘per head’ payment for care of a population, regardless of complexity; Medical programs

Pro fees – Individual provider revenue for services; separate from UCSF Health revenue

Ambulatory Payer Groups – Payment for outpatient surgeries

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Return on Investment (ROI) EquationsFor Value Improvement

UCSF Finance 101

# Reduction

in Utilization( )*

$ Unit Cost - $ Program Cost = ROI

Standard Group $ Cost Per

Case )Intervention Group $ Cost Per

Case- $ Program

Cost = ROI( - * # of Inter-

vention Cases

Age Friendly Health System – Delirium Reduction Case StudyThe team implemented a validated screening tool to assess

Delirium risk, and an order set to implement a range of mitigating activities if high Delirium risk was detected

The Delirium initiative was completed on all inpatient units at the start of FY19

The initiative is designed to decrease delirium onset and intensity, resulting in a decreased length of stay (LOS) for patients with Delirium

LOS of the baseline population was 10.7 days

The team targeted an LOS reduction of 0.1 days (essentially 10% of patients are discharged 1 day earlier as a result of the intervention)

UCSF Finance 101

Delirium Reduction Case Example

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LOS Reduction 0.2 days *

1000 cases( )* Direct Variable

Room Cost per Day$1,500

- MD Lead$20,000

= $280,000

Heme Onc Cost per Case Reduction Case Study In an assessment of service line LOS and cost, it was noted that

LOS and direct cost per case had grown significantly and exceed that of our peers

The team conducted a deep analysis of their costs to understand the key drivers

Initiatives were developed to address areas of opportunity. Some of these areas included:

• Swapping out the use of an expensive drug with a lower cost alternative that had comparable / better outcomes

• Developing a new protocol for platelet utilization that had no detrimental impact on outcomes

UCSF Finance 101

Heme Onc Cost per Case Reduction Case Example

UCSF Finance 101

Baseline Cost per

Case$41,000( )Intervention

Group Cost per Case$40,500

=$680,000- Improve-

ment Specialist $20,000

Inter-vention Cases1,400

* -

Peds Heme Onc Cost per Case Reduction Case StudyThe team did a deep dive into services and noted that LOS index

was high and cost per case was increasing despite a decrease in CMI

The team conducted a root cause analysis of possible issues and initiatives were developed to address areas of opportunity. Key areas that were contributing to the LOS index and high costs included:

• High variability in the admission time of chemo patients with 70% of patients initiating chemo after 7pm

• Communication challenges with incomplete participation on multi-disciplinary teams and with patients families

UCSF Finance 101

Peds Heme Onc Cost per Case Reduction Case Example

UCSF Finance 101

Baseline Cost per

Case$25,000( )Intervention

Group Cost per Case$23,000

=$1,160,000- Intervention

Cases580

*

Antibiotic resistance is a major threat

https://www.cdc.gov/getsmart/community/images/materials/ar-deaths.jpg; Schuts EC et al., Lancet Infect Dis. 2016 Jul;16(7):847-56; Faezel LM et al. J Antimicrob Chemother. 2014 Jul;69(7):1748-54

Antibiotic stewardship is a proven approach to combat resistance, prevent CDI, decrease mortality, and lower costs

Prospective audit and feedback (PAF)“The bread and butter” of ASP

The problem with PAF: Inefficiency

9%

<1%

The solution: Can teams identify patients for our review?

Targeted antibiotic use

FY16 DOT: 400.35FY17 DOT: 368.58↓7.9%

Antibiotic Stewardship Value ROI

*Data source, John Hillman, PhD

Metric Direct Cost Savings

Annualized cost savings, pre-ASP vs. post-Caring Wisely ASP* (2/2017 – 3/2018)

$837,000

Clostridium difficile infections• Rate: 11.06 9.35 7.45• ↓ 54 cases• ↓ 27%

Accessing UCSF Financial Data SourcesFinance Department – The Cube (EPSI data)

Vizient Database

SvcDash – svcdash.ucsfmedicalcenter.org

tag.bio tool – in development (Jahan Fahimi)

UCSF Finance 101

UCSF Finance 101

UCSF Finance 101

UB Class/Major Category Cases* Qty Charges Direct Cost Indirect

Cost Total Cost Charges Per Case

Direct Cost Per Case

Total Cost Per Case

Direct Cost Per Day

Total Cost Per Day

Daily Room & Board 1,106 5,758 87,591,729 11,611,090 8,500,585 20,111,675 79,197 10,498 18,184 2,017 3,493 Drugs 1,087 2,584,250 3,690,500 2,377 3,395 449 641

Pharmacy 1,087 2,640,540 14,964,760 2,584,250 1,106,250 3,690,500 13,767 2,377 3,395 448.81 640.93 Services 902 5,321,218 8,833,476 5,899 9,793 924 1,534

Ambulatory Clinic Services 19 33 9,426 - - - 496.11 - - - - Electoencephalography 541 2,190 18,615,634 1,160,387 666,090 1,826,477 34,410 2,145 3,376 202 317 Imaging 795 5,553 15,790,697 995,448 911,236 1,906,685 19,863 1,252 2,398 173 331 Clinical Laboratory & Pathology 902 57,526 10,265,191 855,140 579,720 1,434,859 11,380 948 1,591 149 249 Respiratory Therapy 219 4,575 4,884,447 727,074 335,005 1,062,080 22,303 3,320 4,850 126 184 Rehabilitation Services 646 8,357 2,824,430 445,850 269,092 714,942 4,372 690 1,107 77 124 Emergency Room 423 1,720 2,029,797 352,490 256,477 608,967 4,799 833 1,440 61 106 Perioperative/OR/PACU 107 17,242 2,889,028 352,074 213,014 565,088 27,000 3,290 5,281 61 98 Cardiology Services 625 1,776 1,734,834 124,211 83,527 207,738 2,776 199 332 22 36 Anesthesia 187 44,589 2,109,071 92,239 61,610 153,850 11,278 493 823 16 27 Blood Services 83 659 153,944 75,748 42,939 118,687 1,855 913 1,430 13 21 Peripheral Vascular Lab 144 284 570,457 68,170 42,012 110,182 3,962 473 765 12 19 Renal Dialysis 9 34 216,093 27,390 14,825 42,215 24,010 3,043 4,691 5 7 Observation Bed 44 1,835 173,106 24,747 18,332 43,079 3,934 562 979 4 7 Radiology - Therapeutic 1 65 286,009 15,769 13,090 28,859 286,009 15,769 28,859 3 5 Telemetry 1 1 135 - - - 135 - - - - Pumonary Function 75 434 124,578 4,480 2,079 6,559 1,661 60 87 1 1 GI & Endoscopy Services 3 3 9,964 - 1,431 3,210 3,321 - 1,070 - 1

Supplies 337 1,121,486 2,032,619 3,328 6,032 195 353 Medical Supplies & Devices 337 4,987 6,227,654 1,121,486 911,134 2,032,619 18,480 3,328 6,032 195 353

Other 458 366,019 644,547 799 1,407 64 112 Miscellaneous Services 458 2,076 2,330,795 366,019 278,529 644,547 5,089 799 1,407 64 112

Grand Total 1,106 2,800,237 173,801,778 21,005,843 14,306,975 35,312,817 157,144 18,993 31,928 3,648 6,133