The Health Roundtable Queensland Chapter 21 July 2011 ©2011 The Health Roundtable Limited 1.

The Health Roundtable

Queensland Chapter 21 July 2011

©2011 The Health Roundtable Limited1


The Health Roundtable …… An Innovation Clearinghouse

Non-profit membership group

73 Members 127 Facilities Founded 1995 Share problems Share solutions Provide informal

network2

HealthRoundtable

HealthRoundtable


The Health Roundtable … Member Organisations (July 2011)

3

Albury Wodonga HealthAlfred HospitalAlice Springs HospitalAngliss HospitalArmadale HospitalAuburn HospitalAuckland City DHBAuckland StarshipAustin HealthBarwon HealthBass CoastBendigo HospitalBentley HospitalBlacktown Mt DruittBox Hill HospitalCaboolture HospitalCairns HospitalCaloundra HospitalCamperdown HospitalCanberra HospitalCanterbury DHBCapital & Coast DHBCasey HospitalCaulfield GeneralCounties Manukau DHBCumberland HospitalDandenong HospitalDunedin HospitalFlinders Medical CentreFremantle Hospital

Gisborne HospitalGold Coast HospitalGoulburn Valley HospitalGove HospitalGraylands HospitalGympie HospitalHampstead RehabilitationHawera Hospital Hawkes Bay HospitalHawkes Bay RuralHornsby KuringgaiHutt Valley DHBInvercargill HospitalIpswich HospitalJohn Hunter HospitalKatherine HospitalKing Edward MemorialLakes District HospitalLogan HospitalLyell McEwin HospitalMaroondah HospitalMasterton HospitalMater Adult HospitalMater Children's HospitalMater Mother's HospitalMater Private HospitalMelbourne HealthMercy Hospital for WomenModbury HospitalMonash Medical Centre

Moorabbin HospitalNambour HospitalNelson HospitalNepean HospitalNoarlunga HospitalWaitemataNorthern Health VictoriaNorthland HospitalsOsborne Park HospitalPalmerston North (Peter MacCallumPrince Charles HospitalPrince of Wales HospitalPrincess Alexandra HospitalQueen Elizabeth II HospitalRedcliffe HospitalRedland HospitalRepatriation GeneralRobina Campus GCHRockhampton HospitalRockingham PeelRotorua HospitalRoyal Adelaide HospitalRoyal Brisbane & WomensRoyal Children's HospitalRoyal Darwin HospitalRoyal Hobart HospitalRoyal North Shore & RydeRoyal Park CampusRoyal Perth Hospital

Royal Women's HospitalRyde Hospital SydneySandringham HospitalShellharbour HospitalShoalhaven HospitalSir Charles GairdnerSt George HospitalSt Vincents Health (St Vincents HospitalSunshine HospitalSutherland HospitalSwan KalamundaSydney HospitalTalbot Park Taranaki Base HospitalTaupo Hospital

Tauranga HospitalTennant Creek HospitalThe Queen ElizabethTimaru HospitalToowoombaTownsville HospitalWaikato HospitalWairau Hospital (NM DHB)Waitakere HospitalWanganui HospitalWangarattaWarrnambool HospitalWerribee Mercy HospitalWest Gippsland Hospital

Western District HealthWestern HospitalWestmead Hospital

Whakatane HospitalWhangarei HospitalWilliamstown HospitalWollongong Hospital


Today’s Agenda

©2011 Confidential Draft Discussion Document 4


Today’s Agenda



Charter for the Queensland Chapter


AIM: improve health service perform by sharing common issues and innovative solutions to operational issues

INITIAL FOCUS: prepare for the implementation of Activity Based Funding by sharing information with each other and with experts on:• management accounting, • costing, • operational planning, and • inpatient coding techniques.

SCHEDULE: Meet twice in 2011 – in July and November – specifically to discuss ABF issues plus monthly teleconferences in August, September, and October to share progress


Health Reform: Health services need much more expertise to learn how to deliver products within the price structure

Health service providers need to understand their cost structure much better to know which services to offer efficiently

However, they have limited systems and expertise Few have feeder systems to measure actual activity & cost

beyond pathology and imaging Except Victoria, few have experience with activity based

funding Few have any management accounting expertise Overall accounting expertise has been removed from many

local health networks


Money Talks: Pricing approach will drive health services to change behaviour

What behaviour is sought? Increased surgical intervention rate? Greater usage of emergency departments? Increased usage of diagnostic testing? Greater use of primary care? Increased usage of “hospital in the home/nursing home?” Avoidance of hospital for chronic care management?

The price differential between hospitals and other alternatives will affect the speed of change


Queensland ChapterSuggested Goals for next 6 – 12 – 18 months



Latest Developments



Queries about the Queensland Funding Model

Why would a Laparascopic Cholecystectomy have a different cost weight at different facilities?

1.92284 $8103 at L3 1.63590 $6894 at M2 1.78737 $7532 at M1 2.15900 $9099 at P

“The prices for Acute Admitted Inpatients are dependent on funds available within the ABF pool and agreed activity targets” (2.9.1) (rather than “activity targets are dependent on funds available?”)


Std Price $4214.08


7. Understand The Horsham Insight ?

The Alfred Hospital

500+ beds

Very high acuity and gravitas

Horsham Base

90 Beds

“This is the end of the world if The Alfred is paid the same price as Horsham Base for Fracture of neck of femur”

This was a universal belief


… The Horsham Insight

Learning / experience curves



ED patients who do not wait for care are funded at $144.58 ??

“There is no fixed payment relating to ED as in previous models, being fully variable based on activity performed.” 2.16.5

Perverse incentives to avoid incurring imaging and pathology costs by ED staff, and to delay transfer to ward by inpatient units until imaging/pathology completed in ED?




“Outpatient services are defined as occasions of service with a clinician via a booked appointment”, including pathology and imaging costs

How can related pathology and imaging costs be measured against specific outpatients or outpatient clinics when there is no outpatient record-keeping at the patient level?




Four payment components to each DRG based on length of stay Short stay outliers (10th percentile) Inliers Long stay outliers (95th percentile) Extra long-stay outliers (98th percentile)

Perverse incentives to hold patients to reach inlier trim point due to trimming formula Example: Hip replacement I03B low trim point = 4 days Payment $19,852 if 4 days. Lose $4963 if 3 days.



Suggested Work Plan to December

1. Understand purchaser’s scope – what’s in? Out?

2. Unbundle financing and activities

3. Develop operational plans for each activity

4. Track revenue and expense per activity

5. Reconcile actual with expected payments

Compare results with other hospitals at each step



Today’s Agenda



Workshop #1 -- Unbundling

What questions/issues do you have with the current draft of the ABF operating manual?

What activities that you perform do not appear to be covered in the funding model?



Workshop #2 -- Operational Planning Model

Concept overview

Cardiology Simulation

Suggested improvements



Operational Planning ToolQueensland Chapter Meeting21 July 2011

©2011 Confidential Draft Discussion Document21


ABF Planning Overview

1. Funder provides an overall inpatient activity target in Weighted Units and Dollars

2. Executive works with clinical leaders to develop an activity plan which:

Meets the target Reflects likely demand growth Matches skills available

Executive works with clinical leaders to develop capacity plans which

Fit within target funding Fit within expected physical bed capacity



Overall Planning Cycle


Funding / Activity Targets

Performance Plan

Capacity Plans

Expenditure Plan

Within Funding

?

No

Yes

Annual

Operational

PlanCapacity

PlansCapacity &

Staffing Plans


Basic Performance Plan


Activity

DRG

Specialty

Hospital Eagle

Cardiology

Chest Pain

Episodes

Days

Unstable Angina

Episodes

Days

Obstetrics

Vaginal Delivery

Episodes

Days


Capacity Plans for Each Service to Support Performance


• Bed Days• Theatre Minutes• CT Scans• Allied Health Interventions• Pathology Tests


Performance Plan Summary Workbook



Illustration: Cardiology Unit Summary


Last year’s actuals for Cardiology

This year’s target set by

Executive


Worksheet to Plan up to 20 DRGs per Unit



Adjust Episode Volume to Reach Activity Target


“Slider Bar” for expected activity


Each DRG has link to Health Roundtable Benchmarks


Use Roundtable Benchmarks to Understand

Improvement Potential


Clinical Units Develop Their LOS plans for Top 20 DRGs


Use Slider Bar to Plan LOS for each of top 20 DRGs


Goal is to Adjust Activity To Meet the Targets


Adjust Planned Episodes and ALOS to reach Overall Targets


Result: Performance Plan for Each Major Clinical Unit


ONCE OVERALL PLAN APPROVED, DEVELOP THE DETAILS

Weekly Plan (Electives and Emergency Episodes, Seasonality)

Ward Allocation ( Co-morbidity, Likely Gender Mix)

Clinical Staffing Plan ( Workloads, Leave Schedules)


Other Plans Follow Performance Plan


Annual

Operational

Plan

Funding / Activity Targets

Performance Plan

Capacity Plans

Expenditure Plan

Within Funding

?

No

Yes

Capacity Plans

Capacity & Staffing

Plans

Annual

Operational

Plan


Suggested Next Steps

Try out the planning tool Get your feedback If interested, we will load your historical data (with

Queensland Weighted Units, if available) Provide tutoring on the use of the tool Encourage sharing of other tools and planning

approaches in use in Queensland



Action planning

In your hospital teams –

Identify your next steps to prepare

Identify assistance required from colleagues

Identify assistance required from Health Roundtable


Will the world end with the introduction of ABF ?

No

ABF provides a great opportunity for improved services to patients

Yes

Will the World, as we know it change ,with the introduction of ABF ?


1. Understand the Purchaser’s Scope

• The purchaser will only pay for their very precise scope of work

• It is essential that a provider understands what activities are In

Scope and consequently paid for

• It is essential that a provider understands what activities are Not

in Scope and consequently are not paid for


2. Unbundle the hospital’s finance and activities…

Expenditure (A,B,C)Finance (A,B,C) Activity ( A,B,C )

Poor

Good

Expenditure C

Expenditure B

Expenditure A

Finance (A)

Finance (B)

Finance (C) Activity (C)

Activity (B)

Activity (A)


Historical

Cardiac Surgery

1 Cost Centre

Unbundled 2 Unbundled 1

Professional Activities

Acute Inpatients

Acute Outpatients

Rehabilitation

Teaching

Training

Research

Investigational

38 Cost Centre 38 Operational Plans

Operational Planning

3. Develop operational plans for each activity to match funded activities

• Plan the Work• Work the Plan • Manage the Variances

The Health Roundtable 41

4. Unbundle the hospital’s finance and activities, down to the lowest level…


Activity A

Acute

Activity B

Mental

Activity C

Aged

Finance

Expenditure

Surplus/Deficit

5. Track the revenue and expense for each activity

Output Pricing

Model A

Output Pricing Model B

Output Pricing Model C


6. Reconcile actual and expected payments for each activity

• A realisation that Cash ($$$) = Fn (coded transactions)• Daily, Weekly & Monthly Coded Performance reports to Units are required • Clinical Units must check coding weekly, Coding Audits • Forecast cash revenue weekly , monthly and yearly• Ability to replicate all Government Reports

Transmit to Department

and Hospital

Dept Calculates

Cash Payment

Allocate Revenue to appropriate

GL a/c

Reconcile

Oops!

Hospital Calculates Revenue

Hospital Allocates

Revenue to appropriate

GL a/c

Hospital Calculates

Cash Payment

Patient Dept

Calculates Revenue

Coded Episode

Medical Record

Cash to Bank


7. Understand the cost dynamics of your Hospital

Essential It is absolutely vital, that the unique cost dynamics of a Hospital

are understood, measured and acted upon

Data collection and reporting must be fit for purpose – both at the organisation and funder level

Example : St Elsewhere


St Elsewhere...1


St Elsewhere...2


St Elsewhere...3


Role 1 The Patient Advocate / The Case Manager• Controller of service utilisation • The person who buys, requests, orders all services on the

patients behalf

Role 2 Departmental Member • A specific service provider• A member of a department delivering services to a patient

• The price of all services is determined by the Department • The quantity / usage of services is determined by The Patient Advocate • Initially the potential big $ savings are in the price of Departmental

Products and in Bed Utilisation

Essential to Understand

8. Understand that a clinician has 2 roles


9. Use ABF to build a major management tool

Given that all outputs now have a price , with a sound costing system, it is

possible to determine profitability (or loss) by

clinician

DRG

Unit

Service

Division

Facility

Funding stream

This management information enables the organisation to be tuned


Departments Price Variation

Clinicians Quantity Variation

Utilisation

10. Use Standard Costing to highlight variance from plan


11. Compare results with other health services to identify improvement opportunities


Cost Benchmarking…


Average cost of DRG Family G07: Appendicectomy ranges from almost $9,000 at Gemma to $2,700 at Achilles 3


Episodes with Complications of Care are more costly, and should drive internal improvement efforts


The Stages to improve readiness for ABF

Recognise that ABF is just a point on a journey . It is not a destination.

Advisor : Do not reinvent the wheel • Link to a coach /advisor / mentor with significant experience

Essential Personnel per Hospital• An experienced ,world class Management Accountant (1 FTE)• Coding Capability (Good and Sufficient )• Excellent Performance Analysis capability (1FTE)• Excellent Case Mix Modelling capability (1FTE)• Excellent Costing System capability (1+1 FTE)

Tasks• Understand Purchasers Scope • Unbundle Activities ,financing and expenditure - A big big task • Understand the Purchasers Funding Model• -


Contacts [email protected] [email protected]: +61 2 9440 2016

Questions ?


Output Pricing Fundamentals…

Digital Data

DRGW= 14.8

$62,160

Provider Products &Services Purchaser

$

$9.00

Price setter


Output Pricing =Activity Based Funding (ABF)=Casemix =Output based funding ≠ Historical funding

Financing is based on outputs not inputs Acute Outputs are measured generically in terms of DRG Weights The purchaser may determine what they will buy and sets the price

they will pay for a coded transaction

Examples :Price per• Bypass Operation• Chest x-ray for outpatients• Registrar in training • Price per normal birth• Laparoscopic Cholecystectomy W/O Closed CDE W/O Cat or Sev CC

Output Pricing Fundamentals…


3.Thou shalt learn to count and code episodes accurately for this determines your financing

Count everything

Record everything

Code appropriately

Medical Record for one Patient


Accuracy Essential at Each Stage

90% Conditions noticed

90% Documented

90% Interpreted

90% Entered correctly

= only 66% accuracyResult: Garbage in –

Garbage out


Monthly performance Reports 1







Monthly Performance Report V1

INSTRUCTIONS for those completing the document: Please enter your responses in the shaded boxes in each section. Space for responses will automatically expand to handle all of the text you enter – ignore how this impacts on the pagination or other layout.

This is a protected document and cannot be modified or reformatted.

Clinical Unit/ Service / Hospital RC if appropriate

Performance Report Month

1. Reasons for Difference between Plan and Actual for the Month.

2. Action to address any unfavourable Monthly differences

3. Reasons for difference between Plan and Actual for Year to Date

4. Action to address unfavourable Year to Date differences

5. When is expected that the Unit / Service / Hospital will be back on the Year to Date plan.

6., Have any Bottlenecks been experienced. If Yes, please describe and suggest action to reduce Bottleneck,

7. Other Significant Matters (Both Positive and negative)

Report authorised by Date of Report

Standard Monthly Report from those accountable for delivery of the performance Plan


8. Thou shalt understand that ABF provides the capability to build a major management tool…

Given that all outputs now have a price , with a sound costing system, it is

possible to determine profitability (or loss) by

clinician

DRG

Unit

Service

Division

Facility

Funding stream

This management information enables the organisation to be tuned


Costing is not an essential element of ABF systems.

Given that all outputs now have a price , with a modern costing system ,it is possible to determine profitability (or loss) by

clinician

DRG

Unit

Service

Division

Facility

Funding stream

A sound costing system combined with output pricing , provides a tool to significantly improve organisational transparency

Cross subsidisation can be made visible


9. Thou shalt undertake strategic cost reduction projects …

• Align bed days and wards to the Performance Plan

• Address the Long Stay Patients issue

• Benchmark Departments

• Reduce the cost of Departmental services

• Etc

As Costs /waste decreases , Quality in general increases


10. Thou shalt understand the Cash Flow System

• A realisation that Cash ($$$) = Fn (coded transactions)• Daily, Weekly & Monthly Coded Performance reports to Units are required • Clinical Units must check coding weekly, Coding Audits • Forecast cash revenue weekly , monthly and yearly• Ability to replicate all Government Reports

Allocate Revenue to appropriate

GL a/c

Reconcile

Oops!

Hospital Calculates Revenue

Hospital Allocates

Revenue to appropriate

GL a/c

Hospital Calculates

Cash Payment

Transmit to Department

and Hospital

Dept Calculates

Cash Payment

Patient Dept

Calculates Revenue

Coded Episode

Medical Record

Cash to Bank

Will the world end with the introduction of ABF ?

No

Yes

Will the World, as we know it change ,with the introduction of ABF ?


Contacts [email protected] [email protected]: +61 2 9440 2016


Questions ?

The Health Roundtable Queensland Chapter 21 July 2011 ©2011 The Health Roundtable Limited 1.

Documents

health roundtable charter

health roundtable limited

health service

share problems

informal network