Invited Panel Discussion: Strategic Problems in Health Care Management Session HC01 DSI Athens, Greece - July 6, 1999 Discussant William P. Pierskalla, Ph.D. John E. Anderson Professor and Former Dean The Anderson School at UCLA 110 Westwood Plaza, Suite B411 Los Angeles, CA 90095-1481 Tel: 310-794-2100 email: [email protected]
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Invited Panel Discussion:Strategic Problems in Health Care Management
Session HC01DSI Athens, Greece - July 6, 1999
DiscussantWilliam P. Pierskalla, Ph.D.
John E. Anderson Professor and Former DeanThe Anderson School at UCLA110 Westwood Plaza, Suite B411
Source: David M. Cutler, “Technology, Health Costs and NIH,” Harvard University and NBER paper presented at the NIHEconomics Roundtable on Biomedical Research, October, 1995. (Data for 1994 added later by WPP.)
TABLE 2.9 AGE –SPECIFIC MEDICAL USE THROUGH TIME (Per Capita Spending)
Source: David M. Cutler, “Technology, Health Costs and NIH,” Harvard University and NBER paperpresented at the NIH Economics Roundtable on Biomedical Research, October, 1995.
Health Expenditures as Percent of GDP
0
5
10
15
1960 1970 1980 1990 2000
Canada
France
Germany
Japan
UnitedKingdom
United States
OECD Health Data 1998
Total Expenditure per Capita in $ at Purchasing Power Parity
0
1000
2000
3000
4000
5000
1960 1970 1980 1990 2000
Canada
France
Germany
Japan
United Kingdom
United States
OECD Health Data 1998
Public Expenditure on Health as % of Total Health Expenditure
0
20
40
60
80
100
1960 1970 1980 1990 2000
Canada
France
Germany
Japan
UnitedKingdom United States
Region Major Characteristics Recent Changes
Europe,Japan andCanada
• Collective responsibility• Public sector prime player• Market minor player
• Increase in marketmechanisms
US • Individual responsibility• Market the prime player• Public sector minor player
• Increase ingovernmentmechanisms
Ø Systems are converging because the fundamental problem- once stripped from its cultural and political backdrop - is thesame. The fundamental problem is to deliver high quality careat low cost in an environment of rapid technological change.
Ø And, OR/MS has a rich tradition of addressing essentiallysimilar problems / trades-off.
Strategic Decisions:Focused Operations
§ Reduce Diseconomies of Scope due toCongestionl Create Homogeneous Production Units
l Reduce “job shop” aspects to more of a “flow shop”
l Utilize common knowledge resources and processes
Homogeneous Class of Patient
§ Uses severity adjusted Diagnosis RelatedGroups (4 severities for each of 477 DRGs=1908sDRGs)l resource use vectors for sDRG i and sDRG j:
l ri = (ri1,ri2, ... ,riR), rj = (rj1,rj2, ... ,rjR) and ak is the riskinesscoefficient for the kth resource
d a r rij k ik jkk
R
= −=
∑1
sDRG Clustering into p clusters
§ Maximize resource usage similarities for the sDRGs ineach cluster
§ Maximize resource usage dissimilarities among theclusters
§ p median problem where p are the number of differentclusters (wards) in a hospital
§ Solve with a capacitated clustering algorithm
§ Diseconomies of very heterogeneous “job shop” like scopeof resource usage illnesses are reduced and economies ofscale for similar illnesses are realized
Preliminary Results ofFocused Operations Study
§ Used data for 350 hospitals in Pennsylvanial Cluster low intensity patients together when possible
l Cluster high intensity patients together as a subset ofall patients
l Cluster mid-range intensity patients intohomogeneous clinically focused units
l Leave the smallest remaining number of patientsungrouped
Areas for the Future Research
Strategic
Conjectures
§ Economies of Scale Are Achievable in Administrativeand Some Ancillary Distributed Systemsl Purchasing
l Information Systems
l Technology Utilization
l Administrative and Process Effectiveness
l some in Laboratory, Pharmacy, Radiology
§ Economies of Scale Can Also be Achieved in ManyClinical Systemsl Coronary Artery Bypass Grafts
l Lens Implants/Lasik Surgery
Conjectures
§ Quality Advantages of Scale--May Also Be Achievedin Clinical Systemsl Reduction in Variation from Best Clinical PathwaysðReduced Mortality, Complications and Readmissions
ðReduced Testing and Lengths of Stay
l Hire Highest Quality of Personnel
l Latest and Best Treatment Protocols
l Effective Continuing Education for Staff
Strategic Research Questions and Needs
§ What are the capacities and resource needs in a health caredelivery system when we are able to obtain efficient patientscheduling, personnel scheduling, forecasting, high quality, etc. ?
§ How do occupancy levels and their variation affect costs andquality of care? Are there significant congestion effects on costand quality at near full capacity? And are there significantdiseconomies of scale at low capacity?
§ How does one design high-quality low-cost “packages of care”for changing populations and environments in vertically and/orhorizontally integrated large systems?
§ What are the optimal sizes for vertically or horizontallyintegrated systems?
Operational Research Questions andNeeds (continued)
§ Can optimizing systems be built to detect low quality,unnecessary, inadequate or improper care delivery by utilizingpatient management paths and clinical pathways and newquality of care measures? (new massive databases now comingon-line--patient records, costing information, personnelavailability, and skills, technology, demographics, institutionalcharacteristics, critical path and patient management protocols,etc.)
§ Can net revenue be optimized by the addition, deletion orsharing of services?
Operational Research Questions and Needs
§ Through design and care delivery changes, can majorimprovements in quality, cost and access be achieved insubsystems?l e.g., recent study found 2/3 of primary care nurses’ time spent on
non-nursing activities not needing RN qualification
§ Can delays (congestion) and omissions be eliminated by just-in-time scheduling?
§ Can set-up times for patients’ services be reduced?§ Can workloads be smoothed better via interactive patient,
personnel and facilities scheduling?
Operational Research Questions andNeeds (continued)
§ What treatment locations are “best” for what patients atwhat times?
§ What techniques, ideas and practices from operationsmanagement supply chain analysis can be utilized in healthcare delivery?
§ How can financial solvency of the institution bemaintained? (modeling of direct and indirect costs withprocess improvement analyses)
§ How does one recruit, train and retain good personnel ina cost focused HCDS?
OR/MS Research Topics
§ How can cybernetic models be built to optimize thesequencing and types of diagnostic tests and therapies inclinical pathways when there are rapidly changingprotocols and technologies?
§ How can adaptive process flow models be built tominimize complications in a rapidly moving, people skillsdependent, technology changing and relatively highturnover environment which operates 24 hours a day and 7days a week?